Appeal from the Circuit Court of Lake County; the Hon. William
D. Block, Judge, presiding.
JUSTICE UNVERZAGT DELIVERED THE OPINION OF THE COURT:
Commonwealth Edison Company (Edison) owns a nuclear steam electric generating station located in Zion Township, Lake County, commonly called "Zion Station."
Zion Park District, Zion-Benton Township High School District No. 126, Zion Public School District No. 6 and Zion Township (taxing bodies) made an assessment complaint to the Department of Local Government Affairs *fn1 (Department) claiming that Zion Station was under-assessed for real estate taxes for 1976. The taxing bodies complained specifically of the assessment of five pollution control facilities located at the Zion Station.
The Department conducted a hearing and rendered its decision adopting the position of the taxing bodies. Edison sought administrative review in the circuit court of Lake County. That court reversed the Department's assessment and reinstated an earlier Department assessment. It is from this order which the taxing bodies appeal. The Department was granted leave by this court to adopt as its own Edison's brief in this appeal.
The decision of the circuit court altered the Department's original 1976 assessment for property tax purposes of five certified pollution control facilities *fn2 (facilities) located at Zion Station.
The five facilities were certified for tax purposes in 1975 as pollution control facilities by the Pollution Control Board (PCB) as provided in section 21a-4 of the Revenue Act of 1939 (Act) (Ill. Rev. Stat. 1975, ch. 120, par. 502a-4). Facilities which are so certified are removed from local tax assessment rolls, and receive favorable tax treatment under section 21a-1 of the Act; i.e., "pollution control facilities should be valued * * * in relation to 33 1/3% of the fair cash value of their economic productivity to their owners." (Ill. Rev. Stat. 1975, ch. 120, par. 502a-1.) The facilities were valued for 1976 tax purposes under section 21a-3 of the Act by the Department as authorized by section 21a-4 of the Act (Ill. Rev. Stat. 1975, ch. 120, pars. 502a-3, 502a-4).
Section 21a-3 provided that the Department take several factors into consideration when determining 33 1/3% of the fair cash value of the certified pollution control facilities:
(1) The actual or probable net earnings attributable to the facilities in question, capitalized on the basis of their productive earning value to their owner;
(2) The probable net value which could be realized by their owner if the facilities were removed and sold at a fair, voluntary sale, giving due account to the expense of removal and condition of the particular facilities in question (basically the salvage value); and
(3) Such other information as the Department may consider as bearing on 33 1/3% of the fair cash value, to their owner, of the pollution control facilities in question, consistent with the principles set forth herein. Ill. Rev. Stat. 1975, ch. 120, par. 502a-3. *fn3
On June 15, 1976, the Department assessed the value of the five facilities at $374,265. That valuation included, inter alia, approximately two-thirds of the concrete walls, doors, floors, ceilings and windows of the Zion Station which had been certified as pollution control facilities by the PCB on the theory they constituted a containment vessel. These various components are termed "excess structures." The taxing bodies filed with the Department a petition for review and correction of the assessment, contending that in addition to net salvage value, the facilities also had "productive earning value" within the meaning of section 21a-3 because they were included in Edison's rate base and earned the same return as all of Edison's other assets.
At the hearing held on August 24, 1976, the taxing bodies presented testimony which established that the pollution control facilities are included along with other assets in Edison's rate base and, thus, they receive the same rate of return as assets which are not certified as pollution control facilities. Edison advanced its position at the hearing that the facilities were not "economically productive" within the meaning of the statute because "productive earning value" refers to the production of electricity and the pollution control facilities do not produce electricity.
In its January 12, 1977, decision increasing the valuation of the facilities from $374,265 to $24,870,240, the Department's hearing officer stated in his opinion:
"[Edison's] position was that their interpretation of * * * income production was that the facilities did not produce electricity but were present only for public benefit. While the intent of the statute may have been to prevent excessive taxation on facilities that were strictly for public benefit, we do not believe the facilities of the Power Company fit that interpretation. The return to the Power Company is just the same on this investment as it is on the rest of the plant."
The Department then issued its revised assessment as we have noted. Edison filed its petition for administrative review on February 14, 1977, contending in substance that the Department decision was contrary to the provisions of section 21a-3 because the facilities did not produce electricity and were not "economically productive." During the pendency of the instant administrative review, the parties stipulated that the cause be stayed "pending a final resolution by an Illinois court of last resort in [Edison's] appeal from an order of the Circuit Court of Cook County, adjudicating the same issues present in this cause against [Edison]; that appeal is now pending in the cause entitled Commonwealth Edison Company, Appellant, v. Department of Local Government Affairs, et al., Appellees, Appellate Court of Illinois, First District, General No. 79-1520."
The supreme court's decision in that case was filed on May 22, 1981. (Commonwealth Edison Co. v. Department of Local Government Affairs (1981), 85 Ill.2d 495.) There, the supreme court affirmed the judgment of the appellate court reversing a judgment of the circuit court of Cook County entered upon administrative review. The circuit court affirmed a 1977 tax assessment made by the Department of 12 certified pollution control facilities in Cook County. The Department had assessed those Edison facilities at 33 1/3% of their present cash value. It was Edison's position that the Department had ignored information provided by it on Department tax forms which indicated that the facilities did not have any productive earning value under section 21a-3. Specifically, the Department's assessment evidenced an ignorance of Edison's negative response as to each of the facilities to the question: "Does the control facility have any enhancement to the manufactured product or is there a by-product derived from the control facility?" Edison pointed out that the pollution control facilities owned by industries other than public utilities were assessed at rates between one-half of one percent to three percent of each facility's present cash value. Edison had presented testimony at the Department hearing that its facilities not only did not aid in the production of electricity, but in fact reduced operating efficiencies. The Department confirmed its original assessment, finding that Edison's facilities produce an extra price increment on the electricity sold by virtue of their inclusion as capital investments in the base upon which Edison's rates are calculated.
On administrative review, the circuit court affirmed the Department's assessment, but the appellate court reversed. (Commonwealth Edison Co. v. Department of Local Government Affairs (1980), 86 Ill. App.3d 768.) The Zion taxing bodies, appellants here, participated in that case as amici curiae. In considering the appeal, the appellate court determined it had to decide whether the inclusion of the cost of a pollution control facility in a regulated company's rate base renders that facility "economically productive" within the meaning of the terms used in sections 21a-1 and 21a-3 of the Act. Its decision was that the construction of the statutes urged by the Department was contrary to the legislative intent to encourage expenditures that would result in environmental improvement and to soften the tax burden on those who are required to make such expenditures. The appellate court noted that although its decision did not depend on it, a 1979 amendment to section 21a-3, effective January 1, 1980, clarified the legislature's prior intent as to when earnings may be attributed to a pollution control facility; to-wit:
"For the purposes of this Act, earnings shall be attributed to a pollution control facility only to the extent that the operation thereof results in the production of a commercially saleable by-product or increases the production or reduces the production costs of the products or services otherwise sold by the owner of such facility. * * *
This amendatory Act of 1979 is not intended to nor does it make any change in the meaning of any provision in this Section but is intended to remove possible ambiguities, thereby confirming the existing meaning of this Section in effect prior to the effective date of this amendatory Act of 1979." Ill. Rev. Stat. 1983, ch. 120, par. 502a-3.
The court observed that the question posed by the Department itself on its tax form ("Does the control facility have any enhancement to the manufactured product or is there a by-product derived from the control facility?") was consistent with the prior intent of the legislature, as presently expressly stated in the amendatory act of 1979.
The supreme court affirmed, noting that the sole issue was the proper method of assessing Edison's pollution control facilities under the Act. (Commonwealth Edison Co. v. Department of Local Government Affairs (1981), 85 Ill.2d 495.) The Zion taxing bodies again participated in that case as amici curiae. The Department did not dispute Edison's assertion there that the pollution control facilities in question do not produce a product or service or reduce Edison's cost of production in any manner. (85 Ill.2d 495, 498.) The Department also conceded that the 1979 amendment to section 21a-3 codified the position taken by Edison throughout the litigation; to-wit: "`Only when [pollution control facilities] increase the quantity of goods or services sold by their owner, reduce production costs or enhance production, are they to be assessed as productive equipment.'" 85 Ill.2d 495, 501.
The Department argued the amendment could not be used to determine the meaning of disputed terms because to do so would be to allow the General Assembly retroactively to alter the meaning of previously enacted statutory language.
The supreme court rejected the Department's position and affirmed the appellate court's judgment. It noted that although the passage of an amendment usually raises a presumption that the legislature intended to change the substantive law, the presumption is rebutted where the circumstances show the amendment was intended to clarify previously ambiguous language. (85 Ill.2d 495, 501, 505.) The supreme court determined that the presumption did not even arise in that case, however, acknowledging the ambiguity of the terms "economic productivity" and "productive earning value" and the express language of the amendment itself that its intent was "to remove possible ambiguities, thereby confirming the existing meaning" of the statute prior to the amendment.
As a result of the supreme court's decision, Edison here sought, and the taxing bodies concurred in, a remand of the cause to the Department for reassessment in accordance with the supreme court's decision. The Department then issued assessments which were slightly lower than the original 1976 assessments, but which were substantially lower than the Department's 1977 assessments. The several assessments are illustrated in the chart below.
Facility June 1976 January 1977 April 1982 Certification No. Assessment Assessment Assessment
21RA-73-12 $ 6,450 $ 403,768 $ 6,100
21RA-73-13 2,450 189,498 2,800
21RA-73-14 60,200 4,275,269 64,100
097-200-AAH-1 3,210 249,334 3,700
097-200-AAH-2 301,955 19,752,371 296,300 _________ __________ _______ $374,265 $24,870,240 $373,000
The taxing bodies sought review of these new assessments before the Department, but the Department determined that it would "not be appropriate" to ...