Moline School District No. 40 Board of Education v. Quinn

2015 IL App (3d) 140535, 37 N.E.3d 282

• Court: Appellate Court of Illinois
• Decided: July 15, 2015
• Docket: 3-14-0535
• Status: Unpublished

Opinion

2015 IL App (3d) 140535

Opinion filed July 15, 2015 _____________________________________________________________________________

IN THE

APPELLATE COURT OF ILLINOIS

THIRD DISTRICT

A.D., 2015

MOLINE SCHOOL DISTRICT NO. 40 ) Appeal from the Circuit Court BOARD OF EDUCATION, ) of the 14th Judicial Circuit, ) Rock Island County, Illinois, Plaintiff-Appellant, ) ) v. ) ) HONORABLE PAT QUINN, Governor of the ) State of Illinois; THE ILLINOIS ) DEPARTMENT OF REVENUE; BRIAN A. ) HAMER, as Director of the Illinois Department ) of Revenue; THE ROCK ISLAND COUNTY ) BOARD OF REVIEW and its members DAN ) DePORTER, JOAN RUSSELL, and ) Appeal No. 3-14-0535 DICK SCHROEDER; LARRY WILSON, ) Circuit No. 13-MR-296 Chief County Assessor, Rock Island County; ) WINNA PANNELL, Blackhawk Township ) Assessor, Rock Island County; and ROSE ) BOOKER, Coal Valley Township Assessor, ) Rock Island County; all in their official ) capacities, ) ) Defendants-Appellees ) ) (Elliot Aviation, Inc., and Coal Valley Fire ) Protection District, ) Honorable ) Frank R. Fuhr, Intervening Defendants-Appellees). ) Judge, presiding. ______________________________________________________________________

JUSTICE CARTER delivered the judgment of the court, with opinion. Justices Holdridge and Wright concurred in the judgment and opinion. _____________________________________________________________________________

OPINION

¶1 This appeal arises from a constitutional challenge brought by the plaintiff, the Moline

School District No. 40 Board of Education (School District), to an amendment to the Illinois

Property Tax Code, by way of Public Act 97-1161, which provided a real property tax exemption

on leasehold interests and improvements on land leased from the Metropolitan Airport Authority

of Rock Island County to fixed based operators (FBOs) providing aeronautical services.

¶2 The trial court denied the School District's motion for summary judgment and granted the

summary judgment motion of the intervening-defendant, Elliot Aviation, Inc., a private company

that received a property tax exemption as a result of the amendment. The School District

appealed, arguing that Public Act 97-1161 violates the Illinois Constitution, which prohibits: (1)

"Special Legislation"; (2) property tax exemptions except for on certain specified property; and

(3) non-uniform taxation upon real property. We reverse and remand with directions.

¶3 FACTS

¶4 Public Act 97-1161 amended the Property Tax Code (35 ILCS 200/1-1 et seq. (West

2014)) by providing an exemption from property taxes on leasehold interests and improvements

at the Metropolitan Airport Authority of Rock Island County for fixed based operators (FBOs)

providing aeronautical services. Pub. Act 97-1161 (eff. June 1, 2013). Public Act 97-1161

added subsection (c) to section 15-160 of the Property Tax Code, as follows:

"If property of the Metropolitan Airport Authority of Rock Island County is

leased to a fixed base operator that provides aeronautical services to the public,

then those leasehold interests and any improvements thereon are exempt." 35

ILCS 200/15-160(c) (West 2014).

2 ¶5 Public Act 97-1161 also amended section 9-195 of the Property Tax Code to provide as

follows:

"(a) Except as provided in Sections 15-35, 15-55, 15-60, 15-100, 15-103,

15-160, and 15-185, when property which is exempt from taxation is leased to

another whose property is not exempt, and the leasing of which does not make the

property taxable, the leasehold estate and the appurtenances shall be listed as the

property of the lessee thereof, or his or her assignee." 35 ILCS 200/9-195 (West

2014).

¶6 At the time the amendments were passed, the Metropolitan Airport Authority of Rock

Island County leased property to the for-profit FBO, Elliott Aviation, Inc. (Elliot Aviation).

Elliot Aviation was the only FBO leasing property from the Metropolitan Airport Authority of

Rock Island County. Prior to the amendment, Elliot Aviation was subject to real property

taxation of $150,000 per year to the School District.

¶7 According to legislative history, the purpose of Public Act 97-1161 was to eliminate

property taxes for Elliot Aviation as an incentive for Elliot Aviation to expand in Illinois, which

would create jobs and substantial economic growth, instead of expanding in Nebraska, Missouri

or Iowa where FBOs did not pay property taxes. 97th Ill. Gen. Assem., House Proceedings,

Mar. 29, 2012, at 137, 140 (statements of Representative Verschoore). A representative in

opposition of the bill stated:

"[G]iving economic incentives to businesses is what this state ought to be

doing more of, but it ought to be done on a level playing field. *** This, I

believe, would be unprecedented to be able to do this and it's an exemption for

one but *** everyone else's property tax would increase. I don't think that's the

3 best way that we should be looking at businesses to give one business that's

already established that's already making that investment [an exemption] and

increasing everyone else's taxes." 97th Ill. Gen. Assem., House Proceedings,

Mar. 29, 2012, at 138 (statements of Representative Franks).

¶8 The legislative history also indicated that the Taxpayers Federation was opposed to the

bill based on the belief that the bill would give a break to a specific company at the expense of

everyone else, which would cause a tax shift to other properties. 97th Ill. Gen. Assem., House

Proceedings, Mar. 29, 2012, at 139 (statements of Representative Sullivan). The sponsoring

representative responded that Elliot Aviation entered into an agreement with the county and

would pay the county some taxes. 97th Ill. Gen. Assem., House Proceedings, Mar. 29, 2012, at

139 (statements of Representative Verschoore).

¶9 The proposed bill returned to the Illinois House of Representatives from the Illinois

Senate with a Senate amendment adding the Lansing Municipal Airport. An exchange between

representatives indicated that the sponsoring representative wanted to return the bill to original

language presented in House Bill 4110 because there was an objection to adding the extra airport

"from people higher up than [him]." 97th Ill. Gen. Assem., House Proceedings, Aug. 17, 2012,

at 3-4 (statements of Representative Verschoore). On February 1, 2013, Public Act 97-1161 was

signed into law and was to become effective on June 1, 2013.

¶ 10 On March 27, 2013, the School District filed a complaint for an injunction and

declaratory relief, challenging the constitutionality of Public Act 97-1161 and naming as

defendants the Governor, the Illinois Department of Revenue, the Rock Island County Board of

Review, the Rock Island County Chief County Assessor, the Blackhawk Township Assessor, and

the Coal Valley Township Assessor. The School District alleged that it would suffer irreparable

4 harm from the diversion of property taxes as a result of the anticipated tax exemption. On May

10, 2013, the trial court granted a preliminary injunction in favor of the School District.

¶ 11 On July 16, 2013, the School District filed a motion for summary judgment, with

supporting memorandum, seeking an order: (1) declaring Public Act 97-1161 unconstitutional;

and (2) permanently enjoining the defendants from enforcing Public Act 97-1161. On

September 5, 2013, Elliot Aviation was granted leave to intervene and filed a response and cross-

motion for summary judgment.

¶ 12 In its response and motion for summary judgment, Elliot Aviation argued that it was a

76-year old family business that employed 229 people at its Moline location. Elliot Aviation

also had locations in Des Moines, Iowa, and Minneapolis, Minnesota. General aviation aircraft

(those aircraft not operated by commercial airlines, large charters, or military) rely of FBOs to

provide fuel, the use of hangars, pilot resting areas, weather briefings, flight planning, aircraft

maintenance, and other services because the airport does not provide services to general aviation

aircraft. The Metropolitan Airport Authority leased property to Elliot Aviation. Elliot Aviation

constructed buildings on the property and agreed to transfer the buildings to the Metropolitan

Authority as a “gift.” Elliot Aviation anticipated expanding and would take into account

property taxes as a significant factor in deciding where to expand. In Iowa, Elliot Aviation does

not pay property taxes. Elliot Aviation's competitors in Michigan and Nebraska do not pay

property taxes as the result of tax exemptions in those States. Public Act 97-1161 allowed Elliot

Aviation to effectively compete in the marketplace and expand its operations, which would

eventually generate jobs and provide a significant economic benefit in the area.

¶ 13 On December 11, 2013, in support of its motion for summary judgment, the School

District argued that the property tax exemption was improper because there were 20 airport

5 authorities in Illinois and the legislation singled out only one business or FBO for a property tax

exemption while other similarly situated entities were not provided the same benefit. The School

District argued that although Elliot Aviation claimed that tax exemption would allow it to

provide economic growth and job creation, the language of the legislation did not tie the

exemption to those goals. The School District claimed that it received 60% of the amount that

should be collected from FBO terminals and, as a result of the legislation, it would suffer a

$150,000 loss, or more if additional FBOs were created or if Elliot Aviation expanded in the

future.

¶ 14 Elliot Aviation argued that the statute was presumed constitutional. Elliot Aviation also

argued that it was uniquely situated because: (1) the Davenport airport in Iowa was located only

minutes away; (2) it had the option of expanding in Illinois or at its location in Des Moine, Iowa;

and (3) there was no evidence that other FBOs in Illinois were located on the border of the state

and had the same unique situation as Elliot Aviation in regard to its location near the border and

its intent to expand.

¶ 15 The trial court found the amendments to the Property Tax Code were proposed in an

effort to incentivize Elliot Aviation to expand its operations in Illinois. The trial court found that

the amendments did not violate the Special Legislation Clause because “nothing in [that clause]

bars the legislature from enacting a law specifically addressing the conditions of an entity that is

uniquely situated,” noting that the Rock Island airport in Illinois was located minutes from the

Davenport Municipal Airport in Iowa. The trial court found that the School District failed to

show that other FBOs in Illinois were similarly situated to Elliot Aviation. The School District

filed a motion to reconsider, which the trial court denied. The School District appealed.

¶ 16 ANALYSIS

6 ¶ 17 On appeal, the School District argues that the trial court erred in denying its motion for

summary judgment and granting the summary judgment motion of Elliot Aviation because the

amendments to the Property Tax Code contained in Public Act 97-1161 are unconstitutional.

Specifically, the School District argues that the property tax exemptions to FBOs leasing

property from the Metropolitan Airport Authority of Rock Island County violates the following

three clauses of the Illinois Constitution: (1) the "Special Legislation" clause of article IX,

section 13; (2) the prohibition on real property tax exemptions except for property belonging to

certain specified entities as set forth in article IX, section 6; and (3) the "Uniformity Clause" of

article IX, section 4(a).

¶ 18 Summary judgment is appropriate where the pleadings, depositions and admissions on

file, together with the affidavits, if any, show that there is no genuine issues as to any material

fact and that the moving party is entitled to judgment as a matter of law. 735 ILCS 5/2-1005(c)

(West 2014); Williams v. Manchester, 228 Ill. 2d 404, 417 (2008). We review cases involving

summary judgment de novo. Arangold Corp. v. Zehnder, 204 Ill. 2d 142, 146 (2003). The trial

court's finding that a statute is constitutional is also reviewed de novo. Id.

¶ 19 We first address the special legislation argument. Plaintiff argues that the amendments

are special legislation because other FBOs at other bordering airports, other Rock Island

employers, and other Illinois employers do not enjoy the same tax exemption status. Elliot

Aviation argues that statutes are presumed to be constitutional and that trial court was correct in

finding that: (1) the School District did not carry its burden in demonstrating that a FBO in Rock

Island was similarly situated with other FBOs in the State; (2) Elliot Aviation was uniquely

situated; (3) the School District failed to prove the statute was arbitrary; and (4) the statute passes

7 the rational basis test. Elliot Aviation argues that it was uniquely situated in that no other FBO

in the state had the opportunity to expand into a state that does not tax leasehold interests (Iowa).

¶ 20 We begin our analysis with the presumption that all statutes are constitutional. Id.

Statutes carry a strong presumption of constitutionality and the party that challenges the

constitutionality of a statute has the burden of rebutting that presumption and "clearly

establishing" the statute's unconstitutionality. (Internal quotation marks omitted.) Id.

¶ 21 The "Special Legislation" clause of the Illinois Constitution provides:

"The General Assembly shall pass no special or local law when a general

law is or can be made applicable. Whether a general law is or can be made

applicable shall be a matter for judicial determination." Ill. Const. 1970, art. IV,

§ 13.

¶ 22 The special legislation clause expressly prohibits the General Assembly from conferring

a special benefit or exclusive privilege on a person or group of persons to the exclusion of others

similarly situated. Best v. Taylor Machine Works, 179 Ill. 2d 367, 391 (1997). The purpose of

the special legislation clause is to prevent arbitrary legislative classifications that discriminate in

favor of a select group without a sound, reasonable basis. Id. Delegates to the 1870

constitutional convention criticized special legislation as enriching particular classes of people at

the expense of others. Id. at 392 (quoting Debates and Proceedings of the Constitutional

Convention of the State of Illinois, at 578 (remarks of Delegate Anderson)). "Governments were

not made to make the 'rich richer and the poor poorer,' nor to advance the interest of the few

against the many; but that the weak might be protected from the will of the strong; that the poor

might enjoy the same rights with the rich; that one species of property might be as free as

8 another—that one class or interest should not flourish by the aid of government, whilst another is

oppressed with all the burdens." (Internal quotation marks omitted.) Id.

¶ 23 There are two requisite elements to a successful special legislation challenge: (1) the

statutory classification at issue discriminates in favor of a select group; and (2) the classification

is arbitrary. Board of Education of Peoria School District No. 150 v. Peoria Federation of

Support Staff, Security/Policeman's Benevolent & Protective Ass'n Unit No. 114, 2013 IL

114853, ¶ 23. The Constitution does not prohibit all legislative classifications, and we review

classifications that do not involve a fundamental right or suspect class under the rational basis

test. Best, 179 Ill. 2d at 394 (providing that where a public act does not affect a fundamental

right or suspect or quasi-suspect classification, the appropriate standard of review is the rational

basis test). Under the rational basis test a statutory classification will be upheld if it is rationally

related to a legitimate state interest. Id.

¶ 24 Here, as to the first element of a special legislation challenge, there is no question that

the legislation at issue in this case discriminates in favor of FBOs leasing property from the

Metropolitan Airport Authority of Rock Island County. The parties dispute the second

element—whether such a classification is rationally related to the legitimate state interest of

economic growth and job creation. We hold that it is not.

¶ 25 As written, the statutory amendments give a property tax break to Elliot Aviation and

any future FBOs who lease property from the Metropolitan Airport Authority. The classification

is arbitrary in that there is no justification for singling out these particular for-profit businesses

over other businesses in Illinois or other FBOs in Illinois. The legislation allows $150,000, or

more, to be taken away from the School District, which can presumably lead to job losses within

the school district, and allows Elliot Aviation to keep that money. We note the other exempted

9 entities listed in section 9-195 of Property Tax Code are provided for government entities,

schools, or public uses or purposes, whereas this exemption is provided to for-profit businesses.

¶ 26 The legislation is based on speculation that Elliot Aviation will reinvest the money it

saves in property taxes in such a way to create jobs and economic growth in Illinois. However,

Elliot Aviation is not required to do so and there is no adequate justification or connection to the

purpose of the statute for the arbitrary application to FBOs leasing property from the

Metropolitan Airport Authority of Rock Island County when we can similarly speculate that

giving a tax break to any company or Illinois FBO would allow that company to expand and

create more jobs in Illinois. This legislation makes Elliot Aviation, or any future FBO leasing

property from the Metropolitan Airport Authority of Rock Island County, richer while other

similarly situated businesses are do not receive the tax exemption and are obligated to continue

paying property taxes.

¶ 27 Elliot Aviation argues that the trial court was correct in finding that it was "uniquely

situated" based on its location near the border of a state with no property taxes and its available

options to expand at locations out of state. By its terms, the special legislation prohibition in

article IV, section 13 of our constitution only prohibits passage of a special law when " 'a general

law is or can be made applicable.' " Big Sky Excavating, Inc. v. Illinois Bell Telephone Co., 217

Ill. 2d 221, 237 (2005) (quoting Ill. Const. 1970, art. IV, § 13). However, where an entity is

uniquely situated, our constitution does not bar the General Assembly from enacting a law

tailored to address the conditions presented by that unique situation. Id.

¶ 28 Elliot Aviation's "uniquely situated" argument fails for two reasons. First, the statute

was not tailored so as to address the conditions of Elliot Aviation's "unique" situation because

any future FBO that leases property from the Metropolitan Airport Authority of Rock Island

10 County would also be exempt from property taxes. We find that future FBOs leasing property

from the Metropolitan Airport Authority of Rock Island County are not uniquely situated just by

reason of their location near the Iowa border. Second, the fact that Elliot Aviation is located in a

state that requires it to pay property taxes while other states do not require leaseholds to pay

property taxes is not unique to Elliot Aviation. Other FBOs in Illinois, and other businesses in

Illinois, are similarly situated in that they also have out of state competitors that do not have to

pay property taxes on their leaseholds. The fact that Elliot Aviation was contemplating an

expansion out of state does not change our conclusion that it is similarly situated to other FBOs

and businesses in Illinois who have to compete in the market with companies whose home states

do not require property taxes.

¶ 29 While economic growth and job creation are important state interests, we are compelled

to hold that Public Act 97-1161, as written, is unconstitutional special legislation that arbitrarily

discriminates in favor of a select group—FBOs leasing property from the Metropolitan Airport

Authority of Rock Island County. It is certainly laudable for the State to seek out economic

benefits and employment opportunities for its citizens, but our constitution prohibits its attempt

at doing so in Public Act 97-1161.

¶ 30 Consequently, we reverse the circuit court's rulings on the parties' motions for summary

judgment. We remand this cause for further proceedings consistent with this opinion and direct

the circuit court to enter an order granting summary judgment in favor the School District, to

address the School District's request for permanent injunction, and to deny Elliot Aviation's

request for summary judgment.

¶ 31 Because we find that Public Act 97-1161 violates the special legislation clause of the

Illinois Constitution, we need not reach the School District's remaining constitutional arguments.

11 ¶ 32 CONCLUSION

¶ 33 The judgments of the circuit court of Rock Island County are reversed, and we remand

this cause with directions.

¶ 34 Reversed and remanded with directions.