Local Government Corruption

Chris Edwards

Local government corruption is a major problem in America. Cities and counties have amassed excessive power over the private sector through permitting, licensing, zoning, and other bureaucratic approval processes. The politicians and officials who gain discretionary authority within these processes are empowered to shakedown individuals and businesses for bribes. You see similar patterns of corruption with marijuana licenses, alcohol licenses, gun licenses, zoning adjustments, housing tax credits, building permits, and other approvals that governments keep in limited supply or that specific politicians or officials can slow‐​walk or deny. The Department of Justice recently busted a powerful Los Angeles politician who for years lined his pockets using his discretionary power over development projects:

Former Los Angeles City Councilmember José Huizar pleaded guilty today to federal criminal charges for using his powerful position at City Hall to enrich himself and his associates, and for cheating on his taxes. … In his plea agreement, Huizar admitted to leading the CD-14 Enterprise, which operated as a pay‐​to‐​play scheme in which Huizar – assisted by others – unlawfully used his office to give favorable treatment to real estate developers who financed and facilitated bribes and other illicit financial benefits. Specifically, Huizar and other city officials demanded and accepted cash bribes, casino gambling chips, prostitution and escort services, political contributions, flights on private jets and commercial airlines, stays at luxury hotels and casinos, expensive meals, tickets to concerts and sporting events, and other benefits. Huizar also admitted to accepting a $600,000 bribe in the form of collateral from a billionaire real estate developer for Huizar to confidentially settle a pending sexual harassment lawsuit against Huizar by a former staffer.

Local government corruption is prevalent across the nation, as the following examples illustrate. The common elements are excessive regulatory control over private activities, slow and nontransparent bureaucracies, and discretionary power over approvals provided to individual politicians and officials.

In Chicago, dozens of aldermen have been found guilty of corruption over the decades. One study found that the crimes typically involved “schemes to extract bribes from builders, developers, business owners or those seeking to do business with the city or state. The bribe‐​payers either assumed or were told that payment was necessary to receive zoning changes, building permits, or similar city or state action.… at the heart of most convictions is a payoff for something that is a sweetheart contract or a law or permit necessary to do business. This has been the main pattern of corruption in the city and the state for over 150 years.”
In Boston, restaurant liquor licensing has long attracted corruption. The government’s strict limits on the number of licenses “creates a pent‐​up demand, which results in licenses selling for a great deal — in some neighborhoods, north of $350,000. To get one, a restaurateur needs not only money but also connections: Businesses must be approved by the local neighborhood association and local elected officials.”
In New York City, many sorts of permitting and licensing have been scandal‐​plagued for decades. The New York Police Department, for example, was engulfed in scandal a few years ago with officers speeding up usually slow gun‐​license approvals in exchange for cash and gifts.
In Los Angeles, two officials in the liquor control agency ran a shakedown scheme that targeted karaoke bar owners. Clients would pay the pair to fast‐​track their liquor license applications, and the pair would demand favors from bar owners while threatening to target them for enforcement raids.
In Pennsylvania, there has been a flood of pay‐​to‐​play scandals—in cities such as Scranton, Harrisburg, Reading, and Allentown—under which officials have extorted cash or campaign contributions for licenses, permits, and other approvals from the government.
In Massachusetts, California, and some other states that have legalized marijuana, there have been numerous corruption scandals because “legalization” has been only partial with strictly limited numbers of licenses available. The high value of the licenses has created large incentives for bribery and shakedowns.
In Dallas, the low‐​income housing tax credit (LIHTC) was at the center of the largest public corruption scandal ever in the city. Fourteen people were convicted of bribery, extortion, and related crimes, including developers, a state representative, the Dallas mayor pro tem, and the city planning commissioner. The politicians and bureaucrats would routinely shakedown developers for bribes in return for zoning changes and allocations of limited housing tax credits.

I discuss these and other corruption scandals here and here. The solution to local government corruption is simple: deregulation. If Americans want less government corruption, they must reduce the government’s power over private activities.