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Rosemont Bldg. Sup. v. Hwy. Tr. Auth.

OPINION FILED MARCH 24, 1970.

ROSEMONT BUILDING SUPPLY, INC., ET AL., APPELLANTS,

v.

ILLINOIS HIGHWAY TRUST AUTHORITY ET AL., APPELLEES.



APPEAL from the Circuit Court of Du Page County; the Hon. WILLIAM J. BAUER, Judge, presiding.

MR. JUSTICE CULBERTSON DELIVERED THE OPINION OF THE COURT:

Rehearing denied May 26, 1970.

Rosemont Building Supply, Inc., and James Cuzzone, plaintiffs, initiated this taxpayers' action in the circuit court of Du Page County to challenge the constitutionality of the Illinois Highway Trust Authority Act, (Ill. Rev. Stat. 1969, ch. 121, par. 101-1 et seq.,) which went into effect July 10, 1969. Named as defendants were the Illinois Highway Trust Authority, the Governor and various other State officials. A summary judgment finding the act to be constitutional was entered for defendants and plaintiffs have appealed. On leave granted, the Illinois Agricultural Association, which also adopts the theory that the act is invalid, has filed a brief as amicus curiae.

The act in question created the Illinois Highway Trust Authority as a body politic and corporate to function as a governmental corporation for a stated purpose of "constructing, reconstructing, improving, equipping, and furnishing State highways, bridges, viaducts, interchanges and roadside rest areas," any and all of which purposes or undertakings are subsequently referred to in the act as "projects." (Ill. Rev. Stat. 1969, ch. 121, par. 101-4.) And while not entirely clear, the act apparently contemplates that the Authority may take over highway projects already planned or partially completed by the Department of Public Works and Buildings inasmuch as subparagraph (e) of section 4 permits the Authority: "To acquire projects from the Department by purchase or otherwise, and to construct, improve, equip, and furnish projects." By the provisions of section 3 (par. 101-3) the Authority consists of three members appointed by the Governor with the advice and consent of the Senate, one of whom is designated chairman by the Governor. By implication, the salaries of the members are to be paid by the Authority.

To permit the corporate purposes to be accomplished, subparagraph (d) of section 4 empowers the Authority: "(d) To acquire under agreement with the Department of Public Works and Buildings, State highways, bridges, easements or rights of way necessary or desirable for carrying out the purposes of the Authority and (without limitation of the foregoing) to lease as lessor to the Department of Public Works and Buildings any project at any time constructed or made available for public use by the Authority, and any property, real, personal, or mixed, tangible or intangible, or any interest therein, at any time acquired by the Authority. Such leases may be entered into contemporaneously with any financing to be done by the Authority and payments under the terms of such leases shall begin at any time after execution of any such leases. Such leases shall contain the provision that rents under the leases shall be payable solely from appropriations to be made by the General Assembly from the Road Fund and any revenues derived from the operation of the leased premises. In the event of nonpayment of rents reserved in such leases the Authority shall maintain and operate such facilities or projects, or execute leases thereof to others for any suitable purposes." Complementing provisions of section 13 (par. 101-13) authorize the Department, with the approval of the Governor, to contract with the Authority to lease projects being constructed and, upon completion, to enter into leases for the use of a project for a term not to exceed 30 years.

Subparagraph (h) of section 4 gives the Authority power to "fix, alter, charge and collect rates, rentals and other charges" for the use of its facilities or projects "at rates to be determined by agreement or otherwise," for the purpose of providing payment of the expenses of the Authority, the payment of principal and interest on the bonds or other obligations of the Authority, and the costs of construction, improvement, repair, equipping and furnishing its facilities or properties. A concluding sentence of the subparagraph provides: "However, the Authority is not empowered to charge tolls for the privilege of vehicular or other traffic usage of a Project as defined in Section 2 of this Act except in the event of non-payment of rents reserved in lease agreements with the Department."

The Authority is given no power to tax, but to provide the funds necessary to permit its purposes, or projects, to be accomplished is empowered by subparagraph (i) of section 4: "To borrow money, make and issue negotiable notes, bonds and other evidences of indebtedness or obligations (herein called `bonds') of the Authority, not exceeding $2,000,000,000 in the aggregate, and not exceeding a total of $1,000,000,000 in the first 4 years after the effective date of this Act, for the acquisition, construction, reconstruction and improvement of highway projects in such amounts as to defray the ordinary and contingent expenses of the Authority, and in such amounts as necessary for defraying the cost of such projects and to secure the payment of such bonds, or any part thereof, by pledge or deed of trust of all or any of its revenues, rentals and receipts, and to make such agreements with the purchasers or holders of such bonds or with others in connection with any such bonds, whether issued or to be issued, as the Authority shall deem advisable and, in general, to provide for the security of said bonds and the rights of the holders thereof." Ensuing subparagraphs permit the Authority to borrow money or accept grants from any Federal agency (par. 101-4(1)); to pledge or encumber all revenues and receipts of the Authority as security for its obligation (par. 101-4(m)); and it is expressly provided in subparagraph (n) that the obligations and debts of the Authority shall not be deemed to be obligations of the State or any of its political subdivisions.

Section 6 (par. 101-6) has to do with the terms of the bonds the Authority issues, which must mature in a period not exceeding 30 years and may bear interest at a rate not in excess of 7% per annum, while section 7 (par. 101-7) sets forth the rights and remedies of the bondholders. It is the purport of subparagraph (a) of section 6 that the obligation of the Authority on its bonds may be restricted "to all or any of the rentals or receipts of the Authority from all or any projects or properties." (Emphasis added.) Noteworthy in light of the emphasized words are the provisions of subparagraph (j) of section 4 which give the Authority power: "To convey property, without charge, to the State of Illinois if and when all debts, which have been secured by the income from such property, have been paid."

Other sections of the act having some pertinency to the principal issue raised here are: Subparagraph (j) of section 2 (par. 101-2(j)) wherein the terms "equipment," "facilities" and "furnishings" as used in the Act are defined as including "any equipment and furnishings whatsoever as may be deemed desirable and required by the Department of Public Works and Buildings for the use of such project"; the direction in subparagraph (n) of section 4 that: "The Authority shall cooperate with the Department in the preparation of plans and specifications for any project;" section 5 (par. 101-5) which permits the Authority and the Department of Public Works and Buildings to enter into agreements for mutual co-operation in the use of employees, equipment and services incidental to the construction, maintenance and operation of projects; section 14 (par. 101-14) which provides that whenever additional land or interests in land are required by the Authority for its corporate purposes, "the Department of Public Works and Buildings, with the approval of the Governor, shall have power and authority to acquire such lands by purchase or condemnation, in the name of the State of Illinois"; and section 15 (par. 101-15) authorizing the Authority to provide by rule that construction bids may be submitted to the Department of Public Works and Buildings as agent for the Authority.

As the first of numerous constitutional objections plaintiffs contend that the $2,000,000,000 in bonds to be issued by the Authority will in fact create a debt against the State, thus causing the act to violate the provisions of section 18 of article IV of the Illinois constitution which prohibits the State from incurring a debt in excess of $250,000 unless the law authorizing the excess has been submitted to the people at a general election and shall have received a majority of the votes cast. (See Mitchell v. Lowden, 288 Ill. 327; People ex rel. City of Chicago v. Barrett, 373 Ill. 393.) And although section 4 of the Act expressly provides that obligations of the Authority are not to be deemed the obligations of the State, this self-serving declaration is not conclusive. Determination of whether the bonds constitute a debt against the State within the proscription of the constitution is a judicial function, rather than a legislative matter. (Baro v. Murphy, 32 Ill.2d 453.) On this score, the parties agree that if the obligation is in fact a debt of the State, the act is invalid in its entirety.

Plaintiffs argue broadly that the Authority is not a separate and independent entity, but is in reality a mere alter ego of the State with the result that the obligations of the Authority are indistinguishable from those of the State. (See People ex rel. Greening v. Green, 382 Ill. 577.) An analysis of the act gives support to this contention. Prior to the enactment of the statute under consideration exclusive authority to construct, improve, maintain and repair State highways, with the exception of toll highways, had been conferred by the legislature upon the Department of Public Works and Buildings, as was the authority to construct rest areas. (See Ill. Rev. Stat. 1967, ch. 121, art. 4.) By the present act it appears that the legislature sought to divert to the Authority the function of "constructing, reconstructing, improving, equipping and furnishing State Highways, bridges, viaducts, interchanges and roadside rest areas." However, the curtain separating the Authority and the Department in the performance of these functions is gossamer at best.

No express provision is made as to who will select or designate the particular projects to be undertaken by the Authority, but the clear implication is that the decision of the Department will control. Subparagraph (e) of section 4 permits the Authority to "acquire projects from the Department by purchase or otherwise," while a later provision of the section directs that: "The Authority shall cooperate with the Department in the preparation of plans and specifications for any project." In addition, subparagraph (j) of section 2 defines "equipment," "facilities" and "furnishings" as meaning "whatsoever as may be deemed desirable and required by the Department of Public Works and Buildings." Similarly, the act gives the Authority no power to maintain or repair the highways it will construct, but provides in section 5 that the Authority and the Department may enter into "agreements providing for mutual cooperation between them in the use of employees, equipment and services incidental to the construction, maintenance and operation of projects." Leaving little doubt that maintenance and repair will in fact be accomplished by the Department is the circumstance that, two days before the Illinois Highway Trust Authority Act became effective, article 4 of the Illinois Highway Code was amended by adding section 4-409 to authorize the Department to "enter into a written contract with any other highway authority for the maintenance, administration, engineering or improvement of any highway or portion thereof." Ill. Rev. Stat. 1969, ch. 121, par. 4-409.

Subparagraph (d) of section 4, as previously noted, permits the Authority to acquire under agreement with the Department any State highways, bridges, easements or rights of way necessary or desirable for carrying out the purposes of the Authority, and if additional lands or interests in land are required, it is the purport of section 14 that they will, with the approval of the Governor, be acquired by the Department by purchase or condemnation in the name of the State of Illinois. Further cementing the nexus between the Authority and the Department is the provision of ...


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