The "Mosque" and Real Conservatism

This New Yorker essay is incredibly helpful in understanding the so-called "Ground Zero mosque" issue.  Apparently it is not even on Ground Zero and instead of a mosque it's a Muslim YMCA.  The thing that jumps out at me when reading Hendrik Hertzberg's essay is that conservatives are so obsessed with local governance -- states' rights, shrinking government, etc. -- until it comes to New York City.  Then suddenly, the opinions of those who actually live in and govern the Lower Manhattan area don't matter.  If Community Board No. 1, the city council that represents the area, endorsed the Muslim center 29 to 1, then it seems that this is all a moot argument.  IT'S THEIR CITY, isn't it?  So I guess they can do whatever they want with it.  Or at least, this is the point of view a real conservative would take.