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Village of Arlington Heights v. Pappas

Court of Appeals of Illinois, First District, Sixth Division

November 10, 2016

THE VILLAGE OF ARLINGTON HEIGHTS, a Municipal Corporation, Plaintiff-Appellant,
v.
MARIA PAPPAS, as County Treasurer of Cook County, Defendant and Third-Party Plaintiff-Appellee, (The County Of Cook, The Forest Preserve District of Cook County, Wheeling Township, Arlington Heights School District, Township School District 214, Harper Community College District 512, The Arlington Heights Park District, The Metropolitan Water Reclamation District of Greater Chicago, and The Northwest Mosquito Abatement District, Third-Party Defendants-Appellees).

         Appeal from the Circuit Court of Cook County. No. 2013 CH 23790 Honorable Franklin U. Valderrama, Judge Presiding.

          JUSTICE ROCHFORD delivered the judgment of the court, with opinion. Presiding Justice Hoffman and Justice Cunningham concurred in the judgment and opinion.

          OPINION

          ROCHFORD, JUSTICE

         ¶ 1 The Village of Arlington Heights (Village) appeals an order of the Cook County circuit court granting summary judgment in favor of the Cook County Treasurer (Treasurer) on the Village's declaratory judgment action and finding that the Treasurer had the authority to seek repayment from the Village for refunds the Treasurer made to taxpayers of certain incremental tax payments received by the Village during the lifetime of two tax increment financing (TIF) districts. In so finding, the circuit court rejected arguments that the Treasurer lacked the authority to seek repayment and that third-party taxing districts were responsible for a pro rata share of the repayment to the Treasurer of the refunds. We affirm.

         ¶ 2 I. Background Information Regarding Property Tax Collection and TIFs

         ¶ 3 The Treasurer is the county collector for Cook County (35 ILCS 200/19-35 (West 2012)) and is responsible for collecting all property taxes for and distributing tax revenue to the hundreds of local taxing districts located within Cook County. 35 ILCS 200/20-85 (West 2012). The process the Treasurer must follow when collecting and distributing property tax revenue varies depending on whether a TIF district has been established.

         ¶ 4 When a TIF district has not been adopted, the Property Tax Code establishes the process the Treasurer must follow. Pursuant to the Property Tax Code, all taxing districts, other than a school district subject to the authority of a Financial Oversight Panel pursuant to article 1H of the School Code (105 ILCS 5/1H-15 (West 2012)), must certify the amounts of their annual property tax levy to the county clerk. 35 ILCS 200/18-15(a) (West 2012). The county clerk determines the total equalized assessed value (EAV) of real properties located within each taxing district and calculates the appropriate tax rate on this EAV to produce the certified amount of the property tax levy. 35 ILCS 200/18-45 (West 2012). The Treasurer collects the taxes, deposits them in the so-called Class A fund (55 ILCS 5/3-11003 (West 2012)), and distributes to each taxing district its respective share of property tax revenue in proportion to the rates established by the county clerk. 35 ILCS 200/18-150 (West 2012). The property tax revenue is deposited in the taxing districts' respective "general corporate funds" to be used for general corporate purposes.

         ¶ 5 When there is a TIF district, the Tax Increment Allocation Redevelopment Act (TIF Act) (65 ILCS 5/11-74.4-1 (West 2012)) applies. The TIF Act was adopted by the legislature "to provide municipalities with the means to eradicate blighted conditions by developing or redeveloping areas so as to prevent the further deterioration of the tax bases of these areas and to remove the threat to the health, safety, morals, and welfare of the public that blighted conditions present." Board of Education, Pleasantdale School District No. 107 v. Village of Burr Ridge, 341 Ill.App.3d 1004, 1010 (2003) (citing 65 ILCS 5/11-74.4-2(a), (b), (c) (West 1994)). Under the TIF Act, after notice and a hearing, a municipality may adopt an ordinance establishing a TIF district for 23 years, approving a redevelopment plan, and designating redevelopment project areas within that TIF district (65 ILCS 5/11-74.4-3.5, 11-74.4-4 (West 2012)), and the municipality may pass an ordinance adopting tax increment allocation financing for the 23-year life of the TIF district. 65 ILCS 5/11-74.4-8 (West 2012). If the municipality passes an ordinance adopting tax increment allocation financing, the county clerk determines the total value for all properties within the redevelopment project area inside the TIF district, referred to as the total "initial equalized assessed value" (initial EAV). 65 ILCS 5/11-74.4-9(a) (West 2012). Each year thereafter while the TIF district is effective, the county clerk determines the actual current EAV of these properties. 65 ILCS 5/11-74.4-9(c) (West 2012). If the actual EAV of these properties exceeds the initial EAV, then that incremental increase is taxed. The Treasurer collects the tax on the incremental increase in property value (tax increment) through the Class A fund and pays all of it to the municipal treasurer, who deposits it in a "special tax allocation fund" to pay the redevelopment project costs and any obligations incurred in the payment thereof. 65 ILCS 5/11-74.4-8(b) (West 2012). None of the tax increment goes to the other taxing districts in the TIF district. In effect, the tax increment, some of which normally would have been distributed to the other taxing districts in the absence of a TIF district, is diverted in total to the municipality for the 23-year lifetime of the TIF district.

         ¶ 6 The Treasurer collects and distributes to the other taxing districts in the redevelopment project area only the taxes on the initial EAV (or on the current EAV, whichever is lower) for the 23 years the TIF district is in effect, and thus the amount of property tax dollars that the taxing districts (other than the municipality) get from the TIF district is effectively frozen for 23 years. 65 ILCS 5/11-74.4-8(a) (West 2012).

         ¶ 7 At the expiration of the TIF district's 23-year lifetime, the tax increment is no longer paid only to the municipality for deposit in the special tax allocation fund but is distributed to all the taxing districts in the former redevelopment project area pro rata for use in their general corporate funds pursuant to the Property Tax Code. 35 ILCS 200/18-150 (West 2012).

         ¶ 8 II. The Facts of This Case

         ¶ 9 The Village established TIF District One in downtown Arlington Heights, south of the Northwest Highway, in 1983, and established TIF District Two in downtown Arlington Heights, north of the Northwest Highway, in 1986. The Village developed and redeveloped various properties within those TIF districts, including three public garages, Harmony Park, a train station, a performing arts theater, and older buildings in the downtown area. The tax increment attributable to the increase in property values in TIF District One over 23 years was approximately $45 million, while the tax increment attributable to the increase in property values in TIF District Two over 23 years was approximately $29 million. Pursuant to the TIF Act, the Village treasurer received 100% of those tax increments and deposited them in the special tax allocation funds, and they were used to pay for the improvements to the properties.

         ¶ 10 Meanwhile, owners of certain taxable real property within TIF District One and TIF District Two filed successful tax objections with the Cook County Board of Review to the assessed value of their properties during the 23-year lifetimes of the TIF districts. As a result of the successful tax objections, the circuit court of Cook County and the Illinois Property Tax Appeal Board (IPTAB) ordered the Treasurer to issue refunds to these taxpayers in the amounts of the tax increments that the taxpayers overpaid plus interest. The Treasurer issued the refunds to comply with the orders of the court and the IPTAB and to prevent the accrual of statutory interest. See 35 ILCS 200/23-20 (West 2012).

         ¶ 11 After paying these refunds out of the Class A fund, the Treasurer sought reimbursement from the Village. The Treasurer alleges that for refunds made during the 23-year statutory lifetime of TIF Districts One and Two, she reimbursed herself by deducting the refund amounts from the next tax increments that were being distributed to the Village for deposit into the special tax allocation funds pursuant to the TIF Act. However, some of the refund orders for over-assessments of tax increments during the TIF districts' lifetimes were entered after the expiration of the TIF districts, when the Property Tax Code, and not the TIF Act, controlled the distribution of the tax increments. Under the Property Tax Code, the tax increments were distributed to all the applicable taxing districts pro rata for use in their general corporate funds rather than distributed in their entirety to the Village for deposit in the special tax allocation funds. See 35 ILCS 200/18-150 (West 2012). As the special tax allocation funds were no ...


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