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Board of Education of Community High School District No. 218 v. Village of Robbins

November 30, 2001


Appeal from the Circuit Court of Cook County. No. 94 CH 08764. Honorable Julia Nowicki, Judge Presiding.

The opinion of the court was delivered by: Justice Greiman.



Defendant-appellee, the Village of Robbins (Village or Robbins), established a tax increment financing (TIF) district for land that was to house an incinerator. Plaintiff-appellant, the Board of Education of High School District No. 218 (Board or plaintiff), along with coplaintiffs, a local elementary school district and a community college district, challenged the adoption of TIF by the Village, claiming that the proposed site violated both the Tax Increment Allocation Redevelopment Act (65 ILCS 5/11-74.4-1 et seq. (West 1994)) (the TIF Act), and the Industrial Project Revenue Bond Act (65 ILCS 5/11-74-1 et seq. (West 1994)) (the Bond Act). *fn1 The circuit court entered summary judgment in favor of defendant on counts II through VI and count IX of plaintiff's amended complaint and conducted a bench trial on the remaining counts I, VII, VIII, and X. The court then entered final judgment on all counts in favor of defendant, and the Board now appeals the court's disposition of all 10 counts. The only question on the pleadings is whether the defendant should have been allowed to amend its answer to plaintiff's complaint after the trial was completed. For the reasons that follow, we affirm the trial court's dismissal of all 10 of plaintiff's claims.

Robbins is an impoverished community located south of Chicago in Cook County, Illinois. Plaintiff is a school board whose taxing district includes parts of the Village, including some of the real property at issue. In the case below, plaintiff challenged the Village's use of TIF in connection with the financing and construction of a $400 million waste-to-energy facility on a site located west of Kedzie Avenue and south of the Cal Sag channel (the Cal Sag site). Mainly, it argued that it was adversely affected by the Village's designation of the site as a redevelopment project area (RPA).

"Under the TIF Act and city ordinances, taxes on incremental increases in the equalized assessed value of property within the TIF district are to be collected by the county treasurer, remitted to the city treasurer, deposited into a special allocation fund and spent on statutorily approved expenses of the TIF district." In re Application of the County Treasurer & ex officio County Collector of McDonough County, 283 Ill. App. 3d 913, 914 (1996). In other words, the TIF Act authorizes municipalities to encourage redevelopment of blighted property by freezing real estate taxes and offering the developer the value of future incremental property taxes to be generated as a result of improvements to the property. As the trial court noted, "[w]hile the TIF Act speaks in terms of depositing the incremental taxes in a special fund and using them to pay eligible project costs, the practical effect of using TIF is to cap -at pre-improvement levels- the real estate taxes on the property for up to 20 years." The plaintiff, which would otherwise be receiving a portion of the incremental taxes from the Cal Sag site, sought a declaratory judgment that the Village's ordinance designating the property as an RPA violated the TIF Act.

Most of the relevant facts are undisputed. In as early as 1983, the Village sought to bring a waste-to-energy facility to the Cal Sag site. In its efforts to attract such a facility, the Village began offering TIF and other economic incentives. After one developer failed to proceed, the Village began to negotiate with Reading Energy (Reading) and, in 1988, entered into a written development agreement. In that agreement, the Village agreed to provide Reading with economic incentives, including TIF, to induce the construction of an incinerator at the Cal Sag site. The Village passed, by resolution, the 1988 development agreement on December 27, 1988.

In the next few years, Reading (with the Village's assistance) conducted a significant amount of work that needed to be completed before the facility could be financed and built. Some of this work included acquiring the approximately 100 parcels of land comprising the site, obtaining siting permits, developing engineering and architectural plans, securing environmental approvals, pursuing waste tipping contracts with other municipalities and waste haulers, and entering into conditional electricity and recycling contracts.

However, even with the Village's promise to provide TIF (along with millions of dollars of municipal bond financing), it became apparent that Reading could not finance or construct the facility on its own. Consequently, Reading contracted with Robbins Resource Recovery Partners (RRRP), a subsidiary of Foster Wheeler Corporation (FW, and collectively, FW/RRRP or the developer). FW/RRRP's involvement was necessary because it had the required technology, the engineering and operations expertise, adequate capital, and the necessary experience and reputation to attract an estimated $300 million from the financial community. Plaintiff never disputed that Reading could not have completed the project on its own.

In August of 1994, FW/RRRP informed the Village in writing that it was relying upon, and could not reasonably anticipate proceeding without, the TIF support that had been promised to Reading. Similarly, Smith-Barney, which underwrote the bond financing for the project, informed the Village in writing that there was a significant risk that the project could not be financed even with the TIF support and that such a risk would be "materially greater" without the pledged TIF revenues.

No other developers ever expressed an interest in the Cal Sag site or any other site in Robbins. In fact, as of 1994, the Village had no commercial or industrial businesses and could not, despite substantial efforts, attract even a gas station, convenience store, or dry cleaner. Accordingly, on August 30, 1994, the Village passed the TIF ordinance. In so doing, the Village relied upon, inter alia, (i) the blighted condition of the Cal Sag site and the rest of the Village; (ii) the poor economic condition of the Village; (iii) the absence of any growth and development, or reasonable prospects of growth and development, at the site or in the rest of the Village; (iv) the 1988 development agreement and the developer's reliance thereon; (v) the lack of any other interest in the site; and (vi) the written communications from the developer and the underwriter confirming the need for the TIF. The Village also relied upon numerous consultants and attorneys, including nationally recognized TIF experts, who all concluded that TIF was necessary and proper.

Thereafter, the Village issued $385 million in industrial development bonds, pursuant to the Bond Act, to finance the construction of the facility. It then entered into a mortgage agreement under which it pledged the incremental revenues it would have received to pay principal and interest on the bonds. Included in that pledge was "the present and continuing right to make claim for, collect, receive and receipt for any Incremental Taxes, and to bring actions and proceedings for the enforcement of its rights with respect thereto." Further, Robbins covenanted as follows:

"As long as any Series 1994A Bonds are Outstanding, the Issuer will continue to deposit the Incremental Taxes into the Special Tax Allocation Account. The Issuer covenants and agrees with the Series 1994A Bondholders that so long as any Series 1994A Bonds remain outstanding, the Issuer will not take any action or fail to take any action which in any way would adversely affect the ability of the Issuer to collect the Incremental Taxes."

The bond proceeds were used to finance the construction of the facility, the outfitting of the facility, and the reimbursement to RRRP for prior development costs.

Robbins then entered into several leases and agreements with RRRP whereby RRRP agreed to pay rent and other benefits to the Village, all of which were dated September 15, 1994, and adopted by resolution. The rents the developer agreed to pay the Village for the period under TIF (1997 through 2016), as determined by the Village's financial consultant, added up to $65,950,280.

Plaintiff brought suit on September 28, 1994, and in its amended 10-count complaint it argued: that the Village's finding that the RPA was not subject to growth and development through investment by private enterprise and would not reasonably be anticipated to be adopted without TIF was erroneous (count I); that the redevelopment plan approved and adopted by the Village did not satisfy the statutory requirements of the TIF Act for redevelopment plans in general (count II); that the leases and other agreements between the Village and the developer were void (count III); that the facility is a tax-exempt facility, and as such, the Village's redevelopment plan would not enhance the tax base of the underlying districts (count IV); that the Joint Review Board was not provided with sufficient information by the Village to make its statutory determination as to whether the proposed redevelopment satisfied the required eligibility criteria (count V); that the Village did not hear and determine the objections at the public hearing, as required by statute (count VI); that section 11-74.4-7.1 of the TIF Act required the Village to agree to pay the other taxing districts 25% of the cost of the building (count VII); that the Village has improperly utilized TIF because it failed to adopt an ordinance and provide for the distribution of surplus in the special TIF fund, because the facility is a private building and is not eligible for TIF, and because tax increment revenues cannot be used to cover prior development costs (count VIII); that the Village never had a comprehensive plan, as required under by statute (count IX); and that under section 11-74.4-10 of the TIF Act, the Village was required to deposit revenues received from its leases with the developer into the special TIF fund (count X).

Prior to trial, the court considered plaintiff's motion for summary judgment on counts II, III, and V through IX, and defendant's motion for summary judgment on counts I through IX. Plaintiff also moved to strike the affidavit of the mayor of Robbins. The court struck the affidavit, granted summary judgment to defendant on counts II through VI and count IX, but denied defendant's motion with respect to counts I, VII, and VIII. Plaintiff's motion was denied as to all counts. Consequently, the only issues raised at trial were with respect to counts I, VII, VIII, and X. The case was tried in October and November of 1999. On July 12, 2000, the court entered an order finding for the Village on the remaining counts. In the proceedings before us, defendant has appealed the court's entry of summary judgment on counts II through VI and count IX, as well as its July 12, 2000, judgment on the remaining counts. Moreover, plaintiff now argues that the Village's expert witness, Patricia Curtner, should not have been allowed to contribute to counsel's closing argument after trial and that Robbins should not have been allowed to amend its answer to plaintiff's complaint after trial. In the interests of economizing space, our opinion will address only those issues that have the most direct impact on the trial court's decision. Accordingly, our discussion of the remaining issues will be nonpublishable under Supreme Court Rule 23. (166 Ill. 2d R. 23). [Nonpublishable material under Supreme Court Rule 23 omitted here.]

Regarding the issues that were decided at trial, we first note that the parties disagree as to our standard of review. Plaintiff argues that because these issues all entail the trial court's interpretation of the relevant statutes and their application to the facts, the trial court was engaged in questions of law, which are subject to a de novo review. See Department of Public Aid ex rel. Davis v. Brewer, 183 Ill. 2d 540, 554 (1998). As further support for this standard, plaintiff continues, this court is being asked to construe several provisions of the TIF Act and the Bond Act - in many instances as a matter of first impression.

Defendant responds that with respect to the remaining issues, they were decided after a trial in which the court made numerous findings of fact. Specifically, the court found that the Cal Sag site was blighted, had not been subject to growth and development through investment by private enterprise, and would not be reasonably anticipated to be developed without the adoption of the TIF redevelopment plan. Moreover, it cites City of Chicago v. Boulevard Bank National Ass'n, 293 Ill. App. 3d 767 (1997), for the proposition that the Village's ordinances have a presumption of validity. There, this court stated:

"When a party challenges a municipality's TIF ordinances, that party is required to overcome the ordinances' presumptive validity by clear and convincing evidence. Castel Properties, Ltd. v. City of Marion, 259 Ill. App. 3d 432, 439 (1994). Clear and convincing evidence is that 'quantum of proof that leaves no reasonable doubt in the mind of the fact finder as to the truth of the proposition [stated].' Bazydlo v. Volant, 164 Ill. 2d 207, 213 (1995)." Boulevard Bank, 293 Ill. App. 3d at 780.

Accordingly, defendant claims that the proper standard of review is for this court to determine whether the trial court's findings were against the manifest weight of the evidence.

While the defendant is correct as to the proper standard, it is only partially accurate as to why it is to be applied. To be sure, the trial court made findings of fact in rendering its decision. It is well established that on appeal, a trial court's findings will not be set aside unless clearly contrary to the manifest weight of the evidence. Reed-Custer Community Unit School Dist. No. 255-U v. City of Wilmington, 253 Ill. App. 3d 503, 508 (1993). However, in both parties' arguments regarding whether the ordinances are otherwise presumptively valid, it appears that they have confused the effect of a presumption with the standard of judicial review in the circuit court. Plaintiff argues that "[o]nce a party introduces sufficient evidence to rebut a presumption, the 'bubble bursts' and the presumption disappears." Reed-Custer, 253 Ill. App. 3d at 508, citing In re Estate of Kline, 245 Ill. App. 3d 413, 424 (1993). Nonetheless, to overturn a TIF ordinance, plaintiff must prove by clear and convincing evidence an abuse of discretion by the municipality. City of Batavia v. Sandberg, 286 Ill. App. 3d 991, 1003-04 (1997).

Such propositions, however, have nothing to do with the standard of review before this court. In the present case, the presumption existed that Cal Sag site was blighted, had not been subject to growth and development through investment by private enterprise, and would not be reasonably anticipated to be developed without the adoption of the TIF redevelopment plan. Regardless of whether plaintiff was able to introduce evidence to the contrary to vanquish that presumption, the trial court determined that plaintiff had not met its burden of proof in showing, through clear and convincing evidence, that the municipality had abused its discretion in passing the relevant TIF ordinances. And, with regard to this court, "[t]he fact finder's determinations will not be disturbed unless clearly contrary to the manifest weight of the evidence." Boulevard Bank, 293 Ill. App. 3d at 780, citing Reed-Custer, 253 Ill. App. 3d at 508. Accordingly, "[t]he decision of the trial court is against the manifest weight of the evidence if a review of the record clearly establishes that the decision opposite to the one reached by the trial court was the proper result [citations]." Boulevard Bank, 293 Ill. App. 3d at 780.

With regard to count I of its complaint, plaintiff asserts that the finding by the Village that the RPA was not subject to growth and development through investment by private enterprise and would not reasonably be anticipated to be developed without the adoption of the redevelopment plan was erroneous, arbitrary, unreasonable, and false. Presumably, therefore, plaintiff is also asserting that the trial court's affirmation of the municipality's grant of the TIF ordinances is against the manifest weight of the evidence. The TIF Act prohibits the adoption of a redevelopment program unless the municipality can make such a finding. See 65 ILCS 5/11-74.4-3(n) (West 1994). As a result, it is commonly referred to as the "but-for" finding. Plaintiff argues that, as a matter of law, when a project has been under prior development for six years and a developer has been obtaining permits, acquiring property, entering contracts, and investing millions of dollars into the site, a municipality cannot find that the area has not been subject to growth and development or would not reasonably be anticipated to be developed without TIF. Ultimately, the crux of plaintiff's argument is that the developer would have proceeded with the facility even if it had not received TIF.

Plaintiff stresses the facts that show that,at the time that the Village made its "but-for" finding, the incinerator project had already been under development for more than six years. Specifically, the site for the incinerator had been selected in 1988, and as of September 15, 1994, RRRP represented that it had invested $37,418,200 in the proposed area. Plaintiff also points to the many permits obtained, that FW started to clear the land on August 1, 1994, and that construction started immediately after the TIF ordinances were passed. The Village's own TIF ordinance states that Robbins and the developer have "continuously attempted to implement the construction, acquisition, installation, and operation of the Facility" since December 27, 1988.

Plaintiff also argues that a determination that an area is "blighted" will not satisfy the requirements of the "but-for" test. While blight is one of the prerequisites to the adoption of TIF (65 ILCS 5/11-74.4-3 (West 1994), the RPA must also meet the ...

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