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Dianne Barrett and Joseph Barrett v. Gwen Henry

April 17, 2013

DIANNE BARRETT AND JOSEPH BARRETT,
PLAINTIFFS-APPELLANTS,
v.
GWEN HENRY, COUNTY TREASURER AND EX OFFICIO COUNTY COLLECTOR OF DU PAGE COUNTY, ILLINOIS,
DEFENDANT-APPELLEE.
DIANNE BARRETT AND JOSEPH BARRETT,
PLAINTIFFS-APPELLANTS,
v.
GWEN HENRY, COUNTY TREASURER AND EX OFFICIO COUNTY COLLECTOR OF DU PAGE COUNTY, ILLINOIS,
DEFENDANT-APPELLEE.



Appeal from the Circuit Court of Du Page County. No. 10-TO-7 No. 11-TO-12 Honorable Paul M. Fullerton, Judge, Presiding.

The opinion of the court was delivered by: Justice Hudson

Appeal from the Circuit Court of Du Page County. Honorable Paul M. Fullerton, Judge, Presiding.

JUSTICE HUDSON delivered the judgment of the court, with opinion. Justices Zenoff and Schostok concurred in the judgment and opinion.

OPINION

¶ 1 Dianne and Joseph Barrett filed tax objection complaints against Gwen Henry, the treasurer and ex officio county collector of Du Page County (Collector), seeking refunds for portions of their 2009 and 2010 property taxes that were collected to make payments on bonds issued by Hinsdale Township High School District Number 86 (District).*fn1 The taxes in question were extended at a rate of $0.0373 per $100 of assessed property value in 2009 and $0.0301 per $100 of assessed property value in 2010. The taxes added $80.35 and $61.35 to the Barretts' property tax bills for 2009 and 2010, respectively. In their tax objection complaints, the Barretts argued that the District abused its discretion in issuing the bonds. In each case, the Collector moved to dismiss pursuant to section 2-619(a)(9) of the Code of Civil Procedure (Code) (735 ILCS 5/2-619(a)(9) (West 2010)). The trial court granted the motions and the Barretts appealed. We consolidated the appeals and we now affirm.

¶ 2 According to the Barretts' objections, the District issued general obligation bonds in December 2002 (Series 2002 Bonds), October 2005 (Series 2005 Bonds), and November 2008 (Series 2008 Bonds). The final official statement for the Series 2002 Bonds indicated that they were issued for working cash purposes, including funding capital improvements to Hinsdale South High School and Hinsdale Central High School. The final official statement for the Series 2005 Bonds indicated that they were issued to increase the District's working cash fund for capital projects and to refund a portion of the Series 2002 Bonds. The final official statement for the Series 2008 Bonds indicated that the proceeds would be used to increase the District's working cash fund and that it was the intent of the District's board of education to use the funds to alter, repair, equip, and improve school buildings and facilities. According to the objections, the District's audited financial statements show that, in each of the fiscal years when the bonds were issued, the proceeds were deposited into the working cash fund and the District made a permanent transfer of funds from the working cash fund. The receipts of bond proceeds and transfers from the fund were as follows:

Fiscal Year Bond Proceeds Transfers 2002-2003 $13,030,000 $13,030,000 2005-2006 $2,300,764 $3,267,416 2008-2009 $3,980,000 $4,000,000

¶ 3 During the period from June 30, 2002, through June 30, 2009, the working cash fund had the following end-of-year balances:

Fiscal Year End-Of-Year Balance 2001-2002 $4,564,831 2002-2003 $5,364,941 2003-2004 $8,303,747 2004-2005 $7,752,850 2005-2006 $7,106,552 2006-2007 $6,713,691 2007-2008 $7,022,189 2008-2009 $7,279,499

¶ 4 As will be discussed at greater length below, a school district's working cash fund is designed to enable the district to finance operations during the period before the property taxes levied for that purpose have been collected. This method of financing serves as an alternative to the issuance of tax anticipation warrants. The Barretts argued that, when a school district has accumulated a working cash fund sufficient to finance the district's operations without the issuance of tax anticipation warrants, the district should not raise additional cash for the fund through the issuance of bonds. The Barretts thus contended that it was an abuse of discretion to issue the bonds, that the bonds were "illegal and void," and that "no authority existed for the levy or extension of taxes for the retirement [of the bonds]."

¶ 5 As noted, this appeal is before us for review of the trial court's rulings on motions to dismiss under section 2-619(a)(9) of the Code. Section 2-619 provides that, within the time for pleading, a defendant may move for involuntary dismissal of a claim on the basis of any of various enumerated defenses or, under subsection (a)(9), on the basis of "other affirmative matter avoiding the legal effect of or defeating the claim" (735 ILCS 5/2-619(a)(9) (West 2010)). For purposes of section 2-619(a)(9), affirmative matter "is something in the nature of a defense which negates the cause of action completely or refutes crucial conclusions of law or conclusions of material fact contained in or inferred from the complaint." Illinois Graphics Co. v. Nickum, 159 Ill. 2d 469, 486 (1994). Our review is de novo. King v. First Capital Financial Services Corp., 215 Ill. 2d 1, 12 (2005). In support of her motions to dismiss, the Collector submitted documentary evidence showing that the bonds were issued in compliance with the applicable statutory requirements of public notice, a public hearing, and the adoption of a resolution authorizing the issuance of the bonds. She argued that the documents "defeat the [Barretts'] claim that [the bonds] were illegal, void and without authority." She further disputed a critical conclusion of law in the Barretts' objections: the conclusion that a school district may raise cash for its working cash fund only to the point at which the fund is sufficient to allow the district to operate without issuing tax anticipation warrants. Accordingly, the Collector argued that the issuance of the bonds was not an abuse of discretion.

¶ 6 There is no dispute that the District complied with the statutory procedures for issuance of the bonds. The sole question raised in this appeal is whether issuance of the bonds was an abuse of discretion. We conclude that it was not, and the Collector's motions to dismiss were properly granted.

¶ 7 Article 20 of the School Code (105 ILCS 5/art. 20 (West 2002)) provides for the creation of working cash funds and governs the use of the funds. During the period when the bonds were issued, section 20-2 of the School Code provided, in pertinent part:

"For the purpose of creating a working cash fund, the school board of any such district may incur an indebtedness and issue bonds as evidence thereof in an amount or amounts not exceeding in the aggregate 85% of the taxes permitted to be levied for educational purposes for the then current year to be determined by multiplying the maximum educational tax rate applicable to such school district by the last assessed valuation as determined at the time of the issue of said bonds plus 85% of the last known entitlement of such district to taxes as by law now or hereafter enacted or amended, imposed by the General Assembly of the State of Illinois to replace revenue lost by units of local government and school districts as a result of the abolition of ad valorem personal property taxes, pursuant to Article IX, Section 5, paragraph (c) of the Constitution of the State of Illinois. *** The school board shall before or at the time of issuing the ...


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