Appeal from the Circuit Court of Winnebago County; the Hon.
John E. Sype, Judge, presiding.
JUSTICE HOPF DELIVERED THE OPINION OF THE COURT:
Plaintiff, Royal Liquor Mart, Inc., Hollywood Food Services, Inc., and August Sacco, brought this suit as a class action (Ill. Rev. Stat. 1983, ch. 110, par. 2-801 et seq.) to enjoin the city of Rockford from collecting a 1% sales tax on food, beverages, liquor and rentals on hotel and motel rooms, and to recover all taxes collected thereunder since April 14, 1983. Plaintiffs contend that the sales tax ordinance, No. 1978-52-0, enacted April 14, 1978, as an exercise of the city of Rockford's home rule power pursuant to article VII, section 6(a), of the Illinois Constitution (Ill. Const. 1970, art. VII, sec. 6(a)) became invalid when the city's home rule powers were repealed by referendum held on April 12, 1983, and certified on April 14, 1983. Consequently, it is claimed that the city lost its authority to collect this tax as of that date.
The Rockford Metropolitan Exposition, Auditorium and Office Building Authority (authority) and the United Bank of Illinois (trustee) were granted leave to intervene. They further filed answers, affirmative defenses, cross-motions for summary judgment or in the alternative judgment on the pleadings and in the case of the trustee a cross-complaint for declaratory relief and damages.
On cross-motions for summary judgment filed in accordance with section 2-1005 of the Code of Civil Procedure (Ill. Rev. Stat. 1983, ch. 110, par. 2-1005), the circuit court of Winnebago County ruled in favor of the defendant city and upheld the tax. Likewise it granted the motions for summary judgment of the authority and trustee, and in the case of the trustee granted its counterclaim for declaratory relief (Ill. Rev. Stat. 1983, ch. 110, par. 2-701). The court denied plaintiffs' motion for summary judgment. The city continues to collect this tax. The plaintiffs appealed. We affirm.
Plaintiffs filed their revised second amended complaint on November 3, 1983, asking for declaratory relief and damages (Ill. Rev. Stat. 1983, ch. 110, par. 2-701). On November 3, 1983, their claim was certified as a class action for all persons and entities who paid or collected the 1% sales tax after April 14, 1983. Plaintiffs, Royal Liquor Mart, Inc., and Hollywood Food Services, Inc., were deemed proper parties to represent the interests of the collecting agents. Plaintiff, August Sacco, was deemed a proper representative of the class who paid the 1% tax in Rockford.
The first issue to be considered is whether the trial court erred in granting defendants' summary judgments and denying plaintiffs'. One of the bases of the trial court's decision was that as a matter of law the tax was validly adopted and levied and remained valid "so long as such tax is pledged to * * * and supports a valid obligation," despite the repeal of home rule.
The second question to be considered arises from the fact that some of Rockford's 1% sales tax was earmarked to fund "any operating deficit" of the Rockford "Metro Centre," the exposition building to be constructed. The authority issued bonds to fund the development of the Metro Centre, and the city agreed to enact the 1% sales tax described herein, in accordance with the terms of an amended intergovernmental agreement entered into between the city and the authority on May 26, 1978. Under the terms of the amended agreement the trustee is to provide funds monthly. The agreement states in paragraph 3.04(c)(ii):
"Each month thereafter until all bonds issued by the Metro Authority and supported by State Funding are retired, the trustee shall continue to pay to the Authority each month's reported Operating Deficit, if any. * * * If, for any reason, the sales taxes levied herein shall be declared invalid by a court of competent jurisdiction, or shall otherwise not provide sufficient funds for the purposes of paying the Operating Deficit of the Metro Authority, the City shall enact such other tax or taxes, or take such other actions as may be necessary and appropriate, to provide for paying the Operating Deficit; provided, however, that in no event shall the Metro Authority be the recipient of any income resulting from taxes as are or may be levied on the personal or real property in the City of Rockford."
The city, the trustee and the authority all contend that the invalidation of the sales tax would be an unconstitutional violation of the contract clauses of the Constitution of the United States, article I, paragraph 10 (U.S. Const., art. I, sec. 10) and the Illinois Constitution, article I, paragraph 16 (Ill. Const. 1970, art. I, sec. 16). The trial court agreed, and the propriety of its ruling is the second issue to be addressed.
The court, in considering the defendants' cross-motions for summary judgment, determined there was no genuine issue of material fact, and that the defendants were entitled to judgment as a matter of law, and ruled in favor of the trustee on its countercomplaint for declaratory relief, and denied the plaintiffs' motion for summary judgment. The court upheld the sales tax and held that the city could continue to collect it. The court stated that on the basis of the bond ordinance and the agreements:
"[T]he Bondholders and the Authority established contract rights and vested rights which are protected by the Constitution of the United States, Art. 1, sec. 10, which provides no state shall pass any law impairing the obligation of contracts, and by Illinois Constitution, Art. 1, sec. 16, which provides no law impairing the obligation of contract shall be passed."
The authority was originally established in 1969 as part of a state-wide civic center program, and was authorized to construct, equip and maintain auditorium, exposition and office buildings for the purpose of promoting "expositions, conventions, theatrical, sports and cultural activities." (Ill. Rev. Stat. 1981, ch. 85, par. 1334.) The authority also had the right to issue interest-bearing revenue bonds which would be payable from income derived from civic activities and from funds received by the authority from any other source. Ill. Rev. Stat. 1981, ch. 85, par. 1340.
The city passed ordinance No. 5 on July 11, 1978. The purpose of this bond ordinance was to permit the authority to issue Metro Centre bonds. In article VI
of this ordinance it provides that its terms constitute a contract between the authority and the bondholders.
Another mechanism for funding was created by the State Legislature in 1970. The Metropolitan Civic Center Support Act provided for the creation of "the Metropolitan Exposition, Auditorium and Office Building Fund in the State Treasury into which shall be paid the proceeds of taxes provided in section 28 of the Illinois `Horse Racing Act' of 1975." (Ill. Rev. Stat. 1981, ch. 85, par. 1393.) Under this provision a local exposition authority could apply for funds and, if certified by the director, become eligible for State financial support. The State would then pay the interest and principal to the local ...