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Franklin County Board of Review v. Dep't of Revenue

March 09, 2004


Appeal from the Circuit Court of Franklin County. Nos. 01-MR-12 & 01-MR-13 (Consolidated) Honorable E. Kyle Vantrease, Judge, presiding.

The opinion of the court was delivered by: Presiding Justice Chapman


The plaintiffs filed complaints in the circuit court of Franklin County for the administrative review of a decision by the Department of Revenue of the State of Illinois (Department). The Department had granted real estate exemptions for three parcels of land owned by the Rend Lake Conservancy District (Rend Lake), one of the defendants herein. The circuit court affirmed the Department, and two of the plaintiffs appeal. We affirm.


Rend Lake applied for property tax exemptions for assessment year 1999 for three parcels of real estate on which a restaurant, a hotel, and a condominium complex are located. Rend Lake sought tax exemptions for this real estate under section 15-75 of the Property Tax Code (35 ILCS 200/15-75 (West 1998)), which provides, in part, that public grounds owned by a municipal corporation and used exclusively for public purposes are tax exempt. The Department found that the properties were not in exempt use, and it denied Rend Lake's applications.

Rend Lake requested a hearing before an administrative law judge (ALJ) pursuant to section 8-35 of the Property Tax Code (35 ILCS 200/ 8-35 (West 2000)). The ALJ framed the issues for the hearing in a pretrial order entered on July 10, 2000: (1) whether Rend Lake is a municipal corporation, (2) whether Rend Lake owns the real estate for which the exemptions were sought, and (3) whether Rend Lake used the real estate for public purposes during the 1999 assessment year. Ewing Northern Community Consolidated School District No. 115 (Ewing) and Benton Community High School District No. 103 (Benton) intervened as plaintiffs in the proceeding. They filed a response with the ALJ and admitted that Rend Lake was a municipal corporation and that Rend Lake was eligible for a property tax exemption pursuant to section 15-75 of the Property Tax Code, if the real estate was used exclusively for public purposes. They denied that the real estate was used exclusively for public purposes.

Plaintiff Franklin County Board of Review (Board) did not participate in the administrative hearing. Rend Lake's general manager and consulting engineer testified, as did the school superintendents for Ewing and Benton. The following evidence was presented to the ALJ. The creation of Rend Lake, a special-purpose unit of government, was authorized by the River Conservancy Districts Act. Ill. Rev. Stat. 1953, ch. 42, par. 383 et seq. (now see 70 ILCS 2105/1 et seq. (West 2002)). It came into existence in 1955 in response to local water-supply problems. It is one of three river conservancy districts in Southern Illinois and is located about 18 miles south of Mt. Vernon on Interstate 57. Rend Lake was given broad powers to accomplish a number of objectives for Southern Illinois, including water supply and distribution, sewage treatment, conservation, and recreation. Rend Lake supplies water to 55 cities, villages, and water districts and an additional 700 households, via 300 miles of distribution pipes. Rend Lake also has a sewage plant in the Village of Ewing.

Rend Lake's promotional material in the record refers to a recreation complex and boasts of millions of visitors annually. It consists of 18,900 acres of water and 20,000 acres of land. The lake, including dams and a reservoir, was constructed by the United States Army Corps of Engineers (Army Corps) from 1965 to 1972 for the purposes of flood control, water supply and quality control, conservation, recreation, and the redevelopment of the area. It cost $60 million. The management of the lake and surrounding forest areas is shared by the Army Corps, the State of Illinois, and Rend Lake.

Rend Lake's recreation complex is large and diverse. The shooting complex houses a 10-station trap field, a skeet range, a sporting clay range, a 3-D archery range, and a five-stand range. A state-licensed public hunting preserve is located within the 300 acres surrounding the shooting complex, and visitors may go on guided hunts with dogs provided by Rend Lake. The golf facility includes a 27-hole course, a driving range, practice greens, a clubhouse, and a pro shop. There are more than 20 boat ramps on the lake, but Rend Lake operates only one. The recreation complex also houses the Southern Illinois artisan shop, where local artists display their work for sale. The artisan shop is owned by the State of Illinois. Rend Lake, in conjunction with other state and federal agencies, hosts numerous festivals and events. Swimming, camping, boating, cycling, horseback riding, and other activities are also available at Rend Lake.

In addition to the foregoing, Rend Lake owns and operates a restaurant, known as the Seasons Restaurant, which includes a dining room, a lounge, a kitchen area, and a banquet room. It offers general restaurant and banquet services. Rend Lake owns and operates a 40-unit hotel, referred to as the Seasons Hotel, and 22 condominiums in a complex called the Fairway Condominiums. (The status of these three properties for the 1999 assessment year is the subject of this appeal. Prior to 1999 they were owned or leased to and operated by private, for-profit entities.) All of Rend Lake's recreational facilities are open and available to the public for a charge, except the boat ramp, which is free. All of Rend Lake's recreational facilities are used by the local citizenry and out-of-town tourists. Visitors at Rend Lake often participate in multiple activities during one visit.

Rend Lake, as a governmental unit, is exempt from sales tax and is not taxed on other operations, including its farm, oil, water, and sewer activities. Rend Lake's income is derived from fees charged for activities noted above and tax revenue. All the revenue generated by Rend Lake's facilities and operations, except water revenue, is deposited into the general bank accounts for Rend Lake, from which expenses are paid. In any given year, if there is a surplus, no profits are distributed, because Rend Lake is not a for-profit enterprise. There are no shareholders, partners, or owners.

The ALJ received lists (consisting of several hundred pages) containing the names of individuals and organizations that used the banquet facilities at the restaurant and stayed at the hotel and condominiums in 1999. These records reflect that in 1999, the banquet facilities were reserved by more than 400 individuals and private and public entities. The hotel logged a total of 7,665 room nights in 1999. The lists provide the names of the individuals who stayed at the hotel and the dates of their arrival and departure. The purpose of those individuals' visits and their places of residence are not noted. The vast majority of the individuals who stayed at the hotel in 1999 stayed one to two days. The 22 condominiums logged 607 room nights from July through December of 1999. These lists are difficult to decipher, but according to the Board's brief, one of the condominiums was leased to an individual for four months and three others were leased to individuals for three months or less. The remaining 18 condominiums appear to have been leased in 1999 to different people for one to three days at a time.

The parties briefed their arguments after the hearing. Ewing and Benton, in their joint memorandum of law, set forth one argument, i.e., that Rend Lake failed to show that the real estate had been used exclusively for public purposes in assessment year 1999. Neither Ewing nor Benton challenged Rend Lake's status as a municipal corporation or the ownership of the subject real estate.

The ALJ recommended that the restaurant and hotel parcels be exempt from taxation for the 1999 assessment year and that the condominiums be exempt for 49% of the 1999 assessment year, pursuant to section 15-75 of the Property Tax Code (35 ILCS 200/15-75 (West 1998)). (The condominiums were owned by Rend Lake for only 49% of the year.) The ALJ's "Recommendation for Disposition" included lengthy and detailed factual findings and conclusions of law. He concluded that the enabling legislation for river conservancy districts delineated a number of purposes, public in nature, and that the subject real estate was primarily used to fulfill those purposes. The Director of Revenue accepted the ALJ's ...

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