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Wood River Township v. Wood River Township Hospital

June 17, 2002

WOOD RIVER TOWNSHIP AND GREGORY G. KUEHNEL, NANCY A. HARRIS, VINCENT B. MILAZZO, SR., BILL STEWART, AND TOM MCRAE, INDIVIDUALLY AND ON BEHALF OF ALL REAL PROPERTY OWNERS AND TAXPAYERS IN WOOD RIVER TOWNSHIP, PLAINTIFFS-APPELLANTS,
v.
WOOD RIVER TOWNSHIP HOSPITAL AND BRADFORD L. PULASKI, MARGARET K. EDEL, MAX EMERY, GARY D. KESSLER, KENNETH MILLER, PEGGY L. RUCKER, INDIVIDUALLY AND AS MEMBERS OF THE BOARD OF DIRECTORS OF WOOD RIVER TOWNSHIP HOSPITAL, NUVEEN PREMIER MUNICIPAL INCOME FUND, INC., CINCINNATI INSURANCE COMPANY, AMALGAMATED BANK OF CHICAGO, MARK VON NIDA, COUNTY CLERK OF MADISON COUNTY, AND FRED BATHON, COUNTY TREASURER AND EX-OFFICIO COLLECTOR OF MADISON COUNTY, DEFENDANTS-APPELLEES.



Appeal from the Circuit Court of Madison County. No. 00-MR-299 Honorable Nelson Metz, Judge, presiding.

The opinion of the court was delivered by: Justice Hopkins

Released for publication.

WOOD RIVER TOWNSHIP AND GREGORY G. KUEHNEL, NANCY A. HARRIS, VINCENT B. MILAZZO, SR., BILL STEWART, AND TOM MCRAE, INDIVIDUALLY AND ON BEHALF OF ALL REAL PROPERTY OWNERS AND TAXPAYERS IN WOOD RIVER TOWNSHIP, PLAINTIFFS-APPELLANTS,
v.
WOOD RIVER TOWNSHIP HOSPITAL AND BRADFORD L. PULASKI, MARGARET K. EDEL, MAX EMERY, GARY D. KESSLER, KENNETH MILLER, PEGGY L. RUCKER, INDIVIDUALLY AND AS MEMBERS OF THE BOARD OF DIRECTORS OF WOOD RIVER TOWNSHIP HOSPITAL, NUVEEN PREMIER MUNICIPAL INCOME FUND, INC., CINCINNATI INSURANCE COMPANY, AMALGAMATED BANK OF CHICAGO, MARK VON NIDA, COUNTY CLERK OF MADISON COUNTY, AND FRED BATHON, COUNTY TREASURER AND EX-OFFICIO COLLECTOR OF MADISON COUNTY, DEFENDANTS-APPELLEES.

Appeal from the Circuit Court of Madison County. No. 00-MR-299 Honorable Nelson Metz, Judge, presiding.

The opinion of the court was delivered by: Justice Hopkins

Wood River Township (the township) and Gregory G. Kuehnel, Nancy A. Harris, Vincent B. Milazzo, Sr., Bill Stewart, and Tom McRae (individual taxpayers) (collectively referred to as plaintiffs) appeal the trial court's order granting a motion to dismiss and for injunctive relief that had been filed by Wood River Township Hospital (the hospital), Bradford L. Pulaski, Margaret K. Edel, Max Emery, Gary D. Kessler, Kenneth Miller, and Peggy L. Rucker (the board of directors), Nuveen Premier Municipal Income Fund, Inc. (Nuveen), Cincinnati Insurance Company (Cincinnati), Amalgamated Bank of Chicago (Amalgamated), Mark Von Nida, and Fred Bathon (collectively referred to as defendants). On appeal, plaintiffs contend that the trial court erred when it dismissed plaintiffs' causes of action. The court found that the township lacked the standing to sue and that the individual taxpayers could not sustain a cause of action in equity because the individual taxpayers had an adequate remedy at law, i.e., they could proceed in a taxpayer's objection proceeding. We affirm.

FACTS

The hospital was organized in 1948 and operated under Article 170 of the Township Code (60 ILCS 1/170-5 et seq. (West 2000)). The hospital is a body corporate and politic separate and distinct from the township, and it is governed by a board of directors appointed by the township's board of trustees. The hospital is authorized to levy ad valorem taxes on real property in the township for the purpose of "maintaining and operating the public hospital and for the purpose of repairing, improving, extending, and equipping the public hospital." 60 ILCS 1/170-30 (West 2000). The hospital also has the authority to issue bonds for "the purpose of acquiring by purchase, constructing, improving, extending, repairing, or equipping" the hospital (60 ILCS 1/170-35(a) (West 2000)) and for "the purpose of (i) constructing, reconstructing, repairing, remodeling, extending, equipping, improving, and acquiring a site or sites for a hospital building or buildings or (ii) refunding any revenue bonds previously issued from time to time in relation to the operation of the hospital when deemed necessary or advantageous in the public interest" (60 ILCS 1/170-50(a) (West 2000)). Section 170-35 requires that the resolution for issuing the bonds be submitted to a referendum of the electors of the township. 60 ILCS 1/170-35(d) (West 2000). Bonds issued under section 170-50, entitled "revenue bonds," can be authorized by a resolution that is not submitted to the electors of the township. 60 ILCS 1/170-50(a) (West 2000).

Both sections 170-35 and 170-50 include a paragraph that incorporates the Omnibus Bond Acts (5 ILCS 70/8 (West 2000)). 60 ILCS 1/170-35(e), 170-50(b) (West 2000). Under the Omnibus Bond Acts, governmental entities, such as the hospital, are given supplemental grants of power pursuant to various acts enumerated in the Omnibus Bond Acts for the purpose of giving the governmental entities "equal access to the municipal bond market." 5 ILCS 70/8(b) (West 2000). The Local Government Debt Reform Act (30 ILCS 350/1 et seq. (West 2000)) is one of the acts listed in the Omnibus Bond Acts. 5 ILCS 70/8(a) (West 2000).

Under the Local Government Debt Reform Act, a governmental unit can issue general obligation bonds, also referred to as "alternate bonds," that are issued in lieu of revenue bonds and that are payable from any revenue source of the governmental unit, including ad valorem real estate property taxes. 30 ILCS 350/15 (West 2000). The alternate bonds issued under the Local Government Debt Reform Act are authorized through a backdoor referendum procedure. 30 ILCS 350/15(b) (West 2000). The backdoor referendum procedure is set out both in section 15(b) and in section 5 (30 ILCS 350/5, 15(b) (West 2000)). Section 15(b) provides that a notice of the bond resolution is to be published in a newspaper of general circulation in the governmental unit, and it sets out the information that is to be included in the published notice, which includes the number of voters required to sign a petition requesting that the issuance of the alternate bonds be submitted to a referendum of voters, the time for filing the petition, the date of the prospective referendum, and a statement that identifies any revenue source that will be used to pay the principal and interest on the alternate bonds. 30 ILCS 350/15(b) (West 2000).

On April 28, 1993, the board of directors of the hospital passed "Resolution No. 1993-1" under the backdoor referendum procedure provided in sections 5 and 15(b) of the Local Government Debt Reform Act (30 ILCS 350/5, 15(b) (West 2000)). The resolution stated that the hospital would issue alternate bonds totaling $13.5 million pursuant to section 15 of the Local Government Debt Reform Act (the resolution called it the "Alternate Bond Act"), for the purpose of refunding already existing revenue bonds and for the purposes of reconstructing, repairing, remodeling, extending, equipping, and improving the hospital. Resolution 1993-1 also provided for notice to be published in accordance with section 15(b) of the Local Government Debt Reform Act, and it set out the contents of the notice. The notice allowed 30 days for the filing of any petitions requesting that the proposed bond issuance be submitted to a referendum of the voters. The notice was published, but no petitions requesting a submission to a referendum of voters were filed during the 30-day period allowed under the published notice. Resolution 1993-1 was adopted by the hospital's board of directors on December 22, 1993. Additionally, resolution 93-9, which levied ad valorem real estate taxes for the years 1994 through 2012 for the payment of the principal and interest on the bonds issued under resolution 1993-1, was also adopted by the hospital's board of directors on this same date.

The hospital's board of directors also adopted resolution 93-8 on December 22, 1993. Resolution 93-8 authorized the issuance of $11.225 million in bonds pursuant to section 9-105 of the Local Governmental and Governmental Employees Tort Immunity Act (745 ILCS 10/9-105 (West 2000)) (the tort bonds) and levied ad valorem real estate taxes for the years 1995 through 2013 pursuant to section 9-107 of the Local Governmental and Governmental Employees Tort Immunity Act (745 ILCS 10/9-107 (West 2000)). Section 9-105 allows for the issuance of bonds by the "board of a local taxing entity" without the bond resolution being submitted to a referendum of voters.

Bonds were issued under the hospital's board of directors' two resolutions. Nuveen and Cincinnati were the purchasers of the bonds issued under the hospital's resolutions. Amalgamated is the escrow agent for the receipt of the pledged taxes for the payment of the bonds and is also the holder of the insurance reserve fund created by the issuance of the tort bonds. The resolutions levying the taxes under the two resolutions were filed with the county clerk on December 30, 1993. The hospital closed and discontinued services on July 21, 2000.

Plaintiffs filed their complaint for a declaratory judgment and for injunctive relief against defendants on July 3, 2000. Plaintiffs asked that the trial court declare the alternate bonds and the tort bonds issued by the hospital void and that the ad valorem real estate taxes for 1999 be declared void because they were levied under the void bond issues. Plaintiffs claimed that the bond issues are void because they were not authorized by a referendum of voters as required by section 170-35 (60 ILCS 1/170-35 (West 2000)), that the notice published for the backdoor referendum did not conform to the requirements of section 15(b) (30 ILCS 350/15(b) (West 2000)), that the pledge of taxes through 2012 is not authorized under Article 170 of the Township Code and that the hospital's board of directors' authority to levy future taxes terminated upon the closing of the hospital, that the pledged taxes are an illegal attempt to bind future boards of directors of the hospital, that the taxes levied on the tort bonds exceed the rate limitation imposed by law on taxes levied for general corporate purposes by the hospital (i.e., three mills on each dollar of assessed value of taxable township property as provided in section 170-30(a) of the Township Hospitals Act (60 ILCS 1/170-30(a) (West 2000)), and that the proceeds from the tort bonds have been used for an unauthorized purpose. Plaintiffs also asked that the court enter a preliminary injunction directing the county treasurer and/or the escrow agent (Amalgamated) to hold all 1999 ad valorem real estate taxes collected from the alternate bonds and tort bonds until the court entered a final ruling ...


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