The opinion of the court was delivered by: Shadur, District Judge.
MEMORANDUM OPINION AND ORDER
Morton Arboretum ("Arboretum"), one of the major holders of
Northern Illinois Toll Highway Revenue Bonds, Series of 1955
("Bonds"), challenges the 1984 amendment (the "Amendment,"
P.A. 83-1258) to the statute (the "Act," Ill.Rev.Stat. ch.
121, ¶¶ 100-1 to 100-35) creating the Illinois State Toll
Highway Authority ("Authority").*fn1 Arboretum says the new
provisions of the Amendment impair the terms of the Bond
resolution (the "Resolution") covering the original issuance of
the Bonds, in violation of Arboretum's rights under (1) the
Contract Clause (U.S. Const. art. I, § 10), (2) the Fourteenth
Amendment*fn2 and (3) the Illinois Constitution's version of
the Contract Clause (Ill. Const. art. I, § 16).*fn3
For the reasons stated in this memorandum opinion and order,
defendants' Fed.R.Civ.P. ("Rule") 12(b)(6) motion is granted
and Arboretum's Complaint and this action are dismissed.
Bondholders' Rights Under the Resolution
As the name "revenue bonds" indicates, holders of the Bonds
cannot look to the faith and credit or taxing power of the
State of Illinois (Res. § 7.01), but only to "Revenues" of the
tollway system (the "Facility," as it is termed in the
Resolution). In a fashion typical of revenue bond issues, the
Resolution has a number of provisions designed to protect the
integrity of the Bond payment provisions:
1. All revenues from tolls charged to users of
the Facility and from other collateral income
derived from the Facility (collectively
"Revenues") are a trust fund "exclusively and
irrevocably pledged . . . for the security and
payment or redemption of, and for the security
and payment of interest on," the Bonds (Res.
2. Authority is obligated to set tolls at
levels at least sufficient to service the
Facility and to meet the current obligations
(including minimum Sinking Fund requirements) on
the Bonds (Res. § 4.01.1).
3. No Revenues will be used for any purposes
except those specified in the Resolution (Res.
4. No other bonds can be issued by Authority,
nor can it create any other lien or charge on the
Facilities or the Revenues (Res. § 7.04).
5. Minimum Sinking Fund requirements call for
accelerating deposits typical of revenue bond
issues, self-amortizing over the life of the
Bonds (Res. § 4.03.2 (Third)). Excess Revenues must
also be transferred to the Sinking Fund Account
(Res. § 4.03.2(g)). All amounts in the Sinking Fund
must be applied to payment and retirement or
redemption of the Bonds (Res. § 5.04).
Authority has no obligation to create surpluses to accelerate
retirement of the Bonds beyond the mandatory Sinking Fund
requirements. Indeed Act ¶ 100-19 requires that tolls be fixed
"at the lowest possible rate that will provide funds
sufficient" to service the Facility and the Bonds, including
Sinking Fund requirements (more of this later). Resolution §
4.01(4) specifically gives Authority the right to reduce tolls,
conditioned only on (1) notice to interested parties, (2)
current compliance with the funding requirements and (3)
certification that the reduced rate will provide sufficient
Revenues to meet the funding requirements for the next ten
To facilitate the construction, operation and maintenance of
a new projected North-South Tollway, the 1984 Amendment
provides for the issuance of Refunding Bonds for purposes of
refunding the Bonds (Act ¶ 100-20.1). Under Act ¶ 100-20.1(f)
all the Bonds will be "deemed paid and no longer . . .
outstanding for purposes of [the] [R]esolution . . . and all
rights and obligations under [the] [R]esolution . . . shall be
deemed discharged . . ." upon establishment of an irrevocable
trust with either:
(a) funds adequate to meet all payment
obligations on the Bonds; or
(b) obligations issued or guaranteed by the
United States government, the amount of which is
sufficient to pay the Bonds; or
(c) the same kinds of obligations in an amount
that, taking into account investment earnings on
those obligations, will be sufficient to pay the
Bondholders of course will retain "an irrevocable and
unconditional right to payment in full of all principal of and
premium, if any, and interest on such outstanding bonds, at
maturity or upon prior redemption, from the amounts on deposit
in such trust" (Act ¶ 100-20.1(f)) — the difference being that
they will look to the trust funds and not to the Revenues of
Last Term the Supreme Court announced the rule of Conley v.
Gibson, 355 U.S. 41, 45-46, 78 S.Ct. 99, 101-102, 2 L.Ed.2d 80
(1957) was still alive and well and living in Washington.
Hishon v. King & Spalding, ___ U.S. ___, 104 S.Ct. 2229, 2233,
81 L.Ed.2d 59 (1984) phrased the applicable standard as
requiring that a complaint survive unless "it is clear that no
relief could be granted under any set of facts that could be
proved consistent with the allegations." But as Judge Bua ...