APPEAL from the County Court of Cook County; the Hon. EDMUND
K. JARECKI, Judge, presiding.
Daniel Gebbie, a taxpayer, here appeals from a judgment of the county court of Cook County overruling seven objections to 1949 taxes of the Sanitary District of Chicago. Five of said objections relate to taxes levied for the corporate fund of the district and the balance to the taxes levied for bond and interest requirements.
The first of the objections to the corporate fund levy is a constitutional attack upon the provisions of section 5.3 of the Sanitary District Act of 1889, (Ill. Rev. Stat. 1949, chap. 42, par. 324m,) which section was first enacted in 1943, (Laws of 1943, pp. 601-602,) and which designed the method the district has used to appropriate for and levy its corporate taxes from 1944 to the present. The pertinent portion of the section is as follows:
"In order to require sanitary districts, organized under this Act, to conduct their fiscal affairs and finance their annual corporate expenditures on an actual cash basis for each budget year, such sanitary districts may appropriate for corporate purposes a sum not in excess of 75% of the tax levied for corporate purposes for the budget year, such sum being equivalent of the amount of money that may be realized from the sale of warrants issued in anticipation of the tax levied for corporate purposes for the budget year, pursuant to the provisions of the statute authorizing the issuance and sale of tax anticipation warrants.
"The fact that the tax levied for corporate purposes for any budget year is in excess of the amount appropriated from such levy for corporate purposes for that year, as above limited and defined, shall not affect the validity of the ordinance making such appropriation or the validity of the ordinance levying such tax.
"Money received or estimated to be received from the tax levied for corporate purposes for any budget year in excess of the amount required for the payment of warrants and interest thereon issued in anticipation of such tax levy, shall become a part of the corporate fund for the budget year in which said excess amount is estimated to be received by the sanitary district and the tax authorized to be levied for corporate purposes for such subsequent budget year shall be reduced by that amount."
Section 12 of the same act authorizes corporate pegged levies for the district in amounts which have fluctuated with district needs, (See: Ill. Rev. Stats. 1943, 1945, 1947 and 1949, chap. 42, par. 332,) and, in each year since the system prescribed by section 5.3 came into full operation, the district has reduced the pegged levy by the money subsequently received in excess of the amounts required to pay principal and interest of tax anticipation warrants. For the years 1946 to 1954, inclusive, such reductions have totaled $14,550,000.
Translating the 1949 corporate taxes into the terms of the statutes, the record shows that the authorized corporate pegged levy for that year was $10,000,000, which, by reason of collections from prior years' tax levies in excess of the amounts required to pay principal and interest on tax warrants, was reduced in the sum of $1,300,000 by the district, which then levied only $8,700,000. As provided by section 5.3, the district appropriated $6,525,000, or 75 per cent of the $8,700,000 levied for corporate functions for the budget year. The objector agrees that to the appropriation of $6,525,000 there may be added an allowance of 10 per cent, or $652,500, for loss and cost, (and the district's failure to appropriate for loss and cost is the subject of another objection,) making a total appropriation of $7,177,500. Therefore, the appellant-objector here challenges that part of the $8,700,000 levied for corporate purposes which exceeds $7,177,500, or $1,522,500. In other words, ignoring the controversy over the loss and cost item for the moment, the appellant objects to the amount levied in excess of that appropriated and challenges the constitutionality of the statutory provisions which permit such a method. The district, of course, defends the constitutionality of the statute and, at the same time, advances the argument that the actual amount involved in the objection should necessarily be the claimed amount of $1,552,500, less $1,300,000, the amount of benefits received by reduction of the pegged levy.
In Mathews v. City of Chicago, 342 Ill. 120, there is found a discussion of the various methods, born of emergency and sound business needs, which have been employed in this jurisdiction to provide funds during the period when the collection of taxes is insufficient to meet the current expenses of municipalities. One method, based upon the principle that it is not necessary for taxing authorities to wait until money is actually needed for paying outstanding obligations before taxes may be levied, has been to permit the authorities to estimate in advance, as nearly as they can, the amount of money that should be raised to meet obligations when they become due, and to thus permit a treasury balance sufficient at all times to meet all current claims upon it. Another method of bridging the gap between levy and collection of taxes, first established in 1879, (Laws of 1879, p. 78,) is the issue of tax anticipation warrants to the extent of 75 per cent of the total amount of the tax levy. Still another method is the "working cash fund" plan, which contemplates the creation, by sale of bonds, direct tax levy, or both, of a revolving fund from which money is transferred to particular corporate funds as needed and later returned to the "working cash fund" when the particular corporate fund is repleted by the collection of taxes. The latter plan, which withstood constitutional attack in the Mathews case, permits subsequent taxes to be levied to retire the bonds by which the fund was established.
What we are confronted with in the present case is still another method designed by the legislature to achieve the purpose of permitting the district to meet its obligations and expenses as they arise. The need and desirability of accomplishing such a purpose is not questioned nor can there be any doubt as to the vital nature and continuing need of the district's functions. The district urges that the method is no different in principle from the "working cash fund" plan and, on the authority of the Mathews case, where identical objections were made, is not violative of the constitution. Appellant, who also relies upon the Mathews case, contends first, that the levy in excess of the amount appropriated for produces a tax which is not "needful" within the meaning of section 1 of article IX of our constitution, second, that the tax is not for a corporate purpose within the constitutional mandate of section 9 of article IX, and, third, that the tax being neither needful, nor for a corporate purpose, deprives him of his property without due process of law. See: Mathews v. City of Chicago, 342 Ill. 120, 135.
We find it difficult to reconcile appellant's argument that the disputed tax is not for a corporate purpose with the express language of the statute that "money received or estimated to be received from the tax levied for corporate purposes for any budget year in excess of the amount required for the payment of warrants and interest thereon issued in anticipation of such tax levy, shall become a part of the corporate fund for the budget year in which said excess amount is estimated to be received by the sanitary district and the tax authorized to be levied for corporate purposes for such subsequent budget year shall be reduced by that amount." (Emphasis supplied.) Appellant appears to take the position that the disputed tax is not for a corporate purpose and is thus a needless tax which serves only to enrich the district's treasury because it is not levied for specifically appropriated purposes. Such a result does not obtain, for, as pointed out in the Mathews case (pp. 137-138,) there is no constitutional requirement that taxes levied by municipalities such as the district in this case shall state the specific purposes for which the levy is made. "Such requirements are found only in the statute, and as they are established by statute they may be modified by the legislature." Thus we think it apparent here that when the legislature directed that the money received from the tax levy in excess of the amounts needed to pay warrants "shall become a part of the corporate fund" and used to reduce the tax levy for corporate purposes of the subsequent year, it limited the use of the tax to a corporate purpose, within the meaning of section 9 of article IX of the constitution. In principle the plan is no different from the "working cash fund" method where the funds realized from the taxes levied to create the fund are not, at the time, earmarked for any particular or specific corporate use.
Nor do we find that the system provided for the district offends the mandate of section 1 of article IX which requires the legislature to provide such revenues as may be "needful." In relation to this provision, it has been held that the amount of taxes and rate of taxation are exclusively for the legislature, subject only to constitutional limitations, and that the exercise of its discretion cannot be controlled by the court except to prevent a clear abuse thereof. (People ex rel. Campe v. Board of Review, 290 Ill. 467; People ex rel. Luers v. Chicago and Alton Railroad Co. 324 Ill. 179; People ex rel. Hartman v. Terminal Railroad Ass'n, 375 Ill. 186.) As pointed out in the Mathews case, and as previously discussed, the establishment of plans or the fixing of rates, as a means whereby municipalities may be able to meet their ordinary expenses as they come due, is a question of sound business judgment and a reasonable exercise of the legislative authority. This is the fundamental concept of the method of taxation under attack in this case and, in the absence of any showing that it has resulted in a needless enrichment of the treasury or that it fails in its purpose of enabling the district to meet its obligations as they arise, we are committed to the principle that a tax of such nature does not offend the constitutional mandate for "needful" taxes.
Appellant, however, insists that the method here provided by the legislature can never result in putting the district on an "actual cash basis" and therefore is to be distinguished from the "working cash fund" plan. Section 5.2 of the Sanitary District Act of 1889, (Ill. Rev. Stat. 1949, chap. 42, par. 324l,) which is composed of definitions, defines "cash basis" in this manner: "`Cash basis' shall mean that system of accounting wherein revenues are accounted for when received in cash and expenditures are accounted for when paid." Pointing to this definition and to the fact that the district's system will be perpetually geared to and dependent upon the sale of tax anticipation warrants totaling 75 per cent of the amount of the tax levied each year, appellant urges that it is clear that the district's appropriations are not to be financed through "revenue accounted for when received in cash" but through interest bearing warrants sold in anticipation of the tax levied for corporate purposes for the budget year. He reasons thus that the tax is not for a corporate purpose and serves only to enrich the district's treasury. We find no justification or need for narrowing the legislative purpose to its definition of a "cash basis" system of accounting. Section 5.3 of the act specifically states that its purpose is to require the district to conduct its fiscal affairs and to finance its annual corporate expeditures on an "actual cash basis" for each budget year and the practical operation of the system has been to provide the district with funds by which they may meet their obligations in cash as they arise. This, as has been pointed out, is within the discretion of the legislature to permit and, inasmuch as all funds realized are applied to corporate purposes and are not permitted to accumulate or lie idly in the district treasury, the constitutional requirements for the tax are met.
Insofar as we are able to interpret and foresee the operation of the district's method of taxation, it is to be conceded, as appellant contends, that the issue and sale of tax warrants will not be eliminated, an eventuality looked upon with favor by this court when considering the "working cash fund" plan in the Mathews case. Such a feature, however, while desirable from the standpoint of tax economy, does not detract from the corporate purpose of the disputed tax nor will the continued use of warrants produce an unnecessary accumulation of funds in the district's treasury, for the clear direction of section 5.3 is that moneys received in excess of the amounts required for payment of warrants and interest shall be used to reduce the tax levied for corporate purposes for subsequent years. The situation is not the same as the case of a working cash fund where the continued use of tax anticipation warrants, once the fund was in complete operation, would have created the danger of an accumulation of idle money in the working cash fund; in this case the legislature has expressly provided against such an accumulation. It is to be noted also that even in the Mathews case, the court recognized that tax warrants would have to be issued in conjunction with the "working cash fund" plan until the fund became fully operative, yet found no constitutional barrier to the coexistence of the two methods. Nothing in the present case, where the district is permitted both to issue warrants and to levy a tax in an amount that will permit it to meet its obligations as they arise, suggests a different result. In reality, it would appear that appellant's ...