Metro. Wash. Chapter v. Dist. of Columbia

• Decision Date: 14 July 2014
• Docket Number: Civ. Action No. 12–853 EGS
• Citation: 57 F.Supp.3d 1
• Parties: Metropolitan Washington Chapter, Associated Builders and Contractors, Inc., et al. Plaintiffs, v. District of Columbia, and Vincent C. Gray, in his official capacity as Mayor of the District of Columbia, Defendants.
• Court: U.S. District Court — District of Columbia

57 F.Supp.3d 1

Metropolitan Washington Chapter, Associated Builders and Contractors, Inc., et al. Plaintiffs
v.
District of Columbia, and Vincent C. Gray, in his official capacity as Mayor of the District of Columbia, Defendants.

Civ. Action No. 12–853 EGS

United States District Court, District of Columbia.

Signed July 14, 2014

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Paul J. Kiernan, Karen Boyd Williams, Holland & Knight LLP, Washington, DC, for Plaintiffs.

Andrew J. Saindon, D.C. Office of Attorney General, Washington, DC, for Defendants.

MEMORANDUM OPINION

Emmet G. Sullivan, United States District Judge

In 1984, the District of Columbia (hereinafter “District”) enacted the First Source Employment Agreement Act (hereinafter “First Source Act” or “Act”), a residential preference statute for the construction industry mandating that certain percentages of construction jobs on projects funded in whole or in part, or administered by the city, be filled by District residents. The Act was amended in 2011 by the Workforce Intermediary Establishment and Reform of First Source Amendment Act of 2011, which was signed by Mayor Vincent C. Gray and passively approved by Congress. The First Source Act, both as enacted and amended, is intended to address the unique position in which the District finds itself as the only jurisdiction in the country that is legally barred from imposing a commuter tax on non-residents who come into the city to work. Nearly 70 percent of jobs in the District are held by non-residents and this inability to levy a commuter tax allegedly results in a significant financial shortfall for the District, especially because the unemployment rate in the District is much higher than in surrounding jurisdictions. Plaintiffs, a non-profit commercial organization, two construction companies, and four individuals who live in Maryland and Virginia challenge the law as enacted and amended as a violation of their constitutional rights. They argue that for the purposes of judicial review of the First Source Act, the District must be treated as if it is a state. They contend that treating the District as a state would render the First Source Act unconstitutional.

This case thus represents something of a twist in the long line of cases in which the District has repeatedly confronted the uncontroverted fact that its unique constitutional status prevents it from enjoying benefits states take for granted. For instance, in this nascent century alone, the District has been told (yet again) that its citizens cannot elect representatives with voting rights to the Congress of the United States, Adams v. Clinton, 90 F.Supp.2d 35 (D.D.C.2000) ; cannot levy a commuter tax, Banner v. United States, 303 F.Supp.2d 1 (D.D.C.2004) ; and cannot control expenditures of locally derived funds, Council of the District of Columbia v. Gray, No. 14–655, 42 F.Supp.3d 134, 2014 WL 2025078, 2014 U.S. Dist. LEXIS 68055 (D.D.C. May 19, 2014). Further, the District is also prohibited from, inter alia, prosecuting its own crimes, D.C. Code § 23–101(c) ; enacting legislation without Congressional approval, D.C. Code §§ 1–204.04(e) ; 1–206.02(c)(1); regulating its own courts or appointing its own judges, D.C. Code §§ 1–204.33(a) ; and enacting zoning regulations without submission to the National Capital Planning Commission for review, D.C. Code § 6–641.05. These

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restrictions apply to the District for the precise reason that it is not a state, but rather an “exceptional” constitutional creation, over which Congress retains ultimate legislative authority.

Even when the District finally gained some measure of autonomy with the passage of the Home Rule Act in 1973, the extent of home rule was limited; the grant of legislative authority to the District in the Home Rule Act is cabined by the power of Congress to determine what is in the best interest of the District and its residents. In practice, since the enactment of the Home Rule Act, this limited ability to legislate has often meant that the prerogatives of the District's locally elected representatives are subordinate to those of Congress. This year alone, Congress has blocked the District's ability to decriminalize marijuana possession, spend its own money on abortions for poor residents, and has cut funds for D.C. police officers to drive their police cruisers to and from their homes if they live outside the District by adding riders to the Congressional appropriations bill.¹ These actions by Congress are widely understood as further setbacks for home rule in the District.

The Court is aware that similar state statutes, when challenged under the Privileges and Immunities Clause of the Constitution, have all been struck down as unconstitutional. However, the District, unlike every other jurisdiction in the country that imposes an income tax on its own residents, is barred by the Home Rule Act from levying a commuter tax on income earned by non-residents working here. While that fact alone would result in a structural imbalance in any city, the magnitude of the problem is unique in the District, where approximately 70 percent of jobs are held by non-residents. This structural imbalance is exacerbated by the fact that the unemployment rate in the District is extremely high—higher than both the national average and that of the entire Washington metropolitan area—thus requiring the city to spend an inordinate amount of its resources on social welfare services in an attempt to aid its un- and under-employed population.

These circumstances put the District in a different position than other cities that have tried to enact similar residence preference legislation. No other jurisdiction can lay claim to being a unique constitutional community, and thus, no other jurisdiction, by operation of our very constitutional structure, could possibly face the challenges faced by the District. Nevertheless, the District has not provided any competent evidence that the First Source Act, as enacted and amended, is a narrowly tailored means to address this unique evil. Thus, having carefully considered the Defendants' motion to dismiss, the response and reply thereto, the supplemental briefing, the applicable law, the oral argument, and the record as a whole, Defendants' motion to dismiss is GRANTED IN PART AND DENIED IN PART.

I. Background

In 1984, the District enacted the First Source Employment Agreement Act to “provide employment opportunities in entry-level positions in District of Columbia government-assisted projects for unemployed residents.” 31 D.C.Reg. 2545 (May 25, 1984). In 2011, the Council of the District of Columbia unanimously amended the Workforce Intermediary Establishment

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and Reform of First Source Amendment Act of 2011 (hereinafter “Amended Act”), which became effective in 2012. The law, as enacted and amended, was to counteract the effects of the “District's Congressionally-imposed ban on taxing any of the income that leaves the city,” which results in “$1 billion to $2 billion a year in lost revenue.” Council of the Dist. of Columbia, Comm. on Hous. and Workforce Dev., “Workforce Intermediary Establishment and Reform of First Source Amendment Act of 2011,” B19–50, Oct. 14, 2011, at 3, available at http://dcclims1.dccouncil.us/images/00001/20120130131015.pdf (last accessed Jul. 4, 2014) (hereinafter “Committee Report”). The Act is administered by the District of Columbia Department of Employment Services (“DOES”). Plaintiffs challenge four elements of the First Source Act as enacted and amended: (1) employment agreements; (2) construction contracts; (3) targeted-hiring contracts; and (4) reporting requirements. Compl. ¶ 9.

A. The First Source Employment Agreement Act of 1984

The First Source Act requires that all “beneficiaries” of a “government-assisted project” or contract enter into an Employment Agreement with the District that provides that the beneficiary will first attempt to fill jobs and vacancies from the First Source Register, on which only District residents can be listed. Compl. ¶¶ 10–12; see D.C. Code § 2–219.03(a)(1).² Under the Act, a beneficiary is defined as, inter alia, (a) the signatory of a contract executed by the Mayor that involves District funds or funds administered by the District, or (b) a beneficiary of a District governmental action, including contracts, grants, and loans, that results in a financial benefit of $100,000 or more. Id. § 2–219.01(1)(A)–(1)(B). A “government-assisted project” is one that is funded in whole or in part by District funds or funds administered by the District, and for which the District is a signatory to any contractual agreement. Id. § 2–219.01(5).

The Act imposes additional requirements on government-assisted projects that cost more than $100,000. For these projects, 51 percent of new employees must be District residents unless: (1) the beneficiary made a good faith effort to comply; (2) the beneficiary is located outside of the “Washington Standard Metropolitan Statistical Area” and none of the contract is performed inside that area; (3) the beneficiary enters into a workforce-development training program with DOES; or (4) DOES certifies that there are not enough qualified District residents to staff...