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People Ex Rel. City of Salem v. Mcmackin

OPINION FILED DECEMBER 1, 1972.

THE PEOPLE EX REL. CITY OF SALEM, PETITIONER,

v.

CHARLES L. MCMACKIN, II, MAYOR, RESPONDENT.)



Original petition for mandamus.

MR. JUSTICE DAVIS DELIVERED THE OPINION OF THE COURT:

This is an original mandamus action, filed pursuant to leave of court (Ill. Const. (1970), art. VI, sec. 4(a); Ill. Rev. Stat. 1971, ch. 110A, par. 381), to compel the respondent, as mayor of the City of Salem, to sign certain bonds and a lease authorized under the provisions of the Industrial Project Revenue Bond Act (hereinafter called "Act"). (Ill. Rev. Stat. 1971, ch. 24, pars. 11-74-1 through 11-74-13.) The constitutionality of the Act is challenged in this proceeding.

The Act is designed to attract industrial developments to Illinois communities. It provides a means or method whereby funds may be raised to carry out the powers vested in them by the Act. Its declared purpose is "to relieve conditions of unemployment, to aid in the rehabilitation of returning veterans, and to encourage the increase of industry within this State, thereby reducing the evils attendant upon unemployment." Par. 11-74-3.

Section 11-74-4 of the Act grants to municipalities the following additional powers:

"(1) To construct, acquire by gift or purchase, reconstruct, improve, better or extend any industrial project within or without the municipality or partially within or partially without the municipality, but in no event further than 10 miles from the territorial boundaries of such municipality, and to acquire by gift or purchase lands or rights in land in connection therewith.

(2) To issue its bonds to finance in whole or in part the cost of the acquisition, purchase, construction, reconstruction, improvement, betterment or extension of any industrial project. The governing body of the municipality in determining such cost may include all cost and estimated cost of the issuance of such bonds, all engineering, inspection, fiscal and legal expenses, and interest which it is estimated will accrue during the construction period and for 6 months thereafter on money borrowed or which it is estimated will be borrowed pursuant to this Division 74.

(3) To rent or lease such industrial project to industrial concerns in such manner that rents to be charged for the use of the industrial project shall be fixed and revised from time to time so as to produce income and revenues sufficient to provide for the prompt payment of interest upon all bonds issued under this Division 74, and to create a sinking fund to pay the principal of such bonds when due, and to provide for the operation and maintenance of such industrial project and for an adequate depreciation account in connection therewith.

(4) To pledge to the punctual payment of bonds authorized under this Division 74 and interest thereon the income and revenues to be received from such industrial project (including improvements, betterments or extensions thereto thereafter constructed or acquired) sufficient to pay such bonds and interest as they become due and to create and maintain reasonable reserves therefor.

(5) To mortgage such industrial project in favor of the holder or holders of bonds issued therefor.

(6) To sell and convey such industrial project, including without limitation the sale and conveyance thereof subject to a mortgage as provided in this Division 74, for such price and at such time as the governing body of the municipality may determine. However, no sale or conveyance of such industrial project shall ever be made in such manner as to impair the rights or interests of the holder or holders of any bonds issued for the construction, purchase, improvement or extension of any such industrial project.

(7) To issue its bonds to refund in whole or in part, bonds theretofore issued by such municipality under authority of this Division 74.

Property acquired by any municipality pursuant to the provisions of this Division 74 shall be exempt from the imposition and collection of taxes thereon while owned by the municipality, but the use of such property in subject to taxation to be paid by the lessee or occupant as provided in section 26 of the Revenue Act of 1939, filed May 17, 1939, as now or hereafter amended."

The implementation of a project under the Act and the authorization of the necessary bonds to fund the project require only the majority vote of the corporate authorities then in office. The bonds may bear interest not to exceed 7% and may mature up to 40 years after date. (Par. 11-74-5.) However, the bonds may not issue unless approved by the affirmative vote of three fifths of the corporate authorities. Par. 11-74-6.

The covenants which may be contained in any bonds are set forth in the Act. The payments due under the bonds may be secured by a mortgage on the industrial project. (Par. 11-74-7.) The bonds are a lien upon the rentals from the industrial project. Par. 11-74-9.

As to the absence of any obligation upon the part of any municipality to pay the monies due on the bonds, section 11-74-10 of the Act provides:

"No holder of any bonds issued under this Division 74 has the right to compel any exercise of taxing power of the municipality to pay the bonds or the interest thereon, and the bonds do not constitute an indebtedness of the municipality or a loan of credit thereof within the meaning of any constitutional or statutory provision. It shall be plainly stated on the face of each bond that it has been issued under the provisions of this Division 74 and that it does not constitute an indebtedness of the municipality or a loan of credit thereof within the meaning of any constitutional or statutory provision."

It is provided that the rentals shall be set so that they are sufficient to pay, when due, all bonds and interest and to provide for all expenses of operation, including maintenance, and depreciation charges. Par. 11-74-11.

It is further provided that the powers which the Act confers upon municipalities are in addition and supplemental to the powers conferred by other laws, and that the limitations imposed therein shall not affect the powers conferred by any other law. The Act does not apply to any municipality which is a home-rule unit. (Par. 11-74-13.) It is agreed that the City of Salem is not a home-rule unit.

Pursuant to the provisions of the Act, the city council of the City of Salem adopted a resolution to create an industrial project under the terms of which it would acquire and construct a new manufacturing plant to be leased to Beatrice Foods Co.; bonds secured by a pledge of the rentals and a mortgage on the property were to be issued in the total sum of $1,000,000; and a lease agreement was to be signed, which provided rentals sufficient to retire the bonds. This was done in reliance upon a preliminary agreement signed by the parties. Thereafter, the mayor refused to sign the bonds and lease agreement, precipitating this action.

The bonds and lease agreement were duly authorized by the corporate authorities and the signature of the mayor to these instruments is purely a ministerial act. Mandamus is an appropriate form of action under these circumstances. People ex rel. Ogilvie v. Lewis (1971), 49 Ill.2d 476, 491; People ex rel. City of Chicago Heights v. Richton (1969), 43 Ill.2d 267, 272, 273.

The petitioner (City of Salem) claims that the constitutionality of the Act is to be determined under the Illinois constitution of 1970, and not that of 1870. The Illinois constitution of 1970, although ratified on December 15, 1970, did not become generally effective until July 1, 1971. The Act here before us was enacted by the General Assembly on June 29, 1971, but was not signed into law by the Governor until September 7, 1971. As noted by the City, the Act was obviously enacted in anticipation of the constitution of 1970, because of its reference to those municipalities which are home-rule units, a possibility not existing prior to the constitution of 1970. We have heretofore held that such legislation is to be tested under the new constitution, and particularly so when the enactment does not become a law until after July 1, 1971, the effective date of the 1970 constitution. People ex rel. Oglivie v. Lewis (1971), 49 Ill.2d 476, 482.

It is urged that the Act, in establishing a scheme for leasing and ultimately conveying the property to a private tenant, is not an enactment for public purposes and thus contravenes section 1(a) of article VIII of the 1970 constitution, which provides: "Public funds, property or credit shall be used only for public purposes." We assume, without deciding, that public funds or property in some manner may be involved, and that the "public purpose" test must be met.

Section 11-74-3 of the Act, declares that its purpose is: to reduce conditions of unemployment and the evils attendant thereto, and to encourage the increase of industry within the State.

We recognize that the self-serving recitation of a public purpose within a legislative enactment is not conclusive of the existence of such purpose. (See: Rosemont Bldg. Supply Inc. v. Ill. Highway Trust Authority (1970), 45 Ill.2d 243, 245.) However, we stated in People ex rel. Adamowski v. Chicago Railroad Terminal Authority (1958), 14 Ill.2d 230, at page 235: "Such a legislative declaration is not to be lightly set aside," and at page 236, we further stated: "`Public purpose' is not a static concept. It is flexible, and is capable of expansion to meet conditions of a complex society that were not within the contemplation of the framers of our constitution. [Citations.]"

We have held on a number of occasions that if the principal purpose and objective in a given enactment is public in nature, it does not matter that there will be an incidental benefit to private interests. (E.g., People ex rel. Adamowski v. Chicago Railroad Terminal Authority (1958), 14 Ill.2d 230, 236; People ex rel. Gutknecht v. City of Chicago (1953), 414 Ill. 600, 611, 612; Poole v. City of Kankakee (1950), 406 Ill. 521, 530; Cremer v. Peoria Housing Authority (1948), 399 Ill. 579, 591-592.) While we acknowledge that there is a benefit to private interests in the financing of industrial projects under the Act, we hold that the principal purpose and objective of the Act is public in nature. Therefore, it does not matter that there will be an incidental benefit to private interests.

In Cremer v. Peoria Housing Authority (1948), 399 Ill. 579, at 588, we recognized that what is for the public good and what are public purposes are, in the first instance, questions for the General Assembly to determine; that the legislature is vested with a large discretion; that its determinations are entitled to full consideration; and that courts are not warranted in setting aside such an enactment unless it is clearly evasive of or contrary to constitutional prohibitions. We find no clear evasion of a constitutional prohibition relative to the Act meeting the public purposes standard.

It appears that as of this time the courts of approximately 31 States have found that industrial-project-revenue-bond statutes serve a public purpose. Legislatures in 48 States have adopted legislation to provide financing of this type. To date, court decisions in only 5 States have held such legislation invalid.

Typical of the approach of other courts to legislation of the type now before us are Green v. City of Mt. Pleasant (1964), 256 Iowa 1184, 131 N.W.2d 5; City of Pipestone v. Madsen (1970), 287 Minn. 357, 178 N.W.2d 594, and City of Gaylord v. Beckett (1966), 378 Mich. 273, 144 N.W.2d 460, wherein the Supreme Courts of these States approved their respective industrial-development acts and recognized that the consensus of modern legislative and judicial thinking is to broaden the scope of activities which may be classed ...


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