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March 30, 1994


Appeal from the Circuit Court of Williamson County. No. 89-CH-2. Honorable Thomas W. Haney, Judge Presiding.

Goldenhersh, Welch,* Chapman

The opinion of the court was delivered by: Goldenhersh

JUSTICE GOLDENHERSH delivered the opinion of the court:

Defendant-counterplaintiff, City of Marion (hereinafter city), appeals from an action brought by plaintiffs-counter-defendants, Castel Properties, Limited, J. D. Castellano, Ron Emery, and Castel Loan Corporation (hereinafter plaintiffs), seeking declaratory and injunctive relief with respect to two tax-increment-financing (TIF) redevelopment plans adopted by the city. The Tax Increment Allocation Redevelopment Act (Act) (Ill. Rev. Stat. 1989, ch. 24, par. 11-74.4-1 et seq. (now 65 ILCS 5/11-74.4-1 et seq. (West 1992)) is a unique statute providing options for municipalities that wish to eliminate blight within their boundaries. It permits a municipality to divert tax revenues from other governmental entities in the city and use that money to subsidize improvements to areas that meet the statutory specifications of a TIF district. In the case below, plaintiffs challenged the first TIF plan (TIF 1) on the theory that the area designated did not comply with the statutory requirements of the Act. The circuit court of Williamson County found that TIF 1 did comply with the statutory requirements, and the court entered judgment in favor of the city. Plaintiffs challenged the second TIF plan (the Illinois Centre TIF) on several grounds. The trial court found in favor of plaintiffs on that issue and entered judgment accordingly.

In this appeal, the city contends that the trial court's judgment pertaining to the Illinois Centre TIF was in error, and that the Illinois Centre TIF did, in fact, comply with the statutory requirements of the Act.

Plaintiffs cross-appeal the trial court's judgment on TIF 1, contending that TIF 1 is invalid as a matter of law because it contains no provision to reduce or eliminate the qualifying blight. We affirm.

The city's appeal involves an area known as the Illinois Centre TIF, which was created in 1989 to generate an $18,000,000 subsidy to developers of a shopping mall. The Illinois Centre TIF comprises 260 acres of farmland, running north along Route 13, less than one-half mile from the Route 13 interchange with Interstate 57. Before the Illinois Centre TIF was created, the property, also known as Broeking Farm, was located entirely outside of the Marion city limits. It had been an active farm since 1840. In 1985, the city circulated a report describing the development potential of Broeking Farm as follows:

"The land is suitable for a commercial property and will be annexed into the City of Marion in order to provide sewer, water, and electrical and gas service for the proposed development. The property will then be zoned in accordance with development plan. * * * Marion is literally the hub of the interstate system. Practically all the property east of the [Interstate] 57 interchange has been developed. Development is now underway adjacent to the property. The property will be annexed into Marion to obtain advantages of zoning, city streets and utilities, fire protection, etc. The property will be developed for commercial, light industrial, single-family lots, multifamily lots, mobile home sites and apartment sites. It will become the real 'City of Southern Illinois.'"

There is no dispute concerning the land development trend in Marion. In the 1940's and 1950's, Marion's shopping district was centered on the town square. Since then, Marion's development has moved westward. The construction of Route 13 and Interstate 57 prompted the development of three shopping centers, all west of Marion's town square. Beginning in the mid-1960's, the city annexed large tracts of land along Route 13, and utilities were extended to Route 148. Most commercial development from 1965 to 1989 was concentrated in the areas along Route 13 and the interchange of Route 13 and Interstate 57, within a half mile of the Broeking Farm. Those commercial developments included retail shopping centers, restaurants, financial institutions, hotel/ motels, office buildings, and automobile dealerships.

At trial, plaintiffs presented evidence to show that in the mid-1980's, development was occurring and would continue to occur in the proximity of the Broeking Farm. Plaintiffs also stated that there had been a significant increase in the assessed valuation of the property in the vicinity of Broeking Farm. In support of these assertions, plaintiffs presented three experts who testified that the Illinois Centre tract did not qualify for TIF subsidies. Tom Forman, an architect/planner, testified that Marion's development would continue westward and that the Illinois Centre tract had inherent value because of its size and location. Urban planner John Brancaglione stated that based on historical trends of past development, he believed that there could be "any number of scenarios" under which the property would develop without TIF subsidies. William Newman, a real estate appraiser, concluded that the Illinois Centre tract would ultimately develop without TIF subsidy due to site visibility, location, and access to utilities.

In contrast, the city presented evidence to show why the Illinois Centre tract required a TIF subsidy to develop according to the city's comprehensive plan. The city argued that prior development in the area did not conform to the city's comprehensive plan, and that all such development was "strip development," i.e., 200- to 400-foot-deep development, rather than large-scale, planned development. The city also presented evidence that it made previous efforts to develop the property in the area of the Broeking Farm in a manner consistent with its comprehensive plan. One example the city presented as a failed effort was "Marion West," a development program encompassing industrial, commercial, and residential development similar to the city's plan for the Illinois Centre tract. The city claimed that a lack of subsidy was the biggest reason the project never came to fruition. Further supporting their position that the Illinois Centre tract required TIF status, the city presented evidence of another failed development in the area. The Saluki National Golf Course was envisioned as an 18-hole golf course with single-family homes adjoining the course. The project, directly south of the Broeking Farm across Route 13, collapsed after a few homes were built.

The events that prompted this lawsuit began in 1986, when Antonia Investments of St. Louis (Antonia) began to study the Broeking Farm as a possible site for a regional shopping mall. Gary Kobes, a representative of Antonia involved in site selection, testified that Antonia was interested in developing a mall close to the interstate. After evaluating five possible sites, Antonia's first choice was the Broeking Farm, in part because the property was the largest parcel under single ownership. On February 9, 1987, Antonia and the Broekings entered into an option/purchase agreement, under which Antonia would buy the parcel for $1.25 million if certain contingencies were met. The deal was contingent upon Antonia's ability to arrange for tax increment financing or some other acceptable financial subsidy to fund the shopping center development. The parties also agreed to have the city annex the property.

After acquiring the option to purchase the Broeking Farm, Antonia met with the Mayor of Marion and Robert Vancil, an economic development consultant and specialist in TIF districts, retained by the city, to discuss the funding of Antonia's project. On March 13, 1987, Vancil's company, Community Economic Development Corporation (CEDC), entered into an agreement with the city in which the city would pay CEDC $25,000 plus 5% of the anticipated tax increment for securing a developer (already designated as Antonia) and creating a TIF district. The contract provided that CEDC was to get 5% of "those sums derived for and on behalf of the city and the developer through any annexation agreement," which the city's mayor and Vancil acknowledged to the trial court was the equivalent of 5% of project costs, or the tax increment. Thus, the city would pay Vancil up to $750,000 of tax revenues for conceiving a TIF plan to provide financial aid to Antonia's shopping mall development. Both the city's mayor and Vancil admitted to the trial court that such an arrangement was illegal under the Act. See Ill. Rev. Stat. 1987, ch. 24, par. 11-74.4-3(q)(1) (now see 65 ILCS 5/11-74.4-3(q)(1) (West 1992)).

Pursuant to his contract with the city, Vancil conducted a field survey of Broeking Farm and the surrounding area. Vancil's field notes do not indicate he found any qualifying blight on the Broeking Farm that he thought should be addressed and eliminated. In early June 1987, Vancil finished preparing a draft plan of a TIF including Broeking Farm, but the parcel had not yet been annexed by the city. On June 10, 1987, the city passed a resolution declaring its intent to create a TIF district in an area Vancil designated (hereinafter referred to as the Vancil TIF). On July 13, 1987, a public hearing on the Vancil TIF was held, and the city, the Broekings, and Antonia entered into an agreement annexing the Broeking Farm into the city that same day. The annexation was, however, contingent upon the city constructing more than $3,000,000 worth of infrastructure on the farm for Antonia's benefit and a $15,000,000 grant from the city to Antonia for the mall development. The annexation agreement further provided that Antonia could disconnect the Broeking Farm from the city should the city fail to perform its $18,000,000 obligation.

The Vancil TIF was formally designated a TIF district on July 28, 1987. That TIF was comprised of what is now referred to as TIF 1 and the Illinois Centre TIF. On July 27, 1987, the day before the designation of the Vancil TIF, the city prepared and accepted a document captioned "Broeking Acres," which attempted to subdivide the farm into three tracts. According to the Act, land that has been actively farmed within the last five years does not qualify for inclusion in any TIF unless it has been subdivided. (See Ill. Rev. Stat. 1987, ch. 24, par. 11-74.4-3 (v)), a requirement of which the city was surely aware. The plat was a site plan of the farm with two vertical lines drawn through the parcel, dividing the property into three tracts. The facts surrounding the creation of the Broeking Acres plat are undisputed. On July 1, 1987, city engineer Glenn Clarida sent a draft of the proposed Broeking subdivision to Vancil's attorney. In the attached ...

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