Town of Normal v. Hafner

Opinion

NO. 4-09-0121 Filed 11/20/09

IN THE APPELLATE COURT

OF ILLINOIS

FOURTH DISTRICT

TOWN OF NORMAL, ) Appeal from Plaintiff and ) Circuit Court of Counterdefendant-Appellee, ) McLean County v. ) No. 07MR98 F.J. HAFNER and FRED HAFNER, ) Defendants and ) Honorable Counterplaintiffs- ) G. Michael Prall Appellants. ) Judge Presiding. _________________________________________________________________

JUSTICE POPE delivered the opinion of the court:

In September 2008, defendants and counterplaintiffs,

F.J. and Fred Hafner (Hafners), filed a motion for summary

judgment seeking an order that they complied with the terms and

provisions of a real estate redevelopment agreement they entered

with plaintiff and counterdefendant, Town of Normal (Normal).

That same month, Normal moved for summary judgment on the ground

the Hafners breached the agreement by failing to pay the

prevailing wage to laborers working on the project. In December

2008, the court granted Normal's motion for summary judgment and

denied the Hafners' motion for summary judgment. The Hafners

appeal, arguing the court erred in granting Normal's motion for

summary judgment because (1) the agreement failed to include a

prevailing-wage provision; (2) the Prevailing Wage Act (Act) (820

ILCS 130/1 through 130/12 (West 2004)) is not applicable to the

agreement; and (3) if the agreement is interpreted to include a

prevailing-wage provision, Normal was not entitled to terminate the agreement for breach of the prevailing-wage provision. We

reverse.

I. BACKGROUND

A. Factual History

On September 7, 2004, the parties entered into an

agreement for the Hafners to redevelop three properties on

Broadway Street in Normal in exchange for a portion of the

increased tax revenues generated by the redevelopment. On

September 20, 2004, the president of the board of trustees of

Normal approved the agreement in resolution No. 3584. The

resolution states Normal has adopted a Downtown Renewal Tax

Increment Redevelopment Plan for the area in which the three

Broadway properties are located. The resolution also notes one of

the purposes of the agreement is "to attract other private

development [to Normal]."

The first page of the agreement states the agreement is

intended to "alleviate certain private costs of the Redeveloper."

Under a section entitled "Representation of the Redeveloper" on

page 15, the Hafners are described as "sole proprietors." Page

six describes the specific terms of the interest subsidy as

follows:

"(a) The annual payment by the Town

shall not exceed fifty (50%) percent of the

Tax Increment generated by the project;

(b) To the extent that fifty (50%)

- 2 - percent of the Tax Increment is not

sufficient to make the full annual payment,

then any shortfall shall carryover to the

following year and become part of the annual

payment for that year;

(c) To the extent that fifty (50%)

percent of the Tax Increment exceeds the

annual payment in [a] year, the excess shall

be used to pay any previous year[']s

shortfall or shall be applied to [any] future

year[']s annual payment;

(d) The obligation of the Town to make

these annual payments, including any

obligations to pay for any shortfalls from

prior years, shall cease upon the termination

of the Redevelopment Project Area pursuant to

the Act."

Section 2.9 of the agreement states "all work with

respect to the [p]roject, the [p]roject [s]ite[,] and any other

structures or buildings on the [p]roject [s]ite shall conform to

[a]pplicable [l]aw."

Town of Normal ordinance No. 4947 was enacted to

establish wages for workers employed in public works. Section 2

of the ordinance states "[n]othing herein contained shall be

construed to apply said general prevailing rate of wages as

- 3 - herein ascertained to any work or employment except public works

construction of the Town of Normal to the extent required by the

aforesaid Act." Town of Normal Ordinance No. 4947, §2 (eff. June

8, 2004).

B. Procedural Background

In April 2007, Normal filed a complaint for declaratory

judgment, seeking a finding (1) the Hafners were required to pay

prevailing wages under the terms of the agreement; (2) the

Hafners were obligated to pay prevailing wages under the terms of

the Act; and (3) the Hafners materially breached the agreement,

rendering Normal exempt from performing its obligations under the

agreement.

In April 2008, the parties agreed to a stipulation of

facts, stating, in pertinent part: (1) on September 7, 2004, the

parties entered a redevelopment agreement providing for the

Hafners' redevelopment of three residential properties on

Broadway Street in Normal; (2) the Hafners developed 602, 604,

and 607 Broadway Street in compliance with the agreed-upon plans;

(3) the Hafners incurred costs of approximately $1,425,040; (4)

to finance the project, the Hafners took out two mortgage loans

with Soy Capital Bank & Trust in the following amounts: (a)

$825,000 for 607 Broadway Street and (b) $1 million for 602 and

604 Broadway Street; (5) as an incentive to redevelop the

property, Normal agreed to pay the Hafners 30% of the annual

interest costs incurred on the project after its completion,

- 4 - provided each annual payment did not exceed 50% of the tax

increment generated by the project that year; (6) in the event

50% of the tax increment would not cover the payment, any

shortfall would carry over to the following year and would be

paid by any subsequent excess of tax increment; (7) Normal's

obligation to make the payment would cease upon termination of

the agreement; (8) pursuant to section 2.9 of the agreement, the

parties agreed construction on the project site would conform to

applicable law; (9) the Hafners did not pay prevailing wages to

the laborers employed on the project; (10) the term "prevailing

wage" is not used in the agreement; (11) Normal did not advance

any public funds to the Hafners to redevelop the property; (12)

Normal has not made any payments to the Hafners; (13) during the

tax years 2004-06, Normal received $42,455.75 in tax increments

from the three properties; (14) if the Act is not applicable, the

Hafners are entitled to the incentive payments from Normal; and

(15) if the Act is applicable, the Hafners are not entitled to

incentive payments from Normal.

Normal moved for summary judgment in April 2008,

seeking an order declaring (1) the Hafners were obligated to pay

prevailing wages under the terms of the agreement and (2) failure

to pay prevailing wages constituted a breach of the contract,

releasing Normal from its obligation to pay the Hafners a portion

of the tax increment.

- 5 - In May 2008, the Hafners filed a countermotion for

summary judgment, arguing (1) the term "prevailing wage" does not

appear in the agreement, which counsel for Normal prepared; (2)

the Hafners' redevelopment project was not a public work under

Illinois law; (3) the Hafners were not a public body under

Illinois law; (4) no public funds were used in the construction

of the Hafners' redevelopment project; (5) the Hafners have

complied with the terms and provisions of the agreement and are

entitled to the incentive payments on the interest pursuant to

the agreement; and (6) Normal breached the agreement by failing

to timely pay the Hafners the interest incentives.

In June 2008, the trial court denied both parties'

motions for summary judgment, finding declaratory judgment was

not the proper remedy and the case posed too many issues for a

summary-judgment order.

In September 2008, the Hafners filed a counterclaim

against Normal for payment of (1) the interest incentive set

forth in the agreement and (2) reasonable attorney fees and costs

incurred as a result of Normal's breach of the agreement. Later

that month, both parties filed motions for summary judgment on

the Hafners' counterclaim.

In December 2008, the trial court granted Normal's

motion for summary judgment, denied the Hafners' motion for

summary judgment, and dismissed with prejudice the Hafners'

- 6 - counterclaim. The Hafners filed a motion to reconsider, which

the court denied in January 2009.

This appeal followed.

II. ANALYSIS

We initially note this case presents an issue of first

impression in Illinois. Previous cases have addressed the

applicability of the Act, but none have posed the specific issue

presented by the agreement between Normal and the Hafners: does

the Act apply to private developers constructing private family

residences in a tax increment financing district where the

developers receive a public incentive in the form of a portion of

the tax increment generated from the project?

We review de novo a trial court's grant of summary

judgment. Murray v. Chicago Youth Center, 224 Ill. 2d 213, 228,

864 N.E.2d 176, 185 (2007). "Summary judgment is appropriate

whenever the pleadings, depositions, admissions, and affidavits

on file, viewed in the light most favorable to the nonmoving

party, show there is no genuine issue of material fact between

the parties and that the moving party is entitled to judgment as

a matter of law." Murray, 224 Ill. 2d at 228, 864 N.E.2d at 185.

Section 1 of the Act states its purpose as follows:

"It is the policy of the State of

Illinois that a wage of no less than the

general prevailing hourly rate as paid for

- 7 - work of a similar character in the locality

in which the work is performed, shall be paid

to all laborers, workers[,] and mechanics

employed by or on behalf of any and all

public bodies engaged in public works." 820

ILCS 130/1 (West 2004).

Section 2 of the Act defines "public works" as follows:

"'Public works' means all fixed works

constructed by any public body, other than

work done directly by any public utility

company, whether or not done under public

supervision or direction, or paid for wholly

or in part out of public funds. 'Public

works' as defined herein includes all

projects financed in whole or in part with

bonds issued under the Industrial Project

Revenue Bond Act[,] *** the Industrial

Building Revenue Bond Act, the Illinois

Finance Authority Act, the Illinois Sports

Facilities Authority Act, or the Build

Illinois Bond Act, and all projects financed

in whole or in part with loans or other funds

made available pursuant to the Build Illinois

Act." 820 ILCS 130/2 (West 2004).

- 8 - Section 2 of the Act defines "public body" as follows:

"'Public body' means the State or any

officer, board or commission of the State[,]

or any political subdivision or department

thereof, or any institution supported in

whole or in part by public funds***."

(Emphasis added.) 820 ILCS 130/2 (West

2004).

Black's Law Dictionary defines "institution" as "[a]n

established organization, esp. one of a public character, such as

a facility for the treatment of mentally disabled persons."

Black's Law Dictionary 813 (8th ed. 2004). Webster's Dictionary

similarly defines "institution" as "an established organization

or corporation (as a college or university) esp. of a public

character." Merriam-Webster's Collegiate Dictionary 605 (10th

ed. 2000).

The Tax Increment Allocation Redevelopment Act (TIF Act)

states the following:

"[I]n order to promote and protect the

health, safety, morals, and welfare of the

public, that blighted conditions need to be

eradicated and conservation measures

instituted, and that redevelopment of such

areas be undertaken[,] *** it is necessary to

- 9 - encourage private investment and restore and

enhance the tax base of the taxing districts

in such areas by the development or

redevelopment of project areas." 65 ILCS

5/11-74.4-2(b) (West 2004).

On appeal, the Hafners argue the trial court erred in

granting summary judgment in favor of Normal because (1) the

agreement failed to include a prevailing-wage provision; (2) the

Act is not applicable to the agreement; and (3) if the agreement

is interpreted to include a prevailing-wage provision, Normal was

not entitled to terminate the agreement for breach of the

prevailing-wage provision. Normal contends the Hafners were

obligated to pay prevailing wages under the Act because (1) the

Hafners became a public body for purposes of the Act by agreeing

to accept public funds and (2) the redevelopment project is a

public work. Normal further argues that despite failing to

include the term "prevailing wage" in the agreement, the

agreement binds the Hafners under the Act because it is an

"applicable law." For the reasons stated below, we conclude the

court erred in granting summary judgment in favor of Normal

because the Act is inapplicable to the parties' agreement and

inapplicable to the Hafners, who are private developers.

In arguing the Hafners are a public body, Normal relies

on the same two cases the trial court cited in its order: People

- 10 - ex rel. Bernardi v. Illini Community Hospital, 163 Ill. App. 3d

987, 516 N.E.2d 1320 (1987), and Opportunity Center of

Southeastern Illinois, Inc. v. Bernardi, 204 Ill. App. 3d 945,

947, 562 N.E.2d 1053, 1054 (1990).

In Illini Community Hospital, a not-for-profit

nonsectarian hospital received tax money from its county between

1982 and 1985. Illini Community Hospital, 163 Ill. App. 3d at

988, 516 N.E.2d at 1320. The money was collected pursuant to a

statute authorizing taxation "'for the purpose of maintaining

public non-sectarian hospitals,' [citation]," and under the

definition of the statute, "'public nonsectarian hospital'

includes nonprofit community hospitals. [Citation]." Illini

Community Hospital, 163 Ill. App. 3d at 988, 516 N.E.2d at 1320.

In 1985, the hospital entered into a contract for the

construction of a canopy over the emergency-room entrance.

Illini Community Hospital, 163 Ill. App. 3d at 988-89, 516 N.E.2d

at 1320. The contract did not specify that workers would be paid

the prevailing wage. Illini Community Hospital, 163 Ill. App. 3d

at 989, 516 N.E.2d at 1320-21. After the Department of Labor

sued to enforce the Act against the hospital, the trial court

dismissed the complaint on the grounds the hospital was not

subject to the Act because it was not a public body. Illini

Community Hospital, 163 Ill. App. 3d at 989, 516 N.E.2d at 1321.

On appeal, this court reversed, finding an institution that is

- 11 - supported in whole or part by public funds is a public body.

Illini Community Hospital, 163 Ill. App. 3d at 990, 516 N.E.2d at

1321. Because the hospital received tax money pursuant to

statute, it was a public body under the Act. Illini Community

Hospital, 163 Ill. App. 3d at 990, 516 N.E.2d at 1322.

In Opportunity Center of Southeastern Illinois, a

private, not-for-profit corporation providing social,

educational, and rehabilitation programs for developmentally

disabled adults contracted for the remodeling of its building.

Opportunity Center of Southeastern Illinois, 204 Ill. App. 3d at

947, 562 N.E.2d at 1054. The parties' stipulation of facts

provided the Opportunity Center received over 50% of its annual

receipts between 1973 and 1987 from the Department of Mental

Health. Opportunity Center of Southeastern Illinois, 204 Ill.

App. 3d at 949-50, 562 N.E.2d at 1056. The trial court found the

Opportunity Center was not a "public body" under the Act.

Opportunity Center of Southeastern Illinois, 204 Ill. App. 3d at

947, 562 N.E.2d at 1054. The appellate court reversed on the

grounds the Act applies when "public money is spent on a 'fixed

work' that is being constructed by a public body." Opportunity

Center of Southeastern Illinois, 204 Ill. App. 3d at 951, 562

N.E.2d at 1056. The center was supported by public money in that

it contracted with the Department of Mental Health to provide

services to disabled adults, and it was a public body because it

- 12 - received half of its budget from public funds. Opportunity

Center of Southeastern Illinois, 204 Ill. App. 3d at 949-50, 562

N.E.2d at 1057. Thus, the remodeling project fell under the

purview of the Act. Opportunity Center of Southeastern Illinois,

204 Ill. App. 3d at 951, 562 N.E.2d at 1057.

Both Illini Community Hospital and Opportunity Center

of Southeastern Illinois are distinguishable from the present

case. In those cases, the institutions at issue consistently

received public funds over a span of years. Unlike Illini

Community Hospital and the Opportunity Center, the Hafners did

not receive public funds from Normal or other government

entities. Merely as an incentive to redevelop the Broadway

properties, Normal agreed to reimburse part of the interest the

Hafners were obligated to pay Soy Capital Bank for financing the

project out of the increased tax revenue generated as a result of

the redevelopment of the properties.

Instructive in this case is Zickuhr v. Bowling, 97 Ill.

App. 3d 534, 423 N.E.2d 257 (1981), in which the reviewing court

held a warehouse construction project financed by municipal bonds

was not subject to the Act. The court stated:

"The [Act] is applicable only in the

construction of 'public works.' Public works

as defined in the statute are projects

constructed by a public body for a public

- 13 - use. Although the public may benefit from

the construction of the warehouse, the use of

the warehouse is private in nature.

Moreover, the actual contracting and

construction of the warehouse is done by

private industry, not a public body. The

public body is no more than a financing

conduit." Zickuhr, 97 Ill. App. 3d at 539-

40, 423 N.E.2d at 262.

In the present case, the trial court opined that

failure to apply the Act to the Hafners would allow future

parties to contract around the Act by choosing a business

structure that is outside the reach of the Act while engaging in

activity the Act covers. Herein lies the error in the court's

analysis. Similar to the plaintiff's warehouse construction in

Zickuhr, the Hafners were building private residences, not public

fixtures. The project did not include construction of a public

works facility, and it was not a public service provider, such as

a hospital or community center for disabled adults. The public

funds the Hafners are entitled to under the agreement are

generated by the increased property-tax dollars assessed to their

private property, which is attributable to the improvements the

Hafners made using a private mortgage loan. Further, the type of

economic incentive Normal provided to the Hafners is commonly

- 14 - offered to private companies and developers by cities wishing to

bolster economic activity. Finding the Hafners are a public body

would mean all private entities receiving a tax benefit in future

development projects would be required to pay the prevailing wage

to laborers. As the above-referenced cases have demonstrated,

the purpose of the Act is to ensure laborers on public projects

are paid the prevailing wage, not to interfere with economic

development by private companies.

Additionally, the legislative history of the Act

supports our conclusion that the legislature did not intend

private individuals' receipt of money under the TIF Act to

qualify their redevelopment project as a public work. In

construing the meaning of a statute, a court's primary purpose is

to determine and give effect to the legislature's intent. Ready

v. United/Goedecke Services, Inc., 232 Ill. 2d 369, 375, 905

N.E.2d 725, 729 (2008). To ascertain the meaning of an ambiguous

statute, courts may use accepted principles of statutory

construction. Ready, 232 Ill. 2d at 375, 905 N.E.2d at 729.

"When construing a statute, the expression of one thing in a

provision generally excludes all others, even where there are no

negative words of prohibition." People v. Hunter, 298 Ill. App.

3d 126, 131, 698 N.E.2d 230, 232 (1998).

In 2003, with Public Act 93-16, the legislature amended

the definition of "public works." Pub. Act 93-16, §5, eff.

- 15 - January 1, 2004 (2003 Ill. Legis. Serv. 158 (West)), amending 820

ILCS 130/2 (West 2002). The words "for public use" were deleted

after the word "constructed," changing the definition to "all

fixed works constructed by any public body, other than work done

directly by any public utility company, whether or not done under

public supervision or direction, or paid for wholly or in part

out of public funds." Pub. Act 93-16, §5, eff. January 1, 2004

(2003 Ill. Legis. Serv. 158 (West)), amending 820 ILCS 130/2

(West 2002). In addition to the financing acts already

identified in the "public works" definition, the legislature

included additional financing acts as follows:

"'Public works' also includes all projects

financed in whole or in part with funds from

the Fund for Illinois' Future under [s]ection

6z-47 of the State Finance Act, funds for

school construction under [s]ection 5 of the

General Obligation Bond Act, funds authorized

under [s]ection 3 of the School Construction

Bond Act, funds for school infrastructure

under [s]ection 6z-45 of the State Finance

Act, and funds for transportation purposes

under [s]ection 4 of the General Obligation

Bond Act." Pub. Act 93-16, §5, eff. January

1, 2004 (2003 Ill. Legis. Serv. 158 (West)),

- 16 - amending 820 ILCS 130/2 (West 2002).

Before approving the above amendment, the legislature considered

House Bill 3399 (93d Ill. Gen. Assem., House Bill 3399, 2003

Sess.), which proposed changing the definition of "public works"

to also include the TIF Act. House Bill 3399 was rejected, and

the TIF Act was not included in the definition of "public works."

Pursuant to the rules of statutory construction, where

the legislature amended the definition of "public works" to

include projects financed by even more financing acts than

already appeared, yet continued to exclude the TIF Act,

particularly after considering its inclusion, we interpret the

exclusion of the TIF Act to mean projects do not become public

works by accepting the benefits of the TIF Act.

Because the Hafners, who are individual sole

proprietors, were constructing private residences on privately

owned land with financing from a private bank with a mortgage for

which the Hafners are personally liable, they were not obligated

to pay the prevailing wage. The Act, the language of the

agreement, Normal's resolution No. 3584, and ordinance 4947 all

support this finding. The Hafners are not a public body under

the Act because they are not the State nor an office, board, or

commission of the State, nor any political subdivision thereof,

nor are they an "institution" supported in whole or in part by

public funds. In addition, when a private individual uses only

- 17 - private funds to redevelop an area under the TIF Act, the project

is not a public work. Consequently, the Act did not apply to the

parties' agreement.

Further, the agreement, drafted by Normal, identifies

the Hafners as "sole proprietors" and states the agreement is

intended to alleviate "private costs" of the redeveloper.

Resolution No. 3584 specifically states the purpose of the

agreement was "to attract other private development." (Emphasis

added.) Finally, ordinance 4947 provides the prevailing wage

shall not be construed to apply to anything besides public-works

construction by Normal. See Town of Normal Ordinance No. 4947,

§2 (eff. June 8, 2004). As private multifamily residences are

not public works, the Hafners are not obligated under ordinance

No. 4947 to pay the prevailing wage. Thus, the court erred in

(1) granting Normal's motion for summary judgment and (2) denying

the Hafners' motion for summary judgment.

III. CONCLUSION

For the reasons stated, we reverse and remand for the

trial court to vacate its order granting summary judgment to

Normal and to enter an order granting summary judgment for the

Hafners.

Reversed and remanded.

TURNER and APPLETON, JJ., concur.

- 18 - - 19 -