Appeal from the Circuit Court of Sangamon County; the Hon.
Richard J. Cadagin, Judge, presiding.
JUSTICE WEBBER DELIVERED THE OPINION OF THE COURT:
Rehearing denied December 30, 1983.
This case concerns the home rule taxing powers of the city of Springfield; specifically, whether the proceeds collected from a tax imposed upon the rental of hotel and motel rooms may be used by the city for general corporate purposes, or whether such proceeds are restricted to the promotion and development of tourism and conventions.
In 1972 the city adopted an ordinance which in substance provided for a tax upon the use and privilege of renting a hotel or motel room. The tax was to be collected from the renter, and after payment of some of the indebtedness of the Springfield Metropolitan Exposition and Auditorium Authority, the balance of the proceeds from the tax was to be paid into a special fund to promote tourism and conventions in the city.
In 1976 the ordinance was amended to remove the requirement that the tax proceeds be used for the development of tourism and instead diverted the tax proceeds into the city's treasury. Provision was made for payment to the exposition authority and the balance was to be retained until lawfully appropriated and expended by ordinance.
In 1982 the city adopted its annual appropriation ordinance which provided for the anticipated use of $200,000 of hotel-motel tax receipts in order to balance the city's budget. Within a few days after the adoption of this ordinance, the plaintiffs, a hotel-motel association and certain operators of hostelries in the city, filed the instant suit against the defendants, the city, its mayor, and its commissioners. After some procedural problems which are not pertinent here, the complaint was amended and dismissed by the trial court on motion of the defendants. This appeal followed.
The amended complaint alleges the history of the ordinances as set forth above and sought as relief: (1) a declaratory judgment that the 1976 ordinance violated the provisions of article VII, sections 6(e) and 6(g), (h) and (i) of the Illinois Constitution of 1970, and section 8-3-14 of the Illinois Municipal Code (Ill. Rev. Stat. 1981, ch. 24, par. 8-3-14); and (2) a permanent injunction prohibiting the defendants from transferring the hotel-motel tax funds to any fund other than that for the promotion of tourism, conventions and other special events in the city.
It is undisputed that Springfield is a home rule city and thus possesses the power to tax under section 6(a) of article VII of the Illinois Constitution of 1970. Any limitation on that power must be found in section 6(e) which provides:
"A home rule unit shall have only the power that the General Assembly may provide by law * * * to license for revenue or impose taxes upon or measured by income or earnings or upon occupations." Ill. Const. 1970, art. VII, sec. 6(e).
The root question here is whether the Springfield tax is one upon an occupation; if it is not, the city has ample power under section 6(a) to impose the tax without limitation; if it is, then the city must follow the General Assembly guidelines.
Plaintiffs' principal argument is that the latter alternative is the correct one; that the tax is one upon an occupation, and therefore the city must follow what has been mandated by the General Assembly. This mandate is found, according to plaintiffs, in section 8-3-14 of the Illinois Municipal Code, which provides:
"The corporate authorities of any municipality containing at least 25,000 and less than 500,000 inhabitants may impose a tax upon all persons engaged in such municipality in the business of renting, leasing or letting rooms in a hotel, as defined in `The Hotel Operators' Occupation Tax Act,' at a rate not to exceed 5% of the gross rental receipts from such renting, leasing or letting, excluding, however, from gross rental receipts, the proceeds of such renting, leasing or letting to permanent residents of that hotel, and may provide for the administration and enforcement of the tax, and for the collection thereof from the persons subject to the tax, as the corporate authorities determine to be necessary or practicable for the effective administration of the tax.
Persons subject to any tax imposed pursuant to authority granted by this Section may reimburse themselves for their tax liability for such tax by separately stating such tax as an additional charge, which charge may be stated in combination, in a single amount, with State tax imposed under `The Hotel Operators' Occupation Tax Act.'
Nothing in this Section shall be construed to authorize a municipality to impose a tax upon the privilege of engaging in any business which under the constitution of the United States may not be made the subject of taxation by this State.
The amounts collected by any municipality pursuant to this Section shall be expended by the municipality solely to promote tourism, conventions and other special events within that municipality or ...