Empress Casino Joliet Corp. v. Giannoulias

• Decision Date: 05 June 2008
• Docket Number: No. 104587.,No. 104586.,No. 104590.,104586.,104587.,104590.
• Citation: 231 Ill.2d 62,896 N.E.2d 277
• Parties: EMPRESS CASINO JOLIET CORPORATION et al., Appellees, v. Alexi GIANNOULIAS, Treasurer of the State of Illinois, et al., Appellants.
• Court: Illinois Supreme Court

896 N.E.2d 277

231 Ill.2d 62

EMPRESS CASINO JOLIET CORPORATION et al., Appellees, v. Alexi GIANNOULIAS, Treasurer of the State of Illinois, et al., Appellants.

No. 104586.

No. 104587.

No. 104590.

Supreme Court of Illinois.

June 5, 2008.

Rehearing Denied September 22, 2008.

Lisa Madigan, Attorney General, Springfield (Michael A. Scodro, Solicitor General, Jerald S. Post, Assistant Attorney General, Chicago, of counsel), for appellants.

Michelle Odorizzi, Hugh R. McCombs, Michael K. Forde, of Mayer Brown LLP, Chicago, for appellees.

William J. McKenna, Jr., Martin J. Bishop, David A. Moore, of Foley & Lardner LLP, Edward M. White, Michael J. Murray, of Carey, Filter, White & Boland, Chicago, for intervenor-appellants.

OPINION

Justice BURKE delivered the judgment of the court, with opinion:

In this case, we are asked to determine the constitutionality of Public Act 94-804 (the Act), which imposed, for a two-year period beginning on the effective date of the amendatory Act, a 3% surcharge on the four riverboat casinos in Illinois that had adjusted gross receipts (AGR) of over $200 million in the calendar year 2004. The remaining five riverboat casinos, all of which had AGRs below $200 million, were not subject to the surcharge. The Act provided that the proceeds of the surcharge were to be distributed to the five horse racing tracks in Illinois. For the reasons that follow, we hold that Public Act 94-804 withstands the constitutional challenges raised, in the circuit court of Will County, by the four casinos subject to the tax.

BACKGROUND

The Illinois legislature authorized riverboat casinos in 1990 under the Riverboat Gambling Act (230 ILCS 10/1 et seq. (West 2004)). There are 10 licenses available for riverboats in Illinois: nine are in use, the tenth is in litigation. The nine riverboat casinos are located in Alton, Aurora, East Dubuque, East St. Louis, Elgin, Joliet, Metropolis, Peoria, and Rock Island. Four casinos have AGRS over $200 million—Empress Casino Joliet, Harrah's Casino Cruises Joliet, Hollywood Casino-Aurora, and Elgin Riverboat Resort-Riverboat Casino. There are five horse racing tracks with live racing in Illinois, located in Arlington Heights, Crete, Collinsville, Stickney/Cicero, and Melrose Park.

In May 2006, the General Assembly passed Public Act 94-804. The Act requires those casinos with AGRs over $200 million to daily contribute 3% of their AGR into the Horse Racing Equity Trust Fund. The Act provides that the monies (along with interest) shall be distributed, within 10 days of deposit into the Fund, as follows: 60% to organization licensees to be distributed at their race meetings as purses and 40% to racetracks "to improve, maintain, market, and otherwise operate [their] racing facilities to conduct live racing, which shall include backstretch services and capital improvements related to live racing and the backstretch." Distribution of the above-described 40% takes place as follows: 11% to Fairmount Park Racetrack and 89% to the other four tracks pro rata based on the aggregate proportion of total handle¹ for calendar years 2004 and 2005 from wagering on live races conducted in Illinois.

In enacting Public Act 94-804, the legislature made the following findings:

"(1) That riverboat gaming has had a negative impact on horse racing. From 1992, the first full year of riverboat operations, through 2005, Illinois on-track wagering has deceased by 42% from $835 million to $482 million.

(2) That this decrease in wagering has negatively impacted purses for Illinois racing, which has hurt the State's breeding industry. Between 1991 and 2004 the number of foals registered with the Department of Agriculture has decreased by more th[a]n 46% from 3,529 to 1,891.

(3) That the decline of the Illinois horseracing and breeding program, a $2.5 billion industry, would be reversed if this amendatory Act of the 94th General Assembly was enacted. By requiring that riverboats agree to pay 3% of their gross revenue into the Horse Racing Equity Trust Fund, total purses in the State may increase by 50%, helping Illinois tracks to better compete with those in other states. Illinois currently ranks thirteenth nationally in terms of its purse size; the change would propel the State to second or third.

(4) That Illinois agriculture and other businesses that support and supply the horse racing industry, already a sector that employs over 37,000 Illinoisans, also stand to substantially benefit and would be much more likely to create additional jobs should Illinois horse racing once again become competitive with other states.

(5) That the 3% of gross revenues this amendatory Act of the 94th General Assembly will contribute to the horse racing industry will benefit that important industry for Illinois farmers, breeders, and fans of horseracing and will begin to address the negative impact riverboat gaming has had on Illinois horseracing." Pub. Act 94-804, § 1, eff. May 26, 2006.

Plaintiffs, Empress Casino Joliet Corporation, Des Plaines Development Limited Partnership d/b/a Harrah's Casino Cruises Joliet, Hollywood Casino-Aurora, Inc., and Elgin Riverboat Resort-Riverboat Casino d/b/a Grand Victoria Casino, filed a four-count complaint for declaratory judgment and injunctive relief against defendants, Alexi Giannoulias as the Treasurer of the State of Illinois² and the Illinois Racing Board.

In count I, plaintiffs alleged that the Act violates the takings clause (article I, section 15) and the due process clause (article I, section 2) of the Illinois Constitution, as well as the due process clause of the United States Constitution, because the surcharge is used for a primarily private use. In count II, plaintiffs alleged that the Act violates article VIII, section 1 (the socalled public funds clause), of the Illinois Constitution because the surcharge was imposed for a private purpose only. In count III, plaintiffs alleged that the Act violates the uniformity clause (article IX, section 2) of the Illinois Constitution as well as the equal protection clauses of the Illinois and federal constitutions. Lastly, in count IV, plaintiffs alleged that the Act violates the special legislation provision (article IV, section 13) of the Illinois Constitution because the surcharge confers a benefit on a particular private group without a reasonable basis, rather than promoting the general welfare of the state. Plaintiffs sought a declaration that the Act is unconstitutional and a permanent injunction against the imposition or collection of the surcharge. Plaintiffs have paid the surcharge under protest pursuant to the State Officers and Employees Money Disposition Act (30 ILCS 230/2a (West 2006)).

Balmoral Park Racing Club, Inc., Hawthorne Race Course, Inc., Maywood Park Trotting Association, the National Jockey Club, and the Illinois Harness Horsemen's Association were granted leave to intervene on behalf of defendants.

The parties eventually filed cross-motions for summary judgment. The circuit court granted summary judgment in favor of plaintiffs, holding that the Act is invalid because it violates the uniformity clause of the Illinois Constitution. The circuit court found there was no real and substantial difference between the four casinos taxed and the five casinos not taxed and that no reasonable relationship had been provided for the classification. In so finding, the circuit court rejected defendants' contention that the classification for the taxed casinos was reasonable since those casinos making over $200 million AGR were better able to absorb the surcharge. The court found that the ability-to-absorb justification was insufficient.

Because the circuit court invalidated an Illinois statute, defendants and intervenors appeal directly to this court. See 210 Ill.2d R. 302(a)(1).

ANALYSIS

Summary judgment is proper where "the pleadings, depositions, and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact and that the moving party is entitled to a judgment as a matter of law." 735 ILCS 5/2-1005(c) (West 2000). We review the circuit court's grant of summary judgment de novo. Arangold Corp. v. Zehnder, 204 Ill.2d 142, 146, 272 Ill.Dec. 600, 787 N.E.2d 786 (2003).

We also review the constitutionality of a statute de novo. Arangold Corp., 204 Ill.2d at 146, 272 Ill.Dec. 600, 787 N.E.2d 786. "Statutes bear a presumption of constitutionality, and broad latitude is afforded to legislative classifications for taxing purposes." Allegro Services, Ltd. v. Metropolitan Pier & Exposition Authority, 172 Ill.2d 243, 250, 216 Ill.Dec. 689, 665 N.E.2d 1246 (1996). The party challenging a nonproperty tax classification carries the burden of rebutting that presumption and "clearly establishing" the Act's unconstitutionality by showing that it "is arbitrary or unreasonable." Allegro Services, Ltd., 172 Ill.2d at 250-51, 216 Ill.Dec. 689, 665 N.E.2d 1246. We have a duty to uphold a statute as constitutional whenever reasonably possible. Arangold Corp., 204 Ill.2d at 146, 272 Ill.Dec. 600, 787 N.E.2d 786.

I. Uniformity Challenge

A. Standards for a Uniformity Challenge

Article IX, section 2, of the Illinois Constitution provides:

"In any law classifying the subjects or objects of non-property taxes or fees, the classes shall be reasonable and the subjects and objects within each class shall be taxed uniformly. Exemptions, deductions, credits, refunds and other allowances shall be reasonable." Ill. Const.1970, art. IX, § 2.

The standards for evaluating a challenge to a statute based on the uniformity clause are well established:

"To survive scrutiny under the uniformity clause, a nonproperty tax classification must (1) be based on a real and substantial difference between the people taxed and those not taxed, and (2) bear some reasonable relationship to the object of the legislation or to public policy." Arangold Corp., 204 Ill.2d at 153, 272 Ill.Dec....