Millennium Park Joint Venture Llc v. Houlihan

• Decision Date: 28 March 2011
• Docket Number: No. 108923.,108923.
• Citation: 948 N.E.2d 1,241 Ill.2d 281,349 Ill.Dec. 898
• Parties: MILLENNIUM PARK JOINT VENTURE, LLC, Appellee,v.James M. HOULIHAN, Assessor of Cook County, et al., Appellants.
• Court: Illinois Supreme Court

241 Ill.2d 281

948 N.E.2d 1

349 Ill.Dec. 898

MILLENNIUM PARK JOINT VENTURE, LLC, Appellee,

v.James M. HOULIHAN, Assessor of Cook County, et al., Appellants.

No. 108923.

Supreme Court of Illinois.

Dec. 23, 2010.Rehearing Denied March 28, 2011.

Anita Alvarez, State's Attorney, of Chicago (Patrick T. Driscoll, Jr., Randolph T. Kemmer, Paul A. Castiglione and Tatia C. Gibbons, Assistant State's Attorneys, of counsel), for appellants.Stephen Novack and John F. Shonkwiler, of Novack & Macey LLP, of Chicago, for appellee.

[349 Ill.Dec. 902 , 241 Ill.2d 285] OPINION

Justice THOMAS delivered the judgment of the court, with opinion.

Plaintiff, Millennium Park Joint Venture, LLC, brought a declaratory judgment action in the circuit court of Cook County against defendants—Cook County Assessor James Houlihan and Cook County Treasurer Maria Pappas—seeking a declaration that defendants' tax assessment of plaintiff's contractual interest in real property owned by the Chicago Park District was not authorized by law. At issue in this case is (1) whether the circuit court has original subject matter jurisdiction over the declaratory judgment action challenging as “unauthorized by law” the assessor's assessment of plaintiff's property interest; and if so, (2) whether plaintiff's agreement with the Park District created an untaxable license as opposed to a taxable lease. The circuit and appellate courts answered both questions in the affirmative. See 393 Ill.App.3d 13, 331 Ill.Dec. 696, 911 N.E.2d 517. For the reasons that follow, we affirm the judgment of the appellate court.

BACKGROUND

Millennium Park in Chicago is owned by one or more tax-exempt entities, including the Chicago Park District, and the entire park is considered “exempt” property under the Property Tax Code (35 ILCS 200/1–1 et seq. (West 2008)). Plaintiff entered into a “Concession Permit Agreement” with the Park District in February 2003, which allowed plaintiff to use certain portions of Millennium Park to operate a food concession service. The Property Tax Code authorizes the assessor to tax a lessee's leasehold interest in tax-exempt property in certain circumstances. 35 ILCS 200/9–195(a) (West 2008). The statutory scheme, however, does not authorize a tax or an assessment on exempt property that is merely licensed. See 35 ILCS 200/9–70 (West 2008); 35 ILCS 200/9–195 (West 2008); 35 ILCS 200/1–130 (West 2008); Jackson Park Yacht Club v. Department of Local Government Affairs, 93 Ill.App.3d 542, 547, 49 Ill.Dec. 212, 417 N.E.2d 1039 (1981); see also Kankakee County Board of Review v. Property Tax Appeal Board, 226 Ill.2d 36, 55, 312 Ill.Dec. 638, 871 N.E.2d 38 (2007) (“Illinois case law is consistent in holding that government permits, ordinances, licenses, orders, or regulatory approvals do not create assessable entities.”).

Plaintiff's agreement with the Park District was for a term of 20 years, with the possibility for extensions that would allow for a total term of 30 years. The agreement divided the property to be used by plaintiff into two portions. The first section was called the “premises” consisting of 11,000 square feet in the “building” and 15,000 square feet in the “tunnel.” The premises contained a sit-down, casual restaurant known as the Park Grill, a bakery and ice cream parlor known as the Park Café, and a seasonal retail store known as the Park Store. Plaintiff was also provided

[349 Ill.Dec. 903 , 948 N.E.2d 6]

with storage facilities located in the tunnel.

The second section of property was designated the “concession area,” and it consisted of a large part of the park in which plaintiff was allowed to operate a seasonal mobile food and beverage concession, subject to the approval of the Park District. The agreement contained diagrams of the park showing the locations of the building and the tunnel, as well as the specific locations of the restaurant, retail store, concession area, and bakery and ice cream parlor.

The agreement required plaintiff to pay a minimum fee of $275,000 per year, with additional percentage fees based on the amount of sales and the number of years the agreement had run. For instance, in the first three years, the percentage fee was 3% of any sales between $3 million and $12 million, and 1% of any sales exceeding $12 million. By years 16 through 20, the percentage increased to 5% of sales between $1 million and $14 million. Plaintiff was required to furnish the Park District with statements of its monthly gross sales for the calculation of the percentage fee. The Park District was also permitted to review plaintiff's financial records to determine gross sales. The minimum fee was to be abated initially until the earliest of certain specified events occurred. The Park District was to pay for all utilities.

The agreement was over 90 pages long and contained numerous requirements in which the Park District was to exercise control over plaintiff's operations. It set forth the minimum times and dates of operation and the permitted uses of the various areas, but provided that the Park District was not required to keep Millennium Park open for any minimum amount of hours. Plaintiff was required to adequately staff the facilities with well-trained personnel for efficient first class service and to provide adequate stock. The Park District had the right to approve all signs used by plaintiff and any name change. It also required that certain “Key Men” or “Alternate Key Men” continue to own or control the affairs of plaintiff's operation to insure its quality. Moreover, plaintiff was subject under the agreement to the Park District's extensive requirements regarding employee uniforms, cleanliness, pest control, signs, repair and maintenance, ice and snow removal and food and safety rules. Plaintiff was also required to carry minimum amounts of insurance.

Furthermore, the agreement did not permit plaintiff to “give, sell, license, sublet, permit, subcontract, sub-concession or otherwise transfer its interest” in the agreement without the prior written consent of the Park District. Such consent was within the sole discretion of the Park District for the first five years of the agreement, but thereafter, the Park District was not to unreasonably withhold its consent. Subject to certain conditions, plaintiff was allowed to enter into license agreements for up to 50% of the concession carts in the concession area. The agreement contained a disclaimer indicating that plaintiff was an independent contractor and that there was no principal-agent, partnership or joint venture relationship between the parties to the agreement.

Finally, the Park District had the right to terminate the agreement immediately with written notice to plaintiff upon the occurrence of certain specified conditions or violations of the agreement. Plaintiff successfully negotiated out of the agreement a provision that would have allowed the Park District to terminate the agreement at will upon written notice.

In March 2005, the assessor sent plaintiff a notice of assessment on the property in question in the amount of $502,550 for

[349 Ill.Dec. 904 , 948 N.E.2d 7]

the 2004 tax year. Although the notice referred to a “proposed increase in valuation,” there had never before been any assessed valuation to increase. Plaintiff challenged the assessment before the county assessor, but that challenge was denied. The assessment became final in April 2005. Plaintiff did not file an assessment complaint with the Board of Review. The Board of Review has the power on written complaint of any taxpayer that any property is “overassessed, underassessed, or exempt” to review the assessment and “confirm, revise, correct, alter, or modify the assessment, as appears to be just.” 35 ILCS 200/16–95, 16–115 (West 2008).

Instead, plaintiff filed a three-count complaint for declaratory and injunctive relief in the circuit court in August 2005. Count I of the complaint sought a declaration that plaintiff had a nontaxable license or concession, rather than a lease of the Park District's property, and therefore the imposition of a tax on plaintiff's interest would be unauthorized by law. Count II sought a declaration that a tax on plaintiff's interest would violate the property tax uniformity clause of the Illinois Constitution (Ill. Const.1970, art. IX, § 4). In count III, plaintiff sought to enjoin the assessor from assessing plaintiff's interest and the treasurer from imposing or collecting any property tax for the tax year of 2004 and subsequent years.

Plaintiff alleged that its agreement with the Park District did not constitute a lease for a number of reasons. Specifically, it noted that the terms of the agreement did not grant plaintiff full enjoyment and exclusive possession of the areas in which it conducted its operations. The agreement did not use the term “lease,” and it did not provide for the payment of rent or purport to grant plaintiff a leasehold interest. The agreement also contained a number of provisions that allowed the Park District to maintain control over the property and plaintiff's operation of its businesses. Moreover, any disputes between the parties were to be decided by the general superintendent of the Park District. The Park District's remedies were also different from those in a lease. The Park District could terminate the agreement immediately upon the occurrence of any one of several specified conditions, but the agreement did not contain any forcible entry and detainer provisions or other landlord-tenant remedies or tenant protections.

Plaintiff further alleged that during February 2005, certain newspaper articles were published that inaccurately suggested that plaintiff was being given special treatment in not being required to pay real estate taxes. Plaintiff also alleged numerous other vendors operate concessions on Park District property similar to plaintiff and are not being assessed or taxed. Nonetheless, shortly after the...