Chicago School Finance Authority v. City Council of City of Chicago

• Citation: 84 Ill.Dec. 668,104 Ill.2d 437,472 N.E.2d 805
• Decision Date: 07 December 1984
• Docket Number: No. 61077,61077
• Parties: , 84 Ill.Dec. 668, 22 Ed. Law Rep. 268 CHICAGO SCHOOL FINANCE AUTHORITY, Appellee, v. The CITY COUNCIL OF the CITY OF CHICAGO et al., Appellants.
• Court: Supreme Court of Illinois

Page 805

472 N.E.2d 805

104 Ill.2d 437, 84 Ill.Dec. 668, 22

Ed. Law Rep. 268

CHICAGO SCHOOL FINANCE AUTHORITY, Appellee, v. The CITY COUNCIL OF the CITY OF CHICAGO et al., Appellants.

No. 61077.

Supreme Court of Illinois.

Dec. 7, 1984.

Winston & Strawn, Chicago, for appellants.

Roger Pascal, Aaron J. Kramer, Wayne A. McCoy, Scott Bieber, Stephen J. Dragich, Schiff, Hardin & Waite, Chicago, for appellee Chicago School Finance Authority.

James D. Montgomery, Corp. Counsel of the City of Chicago, Chicago, for certain appellants; Herbert Lee Caplan, Asst. Corp. Counsel, Chicago, of counsel.

CLARK, Justice:

This appeal involves an action for a declaratory judgment and a writ of mandamus which was filed in the circuit court of Cook County on November 16, 1984, by the Chicago School Finance Authority (the Authority) against the city council of the city of Chicago (the city council), its 50 members and the city clerk of the city of Chicago. The Authority sought to compel the city council to adopt and certify the tax levy ordinance required by section 34A-503(a) of the School Finance Authority Act (the Act) (Ill.Rev.Stat.1983, ch. 122, par. 34A-503(a)) to pay the principal of and the interest on $114,500,000 of general obligation bonds (Series E Bonds) that the Authority had contracted to sell to a group of 85 financial institutions. By agreement of the parties, the defendants' motions to dismiss and the plaintiff's motion for judgment on the pleadings were argued on November 19, 1984. Later that same day, the circuit court issued a final order for a declaratory judgment and a writ of mandamus.

On November 19, 1984, certain of the defendant aldermen filed a notice of appeal to the appellate court. On November 20, 1984, these defendants also filed a motion for a stay in the appellate court. On November 21, 1984, the appellate court, over the written objection of the plaintiff, granted a stay of the circuit court's final order until December 18, 1984. Later, on November 21, 1984, we granted the parties' joint motion for a direct appeal to this court pursuant to our Rule 302(b) (87 Ill.2d R. 302(b)) and set an expedited briefing and hearing schedule. In their motion, the parties urged this court to issue a ruling on the merits no later than December 13, 1984--"the latest practicable date on which a favorable ruling of this Court would permit the delivery and payment for the Series E Bonds." However, during oral argument, it was stated that the last practical date this court could act is actually December 9, 1984.

In January of 1980, the Illinois General Assembly passed, and the Governor signed, Public Act 81-1221 (Pub. Act 81-1221, eff. Jan. 16, 1980), which created the Authority, an independent body both corporate and politic and a unit of local government under the Act. The Authority is governed by a five-member board of directors, two of whom were appointed by the Governor with the approval of the mayor of Chicago; two directors were appointed by the mayor of Chicago with the approval of the Governor, and one director, appointed jointly by the Governor and mayor, serves as chairman of the Authority. (Ill.Rev.Stat.1983, ch. 122, par. 34A-301.) The Authority was created to provide financial assistance to the board of education of the city of Chicago (the board). The Act was viewed as the legislative and executive response to the board's poor financial situation. The Authority, as an independent governmental body, was to possess the credibility necessary in the financial markets to borrow the money which was so badly needed for the operation of the Chicago public school system. The Act established a mechanism by which the Authority could sell bonds to raise the needed funds for the board. The financing mechanism is a five-step process under which the Authority first publicly advertises for competitive bids; second, receives the bids and determines which bid is the highest and best; third, accepts the winning bid and demands and directs the city council to levy a tax to pay for the principal of and interest on the bonds; fourth, pursuant to the Authority's demand the city council passes the tax-levy ordinance; and fifth, the Authority issues the bonds.

In 1984, the General Assembly, concerned about the poor condition of school buildings in Chicago, passed an amendment to the Act that increased the Authority's borrowing limit and broadened permissible borrowing purposes to include school construction and rehabilitation (Pub. Act 83-1270, eff. Aug. 28, 1984). The Governor signed the bill. On November 1, 1984, the Authority adopted a resolution authorizing a public sale of the $114.5 million of Series E Bonds and sought competitive bids. On November 13, 1984, the Authority accepted the bid of an 85-member syndicate led by Continental Illinois National Bank and Trust Company of Chicago and adopted a resolution to that effect. The Authority had stated to prospective bidders that it expected delivery of the bonds to be made to the winning bidder on or about November 20, 1984. The resolution passed on November 13, 1984, also demanded and directed the city council to adopt an ordinance providing for the levy and collection of a tax to pay the principal of and interest on the Series E Bonds, as required by section 34A-503 of the Act (Ill.Rev.Stat.1983, ch. 122, par. 34A-503). On that same date, the finance committee of the city council voted to recommend that the city council "not adopt or pass" such an ordinance. Pursuant to city council rules, the ordinance was automatically tabled. The only way in which the city council could have considered the ordinance was to disapprove the finance committee recommendation. However, on November 14, November 20, and November 21, 1984, the city council refused to disapprove the finance committee's recommendation. Since the tax levy is a condition precedent to closing, the Authority is unable to issue and receive payment for the Series E Bonds. The Authority is obligated under the terms of the bid to issue the bonds and complete delivery to the purchasers no later than 12 noon on December 18, 1984.

Basically, two issues have been raised in this case, namely: (1) whether the Act is constitutional, in that it imposes a mandatory duty upon the city council to adopt a tax-levy ordinance upon the demand of the Authority; and (2) whether a writ of mandamus is the appropriate...