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Southwestern Illinois Development Authority v. National City Environmental

April 04, 2002

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 Garman

Released for publication April 18, 2002.

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 Garman

PUBLISHED

Docket No. 87809-Agenda 16-September 2001.

 The issue in this case is whether the Southwestern Illinois Development Authority (SWIDA) properly exercised the power of eminent domain to take property owned by National City Environmental, L.L.C., and St. Louis Auto Shredding Company (collectively NCE), and convey that property to Gateway International Motorsports Corporation (Gateway). The circuit court of St. Clair County ruled that SWIDA had properly exercised its authority to take the land in question. The appellate court reversed. 304 Ill. App. 3d 542. On April 19, 2001, we reversed the decision of the appellate court, but subsequently granted rehearing. We now affirm the decision of the appellate court.

BACKGROUND

SWIDA was created in 1987 by the Illinois General Assembly through passage of 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.)). SWIDA is a political entity and municipal corporation whose stated purpose 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).

The Act mandates that SWIDA "promote development within the geographic confines of Madison and St. Clair counties." 70 ILCS 520/5 (West 1998). It is the duty of SWIDA to assist in the development, construction, and acquisition of industrial, commercial, housing or residential projects within these counties. 70 ILCS 520/5 (West 1998). A "[c]ommercial project" is defined 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 SWIDA to issue bonds for the purpose of acquiring, improving or developing projects, including those established by business entities attempting to locate or expand property within Madison and St. Clair Counties. 70 ILCS 520/7 (West 1998). SWIDA also has the authority to acquire property by condemnation. According to the Act, SWIDA's "acquisition by eminent domain of such real property or any interest therein by [SWIDA] 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)]." 70 ILCS 520/8(b) (West 1998).

In June 1996, SWIDA issued $21.5 million in taxable sports facility revenue bonds. The proceeds of the bonds were lent to Gateway to finance the development of a multipurpose automotive sports and training facility in the region (the racetrack). Gateway signed a loan agreement and a note to evince its obligation to repay the loan. Revenues received by SWIDA pursuant to the loan agreement are pledged to secure payment of the bonds. 70 ILCS 520/7(d) (West 1998). If at any time SWIDA is unable to pay the principal and interest on the bonds, it shall so certify to the Governor, who then submits the amounts so certified to the General Assembly. As such, the bonds constitute a moral obligation of the state. 70 ILCS 520/7(f) (West 1998).

The racetrack was developed and has flourished. In 1997, the racetrack had a total attendance of 400,000 at various large and small events. Seating included 25,000 grandstand seats and 25,000 portable seats. In 1998, Gateway increased its seating capacity and desired to increase its parking capacity as well. It called upon SWIDA to use its quick-take eminent domain powers to acquire land to the west of the racetrack for the purposes of expanded parking facilities. The adjacent 148.5 acre tract of land sought was owned by NCE.

NCE operates a metal recycling center in an area of St. Clair County that, until recently, was National City, Illinois. NCE employs 80 to 100 persons full time and has been at its present location since 1975. NCE shreds cars and appliances and separates the reusable metals. It disposes of nearly 100,000 cars per year. Nonrecyclable by-products of the process, referred to as "fluff," are deposited in NCE's landfill, located to the east of its recycling center. When this landfill site reaches capacity, NCE plans to expand its landfill operations onto the 148.5 acre tract of land it owns to the east of the current landfill. NCE uses clay and dirt from the 148.5 acre tract to fill and cover fluff in the landfill area currently in use.

In early 1998, Gateway attempted to discuss the purchase of NCE's land with NCE's owner. NCE would not discuss the matter and, initially, Gateway made no offer to purchase the land. Instead, Gateway asked SWIDA to exercise its quick-take eminent domain powers to take the 148.5 acres of land and transfer it to Gateway.

Gateway completed a "Quick-Take Application Packet" and stated that it wanted to use the land as a parking lot for the purpose of increasing the value of Gateway's racetrack. Gateway paid SWIDA an application fee of $2,500, and the sum of $10,000 to be applied toward SWIDA's sliding scale fee of 6% to 10% of the acquisition price of property being condemned. In addition, Gateway agreed to pay SWIDA's expenses, including the acquisition price of the property, and other costs associated with the quick-take process.

Approval of the county board is required before SWIDA can use its quick-take eminent domain powers within unincorporated areas of a county. 70 ILCS 520/8(b) (West 1998). On February 23, 1998, the St. Clair County board adopted a resolution authorizing SWIDA to exercise its quick-take eminent domain authority to acquire the NCE tract of land for Gateway parking. The board noted that dramatic attendance increases could be expected at the racetrack and that it was necessary to create additional parking facilities to adequately serve patrons. The board also found that expansion of the racetrack facilities would enhance the public health, safety, morals, happiness, and general welfare of the citizens of southwestern Illinois by increasing the tax base in the area and generating additional tax revenues.

On March 5, 1998, SWIDA held a public meeting to address the proposed taking. Notice was given to NCE and adjacent property owners. Over the objections of NCE's counsel, SWIDA adopted a resolution manifesting an intent to assist Gateway with racetrack expansion through the acquisition of NCE's property. Like the St. Clair County board resolution, SWIDA's resolution recounted the numerous benefits that could be created for the region. SWIDA found that the acquisition of NCE's property was essential to the success of the proposed expansion and further development of the racetrack, and authorized its executive director, Alan Ortbals, to acquire title to the property by all necessary and appropriate means, including negotiations and quick-take eminent domain proceedings. SWIDA authorized the execution of an agreement with Gateway for acquisition of the property through quick-take eminent domain proceedings and subsequent conveyance of the property to Gateway.

In an effort to acquire the property through a negotiated sale, Ortbals attended a meeting on March 17, 1998, at which he delivered to NCE a written offer to purchase the property for $1 million. By letter dated March 19, 1998, NCE rejected the $1 million offer but indicated its willingness to meet with SWIDA the week of March 30, 1998, following an expected appraisal of the property. On March 20, 1998, SWIDA made another written offer to NCE to purchase the property for $1 million and advised NCE that SWIDA would initiate proceedings to condemn the property if NCE did not accept the offer by 5 p.m. on March 30, 1998.

NCE did not respond to the second offer and ultimatum until April 20, 1998. By letter, NCE indicated that it felt it was unnecessary to respond to the offer, as SWIDA was aware of NCE's prior rejection of the earlier offer to purchase the property for the identical sum of $1 million. However, to be clear on the matter, NCE indicated that it was again rejecting the offer of $1 million for the sale of its property.

Meanwhile, on March 31, 1998, SWIDA filed a complaint in the circuit court of St. Clair County seeking condemnation of, and acquisition of fee simple title to, the property. In addition, SWIDA filed a motion for immediate vesting of title, and asked the circuit court to fix a date for quick-take proceedings pursuant to sections 7-103 and 7-104 of the Code of Civil Procedure (735 ILCS 5/7-103, 7-104 (West 1998)). On the same date, NCE filed a motion to dismiss the complaint and on April 2, 1998, filed a traverse and motion to dismiss. NCE argued that the proposed taking was for an unconstitutional private use; the proposed taking was excessive; additional parking at Gateway's racetrack was not needed; and SWIDA had failed to make a good-faith effort to negotiate an acceptable purchase price with NCE. In addition, NCE filed a motion to strike SWIDA's request for immediate vesting of title. The circuit court denied both the motion to dismiss and the motion to strike the request for immediate vesting of title.

The circuit court held a quick-take hearing and on April 27, 1998, ruled in SWIDA's favor. Relying on testimony from Mike Pritchett of the Illinois Department of Transportation (the Department), the circuit court found that the taking was for a public purpose as there were serious public safety issues involved. Pritchett had testified that the Department was working with Gateway to develop a traffic plan that would move traffic into and out of the racetrack facility, while minimizing impact on the surrounding state and interstate highways. According to traffic pattern data studied by the Department, significant traffic congestion occurred on Interstate 55-70 when major events were held at the racetrack. According to Pritchett, a safety hazard was created because drivers do not normally anticipate stopped traffic on the interstate. Pritchett further testified that pedestrians often crossed Illinois Route 203 from the parking areas east of the highway to the racetrack. A traffic signal was in place to allow patrons to cross Route 203. However, the signals created even more automobile traffic delays. There was additional testimony that there was a risk pedestrians would be struck by automobile traffic as they crossed Route 203 at improper locations away from the designated crossing area and signal. Pritchett testified that construction of a parking lot on NCE's property, as suggested in the Department's 1996 traffic impact study, would provide parking to the west of the racetrack and alleviate traffic problems when major events were taking place at the racetrack. Therefore, according to Pritchett, there was some urgency in acquiring the property and developing parking facilities to alleviate stress on the highway system and improve safety.

The circuit court also relied on Ortbals' testimony regarding public safety, economic development, and elimination of blight. According to Ortbals, the county was experiencing serious traffic problems on days the racetrack hosted events. Like Pritchett, Ortbals also referred to congestion on Interstate 55-70 and traffic and pedestrian concerns related to Illinois Route 203. In addition, Ortbals testified that development of a parking facility on the property was necessary to promote economic development, as the number of spectators, development and expansion of neighboring businesses, and other economic spin-off, all had exceeded initial expectations. Ortbals testified that it was necessary to acquire the entire 148.5 acre tract owned by NCE because areas that had previously been used for patron parking, such as areas now occupied by hotels and restaurants and the golf course, were no longer available. In addition, Ortbals testified that the development of the racing facilities had indirectly helped to eliminate blight in the area.

Rod Wolter, president and general manager of Gateway International Raceway, testified that by turning the 148.5 acres owned by NCE into parking for the racetrack, Gateway would grow and profits would increase. Wolter acknowledged that Gateway had discussed developing a parking garage facility to meet its needs but that it would be much less expensive to have SWIDA take the property in question from NCE and give it to Gateway for ground parking.

The circuit court also heard testimony from a number of other sources, including city officials from the region, area businessmen and other Gateway officials. Most, if not all, testified as to the many benefits that continued expansion of Gateway could potentially bring to the area. The court found that the taking was not excessive and that NCE had been unwilling to negotiate in a meaningful fashion for the sale of the property. The court found that SWIDA had bargained for the property in good faith and NCE's failure to timely reject SWIDA's final offer of sale or to present a counteroffer was dispositive of this issue. Therefore, the circuit court held that quick-take procedures were necessary to avoid any negative economic impact to the people of the region.

The circuit court denied NCE's oral motion for a stay of proceedings (see 735 ILCS 5/7-104(b) (West 1998)) and heard evidence of just compensation for the property (see 735 ILCS 5/7-104(c) (West 1998)). On April 28, 1998, the circuit court made a preliminary finding that $900,000 was just compensation for the property. On April 30, 1998, the circuit court entered an order of taking, vesting SWIDA with title to the property in fee simple and granting it the right to immediate possession of the property. See 735 ILCS 5/7-105(a) (West 1998)). On the same day, SWIDA conveyed title to the property to Gateway by way of a quit-claim deed. NCE filed an emergency motion in the circuit court seeking a stay of the transfer of title or, in the alternative, an order requiring SWIDA to post a bond of $38 million pending appeal. The motion was denied.

Pursuant to section 7-104(b) of the Code of Civil Procedure (735 ILCS 5/7-104(b) (West 1998)) and Supreme Court Rule 307(a)(7) (188 Ill. 2d R. 307(a)(7)), NCE filed an interlocutory appeal arguing in part that SWIDA lacked constitutional authority to take the property and convey it to Gateway. NCE also filed an emergency motion for a stay of the condemnation, which was granted.

The appellate court determined that SWIDA had exceeded its constitutional authority in taking NCE's land by eminent domain and reversed the decision of the circuit court. 304 Ill. App. 3d 542.

SWIDA filed a petition for leave to appeal pursuant to Supreme Court Rule 317 (134 Ill. 2d R. 317). We granted the petition and on April 19, 2001, reversed the judgment of the appellate court and remanded the cause. Subsequently, NCE petitioned this court for rehearing, which we allowed on June 4, 2001. 155 Ill. 2d R. 367. On rehearing, we now affirm the decision of the appellate court.

ANALYSIS

The State of Illinois, as a sovereign, has the inherent right to condemn property, subject to the state constitutional mandate that private property shall not be taken or damaged for public use without just compensation to its owner. Ill. Const. 1970, art. I, §15; Forest Preserve District v. West Suburban Bank, 161 Ill. 2d 448, 455 (1994). The fifth amendment to the United States Constitution (U.S. Const., amend. V), made applicable to the states through the fourteenth amendment (U.S. Const., amend. XIV), also provides that private property shall not be taken for public use without just compensation. Hawaii Housing Authority v. Midkiff, 467 U.S. 229, 231, 81 L. Ed. 2d 186, 191, 104 S. Ct. 2321, 2324 (1984).

In this case, we determine whether this taking achieves a legitimate public use pursuant to the constitutionally exercised police power of the government (Berman v. Parker, 348 U.S. 26, 99 L. Ed. 27, 75 S. Ct. 98 (1954)) and, therefore, whether eminent domain powers authorized by the State of Illinois were improperly exercised in the taking of private property from one private entity for the benefit and use of another private entity.

The right of a sovereign to condemn private property is limited to takings for a public use. U.S. Const., amend. V; Ill. Const. 1970, art. I, §15; Gaylord v. Sanitary District, 204 Ill. 576, 588 (1903). Clearly, private persons may ultimately acquire ownership of property arising out of a taking and the subsequent transfer to private ownership does not by itself defeat the public purpose. Hawaii Housing Authority, 467 U.S. at 243-44, 81 L. Ed. 2d at 199, 104 S. Ct. at 2331. However, that principle alone cannot adequately resolve the issues presented in this case. "Before the right of eminent domain may be exercised, the law, beyond a doubt, requires that the use for which the land is taken shall be public as distinguished from a private use." People ex rel. Tuohy v. City of Chicago, 394 Ill. 477, 481 (1946).

SWIDA's action in taking NCE's property and transferring it to Gateway for Gateway's private use presents fundamental constitutional issues that are essential to resolving this dispute. The essence of this case relates not to the ultimate transfer of property to a private party. Rather, the controlling issue is whether SWIDA exceeded the boundaries of constitutional principles and its authority by transferring the property to a private party for a profit when the property is not put to a public use.

It may be impossible to clearly delineate the boundary between what constitutes a legitimate public purpose and a private benefit with no sufficient, legitimate public purpose to support it. "We deal, in other words, with what traditionally has been known as the police power. An attempt to define its reach or trace its outer limits is fruitless, for each case must turn on its own facts." Berman, 348 U.S. at 31-32, 99 L. Ed. at 37, 75 S. Ct. at 102. "While, from time to time, the courts have attempted to define public use, there is much disagreement as to its meaning." Tuohy, 394 Ill. at 481. Great deference should be afforded the legislature and its granting of eminent domain authority. Berman, 348 U.S. at 31-32, 99 L. Ed. at 37, 75 S. Ct. at 102; Old Dominion Land Co. v. United States, 269 U.S. 55, 66, 70 L. Ed. 162, 165, 46 S. Ct. 39, 40 (1925); United States ex rel. Tennessee Valley Authority v. Welch, 327 U.S. 546, 552, 90 L. Ed. 843, 848, 66 S. Ct. 715, 718 (1946). However, the exercise of that power is not entirely beyond judicial scrutiny (see Hawaii Housing Authority, 467 U.S. at 241, 81 L. Ed. 2d at 197, 104 S. Ct. at 2329 (and cases cited therein)), and it is incumbent upon the judiciary to ensure that the power of eminent domain is used in a manner contemplated by the framers of the constitutions and by the legislature that granted the specific power in question. "Courts all agree that the determination of whether a given use is a public use is a judicial function." Tuohy, 394 Ill. at 481.

SWIDA contends that the condemnation and taking of NCE's property is sustainable because a public purpose will be served through (1) the fostering of economic development, (2) the promotion of public safety, and (3) the prevention or elimination of blight. Moreover, once the determination is made that one or all of these requirements is satisfied, "possesory use by the public is not an indispensable prerequisite to the lawful exercise of the power of eminent domain." People ex rel. Gutknecht v. City of Chicago, 3 Ill. 2d 539, 544-45 (1954).

SWIDA contends that any distinction between the terms "public purpose" and "public use" has long since evaporated and that the proper test is simply to ask whether a "public purpose" is served by the taking. While the difference between a public purpose and a public use may appear to be purely semantic, and the line between the two terms has blurred somewhat in recent years, a distinction still exists and is essential to this case. We agree that these terms are necessarily somewhat loosely defined. However, that does not mean they are indistinguishable. The term " `[p]ublic purpose' is not a static concept. It is flexible, and is capable of expansion to meet conditions of a complex society that were not within the contemplation of the framers of our constitution." People ex rel. Adamowski v. Chicago R.R. Terminal Authority, 14 Ill. 2d 230, 236 (1958) (citing People ex rel. Gutknecht v. Chicago Regional Port District, 4 Ill. 2d 363 (1954), Grasse v. Dealer's Transport Co., 412 Ill. 179 (1952), People v. Chicago Transit Authority, 392 Ill. 77 (1945), and People ex rel. Greening v. Bartholf, 388 Ill. 445 (1944)). However, this flexibility does not equate to unfettered ability to exercise takings beyond constitutional boundaries. "A purely private taking could not withstand the scrutiny of the public use requirement; it would serve no legitimate purpose of government and would thus be void." Hawaii Housing Authority, 467 U.S. at 245, 81 L. Ed. 2d at 200, 104 S. Ct. at 2331. As this court held in Gaylord, 204 Ill. at 584, "[t]he public must be to some extent entitled to use or enjoy the property, not as a mere favor or by permission of the owner, but by right."

Clearly, the taking of slums and blighted areas is permitted for the purposes of clearance and redevelopment, regardless of the subsequent use of the property. See, e.g., Village of Wheeling v. Exchange National Bank of Chicago, 213 Ill. App. 3d 325 (1991); City of Chicago v. Gorham, 80 Ill. App. 3d 496 (1980); City of Chicago v. Walker, 50 Ill. 2d 69 (1971). However, this proposition and the cases supporting it are of little assistance in this instance, as we are not dealing with a taking for the purposes of eliminating slums or blight.

If this taking were allowed to stand, it may be true that spectators at Gateway would benefit greatly. Developing additional parking could benefit the members of the public who choose to attend events at the racetrack, as spectators may often have to wait in long lines of traffic to park their vehicles and again to depart the facility. We also acknowledge that a public use or purpose may be satisfied in light of public safety concerns. See Illinois Toll Highway Comm'n v. Eden Cemetery Ass'n, 16 Ill. 2d 539 (1959). The public is allowed to park on the property in exchange for the payment of a fee. Gateway's racetrack may be open to the public, but not "by right." Gaylord, 204 Ill. at 584. It is a private venture designed to result not in a public use, but in private profits. If this taking were permitted, lines to enter parking lots might be shortened and pedestrians might be able to cross from parking areas to event areas in a safer manner. However, we are unpersuaded that these facts alone are sufficient to satisfy the public use requirement, especially in light of evidence that Gateway could have built a parking garage structure on its existing property.

We have also recognized that economic development is an important public purpose. See People ex rel. City of Canton v. Crouch, 79 Ill. 2d 356 (1980); People ex rel. City of Urbana v. Paley, 68 Ill. 2d 62 (1977); People ex rel. City of Salem v. McMackin, 53 Ill. 2d 347 (1972). SWIDA presented extensive testimony that expanding Gateway's facilities through the taking of NCE's property would allow it to grow and prosper and contribute to positive economic growth in the region. However, "incidentally, every lawful business does this." Gaylord, 204 Ill. at 586. Moreover, nearly a century ago, Gaylord expressed the long-standing rule that "to constitute a public use, something more than a mere benefit to the public must flow from the contemplated improvement." Gaylord, 204 Ill. at 584.

This case is strikingly similar to our earlier decision in Limits Industrial R.R. Co. v. American Spiral Pipe Works, 321 Ill. 101 (1926). In Limits Industrial, this court held that a railroad could not exercise eminent domain authority to acquire property for the purpose of expanding its facilities. Despite a certificate of convenience and necessity issued by the Illinois Commerce Commission, we found the proposed spur track and public freight house provided minimal public benefit and principally benefitted the railroad itself and a few other business entities. Limits Industrial, 321 Ill. at 109-10. Similarly, it is incumbent upon us to question SWIDA's findings as to the parking situation at Gateway and determine whether the true beneficiaries of this taking are private businesses and not the public.

We do not require a bright-line test to find that this taking bestows a purely private benefit and lacks a showing of a supporting legislative purpose. As was the case in Limits Industrial, members of the public are not the primary intended beneficiaries of this taking. Limits Industrial, 321 Ill. at 109-10. This condemnation clearly was intended to assist Gateway in accomplishing their goals in a swift, economical, and profitable manner.

Entities such as SWIDA must always be mindful of expediency, cost efficiency, and profitability while accepting the legislature's charge to promote development within their defined parameters. However, these goals must not be allowed to overshadow the constitutional principles that lie at the heart of the power with which SWIDA and similar entities have been entrusted. As Justice Kuehn stated in dissent in the appellate court, "If property ownership is to remain what our forefathers intended it to be, if it is to remain a part of the liberty we cherish, the economic by-products of a private capitalist's ability to develop land cannot justify a surrender of ownership to eminent domain." 304 Ill. App. 3d at 556 (Kuehn, J., specially concurring).

While the activities here were undertaken in the guise of carrying out its legislated mission, SWIDA's true intentions were not clothed in an independent, legitimate governmental decision to further a planned public use. SWIDA did not conduct or commission a thorough study of the parking situation at Gateway. Nor did it formulate any economic plan requiring additional parking at the racetrack. SWIDA advertised that, for a fee, it would condemn land at the request of "private developers" for the "private use" of developers. In addition, SWIDA entered into a contract with Gateway to condemn whatever land "may be desired *** by Gateway." Clearly, the foundation of this taking is rooted not in the economic and planning process with which SWIDA has been charged. Rather, this action was undertaken solely in response to Gateway's expansion goals and ...


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