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1001 Ogden Avenue Partners v. Henry

Court of Appeals of Illinois, Second District

September 21, 2017

1001 OGDEN AVENUE PARTNERS, et al., Plaintiffs-Appellants,
v.
GWEN HENRY, Du Page County Treasurer and ex officio Du Page County Collector, Defendant-Appellee Bensenville Elementary School District No. 2, Itasca School District No. 10, Marquardt School District No. 15, Keeneyville Elementary School District No. 20, Benjamin School District No. 25, West Chicago Elementary School District No. 33, Villa Park School District No. 45, Butler School District No. 53, Darien School District No. 61, Hinsdale Township High School District No. 86, Du Page High School District No. 88, Carol Stream Community Consolidated School District No. 93, Fenton Community High School District No. 100, Lake Park Community High School District No. 108, Wheaton-Warrenville Community Unit School District No. 200, Westmont Community Unit School District No. 201, Intervenors-Appellees.

         Appeal from the Circuit Court of Du Page County. No. 02-TO-15 Honorable Paul M. Fullerton, Judge, Presiding.

          Justices McLaren and Jorgensen concurred in the judgment and opinion.

          OPINION

          ZENOFF JUSTICE

         ¶ 1 Plaintiffs, 1001 Ogden Avenue Partners, et al. (the taxpayers), [1] appeal from the Du Page County circuit court's order granting summary judgment in favor of defendant, Gwen Henry, the Du Page County treasurer and ex officio Du Page County collector, as well as 16 intervening school districts (collectively, the School Districts) on tax-rate objections spanning 11 years. For the reasons that follow, we affirm.

         ¶ 2 I. BACKGROUND

         ¶ 3 From tax years 2001 through 2012, the School Districts each issued working-cash-fund bonds under article 20 of the School Code (105 ILCS 5/20-1 et seq. (West 2002)). The taxpayers filed objections in the trial court, challenging the validity of the taxes levied to pay the principal and interest on the working-cash-fund bonds. The objections included various ranges of tax years from 2001 through 2012, depending on the school district at issue. The objections alleged that the School Districts improperly issued the working-cash-fund bonds under article 20, because the "true purpose" of each bond issuance was to raise funds for building purposes. The taxpayers claimed that the School Districts were required to conduct a direct referendum under section 19-3 of the School Code (105 ILCS 5/19-3 (West 2002)) before issuing bonds for building purposes. They also claimed that a direct referendum was required under section 18-190 of the Property Tax Extension Limitation Law (35 ILCS 200/18-190 (West 2002)). The taxpayers ultimately argued that the taxes levied on the working-cash-fund bonds were illegal and void.

         ¶ 4 The School Districts moved to intervene, and the trial court consolidated the taxpayers' objections. Because the facts underlying each bond issuance were substantially the same, the consolidation allowed Itasca School District No. 10 (District 10), West Chicago Elementary School District No. 33, and Villa Park School District No. 45 to represent all of the School Districts. Defendant and the School Districts then filed a joint motion for summary judgment. The motion addressed the facts relating to the working-cash-fund bonds issued only by District 10, as representative of the facts concerning all of the School Districts.

         ¶ 5 The factual background concerning District 10's bond issuance was as follows. On December 13, 2006, District 10's board of education adopted a resolution declaring its intent to issue working-cash-fund bonds. Two days later, District 10 published in a newspaper of general circulation a notice of a public hearing and a notice of its intent to issue the bonds. The notices stated that District 10 was going to issue the bonds under article 20 for the purpose of increasing its working cash fund to allow it to have sufficient money for "corporate purposes." The notices also informed the public of the opportunity to submit within 30 days a petition signed by 524 voters of the district, requesting that a referendum be held on the bond issuance. On January 16, 2007, a "No Petition Certificate" was filed, evidencing that no petition had been filed by voters.

         ¶ 6 On February 14, 2007, District 10 adopted a bond resolution stating that the board was authorized to issue bonds totaling $2, 685, 000 under article 20 of the School Code; the proceeds were to be deposited into the working cash fund and "held apart, maintained and administered" under article 20 until the bonds were retired. The bond resolution further stated that it was the "present intention and reasonable expectation of the Board" that the bond proceeds would be used to "improve the sites of, build and equip additions to and alter, repair and equip the existing school buildings, " after the funds were transferred to the appropriate operating fund in accordance with article 20.

         ¶ 7 The bonds were issued and titled "General Obligation Limited Tax School Bonds, Series 2007." The proceeds were deposited into District 10's working cash fund, known as the "Working Cash Fund of School District Number 10, DuPage County, Illinois." Following the issuance of the bonds, District 10 undertook a series of repair and maintenance projects at its schools. These projects included, but were not limited to, door replacements, roof maintenance, carpet replacement, ceiling repair, locker painting, gym floor repair/varnish, and toilet replacements. District 10 transferred or abated money from its working cash fund, including the proceeds of the 2007 bond issuance, to its operations and maintenance fund to pay for the projects when those bills became due.

         ¶ 8 In their motion for summary judgment, the School Districts argued that the 2007 working-cash-fund bond issuance was authorized under article 20 of the School Code and that the bonds were properly issued pursuant to that article. Specifically, they noted that the board's resolution explicitly stated that working cash bonds were to be issued and the notices of intent stated that the bonds were being issued under article 20 to increase the working cash fund. The School Districts also maintained that article 20 authorized the proceeds of the bonds to be transferred or abated from the working cash fund to the operations and maintenance fund. The School Districts further argued that section 19-3 and its direct-referendum requirement were inapplicable and irrelevant to bonds properly issued under article 20. Moreover, working-cash-fund bonds issued under article 20 were considered "limited bonds." The School Districts noted that the Property Tax Extension Limitation Law did not apply to limited bonds properly issued under article 20.

         ¶ 9 In their response to the motion for summary judgment, the taxpayers argued as follows. Section 19-3 provided the only statutory authority to issue bonds to "improve the sites of, build and equip additions to, and alter, repair, and equip" existing school buildings. Bonds issued under article 20 were limited in purpose, and no language in article 20 "enumerate[d]" a legislative intent to allow school districts to issue working-cash-fund bonds for the purposes of operations and maintenance. To construe the statutory provisions otherwise would create an absurdity in that no school district would ever opt for a direct referendum under section 19-3. Here, the School Districts ignored legislative intent by issuing working-cash-fund bonds for the purposes of equipping, altering, and repairing existing school buildings. The School Districts "scammed" the taxpayers by issuing false and misleading notices that did not specify that the working-cash-fund bond proceeds would be used for "operations and maintenance." The taxpayers argued that the bonds were void because they were issued without a direct referendum.

         ¶ 10 In their reply, the School Districts argued as follows. Article 20 authorized the issuance of working-cash-fund bonds to obtain proceeds that could be used for operations and maintenance purposes. Additionally, requiring a school district to set forth in the notice of intent its intended use of working-cash-fund bond proceeds would go beyond the notice requirements set forth in article 20 and would otherwise strip a school district of the discretion to use the bond proceeds for unforeseen "corporate purposes" that might arise. Furthermore, section 19-3's direct-referendum requirement was inapplicable because (1) article 20 allowed for the abatement of working-cash-fund monies to any other fund in the school district, and (2) article 20 contained its own provisions for a "backdoor" referendum.

         ¶ 11 The trial court granted the motion for summary judgment. In its written order, the court rejected the taxpayers' argument that section 19-3 was the sole source of financing for building, equipping, altering, and repairing schools. The court found that article 20 authorized the School Districts to abate or transfer the bond proceeds to the operations and maintenance fund to pay for repairs, alterations, and improvements. The court noted that the use of the bond proceeds for those purposes "sustain[ed]" the schools that educated students on a daily basis. The court thus found that the School Districts properly issued working-cash-fund bonds and that they appropriately followed the requirements of article 20 in issuing those bonds. Additionally, the court rejected the taxpayers' argument that the School Districts' notices were deficient or misleading, as article 20 required them only to publish notice of their intent to issue bonds in accordance with article 20. Furthermore, the court rejected the taxpayers' argument that section 19-3 would be rendered meaningless if the School Districts were allowed to use working-cash-fund bonds in this manner. The court noted that working-cash-fund bonds were limited in the amount that could be issued, whereas bonds associated with section 19-3 were subject to a higher general debt limitation, thus evidencing the legislature's intent that section 19-3 be used for "larger projects."

         ¶ 12 The court found "no just reason for delaying either enforcement or appeal or both" of its judgment, pursuant to Illinois Supreme Court Rule 304(a) (eff. ...


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