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People Ex Rel. City of Canton v. Crouch





Appeal from the Circuit Court of Fulton County, the Hon. Charles Wilhelm, Judge, presiding.


The mayor of the city of Canton, Harlan E. Crouch, appeals from a judgment of the circuit court of Fulton County entered in a mandamus proceeding brought against the mayor by the city. The petition for a writ of mandamus was filed to compel the mayor to execute two general obligation bonds authorized by a municipal ordinance adopted July 5, 1978. The mayor, in a letter to the city council, refused to execute the bonds, stating that he could not because there was some doubt as to the "validity, interpretation, and constitutionality" of the enabling act, the Real Property Tax Increment Allocation Redevelopment Act (hereinafter the Act) (Ill. Rev. Stat. 1977, ch. 24, pars. 11-74.4-1 through 11-74.4-11). The circuit court did not agree and, based upon the pleadings, a stipulation of fact and multiple exhibits, denied the mayor's motion for summary judgment and entered summary judgment in favor of the city. The mayor appealed to the appellate court and the cause was transferred to this court pursuant to Rule 302(b) (73 Ill.2d R. 302(b)).

The issue presented is whether the Act is constitutional. The Act became effective January 10, 1977. Its stated purpose is to eradicate blighted conditions and prevent new ones from occurring. The intent of the Act is to redevelop blighted areas so as to prevent the further deterioration of the tax bases of these areas and to remove the threat to the health, safety, morals and welfare of the public which blighted conditions present. (Ill. Rev. Stat. 1977, ch. 24, pars. 11-74.4-2(a), (b).) The General Assembly declared:

"[I]ncremental tax revenues derived from the tax rates of various taxing districts in redevelopment project areas for the payment of redevelopment project costs is of benefit to said taxing districts for the reasons that taxing districts located in redevelopment project areas would not derive the benefits of an increased assessment base without the benefits of tax increment financing * * *." Ill. Rev. Stat. 1977, ch. 24, par. 11-74.4-2(c).

The procedure under the Act authorizes public hearings and, subsequently, the passage of an ordinance designating a redevelopment project area, as defined in section 11-74.4-3(h) (Ill. Rev. Stat. 1977, ch. 24, par. 11-74.4-3(h)), and approving a redevelopment plan or project (Ill. Rev. Stat. 1977, ch. 24, par. 11-74.4-5). Notice of the hearing is required to be given to property owners within the redevelopment area, both by publication and mailing. (Ill. Rev. Stat. 1977, ch. 24, par. 11-74.4-6.) Once an ordinance authorizing a redevelopment plan and project and designating a redevelopment project area is adopted, the municipality is granted a panoply of powers to carry the plan into effect. For example, the municipality may: make and enter into all necessary or incidental contracts; acquire property by purchase, donation, lease or eminent domain; own, convey, lease, mortgage or otherwise dispose of property; demolish, remove, renovate, rehabilitate or construct any structure or building within a redevelopment project area; incur development costs, create a commission to exercise powers under the Act; and exercise any and all other powers necessary to effectuate the purposes of the Act. Ill. Rev. Stat. 1977, ch. 24, par. 11-74.4-4.

Additionally, the municipality may issue bonds, incur other obligations and pledge the full faith and credit of the municipality as well as the net revenues from, and taxes collected on, the redevelopment project area as collateral for repayment of its obligations. The obligations must have a maturity date not exceeding 20 years. The ordinance authorizing the obligations may provide that the obligations shall contain a recital that they are issued pursuant to the Act, which recital shall be conclusive evidence of their validity and of the regularity of their issuance. The debt incurred by a municipality pursuant to the Act is exclusive of any statutory limitation upon the indebtedness a taxing district may incur. Ill. Rev. Stat. 1977, ch. 24, par. 11-74.4-7.

Once an ordinance is passed which adopts tax increment allocation financing, the county clerk immediately thereafter determines the most recently ascertained equalized assessed value of each lot, block, tract or parcel of real property within the redevelopment project area. That value is designated the "initial equalized assessed value." The county clerk adds these values together to reach the "total initial equalized assessed value" of all the taxable real property within the project area. The "total initial equalized assessed value" is then used to compute the rate per cent of tax with respect to every taxing district in the redevelopment project area in lieu of the current equalized assessed value of all taxable real property, for as long as tax increment allocation financing is in effect. (Ill. Rev. Stat. 1977, ch. 24, par. 11-74.4-9.) Each year after the adoption of the ordinance, until redevelopment costs are paid, those real property taxes which are attributable to the initial equalized assessed value shall be paid by the taxpayers to the various taxing districts in the manner required by law in the absence of the adoption of tax increment allocation financing. (Ill. Rev. Stat. 1977, ch. 24, par. 11-74.4-8(a).) That portion of taxes which is attributable to the current equalized assessed value over and above the initial equalized assessed value of all taxable property in the project area shall be allocated to and, when collected, shall be paid by the county collector to the municipal treasurer, who shall deposit the taxes into a special fund called the special tax allocation fund of the municipality for the purpose of paying redevelopment-project costs and obligations incurred in the payment thereof. (Ill. Rev. Stat. 1977, ch. 24, par. 11-74.4-8(b).) Once all redevelopment costs and obligations are paid, all surplus funds remaining in the special tax allocation fund shall be paid by the municipal treasurer to the county collector for payment to the taxing districts in the redevelopment area.

The unique part of tax increment allocation financing is that the Act permits tax increments attributable to an increase in real property values to be paid from each taxing district which overlaps with the project area to the municipality. In the case at bar, the taxing districts affected are the County of Fulton, Canton Township, Canton Park District, the Spoon River College District, Canton Union School District No. 66 and the city of Canton. After the ordinance was adopted designating a downtown redevelopment project area and approving a redevelopment plan and project, the city authorized the sale of tax allocation bonds. It is these bonds which the mayor refuses to execute.

We have reviewed the briefs of the parties and the two amici, as well as the record on appeal. We agree with the mayor that the tax increment scheme is a "novel proposition," but we are unable to say it violates any constitutional provision. Accordingly, we affirm.

The first contention raised by the mayor in essence is that the redevelopment of blighted private commercial areas within a municipality is not a public purpose with respect to municipalities, counties, townships, park districts, school districts and other limited-purpose units of government.

This court addressed this issue recently in People ex rel. City of Urbana v. Paley (1977), 68 Ill.2d 62. That case was also a mandamus proceeding, brought by the city to compel the mayor to execute certain general obligation bonds and interest coupons for the purpose of acquiring a parcel of land for an urban development program. The court said:

"It is well established that the elimination of a blighted area is itself a public purpose, whether its characterization as blighted results from its physical condition or its unmarketability. (People ex rel. Gutknecht v. City of Chicago

, 414 Ill. 600.) This is no less true when the purpose of the municipality is the prevention, rather than elimination, of blight which has not yet begun or which, though begun, has not yet reached its apex." (68 Ill.2d 62, 73.)

Further, the court stated in Paley:

"[T]he fact that the statute provide[s] an impetus to economic development satisfie[s] the requirement of public purpose. * * * [T]he city's determination to promote the commercial rebirth of its downtown area is a public purpose satisfying the requirements of article VIII, section 1(a), and the due process clause [of the 1970 Constitution]." (68 Ill.2d 62, 74.)

Thus, we conclude that, as to the city of Canton, the Act fulfills the constitutional requirement that municipal revenues spent to eliminate urban blight, as contemplated under this act, are spent for a legitimate public purpose.

We need to decide, however, whether tax revenues may be collected from the other taxing districts and expended by the city in order to carry out a redevelopment plan within the city. It is argued by the mayor that some of the other taxing districts, such as the Spoon River Junior College District and the Park District, may distribute their revenues for limited purposes only. Thus, argues the mayor, the revenues collected by the various special taxing districts may only be spent to advance the corporate purpose for which they were created and not to assist in redeveloping the city of Canton. We do not agree that a corporate purpose of each taxing district needs to be fulfilled in this case in order for the legislature to constitutionally authorize the elimination of urban blight. The single constitutional requirement in this regard is that public funds, property or credit be used only for public purposes. (Ill. Const. 1970, art. VIII, sec. 1(a); People ex rel. City of Urbana v. Paley (1977), 68 Ill.2d 62, 75; People ex rel. City of Salem v. McMackin (1972), 53 Ill.2d 347, 354.) In Paley, we explicitly concluded that "the application of the public-purpose doctrine to sanction urban redevelopment can no longer be restricted to areas where crime, vacancy, or physical decay produce undesirable living conditions or imperil public health. Stimulation of commercial growth and removal of economic stagnation are also objectives which enhance the public weal. [Citations.]" People ex rel. City of Urbana v. Paley (1977), 68 Ill.2d 62, 74-75.

In People ex rel. Sanitary District v. Schlaeger (1945), 391 Ill. 310, an amendment to the election law was challenged. The amendment provided that counties, municipalities and taxing districts participating in and benefiting by elections, are required to apportion the costs of elections. After the sanitary district failed to pay its costs, the county collector deducted tax revenue intended for the district and credited the revenue to the county clerk as reimbursement for having paid the sanitary district's costs. The sanitary district complained that the State lacked authority to deduct such amounts because they constituted an unlawful State tax for a local purpose and because the amendments embraced subject matter not expressed in the title or germane to the act amended. This court rejected both of the sanitary district's arguments. In holding that the deductions for elections were for a valid public, as opposed to a local, purpose, it was said:

"The legislature may direct a municipality, as an agency of the State, to perform any governmental function of the State. In such case the municipality simply becomes an agency of the State. The power in all its aspects remains in the legislature, unchanged and unaffected by the delegation to the agent. It is delegated to smaller municipalities only that it may be more effectively exercised. [Citation.]" 391 Ill. 314, 323-24.)

Moreover, it was there stated:

"It has been frequently held by this court that corporate purposes, within the meaning of the constitutional provisions here invoked, do not include functions which a municipal corporation performs in its governmental capacity as an agency of the State, although the performance ...

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