APPELLATE COURT OF ILLINOIS, SECOND DISTRICT
Collector (School District No. 26, McHenry County, et
al., Petitioners-Appellees, v.
Palatine National Bank, Trust No. 953, et al.,
520 N.E.2d 78, 166 Ill. App. 3d 629, 117 Ill. Dec. 88 1988.IL.236
Appeal from the Circuit Court of McHenry County; the Hon. James C. Franz, Judge, presiding.
JUSTICE UNVERZAGT delivered the opinion of the court. HOPF and DUNN, JJ., concur.
DECISION OF THE COURT DELIVERED BY THE HONORABLE JUDGE UNVERZAGT
The respondent tax objectors appeal from a judgment of the circuit court of McHenry County denying their objections to taxes levied for the years 1982 and 1983 by School District No. 26.
The parties stipulated to the facts. On July 13, 1981, the Board of Education of School District No. 26 in McHenry County (the District) adopted a resolution abolishing its working cash fund and directing that the balance remaining in the fund, $99,559, be transferred to the educational fund at the end of the current school year. In the same resolution, it created a new working cash fund and authorized the issuance of working cash fund bonds of $625,000. Additional taxes were levied against the District's taxpayers as a result of the bond issue. The respondents objected to the additional taxes levied against them for the years 1982 and 1983.
The School Code authorizes school districts with a population of less than 500,000 to create a working cash fund to meet the district's ordinary and necessary corporate expenditures. (Ill. Rev. Stat. 1981, ch. 122, par. 20-1.) In order to create the fund, the School Code authorizes the district to incur indebtedness in the form of bond issues, but limits the aggregate amount of those bonds to a fixed percentage of the district's maximum permissible tax for educational purposes. (Ill. Rev. Stat. 1981, ch. 122, par. 20-2.) The district may transfer money temporarily from its working cash fund to its educational, transportation or operations, building and maintenance funds to be used for ordinary and necessary expenditures, but the money so transferred must be repaid to the working cash fund when taxes levied to meet those expenditures are collected. (Ill. Rev. Stat. 1981, ch. 122, par. 20-4.) The School Code provides that "[any] school district may abolish its working cash fund, upon the adoption of a resolution so providing, and directing the transfer of any balance in such fund to the educational fund at the close of the then current school year." (Ill. Rev. Stat. 1981, ch. 122, par. 20-8.) Finally, the Code provides that "[nothing] in this Article prevents a school district which has abolished or abated its working cash fund from again creating a working cash fund in the manner provided in this Article." Ill. Rev. Stat. 1981, ch. 122, par. 20-9.
The objectors argued initially that the District had issued bonds as if it were creating a working cash fund when in fact it already had a working cash fund (which the objectors argued could not be effectively abolished and re-created in the same resolution). That argument was rejected by the Illinois Supreme Court in In re Application of Walgenbach (1984), 104 Ill. 2d 121. In that case, these same tax objectors challenged the actions of two school districts that had issued bonds to increase the balances of their existing working cash funds. The objectors argued that the School Code authorized the issuance of working cash fund bonds only to create a new working cash fund. This court sustained the objections, holding that if the money contained in an existing working cash fund was insufficient to meet a school district's expenses, the district could not issue bonds to increase the amount, but could "abolish the fund [citation] and then create a new one." (In re Application of Walgenbach (1983), 117 Ill. App. 3d 14, 18.) The supreme court reversed, concluding that the legislature intended to authorize school districts to issue bonds both to create a working cash fund and "to obtain funds for an existing working cash fund." (In re Application of Walgenbach, 104 Ill. 2d at 127.) The court stated that "[to] require that in order to have authority to issue bonds a school district must abolish its working cash fund, thus effecting a transfer of funds into its educational fund, is repugnant to the explicit statutory requirement that funds transferred from the working cash fund be repaid." 104 Ill. 2d at 126.
The objectors now appear to have reversed their position to contend that, while a school district with an insufficient working cash fund may increase the fund by issuing bonds, it may not abolish and re-create the fund to achieve the same result. They contend that if the procedure utilized by the District is upheld, a school district may annually, or regularly, abolish and re-create its working cash fund to supplement its educational fund (by transferring to it the funds remaining in its current fund before abolishing and re-creating it), effectively levying taxes in excess of the limits imposed by statute. (See Bell v. School District No. 84 (1950), 407 Ill. 406, 414.) The District claims that it abolished and immediately re-created the fund only because the position taken by the objectors in the earlier case caused it to believe that it could not issue bonds to increase the balance of an ...