City of East St. Louis v. East St. Louis Financial Advisory Authority

722 N.E.2d 1129, 188 Ill. 2d 474, 243 Ill. Dec. 60, 1999 Ill. LEXIS 1627
CourtIllinois Supreme Court
DecidedDecember 16, 1999
Docket87076
StatusPublished
Cited by17 cases

This text of 722 N.E.2d 1129 (City of East St. Louis v. East St. Louis Financial Advisory Authority) is published on Counsel Stack Legal Research, covering Illinois Supreme Court primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
City of East St. Louis v. East St. Louis Financial Advisory Authority, 722 N.E.2d 1129, 188 Ill. 2d 474, 243 Ill. Dec. 60, 1999 Ill. LEXIS 1627 (Ill. 1999).

Opinions

JUSTICE HEIPLE

delivered the opinion of the court:

This case presents two issues: first, whether the Financially Distressed City Law (hereinafter, the Act) (65 ILCS 5/8 — 12—1 et seq. (West 1996)) empowers a “Financial Advisory Authority” to impose a budget upon a financially distressed city after that city fails to adopt a satisfactory budget; and second, whether the East St. Louis Financial Advisory Authority (the Authority) acted in an arbitrary and capricious manner in rejecting the second of two proposed city budgets submitted by the City of East St. Louis (the City). For the reasons that follow, we hold that the Act does not empower a Financial Advisory Authority to impose a budget upon a city; however, we also hold that the Authority did not act in an arbitrary and capricious manner when it rejected the City’s second proposed budget.

BACKGROUND

Following the enactment of the Financially Distressed City Law in 1990, the City adopted an ordinance requesting that it be designated a financially distressed city under the Act. Consistent with that designation, the City thereafter has been required each year to submit its annual budget, after adoption by the City, to the Authority for approval. 65 ILCS 5/8 — 12—16 (West 1996).

In accordance with the statutory procedure, on November 12, 1997, the City adopted a budget for 1998 and submitted it to the Authority for its approval. On November 22, 1997, the Authority rejected the City’s first proposed budget and returned it to the City for correction. The Authority listed several reasons for its rejection of the budget: (1) the City’s revenue estimates failed to comply with the estimates approved by the Authority; (2) the budget failed to separate grants and special revenues; (3) the salaries of certain city employees were improperly charged to the Motor Fuel Tax Fund; (4) the budget failed to comply with certain requirements of the federal “COPS FAST” grant program; (5) several budget items, including “electricity,” “vehicle maintenance,” “unemployment insurance,” “overtime,” and “sewer maintenance,” were underfunded; and (6) the budget improperly failed to fund the position of a fire department lieutenant who was then on active military leave.

On December 7, 1997, the City adopted a revised budget and submitted that budget to the Authority for approval. On December 20, 1997, the Authority rejected the City’s revised budget. According to the Authority, the revised budget still failed to fully comply with the requirements of the federal COPS FAST grant program. In particular, under the revised budget, the City proposed to fund certain vacant police officer positions in the budget while other officers would be paid with federal grant money. Thus, the City was proposing to pay eight officers with grant money while at the same time cutting back on the number of officers being paid by the City and using the salary savings for other purposes. This, according to the Authority, was a violation of the “maintenance of effort” requirement of the grant program and rendered the City’s budget inconsistent with the City’s three-year financial plan. Moreover, the Authority noted that several budget line items, including electricity, unemployment insurance, overtime, sewer maintenance, and vehicle maintenance, remained underfunded in the revised budget. The Authority stated that the underfunding of these items rendered the budget not reasonably capable of being achieved.

In addition to the above defects, the Authority alleged new problems with the City’s revised budget. First, the revised budget proposed to fund $400,000 in maintenance work with sewer revenues that had never generated more than $100,000. Second, the Authority concluded that the City’s proposed $200,000 reduction in the amount budgeted for the public library was unlawful because it improperly reduced the library’s proportionate share of the City’s personal property tax replacement funds from 23% to 7%.

At the Authority’s December 20 meeting, immediately after the roll-call vote rejecting the City’s second budget, the members of the Authority discussed how to proceed with respect to the City’s budget. First, the Authority could simply allow its rejection of the budget to stand and take no further action. Second, the Authority could act pursuant to its statutory authority to intercept funds due to the City from the state. 65 ILCS 5/8 — 12—21(2) (West 1996). Third, the Authority could simply impose a budget of its own making upon the city. A copy of the Authority’s proposed budget, which had already been prepared by the Authority’s staff, was distributed among the Authority’s members. After hearing comments from several of the Authority’s directors who expressed the opinion that intercepting state payments was too harsh a remedy, the Authority unanimously voted to impose its budget on the City.

On December 24, 1997, the City filed a complaint against the authority requesting that the circuit court of St. Clair County enjoin the Authority from intercepting payments due the City from the state Treasurer, and further requesting that the court declare the Authority’s imposition of a budget on the City to be “void, unconstitutional, improper and otherwise contrary to law ab initia.” On December 30, 1997, the City obtained new counsel and filed an amended complaint. On December 31, 1997, the court entered an order whereby the parties agreed to operate under the Authority’s proposed budget, except that the City was required to operate under its own proposed budget regarding the layoff of employees. The Authority also agreed not to intercept any funds due to the City from the state Treasurer. The agreement also required the parties to continue to negotiate in good faith to obtain an approved budget.

On April 15, 1998, the City filed a four-count second-amended complaint. In count I, the City sought a declaration that the Financially Distressed City Law did not permit the Authority to impose a budget on the City. The City also requested that the Authority be enjoined from imposing its budget on the City. Count II requested that the court find that the Authority acted arbitrarily and capriciously when it rejected the City’s second proposed budget. Count III, entitled “Petition for Writ of Certiorari,” requested that the court review the decision of the Authority to reject the City’s proposed budget and impose its own budget on the City. Count IV requested injunctive relief prohibiting the Authority and its agents from taking certain steps to implement the budget.

On April 17, 1998, the court entered an order denying the City relief, stating that the Authority had not acted arbitrarily and capriciously in rejecting the City’s budget, and that the Authority had not acted beyond the scope of its powers in imposing a budget on the City. The appellate court affirmed. No. 5 — 98—0288 (unpublished order under Supreme Court Rule 23). We granted the City’s petition for leave to appeal and now affirm in part and reverse in part.

ANALYSIS

I. The Imposition of Budget by the Authority

The City argues that the appellate court erred in holding that the Act permitted the Authority to impose a budget of its own making on the City.

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Cite This Page — Counsel Stack

Bluebook (online)
722 N.E.2d 1129, 188 Ill. 2d 474, 243 Ill. Dec. 60, 1999 Ill. LEXIS 1627, Counsel Stack Legal Research, https://law.counselstack.com/opinion/city-of-east-st-louis-v-east-st-louis-financial-advisory-authority-ill-1999.