Appeal from the Circuit Court of Madison County; the Hon.
Edward C. Ferguson, Judge, presiding.
JUSTICE KARNS DELIVERED THE OPINION OF THE COURT:
Rehearing denied September 29, 1983.
The appellant, Apex Oil Company, brought these actions, consolidated on appeal, for declaratory judgment and injunctive relief against certain officials of Madison County concerned with the assessment and collection of property taxes and for administrative review of an adverse decision of the Illinois Property Tax Appeal Board, contesting the assessment of its leasehold property located within the Tri-City Regional Port District, Madison County, Illinois. The Circuit Court of Madison County resolved these proceedings adversely to Apex.
Apex is the lessee of approximately three acres of land along the Mississippi River in Madison County within the Port District. The land is owned by the United States of America and is leased to the Port District, which, in turn, subleases the property here involved to Apex. Located on the leasehold estate are two storage tanks owned by the Port District and six storage tanks erected by Apex. The parties state that these tanks are owned by Apex, but the record is silent as to the ownership of the tanks at the termination of the lease, which is not in evidence.
Section 3.1 of the Tri-City Regional Port District Act (Ill. Rev. Stat. 1979, ch. 19, par. 286.1) for the year involved provided:
"All property of every kind belonging to the Port District shall be exempt from taxation, provided that taxes may be assessed and levied upon a lessee of the District by reason of the value of the leasehold estate separate and apart from the fee and upon such improvements as are constructed and owned by others than the District. All property of the District shall be construed as constituting public property owned by a municipal corporation and used exclusively for public purposes within the provisions of Section 19.19 of the `Revenue Act of 1939', filed May 17, 1939, as heretofore or hereafter amended." (Emphasis added.)
Public Act 81-1414, effective January 1, 1981, amended section 3.1 of the Act by substituting the disjunctive "or" in place of "and"; in all other respects the statute remained the same. The parties agree that no legislative history can be found that would indicate the purpose of the amendment.
Section 19.19 of the Revenue Act of 1939 (Ill. Rev. Stat. 1979, ch. 120, par. 500.19) exempts from taxation:
"All property of every kind belonging to the Chicago Regional Port District or any other port district created by the legislature of this State, provided that a tax may be levied upon a lessee of such a District by reason of the value of a leasehold estate separate and apart from the fee, or upon such improvements as are constructed and owned by others than the Port District." (Emphasis added.)
For the year 1979, the tax assessor of Venice Township, where the Port District is located, and the supervisor of assessments of Madison County, assessed both the value of Apex' leasehold, including the two storage tanks owned by the Port District, by capitalizing the annual rental of the lease, and the improvements, the storage tanks owned by Apex, by computing the replacement cost of the tanks. The leasehold estate was valued at $77,260 and the improvements owned by Apex at $252,200. Apex does not contend that the values thus obtained were excessive or that the method of assessment was improper, as the method used to value the leasehold estate was that approved by the supreme court in People ex rel. Korzen v. American Airlines, Inc. (1968), 39 Ill.2d 11, 233 N.E.2d 568. In that case American Airlines paid the city of Chicago a monthly rental for ground at O'Hare International Airport and an additional monthly rental for a hangar owned by the city. Section 20 of the Revenue Act of 1939 (Ill. Rev. Stat. 1965, ch. 120, par. 501(2)), dealing with the valuation of real property, provided that "[e]ach taxable leasehold estate shall be valued at its fair cash value, estimated at the price it would bring at a fair, voluntary sale." The court approved a method of valuation that capitalized the fair cash value of the current market rent over the unexpired term of the lease. In that case, however, there were no improvements owned by the lessee. Here, the storage tanks owned by Apex were assessed in the same manner as other like property in the county.
• 1, 2 Apex' first argument is that the special tax treatment of leasehold estates established by section 3.1 of the Tri-City Regional Port District Act, which authorizes taxation of both the value of the leasehold and the improvements owned by others, violates article IV, section 13, of the Illinois Constitution of 1970. This argument was not raised in the pleadings or in the trial court; we could consider it waived, but because of its importance and the likelihood that it will reoccur, we will address it.
That section provides that "[t]he General Assembly shall pass no special or local law when a general law is or can be made applicable." The general law relating to port districts, section 19.19 of the Revenue Act of 1939, it is argued, only allows taxation of the value of the leasehold estate or the improvements owned by others.
The general principle of taxation contained in section 20 of the Revenue Act of 1939 is that all property is to be valued for tax purposes at a percentage of its fair cash value. Considering that statutes exempting property from taxation must be strictly construed (Follett's Illinois Book & Supply Store, Inc., v. Isaacs (1963), 27 Ill.2d 600, 605, 190 N.E.2d 324, 327), it could hardly be contended that the General Assembly does not have the power to authorize the taxation of both the leasehold estate and improvements erected thereon, as the general rule is that both should be subject to taxation, just as any property owner pays property taxes on the value of his land and the improvements erected thereon. It is clear that the General Assembly has the power to classify a leasehold as real property for purposes of taxation and to base the value of the leasehold on the value of the fee interest. (Dee-El Garage, Inc. v. Korzen (1972), 53 Ill.2d 1, 289 N.E.2d 431, rev'd on other grounds.) So, our first inquiry must be to determine the manner of taxation of leaseholds provided for in the general law relating to taxation of Port Districts before we need consider any violation of constitutional principles.
Rosewell v. Bulk Terminals Co. (1979), 73 Ill. App.3d 225, 390 N.E.2d 1294, dealt with the taxation of leasehold property in a port district. Involved there was taxation of lessees of property located in the Chicago Port District under section 19.19 of the Revenue Act of 1939. Notwithstanding the use of the disjunctive "or" in section 19.19, the court approved the assessment of both the leasehold estate, under the American Airlines, Inc. formula and improvements erected on the leasehold property by the lessee, Bulk Terminals, Inc. There the taxpayer contended that the value of the improvements placed on the leasehold by the lessee could not be included in the valuation of the lessee's leasehold interest. The court found this argument to be without merit, and noting that the improvements were for the benefit of the lessee to enable it to enjoy its ...