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Green v. The Village of Winnetka

Court of Appeals of Illinois, First District, Sixth Division

July 26, 2019

MARK GREEN, Individually and on Behalf of All Others Similarly Situated, Plaintiff-Appellant,
THE VILLAGE OF WINNETKA, Defendant-Appellee.

          Appeal from the Circuit Court of Cook County. No. 15 CH 2430 Honorable Pamela McLean Meyerson, Judge Presiding.

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



         ¶ 1 Plaintiff Mark Green (Green) appeals from a summary judgment in favor of defendant Village of Winnetka (Village) in plaintiffs declaratory judgment action alleging that the Village's stormwater utility fee (Fee) is not a fee but actually a tax that violates the Illinois Constitution and Illinois Municipal Code. The circuit court granted summary judgment for the Village upon cross-motions for summary judgment by Green and the Village. On appeal, Green contends that the court erred in granting the Village's motion and denying his motion. For the reasons stated below, we affirm the judgment of the circuit court.

         ¶ 2 I. JURISDICTION

         ¶ 3 On September 14, 2018, the circuit court issued an order granting summary judgment for the Village. Green timely filed his notice of appeal on October 9, 2018. Accordingly, this court has jurisdiction pursuant to article VI, section 6, of the Illinois Constitution (Ill. Const. 1970, art. VI, § 6) and Illinois Supreme Court Rules 301 (eff. Feb. 1, 1994) and 303(a) (eff. July 1, 2017) governing appeals from a final judgment in a civil case.

         ¶ 4 II. FACTS

         ¶ 5 The Village is a municipal corporation under Illinois law. Green is a resident of the Village and owner of property in the Village. He has at all relevant times been subject to the Fee, which he has paid under protest since it came into force. Green filed a declaratory judgment action alleging the Fee was actually a tax disguised as a fee. His complaint as amended alleged that the Fee is a property tax that violates the uniform real-property taxation clause of the Illinois Constitution and the procedures for imposing a property tax in the Illinois Municipal Code. Ill. Const. 1970, art. IX, § 4; 65 ILCS 5/8-3-1 (West 2014).

         ¶ 6 A. Background

         ¶ 7 The Village is a suburb on Chicago's north shore. Situated along a large floodplain, the Village operates a network of storm sewers and pumping stations to alleviate flooding. Following flooding in 2008, the Village council (Council) considered improvements to its stormwater system that could further alleviate flooding. In 2011, the Village experienced massive rainfall that led to a 100-year flood, that is, a flood event that has a 1% chance of occurring in a given year. The Council then resolved to design a system sufficient to withstand a 100-year flood. To that end, the Council issued a stormwater management plan (Plan).

         ¶ 8 B. The Fee

         ¶ 9 In 2014, the Council adopted the stormwater ordinance (Ordinance), codified as chapter 13.16 of the Winnetka Village Code. The Ordinance's legislative findings state that "all real property in the Village contributes to runoff and either uses or benefits from the maintenance of the stormwater system." Winnetka Village Code § 13.16.010(A)(1) (adopted July 1, 2014). The Ordinance states that it is in the best interests of health, safety, and general welfare that the stormwater system be operated as a municipal utility funded through user fees, and the Ordinance establishes such a "utility to provide for the management, operation, maintenance, engineering, planning, construction, enhancement and rehabilitation of the Village's storm water system." Id. §§ 13.16.010(A)(3), 13.16.030(A), 13.16.040(A). The Ordinance states Village policy "to provide a dedicated funding source for the construction, maintenance, operation and improvement" of the Village stormwater system and to collect a stormwater utility fee from any owner of real property in the Village that uses or benefits from the stormwater system "whether or not the owner or parcel is exempt from taxation." Id. § 13.16.010(B)(1), (2). The Ordinance provides that the Fee is "based on the extent to which each parcel creates a need for stormwater management; the amount of impervious area on each parcel; and the cost of operating, maintaining, and improving the stormwater system." Id. § 13.16.060(B).

         ¶ 10 The Ordinance imposes the Fee on the owners of property in the Village based upon an equivalent runoff unit (ERU) of 3400 square feet of impervious surface area, "rounded to the nearest 10th of an ERU" for a given parcel. Id. §§ 13.16.020, 13.16.070(A). The Ordinance defines impervious surface area as "the area within a parcel that prevents or significantly impedes the infiltration of stormwater into the soil. Impervious areas shall include, but are not limited to buildings, roofed structures, paved areas, walkways, driveways, parking lots, patios, decks, swimming pools, and similar non-porous areas." Id. § 13.16.020. A parcel with an impervious area of less than 170 square feet is not subject to the Fee. Id. § 13.16.070(A). "Dedicated public rights-of-way, such as roadways, sidewalks and alleys," are not subject to the Fee. Id. § 13.16.130. The Ordinance provides for a procedure for adjusting the Fee, including challenging errors in measuring or calculating the ERU. Id. § 13.16.100.

         ¶ 11 A parcel that does not discharge its stormwater into the Village stormwater system, directly or indirectly, may obtain a 100% credit of the Fee. Id. § 13.16.140(B)(1)(b). Similarly, a parcel where at least half of the stormwater runoff for a 100-year storm is detained and cleaned before discharge into the Village stormwater system may obtain a 50% credit of the Fee. Id. § 13.16.140(B)(1)(a).

         ¶ 12 The Fee has two components: the "base fee" and "other rates, fees, and charges." The base fee is the amount "charged each month per ERU in order to produce the amount of principal and interest on any outstanding stormwater utility system debt that is due and payable during the fiscal year" for which the base fee is calculated. Id. § 13.16.070(C)(1). The Ordinance defines the second component of the Fee as "[s]uch other rates, fees, and charges that the Village Council determines are necessary to recover all costs related to operating, maintaining, and improving the stormwater system utility." Id. § 13.16.070(C)(2).

         ¶ 13 The Ordinance provides that the Fee is assessed on each parcel's Village utility bill and that an unpaid Fee "shall constitute a lien against the property to which service was provided, to the extent such lien is authorized by law." Id. §§ 13.16.080(A), 13.16.090(B). It provides that "[a]ll revenues from the stormwater utility fee shall be deposited in the stormwater utility enterprise fund and shall be used solely for the operation, maintenance, expansion and rehabilitation of the stormwater infrastructure." Id. § 13.16.110(A).

         ¶ 14 C. Initial Litigation

         ¶ 15 Green alleged in his complaint as amended that the Plan called for the construction of a 7900-foot-long storm sewer under Willow Road (the Tunnel). Originally projected to cost $34.5 million, the Tunnel was intended to provide flood relief to about half of the Village. The Plan also called for about $8 million in improvements to the Village's existing stormwater system in three other drainage areas. To finance the Plan, the Council allocated $8.2 million in reserve funds, more than sufficient to cover the improvements to the existing system. The Council chose to finance the remaining $34.5 million of the Plan by issuing municipal bonds, costing the Village over $61 million in principal and interest over the next 30 years, and to service the bonds by enacting the Fee. Green's amended complaint raised the prospect that the Village would not construct the Tunnel, based on the Council's discussion of significant cost increases.

         ¶ 16 Green alleged that the Council set an initial base rate of $262 per ERU, which would then climb steadily to $362 per ERU by 2018, to ensure the Village would receive enough funds to make $61.5 million in bond payments over the next 30 years. Green argued that the Fee is assessed only on developed property-that is, property with impervious surfaces-by multiplying each parcel's ERUs by the base rate. Green alleged that the Fee is not a valid fee for the stormwater system because it bears no relation to a property owner's actual use of the system. Instead, the Fee is a real property tax that was not levied on valuation as required by the constitution (Ill. Const. 1970, art. IX, § 4) nor adopted according to the statutorily prescribed procedure. 65 ILCS 5/8-3-1 (West 2014). Green alleged that the Fee is not proportional to use of the stormwater system because it is designed to cover the debt issued to finance the Tunnel, which would not service the entire Village, and because it does not vary according to the amount of stormwater actually discharged by property in the Village, as the Village does not measure each parcel's stormwater discharge into the system in order to assess the Fee.

         ¶ 17 The Village filed a motion to dismiss the complaint as amended. See 735 ILCS 5/2-615 (West 2014). It argued that all claims in the complaint as amended depended on Green's legal conclusion that the Fee was not a valid user fee but a real property tax and that the court could take judicial notice of the Ordinance provisions that contradicted Green's allegations. The Village argued that the Fee is a valid user fee because (1) it compensates the Village for property owners' use of the stormwater system, including but not limited to the Tunnel; (2) the proceeds are segregated into a special fund for the stormwater system; and (3) the Fee is based on the cost of constructing, maintaining, and operating the stormwater system.

         ¶ 18 The Village argued that impervious land area does not allow stormwater to soak into the ground and thus causes stormwater runoff into the Village stormwater system. It argued that the Ordinance allows for the Fee to be adjusted as a property's impervious surface area changes and thus the Fee is directly and proportionately related to a property owner's use of the system. The Village argued that a fee does not have to be precisely metered to individual usage to be duly proportionate. The Village cited supreme court case law to the effect that a fee is not converted to a tax merely by being widely assessed, nor by imposing a lien to collect the fee, nor by using fee revenue to pay capital costs. The Village's motion cited extensively to Church of Peace v. City of Rock Island, 357 Ill.App.3d 471 (2005), in which the Third District of this court upheld a stormwater utility fee. The Village argued that the validity of the Fee would not be changed if the Village did not construct the Tunnel: as the Ordinance requires all Fee revenue be spent solely on the stormwater system, Fee revenue not spent on the Tunnel would be spent on other improvements to or expenses of the stormwater system.

         ¶ 19 Responding to the motion to dismiss, Green argued that it improperly sought to contradict the facts alleged in his complaint as amended. Green also argued that a charge imposed to finance future construction, such as the Tunnel, is not a fee imposed based on actual use. He argued that reliance on Church of Peace was misplaced because that case was reviewing a summary judgment rather than a dismissal at the pleading stage.

         ¶ 20 The circuit court granted the Village's motion to dismiss, finding that Green could set forth no facts that would support his claim that the Fee was an invalid tax. Green appealed.

         ¶ 21 D. First Appeal

         ¶ 22 On appeal, we reversed the dismissal and remanded for further proceedings. Green v. Village of Winnetka, 2016 IL App (1st) 152471-U. We found that Green's complaint as amended stated a cause of action that the Fee is an unconstitutional tax levied without voter approval. Id.

         ¶ 21. We noted that Illinois law defines a tax as a charge having no relation to the service rendered, assessed to provide general revenue rather than compensation, while a fee is proportional to a benefit or service rendered. Id. ¶ 25. We found that the resolution of Green's claim would require a factual determination as to the extent the Fee is actually used to construct, maintain, operate or improve the Village's stormwater system. Id. ΒΆ 35. However, "[g]overned solely by the allegations of the first amended complaint," which alleged that the Fee was unrelated to the Village's stormwater services, we found that Green stated a cause of ...

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