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Stephen T. Malec v. the City of Belleville

February 7, 2011

STEPHEN T. MALEC,
PLAINTIFF-APPELLANT, .
v.
THE CITY OF BELLEVILLE, ILLINOIS, AN ILLINOIS MUNICIPAL CORPORATION,
THF GREEN MOUNT DEVELOPMENT, LLC, A MISSOURI LIMITED LIABILITY COMPANY, AND GMCR, LLC, A MISSOURI LIMITED LIABILITY COMPANY,
DEFENDANTS-APPELLEES.



Appeal from the Circuit Court of St. Clair County No. 06-MR-45 Honorable Lloyd A. Cueto,Judge, presiding

The opinion of the court was delivered by: Justice Wexstten

NOTICE

Decision

The text of this decision may be changed or corrected prior to the filing of a Peti tion for Rehearing or th e disposition of the same.

JUSTICE WEXSTTEN delivered the judgment of the court, with opinion. Presiding Justice Chapman concurred in the judgment and opinion. Justice Spomer dissented, with opinion.

OPINION

The plaintiff, Stephen Malec, filed an action seeking declaratory and injunctive relief against the defendants, THF Green Mount Development, LLC, and GMCR, LLC (the Developers), and the City of Belleville, Illinois (the City), in the St. Clair County circuit court. The suit challenged (1) the formation of a tax-increment-financing district (TIF District) pursuant to the Tax Increment Allocation Redevelopment Act--division 74.4 of the Illinois Municipal Code (TIF Act) (65 ILCS 5/11-74.4-1 et seq. (West 2006)), (2) the formation of the Carlyle/Green Mount Business District (Business District) pursuant to division 74.3 of the Illinois Municipal Code (Business District Division) (65 ILCS 5/11-74.3-1 et seq. (West 2006)), and (3) the use of municipal sales taxes generated by the development project to reimburse the Developers for regional infrastructure improvements made pursuant to an economic incentive agreement under section 8-11-20 of the Illinois Municipal Code (65 ILCS 5/8-11-20 (West 2006)). After a bench trial, the circuit court entered a judgment for the defendants on all the counts. We affirm the circuit court's order.

BACKGROUND

In 2003, the Developers began evaluating the corner of Green Mount Road and Carlyle Avenue in Belleville for a new shopping center. The TIF project area measured approximately 150 acres in size and contained three parcels: two undeveloped parcels totaling approximately 130 acres and one parcel with rundown structures. The latter parcel included approximately 18 acres and contained five structures--one mobile home and four farm buildings, which were grouped together on 2.5 acres of the parcel. The Developers purchased the property for approximately $50,000 per acre for a total of $7.5 million. In 2004, the Developers negotiated with Centex Corp., and Centex Corp. purchased the northern portion of the property totaling approximately 83 acres for residential units, leaving the Developers approximately 64 acres of the project area for private commercial and retail development.

Subdivision of Land

The TIF project area's three parcels had corresponding tax identification numbers of 09-19.0-100-005, 09-19.0-100-009, and 09-19.0-100-010 (parcels 005, 009, and 010, respectively). Two deeds from 1937 show that 009 and 010 were owned by Charles Edward Biebel in 1937. In 1958, Charles and Hilda Biebel deeded parcels 005, 009, and 010, along with another tract of land south of Carlyle Avenue, to themselves as joint tenants. On December 27, 1961, Charles Biebel, by then a widower, conveyed an eastern half of the area south of Carlyle Avenue totaling approximately 75 acres (the east one-half of the southwestern quarter of section 19) to his daughter and granddaughter, Jean Biebel Moore and Carolyn Moore. In February 1968, Charles Biebel, with Jean Biebel Moore and Edward Moore as the guardians of Carolyn Moore, conveyed the southwest quarter of section 19, the area south of Carlyle Avenue (approximately 149 acres), to Chicago Title and Trust Company. In December 1969, Charles Biebel conveyed the west 20 acres of the southwest quarter of the northwest quarter of section 19 (parcel 005), a western portion of the land north of Carlyle Avenue, along with the set of farm buildings more than 60 years old, to Jean Biebel Moore. On January 5, 1973, Charles Biebel conveyed an eastern portion of the land (a part of the southwest fractional quarter of section 18 and a part of the northwest quarter of section 19, which amounted to more than five acres) located north of Carlyle Avenue (parcel 010) to Jean Biebel Moore.

Parcels 009 and 010 kept the same tax identification numbers from 1937 until the time they were conveyed by the Moore family to the Developers in 2005. At the time of the conveyance, they and parcel 005 were under the ownership of Carolyn Moore Miller and Ernest Miller. Harold Amann, and his father before him, farmed these parcels for 50 years as a single farm, approximately 143 acres of land, pursuant to an oral lease with the Moore family. Amann farmed the land profitably until the Developers, having purchased the property, terminated his lease in October 2005.

Underground Mine

Throughout 2004 and 2005, the Developers negotiated with Lowe's and Walmart as potential tenants of the project area. Both Lowe's and Walmart indicated a concern regarding the satisfactory remediation of an underground mine located under a portion of the property.

On June 4, 2004, the Developers obtained a preliminary site geologic evaluation of the property from its geologic consultant, Midwest Testing. In its June 4, 2004, letter explaining its preliminary analysis, Midwest Testing noted that the commercial site was roughly a 56-acre rectangular-shaped parcel and that the proposed development included a strip shopping center composed of Lowe's and Walmart anchors. The preliminary site geologic evaluation, addressed to the Developers' principal officer, Alan Bornstein (an equity holder in THF Green Mount Development, LLC), relayed that, according to maps from the Illinois Geological Survey, the site was probably underlain by an abandoned coal mine (mined by the Little Oak Coal Company) at a depth of 120 to 150 feet.

Midwest Testing noted that "[t]he risk of collapse, or subsidence, of the mined voids beneath [the] site [was] the principal concern of constructing over mined areas," that "[t]here is a similar risk of portions located immediately beyond the mapped undermined area that, although located on intact coal, would be influenced by subsidence of adjacent undermined areas," and that one occurrence of surface-reflected subsidence near the subject property had been reported. In the evaluation letter, Midwest Testing also stated the following:

"[T]o the best of our knowledge, the development in the surrounding area over the past 15 years or so has been accomplished without mine remediation. Obviously, many owners have assumed the risk of subsidence or concluded that the cost of remediation versus the risk is too high to warrant remedial action. Additionally, subsidence events in the region have been isolated and, when they have occurred, they have affected a very tiny percentage of the structures and infrastructure overlying abandoned mines. Known exceptions are the St. Clair Square, possibly, the Home Depot on Lincoln Trail, and more recently, the American TV & Appliance Store on Green Mount Road in O'Fallon, approximately one mile north of the subject site.

Options regarding the apparent undermining include: 1) proceeding without further exploration, 2) undertaking a more detailed search of available maps and data through various state and local agencies, and 3) conducting a mine subsidence evaluation. We have discussed these options with you and we understand you have elected to include grouting costs in your budget at this time for site development."*fn1 According to the trial testimony of Michael Malloy, the previous director of economic planning and development for the City, the City did not receive a copy of the June 4, 2004, letter from Midwest Testing. On June 6, 2005, the city council approved an initial TIF eligibility study prepared by Eugene Norber, who was the City's TIF consultant and president of Economic Development Resources (EDR). The eligibility study characterized Midwest Testing's June 4, 2004, letter, stating as follows:

"Midwest Testing, Inc. prepared a preliminary geological evaluation for property located at the northeast corner of State Route 161 (Carlyle Avenue) and Green Mount Road in Belleville, Illinois for the purpose of determining the geologic conditions that might impact proposed development. As reported by Midwest Testing, Inc. in a letter to THF Realty dated June 4, 2004, 'this site was mined for the Herrin No. 6 coal, originally by the Little Oak Coal Company.' Green Mount Road was formerly named Little Oak Road. Midwest [Testing] has determined that the impact of such mining activity will require grouting of areas from which coal was extracted, or construct columns to provide additional support for the coal 'roof.' " At the trial, Norber admitted failing to inform the city council about the contents of the June 4, 2004, letter and, specifically, the statements therein about mine remediation being uncommon in the surrounding area. Norber admitted that he did not independently study whether mine remediation was required for development in the area and that he relied upon the Developers' representation that to develop the project, there would have to be mine remediation.

On July 1, 2005, Norber/EDR submitted for the City's consideration a TIF "Redevelopment Plan" that contained, verbatim, the same characterization of the June 4, 2004, letter from Midwest Testing as had been set forth in the eligibility study.

In a mine subsidence study submitted by Midwest Testing, dated July 29, 2005, Midwest Testing noted that the conditions of the Herrin No. 6 coal seam, and the associated Little Oak Mine, which underlay the proposed area, were further explored by drilling 30 test borings at the locations shown. In the report, Midwest Testing stated the following:

"The presence of a mine beneath a developed site poses the inherent risk of a mine collapse, which can result in ground surface subsidence (i.e., a sudden collapse or drop). ***

At this site, judging from past reported subsidence events in the area, the trough subsidence would be the likely form and, if it occurred, would be evident at the surface as dish-shaped depressions. The time period between mining and subsidence may vary from hours or days to decades, and the subsidence event may be one large movement or a series of smaller movements occurring over time.

The mine void information obtained from borings, coupled with the downhole video, suggests that some degree of mine degradation has already occurred over most of the site. Surface subsidence has been reported at several locations elsewhere in the region with similar conditions.

Based on conditions encountered in the borings, it is our opinion that subsidence, or 'squeezing' of the mine void has occurred. Squeezing occurs when portions of the mine collapse and is indicative of a mine that is susceptible to further collapse.

On a risk scale of negligible-slight-moderate-severe, we judge the majority of this site to be at the moderate category for a subsidence event under the current conditions. With the potential for pillar deterioration, and associated or independent roof collapse, it is our opinion that the risk level moves into the upper end of the moderate range within the life of the building (estimated at 50 years).

The extent of development in the undermined portions of Belleville and surrounding areas (e.g., Fairview Heights and O'Fallon) is significant. These developed areas overlie or are within the potential zone of influence of a number of abandoned coal mines."

Midwest Testing reiterated that "many owners have assumed the risk of subsidence or concluded that the cost of remediation versus the risk is too high to warrant remedial action" and that "subsidence events in the region have been isolated and, when they have occurred, they have effected [sic] a very tiny percentage of the structures and infrastructure overlying abandoned mines." Midwest Testing again stated that "the development in the surrounding area over the past 15 years or so has been accomplished without mine remediation with the exception of," among others, the American TV facility, for which mine grouting was completed and Midwest Testing was the lead geotechnical consultant, concluding that the risk was also in the moderate category. Midwest Testing further stated as follows:

"It is our opinion that the current projected risk level for mine subsidence suggests that risk mitigation measures should be considered. At a minimum, we recommend that a specialty contractor who specializes in grouting of subsurface mines be contacted and a cost estimate prepared for filling the mine voids, either partially or completely, beneath the facility."

Midwest Testing listed the available options as ranging from "[d]o nothing and accept the risk" to "[f]ully grout the mines within the zone of influence of the desired area of protection and eliminate the subsidence risk." At the trial, Malloy testified that the City also did not receive the mine subsidence study dated July 29, 2005. Malloy acknowledged that the City generally relied on EDR's reports as its sole basis for the findings that it made with respect to the TIF and Business Districts.

On December 16, 2005, in an intercompany e-mail from Lowe's geotechnical engineer, Lowe's expressed a need to review grout test results and formed an opinion that the grouting program should include the mined areas within the influence zone of the Lowe's Garden Center, truck ramps, truck access road, and front entrance driveway. Lowe's considered it "prudent" to conduct an additional investigation to verify the reserve area beneath the building.

Traffic Impact Study

Crawford, Bunte, Brammeier (CBB), traffic and transportation engineers, prepared a traffic impact study dated February 10, 2005, evaluating the Green Mount Road/Carlyle Avenue intersection. In this study, CBB noted that the 147-acre site would be developed as approximately 64 acres of commercial development and 83 acres of residential development and that access to the residential and commercial sites would be provided on both Illinois Route 161 (Carlyle Avenue) and North Green Mount Road. The study noted that CBB's purpose "was to forecast the amount of traffic that would be generated by the proposed development, evaluate its impact upon the adjoining road system, and determine the need for roadway and/or traffic control improvements."

The traffic impact study noted, "Levels of traffic service (LOS) are quantifiable measures of traffic flow, which consider such factors as speed and travel time, traffic interruptions, safety, driving comfort, and convenience." The traffic impact study noted that level C represents a roadway operating at approximately 80% of its capacity and that level D is considered acceptable for peak period conditions in urban areas.

In the traffic impact study, CBB concluded that the existing operating conditions at the intersection were acceptable during the morning peak but operations degraded considerably during the afternoon peak hour and that "an exclusive southbound right-turn lane [was] already needed at the intersection to provide acceptable conditions for existing traffic." In the traffic impact study, CBB rated the northbound approach to the intersection, the southbound approach to the intersection, and the intersection overall as LOS F. As explained in the "Highway Capacity Manual," prepared in 2000 by the Transportation Research Board of the National Academies and offered into evidence at the trial, LOS F is considered unacceptable to most drivers and often occurs with oversaturation, when arrival flow rates exceed the capacity of lane groups.

Phase I Environmental Assessment

In a "Phase I Environmental Assessment" prepared by Midwest Testing for Walmart and the Developers, dated August 17, 2005, Midwest Testing noted "minor dumping of yard and household waste *** limited to the western portion of the site near the existing mobile home and barns." Midwest Testing found no evidence of hazardous waste disposal or storage. Midwest Testing concluded that its investigations "revealed no evidence of recognized environmental conditions in connection with the subject property."

TIF Ordinances

On January 11, 2006, the City found that the property qualified under the TIF Act (65 ILCS 5/11-74.4-1 et seq. (West 2006)), the Business District Division (65 ILCS 5/11-74.3-1 et seq. (West 2006)), and the economic incentive agreement provisions in the Illinois Municipal Code (65 ILCS 5/8-11-20 (West 2006)). Accordingly, the City enacted Ordinances 6814, 6815, and 6816 (Belleville, Ill., Ordinance Nos. 6814, 6815, 6816 (eff. January 11, 2006)) (collectively, TIF ordinances), which created the TIF District, adopted and approved a "Revised TIF Redevelopment Plan"*fn2 (Redevelopment Plan), and approved tax-increment-allocation financing to reimburse the Developers for project redevelopment costs in the TIF District.

In Ordinance 6814 (Belleville, Ill., Ordinance No. 6814 (eff. January 11, 2006)), the City found that the Carlyle Avenue/Green Mount Road redevelopment project area as a whole was blighted and had not been 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. The City adopted and approved the Redevelopment Plan dated October 17, 2005.

In the Redevelopment Plan, the City, through EDR, found that the "improved blighted" portion of the TIF area, the parcel with five rundown structures, included dilapidation, obsolescence, deterioration, structures below minimum code, excessive vacancies, a lack of ventilation, light, or sanitary facilities, inadequate utilities, deleterious land use or layout, a lack of community planning, and declining total equalized assessed value.

With regard to the two undeveloped parcels, the Redevelopment Plan described this portion as vacant because the parcels within the area had been subdivided. In the Redevelopment Plan, the City found the property to be "blighted" because, pursuant to information provided by the Department of Natural Resources, Illinois State Geological Survey, and Midwest Testing, Inc., coal mining had been conducted beneath the portion of the proposed redevelopment project area north of Carlyle Avenue. In the Redevelopment Plan, the City concluded that this factor was present to a meaningful extent and reasonably distributed throughout the vacant portion of the redevelopment project area.

Specifically, in the Redevelopment Plan, the City, through Norber and EDR, indicated, "Midwest [Testing] has determined that the impact of such mining activity will require grouting of areas from which coal was extracted, or construct columns to provide additional support for the coal 'roof.' " Pursuant to the Redevelopment Plan, the City found that the abandoned coal mine beneath the northern and eastern portions of the site rendered "[v]irtually the entire Area north of Carlyle Avenue *** at risk due to the fact that subsidence can occur beyond the area actually mined." Pursuant to the Redevelopment Plan, the City further found that "the unused mine impairs the sound growth of substantially all of the Area."

In the Redevelopment Plan, the City, through EDR, concluded that the redevelopment project area on the whole had not been subject to growth and development through investment by private enterprise and would not reasonably be anticipated to attract new development without the adoption of the Redevelopment Plan. Specifically, the City concluded that the area was "characterized by both disinvestment and neglect," that "all structures [were] vacant, obsolescent, deteriorated, and below minimum code," and that "[r]einvestment within the Area [had] been limited for many decades." The City further concluded that the public infrastructure, including public rights-of-way, was inadequate due to functional obsolescence and that significant portions of the area consisted of abandoned coal mines.

The City, through EDR, concluded in the Redevelopment Plan as follows: "Given the lack of investment within the Area [and] the $19.8 million budgeted to implement the mine remediation, infrastructure improvements, storm water management, and other TIF eligible expenditures, it is clear that 'but for' the use of tax increment financing the Area will not be redeveloped."

In the Redevelopment Plan, the City, through EDR, also concluded as follows: "Public infrastructure, including public rights-of-way, is inadequate due to functional obsolescence. Significant portions of the Area consist of abandoned coal mines. Absent a municipal commitment to the development of this area--including updating the public infrastructure, and remediating the hazards posed by the unused mine--the likelihood of private investment and new growth is remote."

Ordinance 6818 Creating the Business District

Pursuant to Ordinance 6818 (Belleville, Ill., Ordinance No. 6818 (eff. January 11, 2006)), passed the same day as the TIF ordinances, the City created the Business District, approved the "Carlyle/Green Mount Business District Development Plan" (Business District Plan) prepared by EDR, and imposed a business district tax to reimburse the Developers for project redevelopment costs pursuant to section 11-74.3-3(12) of the Illinois Municipal Code (65 ILCS 5/11-74.3-3(12) (West 2006)). In Ordinance 6818, the City depicted the boundaries of the Business District, which is a part of the TIF District (the southern half of the approximately 150-acre TIF redevelopment project area) and is approximately 70 acres in size and consists of two parcels.

Pursuant to section 11-74.3-5(3) of the Illinois Municipal Code (65 ILCS 5/11-74.3-5(3) (West 2006)), the City made the following findings, based on the facts set forth in the Business District Plan:

"The Business District is a blighted area; that, by reason of the predominance of defective or inadequate street layout, unsanitary or unsafe conditions, deterioration of site improvements, or the existence of conditions which endanger life or property by fire or other causes, or any combination of those factors, constitutes an economic or social liability or a menace to the public health, safety, morals, or welfare in its present condition and use.

The Business District, on the whole, has not been subject to growth and development through investment by private enterprises or would not reasonably be anticipated to be developed without the adoption of the Business District Plan." Belleville, Ill., Ordinance No. 6818 (eff. January 11, 2006).

In the Business District Plan, dated July 1, 2005, EDR noted that the Business District was bounded on the north by vacant property, on the east by the YMCA, on the south by Carlyle Avenue, and on the west by Green Mount Road. In the section of the Business District Plan involving the basis for blight, EDR noted that the district contained two parcels (parcels 005 and 010)--an 18.75-acre parcel with five structures, including one mobile home and four farm buildings, and a 42-acre unimproved parcel used for agricultural purposes.

In the Business District Plan, EDR concluded that, with its two-lane configuration, Green Mount Road could not adequately accommodate current traffic volumes, which the Illinois Department of Transportation reported as 15,500 to 16,300 vehicles per day. EDR noted that the traffic impact study identified the roads' level of service at F during the afternoon peak hour and that level F traffic volumes exceed the capacity of the intersection and are classified as "breakdown flow." EDR also noted that an interior roadway must be removed, because it was in disrepair and inadequate to accommodate redevelopment. Thus, EDR concluded that the street layout was inadequate and represented an impediment to development within the Business District.

In the Business District Plan, EDR found unsanitary or unsafe conditions, noting that all five structures on the property failed to meet building code requirements, that virtually the entire district was subject to mine subsidence, an unsafe condition that endangers the property itself, and that the level of service F identified in the traffic impact study connoted traffic congestion that had reached unsafe levels during the afternoon peak hours.

In the Business District Plan, EDR found deterioration of site improvements, noting the major defects of the five structures in the district. EDR also found the existence of conditions which endanger life or property by fire or other causes with regard to the structures and noted that the undermining and subsidence potential within the Business District was also an unsafe condition endangering the property. EDR concluded that the combination of the factors above constituted an economic or social liability or a menace to the public health, safety, morals, or welfare in its present condition and use. EDR concluded that the Business District on the whole was not subject to growth and development through private investment and would not reasonably be anticipated to be developed without a Business District Plan.

Ordinance 6819

Pursuant to Ordinance 6819 (Belleville, Ill., Ordinance No. 6819 (eff. January 11, 2006)), also passed on January 11, 2006, the City noted that it had the authority under the Illinois Municipal Code (65 ILCS 5/8-11-20 (West 2006)) to share a portion of any retailer's occupation taxes and service occupation taxes generated by a development project with the Developers. Accordingly, the City authorized the use of general sales tax revenues, in addition to the TIF and business district tax financing, to reimburse the Developers for project development costs through an economic incentive agreement pursuant to section 8-11-20 of the Illinois Municipal Code (65 ILCS 5/8-11-20 (West 2006)). Pursuant to the Illinois Municipal Code, the City found, inter alia, that the project area was vacant and had remained vacant for at least one year, that the development project was expected to create or retain job opportunities within the City, and that without the "Redevelopment Agreement," the development project would not be possible. Attached as exhibit B to Ordinance 6819 was EDR's October 2005 findings, which also indicated that the property was vacant and had remained vacant for at least one year. EDR's findings further indicated the following:

(A) The buildings on the property no longer comply with current building codes.

"For that portion of the Project's area that is currently developed:

Field investigations by EDR and the City in 2005 have shown that the five structures on the developed parcel (parcel *** 005) do not comply with current building codes.

(B) The buildings on the property have remained less than significantly occupied or underutilized for a period of at least one year. The City concluded that it was thereby ...


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