APPEAL from the Circuit Court of Cook County; the Hon. WALTER
B. BIESCHKE, Judge, presiding.
MR. JUSTICE LINN DELIVERED THE OPINION OF THE COURT:
Defendants, the Department of Local Government Affairs (DLGA), the Cook County Assessor, and the Cook County Treasurer in his position as County Collector, appeal from an order entered in the circuit court of Cook County which overruled an administrative finding of the DLGA. The DLGA, in 1979, had found that nine parcels of real estate owned by plaintiff, Illinois Central Gulf Railroad Company (Gulf), were subject to local assessment and taxation for the years 1971 to 1978. On review, under a petition filed pursuant to the Administrative Review Act, the trial court reversed the DLGA and found the property to be exempt from local assessment and taxation for those years. On appeal, defendants have sought reversal of the trial court and reinstatement of the finding of the DLGA.
We affirm the trial court's order with modifications.
The nine parcels of real estate in question are part of a land mass commonly known as the Chicago River Terminal, which is bound on the south by Randolph Street, on the north by the Chicago River, on the east by Lake Michigan, and on the west by Michigan Avenue. Prior to 1950, all of the Terminal property was owned by the Illinois Central Railroad Company, the Gulf's predecessor in title, and was used by the Central exclusively for railroad purposes.
The Central was formed in 1851 by a charter granted by the State of Illinois. ("An Act to incorporate the Illinois Central Railroad company" (Priv. Laws of Ill. 1851, at 61).) Under its charter, the Central was required to construct and operate a midcontinental railroad in Illinois and was given the power to acquire land necessary to carry out this purpose. The Terminal property was acquired for this purpose by the Central in different acquisitions in the 19th and early 20th centuries.
Under the charter, the Central was required to pay a gross receipts tax to the State and a property tax assessed by the State. The Central was "exempted from all [other] taxation of every kind." (Ill. Rev. Stat. 1979, ch. 120, par. 374.) This general exemption from local assessment and taxation applied only to property acquired by the Central to carry out its charter purpose, which was to construct, maintain, and operate a railroad. It did not apply to property acquired and used for nonrailroad purposes, which property was not exempt from local assessment and taxation. In re Swigert (1886), 119 Ill. 83, 6 N.E. 469.
All parties before us concede that all the Terminal property was exempt from local assessment and taxation until the 1950's under the Central's charter. Beginning in the 1950's, because of the growth of interstate highways and the shipment of freight by truck, the Central's need for the lake front terminal began to decline. As a result, the Central began to sell and convey different parcels in the Terminal area to private developers (the Prudential Building and the Outer Drive East are examples of such sales and conveyances). As soon as title to a parcel was conveyed, it became subject to local assessment and taxation. This series of piecemeal sales continued until 1969 when the Central entered into two separate contracts to sell all of its remaining property in the Terminal area to two entities, a limited partnership known as Metropolitan Structures and a joint venture known as the Illinois Center Plaza Venture.
The two contracts were executory in nature. Title to individual parcels was to be conveyed, and payments for those parcels were to be made, at different times over a period of 20 years, with all remaining property to be conveyed in 1990. The nine parcels in question in this case were subjects of the contracts. It appears that by 1979, title to these nine parcels had not yet been conveyed. Under the contracts, the Central reserved the right to use all property for railroad purposes until title was conveyed.
The two contracts were subject to approval by the Illinois Commerce Commission. To obtain such approval, the Central had to show that the sale of the property would not interfere with the Central's duty to the public to maintain and operate the railroad. At hearings held before the Commission in late 1969, a representative of the Central told the Commission that the Terminal property was no longer necessary or useful to the Central in carrying out its operations and its duty to the public. He said that, though operations continued in the area, the Central could gradually relocate all of its operations in the area to its property south of Randolph Street without any noticeable impact on the public. The Commission approved the sale and the contracts became binding in late 1969.
Following the approval of the contracts, the Central continued to use property in the Terminal area for railroad purposes. However, the Cook County Assessor discovered that on January 1, 1971, nine random and unconnected parcels in the Terminal were vacant. The assessor determined that these nine parcels should be subject to local assessment and taxation because they were not being used for railroad purposes and because they were subjects of the contracts for sale. Proceedings were begun before the DLGA to determine whether the nine parcels were still exempt as charter line property of the Central. These proceedings lasted until 1979. At one point, in 1972, the DLGA issued an order holding the property to be nonexempt, but this order was later remanded by the trial court for the DLGA to take further evidence. Amendments were made in the proceedings over the years to include the years 1972 to 1978 as years in which the property should be subject to local assessment and taxation.
The original issue before the DLGA was whether the nine parcels were exempt as charter line property of the Central. This issue became somewhat complicated on August 10, 1972. On that date, the Central transferred all of its assets to the Gulf as part of a reorganization plan approved by the Interstate Commerce Commission. Because of this transfer, the supreme court subsequently held that the Gulf, after December 31, 1972, had no right to the use of the Central's tax exemption under the charter. (Snow v. Dixon (1977), 66 Ill.2d 443, 362 N.E.2d 1052.) As a result, the legal issues before the DLGA changed after the transfer. Initially, the DLGA had to determine if the property was exempt as charter line property of the Central in the years 1971 and 1972. Then, the DLGA had to determine whether the property was exempt for the years 1973 to 1978 when it was owned by the Gulf.
The applicable exemption statute for the Gulf is found in the Revenue Act, section 79 et seq. (Ill. Rev. Stat. 1979, ch. 120, par. 560 et seq.). Under the Revenue Act, a railroad's "operating property" is exempt from local assessment and from taxation based on such an assessment. "Operating property" is defined as:
"[A]ll tracks and right of way, all structures and improvements on such right of way, all rights and franchises, all rolling stock and car equipment, and all other property, real or personal, tangible or intangible connected with or used in the operation of the railroad including real estate contiguous to railroad ...