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Southwestern Illinois Development Authority v. National City Environmental

April 19, 2001

THE SOUTHWESTERN ILLINOIS DEVELOPMENT AUTHORITY, APPELLANT,
v.
NATIONAL CITY ENVIRONMENTAL, L.L.C., ET AL., APPELLEES.



The opinion of the court was delivered by: Justice Freeman

Docket No. 87809-Agenda 18-May 2000.

At issue in the present case is whether the Southwestern Illinois Development Authority (the Authority) can use the power of eminent domain to take real property owned by National City Environmental, L.L.C., and St. Louis Auto Shredding Company (collectively NCE), and convey the property to Gateway International Motorsports Corporation (Gateway).

BACKGROUND

The Authority is a political subdivision, body politic and municipal corporation created by the Southwestern Illinois Development Authority Act (the Act) (70 ILCS 520/1 et seq. (West 1998) (formerly Ill. Rev. Stat. 1991, ch. 85, par. 6151 et seq.)). The stated purpose of the Act is "to promote industrial, commercial, residential, service, transportation and recreational activities and facilities, thereby reducing the evils attendant upon unemployment and enhancing the public health, safety, morals, happiness and general welfare of this State." 70 ILCS 520/2(g) (West 1998).

Pursuant to the Act, it is "the duty of the Authority to promote development within the geographic confines of Madison and St. Clair counties." 70 ILCS 520/5 (West 1998). The Act mandates that the Authority assist in the development, construction and acquisition of industrial, commercial, housing or residential projects within these counties. 70 ILCS 520/5 (West 1998). The Act defines a "[c]ommercial project" as "any cultural facilities of a for-profit or not-for-profit type including *** racetracks *** [and] parking facilities." 70 ILCS 520/3(j) (West 1998).

To accomplish the purposes of the Act, the legislature empowered the Authority to issue bonds for the purpose of acquiring, improving or developing projects, including those established by business entities locating or expanding property within Madison and St. Clair Counties. 70 ILCS 520/7 (West 1998). The Act also confers upon the Authority the power to acquire real property by condemnation, and declares that "[t]he acquisition by eminent domain of such real property or any interest therein by the Authority shall be in the manner provided by the `Code of Civil Procedure' [735 ILCS 5/1-101 et seq. (West 1998)], *** including Section 7-103 thereof [735 ILCS 5/7-103 (West 1998) (quick-take provision)]." 70 ILCS 520/8(b) (West 1998).

In June 1996, the Authority issued $21.5 million in taxable sports facility revenue bonds. The Authority lent the proceeds of the bonds to Gateway to finance the costs of acquiring, constructing and installing a multipurpose automotive sports and training facility in the City of Madison. Gateway signed a loan agreement and a note to evince its obligation to repay the loan. Additionally, payment of the principal of, and interest on, the note and the bonds are guaranteed by Grand Prix Association of Long Beach (Grand Prix) and Automotive Safety and Transportation Systems, Inc., companies related to Gateway. Although the bonds do not constitute an indebtedness of the Authority or of the state, they are a moral obligation of the state.

Gateway used the proceeds from the bonds to acquire a small racetrack and transform it into a racing and training facility capable of hosting major race car events. In 1997, the racetrack had 25,000 grandstand seats and 25,000 portable seats. The racetrack hosted three major events and a number of smaller events, with total attendance of 400,000. In 1998, Gateway increased seating capacity and hosted four major events at the racetrack. Gateway's goal is to increase seating capacity in increments to the point where the racetrack has the 85,000 to 100,000 seats needed to host a Winston Cup NASCAR event.

On February 20, 1998, Gateway requested that the Authority use its quick-take eminent domain powers to acquire a 148.5 acre tract of land (the Property) west of the racetrack for parking. Gateway asked the Authority to acquire the Property from its owner, NCE, and convey it to Gateway. Gateway paid an application fee of $2,500 to the Authority, and the sum of $10,000 to be applied toward the Authority's sliding scale fee of 6% to 10% of the acquisition price of property being condemned. Gateway also agreed to pay the Authority's out-of-pocket expenses or other costs associated with the quick-take process, including the acquisition price of the Property. Members of the board of the Authority are not entitled to compensation (70 ILCS 520/4(c) (West 1998)), and did not receive any part of these fees.

On February 23, 1998, the St. Clair County board adopted a resolution authorizing the Authority to exercise its quick-take eminent domain powers to acquire the Property for use by Gateway for racetrack parking. See 70 ILCS 520/8(b) (West 1998) (requiring the approval of the county board before the Authority can use its quick-take eminent domain powers within the unincorporated areas of a county). The board noted that attendance at the racetrack was expected to increase from 400,000 in 1997 to 600,000 in 1998, and that other development projects in the area would reduce available racetrack parking by 100 acres. The board found that it was necessary to create additional parking areas to safely and adequately serve the spectators who would be attending events at the racetrack during 1998 and in subsequent years. Further, the board found that expansion of the racetrack would enhance the public health, safety, morals, happiness, and general welfare of the citizens of southwestern Illinois by increasing the tax base in St. Clair County and generating additional tax revenues.

Upon receipt of the St. Clair County board resolution, the Authority held a public hearing on March 5, 1998, with notice given to NCE and adjacent property owners. Ray Reott, an attorney representing NCE, attended the meeting and voiced NCE's objections to the proposed taking. At the meeting, the Authority adopted a resolution to assist the expansion of the racetrack (the Development Project) through the acquisition of the Property. The Authority found that the Development Project would enhance the public health, safety, morals, happiness, and the general welfare of the citizens of southwestern Illinois through the creation of job opportunities, the generation of additional tax revenues and the expansion of the tax base within St. Clair County. The Authority also found that the Property was integral to the success of the Development Project, and authorized its executive director to take all necessary and appropriate actions, including negotiations and commencement of quick-take eminent domain proceedings, to acquire title to the Property. Further, the Authority authorized its chairman or vice-chairman to execute an agreement between the Authority and Gateway for acquisition of the Property through the use of quick-take eminent domain proceedings and conveyance of the Property to Gateway in furtherance of the Development Project.

Alan Ortbals, the Authority's executive director, attended a meeting in Chicago on March 17, 1998, in an attempt to acquire the Property through negotiations. At the meeting, Gateway delivered a written offer to NCE to purchase the Property for $1 million. By letter dated March 19, 1998, NCE rejected the offer, but indicated its willingness to meet the week of March 30, 1998, when NCE expected to have a completed appraisal of the Property. In a separate letter to the Authority, NCE requested that the Authority forward copies of any appraisals of the Property in its possession by March 25, 1998. The Authority complied with this request.

On March 20, 1998, the Authority made a written offer to NCE to purchase the Property for $1 million, and advised NCE that the Authority would initiate condemnation proceedings if NCE did not accept the offer by 5 p.m. on March 30, 1998. The Authority also attempted to follow through with the suggestion in NCE's letter of March 19, 1998, that the parties meet the week of March 30, 1998. On March 30, 1998, Harry Sterling, the Authority's attorney, and Ortbals attempted to place a conference call to Reott. Reott was not available and failed to return the telephone call.

NCE did not respond to the Authority's offer by the stated deadline. Instead, by letter dated April 20, 1998, NCE indicated that it did not feel that it was necessary to respond to the Authority's offer because the Authority knew that NCE had rejected Gateway's offer to purchase the Property for the identical sum of $1 million. However, to remove any uncertainty on the subject, NCE indicated that it was rejecting the Authority's offer.

Meanwhile, on March 31, 1998, the Authority filed a complaint for condemnation in the circuit court of St. Clair County, seeking to acquire fee simple title to the Property. The Authority also filed a motion for immediate vesting of title, and requested that the court fix a date for a quick-take hearing, pursuant to the quick-take provisions of the Code of Civil Procedure. See 735 ILCS 5/7-103, 7-104 (West 1998).

Also on March 31, 1998, NCE filed a motion to dismiss the complaint for condemnation. Subsequently, on April 2, 1998, NCE filed a traverse and motion to dismiss, arguing that the proposed taking was for an unconstitutional private use; that the proposed taking was excessive; that the racetrack did not need additional parking; and that the Authority had not made a good-faith attempt to agree with NCE on an acceptable purchase price. NCE also filed a motion to strike the Authority's request for immediate vesting of title. The circuit court denied NCE's motion to dismiss and motion to strike the Authority's request for immediate vesting of title.

The court proceeded to hold a quick-take hearing. At the hearing, John Baricevic, St. Clair County board chairman, testified that the Property is located in unincorporated St. Clair County, and that the board adopted a resolution authorizing the Authority to exercise its quick-take eminent domain powers to acquire the Property. Baricevic also testified that certain economic studies were done in connection with the bond issue and Gateway's acquisition of the racetrack. These studies showed the projected economic impact from the development of the racetrack and from increased attendance as the racetrack expands. No specific studies were made regarding the impact of the proposed taking on tax revenues or the tax base.

Alan Ortbals testified regarding the economic and traffic impact of the racetrack on the surrounding area. Ortbals stated that the racetrack hosted more major races and drew more spectators in 1997 than anticipated in studies performed prior to the development of the racetrack. The racetrack had added 10,000 seats and was ahead of projections for attendance in 1998. As a result, the county was experiencing faster economic spin-off than anticipated. A truck stop across from the racetrack was undergoing expansion; a parcel of land across from the racetrack sold for development of a restaurant; and a golf course was being developed on the site of a former junk yard. In addition, several hotels and restaurants were being developed in the immediate area of the racetrack and in nearby municipalities.

Due to the success of the racetrack, the county was experiencing serious traffic problems on race days with traffic backed up on both sides of Interstate 55-70. A number of racetrack patrons parked east of Illinois Route 203, creating traffic safety problems as they crossed Illinois Route 203 to gain access to the racetrack. Using the Property for racetrack parking would alleviate both of these traffic problems.

Ortbals also testified that when Gateway approached the Authority regarding the Property, he reviewed the studies that were done in connection with the financing of the racetrack, including an analysis of Gateway's business plan, an analysis of the economic impact of the racetrack, an analysis of the traffic impact of the racetrack, and a market demand study. He also reviewed an analysis of the economic impact of a similar racetrack in Topeka, Kansas. He presented a report to the board of the Authority regarding these studies. In Ortbals' opinion as an expert in the field of economic development, the Authority's acquisition of the Property by quick-take was necessary to promote economic development, alleviate traffic safety problems, and eliminate blight.

On cross-examination, Ortbals testified that the Authority did not commission any studies analyzing the effect of the condemnation of the Property on employment levels, the tax base of St. Clair County, or traffic safety problems. Ortbals admitted that there were no slums on the Property. However, the development of the racetrack has had an indirect effect on the elimination of blight in the area. The golf course replaced an old junk yard, and three or four dilapidated and abandoned homes on Bend Road have been demolished.

Mike Pritchett, a design and planning engineer employed by the Illinois Department of Transportation (IDOT), testified as an expert in the field of civil engineering. He stated that IDOT was working with Gateway to find a traffic plan that would move traffic in and out of the racetrack efficiently, with minimal impact on the state and interstate highways. To that end, IDOT has studied the traffic patterns occurring around the racetrack. On days of major events, there were significant backups on Interstate 55-70, extending into Missouri. Because the interstate was designed to facilitate travel at high speeds, drivers do not anticipate that cars will be stopped in traffic on the interstate. Stopped traffic on the interstate is thus a safety hazard.

Pritchett also testified that large numbers of racetrack patrons crossed Illinois Route 203 from the parking areas east of the highway to the racetrack. Illinois State Police troopers operate a traffic signal at Ohio Street and Illinois Route 203 manually to allow racetrack patrons to cross the highway. However, the traffic backed up at the signal had negative repercussions on Interstate 55-70. Furthermore, many racetrack patrons crossed at random locations along the highway. When IDOT put a fence along Illinois Route 203 to try to channel racetrack patrons to Ohio Street, they pushed the fence down to cross the highway. Although no accidents had yet occurred, there was no assurance that none would.

Pritchett testified further that IDOT had improved Illinois Route 203 to help the flow of traffic in and out of the racetrack. These improvements were based on a traffic impact study conducted in 1996, which assumed a considerable amount of parking west of the racetrack. Construction of a parking lot on the Property would provide parking west of the racetrack, as suggested in the study, and alleviate traffic problems on race days. Pritchett concluded that it was necessary, from a safety standpoint, for the Authority to acquire the Property for development of a parking lot.

On cross-examination, Pritchett testified that taking the Property would not solve all the traffic problems in the area. Some racetrack patrons would continue to park east of Illinois Route 203 and cross the highway to gain access to the racetrack. And if the racetrack was able to host a Winston Cup race, the traffic jams in the area would increase. However, construction of a parking lot on the Property was one of several measures IDOT was considering to provide additional access to the racetrack and ease the pressure on Illinois Route 203.

The mayor of the City of Madison testified that the racetrack had brought new jobs to the city and increased revenues from sales and entertainment taxes. He attributed the development of the golf course to the racetrack, and testified that several developers were negotiating plans with the city to develop motels and restaurants in the area. He also testified regarding the traffic problems on race days, and stated that it would be beneficial to have parking on the Property.

The president of the Village of Fairmont City attributed the development of an 86-room hotel in the village to the racetrack. He testified that continued growth of the racetrack was in the best economic interest of the village.

The president of the Southwestern Illinois Tourism and Convention Bureau, a not-for-profit corporation representing eight southwestern Illinois counties, testified that tourism was the second largest industry in the area. He estimated that in 1997 tourism added between $520 million and $530 million to the economies of the eight counties, with the economic impact of the racetrack being $43.4 million. He also testified that, since January 1, 1996, in excess of 30 hotels had been built, were under construction, or were slated for construction in the area. The racetrack was a major contributing factor to the construction and proposed development of the hotels.

Scott Harding, a consulting engineer, performed an offsite evaluation of the Property. He testified that approximately 27 to 48 acres of the Property constitute wetlands. A developer who proposes to drain and build on an area that has been designated a wetland must first obtain a permit from the United States Army Corps of Engineers, listing conditions that must be met to minimize impact on the wetland, or steps, such as compensation, that must be taken in mitigation. Compensation involves replacing wetland that is used in a project with wetland that is created on another part of the same site or on a different site. Harding testified that Corps of Engineers policies call for compensation ratios of three to one for wooded wetlands, two to one for wetlands with scrub shrub, one and a half to one for emergent wetlands and one to one for farm wetlands. The Corps of Engineers may determine that certain high quality wetlands should not be impacted at all.

Based upon the types of wetland found on the Property, Harding estimated that the Corps of Engineers would require two to one compensation; that is, for every acre of wetland impacted by construction, the Corps of Engineer would require that Gateway create or construct two acres of wetlands. Thus, assuming that Gateway impacted 48 acres of wetlands and compensated on site, approximately 50 acres of land would remain for development.

Rod Wolter, Gateway's president and general manager, testified that all the major events at the racetrack were sold out in 1997. Total attendance at the racetrack that year was 400,000. The racetrack's schedule for 1998 listed more events than in 1997. In addition, the racetrack expected sell-out crowds at the major events in 1998. Attendance at those events would be greater than in 1997 because of increased seating capacity at the racetrack.

On cross-examination, Wolter testified that the racetrack had an immediate need for 2,000 to 5,000 parking spaces. The racetrack can park 2,000 cars on as little as 20 acres, and 5,000 cars on as little as 49 acres. The racetrack could get through the 1998 season without the Property, using remote parking areas. On redirect, Wolter testified that it was not in the racetrack's best interest to "get by" with parking. Lack of adequate parking could result in faltering attendance at the racetrack.

Christopher Pook, the CEO of Grand Prix, testified that Gateway added 10,000 seats to the racetrack in the spring of 1998, and planned to add another 20,000 seats in the fall. He also testified that, in order to obtain a contract to host a NASCAR Winston Cup event, Gateway would have to increase seating capacity to a minimum of 85,000 seats and have adequate parking in place. Gateway has considered building a raised parking garage at the racetrack. However, building such a garage was not economically feasible.

Pook testified next regarding several unsuccessful attempts, starting in May 1995, to reach an agreement with NCE for the use or purchase of the Property. Irv Pielet, one of NCE's owners, told him repeatedly that NCE was not interested in selling the Property or in any business relationship with Gateway. Pook also testified that two nearby landowners had notified Gateway that 30 acres of land previously used for parking would no longer be available.

Roger Bowler, the plant manager for St. Louis Auto Shredding Company, testified that the plant employed 80 persons on a full-time basis. During periods of peak activity, the plant hired additional employees on a part-time basis. On an annual basis, the plant recycled 90,000 to 100,000 cars, recovering metals from the cars for shipment to foundries, steel mills and smelters, and depositing other materials in a landfill operated by the plant. Bowler also testified that the current landfill would be capped in five to eight years and NCE planned to use the Property as its new landfill.

In lieu of personal testimony, the circuit court admitted into evidence Irv Pielet's discovery deposition. Pielet stated that Pook was interested in some part of NCE's land for a business venture, but he denied that Pook spoke to him about purchasing the Property. Pielet claimed that he learned of Gateway's interest in the Property from a newspaper account of the St. Clair County board's resolution.

Pielet stated further that the NCE's current landfill had less than 10 years of capacity remaining. However, no studies had been done of the landfill's capacity and 11 acres of the landfill had not yet been used. Pielet also stated that NCE had taken dirt once from the Property to cover a portion of the current landfill. NCE planned to take more dirt from the Property as needed to cover the section of the landfill the ...


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