People ex rel. City of Urbana v. Paley, 49255

• Citation: 368 N.E.2d 915,11 Ill.Dec. 307,68 Ill.2d 62
• Decision Date: 05 October 1977
• Docket Number: No. 49255,49255
• Parties: , 11 Ill.Dec. 307 The PEOPLE ex rel. The CITY OF URBANA, Appellee, v. Hiram PALEY, Mayor, Appellant.
• Court: Supreme Court of Illinois

Page 915

368 N.E.2d 915

68 Ill.2d 62, 11 Ill.Dec. 307

The PEOPLE ex rel. The CITY OF URBANA, Appellee, v. Hiram PALEY, Mayor, Appellant.

No. 49255.

Supreme Court of Illinois.

Oct. 5, 1977.

Harvey Schwartz, Schwartz & Zaban, Chicago, for appellant.

Jack Waaler, City Atty., City of Urbana, Urbana, Ross, Hardies, O'Keefe, Babcock & Parsons, Chicago, for appellee; R. Marlin Smith, Jeffrey R. Ladd, Chicago, of counsel.

RYAN, Justice.

This is an appeal by Hiram Paley, the mayor of the city of Urbana, from a judgment of the circuit court of Champaign County in a mandamus proceeding brought on behalf of the city against the mayor. The action was instituted in response to the mayor's refusal to execute certain general obligation bonds and interest coupons authorized by the Urbana city council for the purpose of acquiring a parcel of land as part of an urban development program. The mayor, in a letter to the city council, explained that he refused to sign the bonds because their issuance for the purpose contemplated would violate the Constitution of the State of Illinois in that it "would constitute the taking of private property for a private use and the expenditure of public funds and the lending of public credit for private (as opposed to public) purposes." The circuit court disagreed and, on the basis of the pleadings and a stipulation of fact, granted the mandamus requested on behalf of the city. The mayor appealed to the appellate court, and the cause was transferred to this court pursuant to our Rule 302(b) (58 Ill.2d R. 302(b)).

Both parties to this dispute agree that by 1974 the central business area of the city of Urbana suffered from a serious case of urban blight. The symptoms were general economic deterioration and a proliferating number of vacant buildings and buildings with structural and mechanical infirmities. The city, in an effort to arrest the spread of blight in downtown Urbana, authorized Arthur Rubloff and Co. to study the business area and make recommendations. The Rubloff report concluded that a commercial renewal project must be undertaken to prevent any further deterioration. In the absence of such a project, "properties will continue to decline in economic value, more stores will become vacant, and the * * * area will continue to change from a retail area to a service area. Little new construction will occur, although financial institutions and government offices may expand and upgrade facilities as needed. In time, tax revenues from the Downtown will be less than the cost of services to the area, meaning increased Real Estate taxes." Further, the report recommended that, to make the project economically feasible, the city should play an active role in its implementation. We might note here that the authority of the city, as a home rule unit, to undertake a program of urban redevelopment is not in dispute herein, having been conceded by both parties. (See also City of Urbana v. Houser, 67 Ill.2d 268, 10 Ill.Dec. 239, 367 N.E.2d 692.) We are not, therefore, called upon in this case to assess the propriety of the city's objective, but rather to determine the constitutional validity of the means used by the city to achieve that end.

The Rubloff report appraised and enthusiastically approved a redevelopment plan proposed by a local developer, Broadway Development Corporation. The plan, in brief, calls for the expansion of Lincoln Square Mall, an existing shopping facility, by constructing an adjacent commercial center with space for a retail area, offices, and a bank. Moreover, as stated in the report:

"The proposal contains as a key element the participation of the City in the total redevelopment program; the City is to acquire the land necessary for the development, make street alterations and other public improvements, and provide parking facilities."

Subsequent to receipt of the Rubloff report, the Urbana city council passed a series of ordinances to implement the recommendations of the report and the proposed redevelopment plan or one similar to it, though no particular developer has yet been chosen. The first of these was Ordinance No. 7374-70, adopted on May 1, 1974. Section 5 of the ordinance enumerates the powers which the city council may choose to exercise in carrying out the redevelopment plan:

"(A) To approve all development and redevelopment proposals for business districts created in the City of Urbana pursuant to this ordinance.

(B) To exercise the power of eminent domain for the acquisition of real and personal property for the purpose of implementing a development or redevelopment plan for such business district or a development or redevelopment project for which provision is made in such a plan.

(C) To acquire, manage, convey or otherwise dispose of real and personal property acquired pursuant to the provisions of a development or redevelopment plan.

(D) To apply for and accept capital grants and loans from the United States and the State of Illinois, or any instrumentality of the United States or the State, for business district development and redevelopment.

(E) To borrow funds as it may be deemed necessary for the purpose of business district development and redevelopment, and in this connection issue such general obligation or revenue bonds as it shall be deemed necessary, subject to such limitations as the General Assembly of the State of Illinois may hereafter impose pursuant to Section 6(k) of Article VII of the 1970 Constitution of the State of Illinois.

(F) To enter into contracts with any public or private agency or person for the purpose of business district development and redevelopment.

(G) To sell, trade, or improve such real property as may be acquired in connection with business district development and redevelopment plans and to provide by ordinance for the procedures that shall be employed in the sale or trade of any such real estate.

(H) To employ all such persons as may be necessary for the planning, administration and implementation of business district plans.

(I) To expend such public funds as may be necessary for the planning, execution and implementation of the business district plans.

(J) To establish by ordinance or resolution procedures for the planning, execution and implementation of business district plans."

The final ordinance in the series was No. 7475-104, adopted on June 2, 1975. That ordinance provided for the borrowing of $40,000 for the purpose of acquiring a specified parcel of land for redevelopment. In evidence of that indebtedness, the ordinance provided for the issuance of eight general obligation municipal bonds, each of the denomination of $5,000 and bearing interest at the rate of 5%. Each bond further recites that "(f)or the prompt payment of this bond, both principal and interest, as aforesaid, at maturity, and the levy of taxes sufficient for the purpose, the full faith, credit and resources of said City are hereby irrevocably pledged." The subsequent refusal of the mayor to sign these bonds led to the mandamus action which is the subject of this appeal.

As aforementioned, we are concerned in this case with the method chosen by the city to assist in the redevelopment of the downtown area. More specifically, we must decide upon the constitutionality of the financing scheme employed to raise money for land acquisition. The mayor argues that the issuance of general obligation bonds to finance the proposed development is a violation of both the due process clauses of the Federal and State constitutions and section 1(a) of article VIII of the Illinois Constitution, which provides:

"Public funds, property or credit shall be used only for public purposes."

It has long been held that the imposition of a tax for other than a public purpose constitutes a violation of the due process clause of the fourteenth amendment to the Federal Constitution (Green v. Frazier, 253 U.S. 233, 40 S.Ct. 499, 64 L.Ed. 878), and of the Illinois Constitution of 1870 (Cremer v. Peoria Housing Authority, 399 Ill. 579, 78 N.E.2d 276). In Schuler v. Board of Education, 370 Ill. 107, 109, 18 N.E.2d 174, 175, the court stated: "We have expressly decided that the application of tax money for other than public purposes is a deprivation of property without due process of law." The court cited Robbins v. Kadyk, 312 Ill. 290, 143 N.E. 863, which repudiated a due process attack on a bond issue to finance construction of a community building because such construction was for a public purpose.

In addition to the due process restriction, article IV, section 20, of the Illinois Constitution of 1870 contained the following specific limitation:

"The State shall never pay, assume or become responsible for the debts or liabilities of, or in any manner give, loan or extend its credit to, or in aid of any public or other corporation, association or individual."

It has been suggested that such limitations found in State constitutions are not intended to be coextensive with the public-purpose limitation of the fourteenth amendment but are specific limitations not satisfied solely by the finding of a public purpose to be served by the questioned project. See Comment, State Constitutional Provisions Prohibiting the Loaning of Credit to Private Enterprise A Suggested Analysis, 41 U.Colo.L.Rev. 135 (1969), and Willatt, Constitutional Restrictions on Use of Public Money and Public Credit, 38 Tex.Bar J. 413 (1975).

This court, however, has not given an expansive interpretation to the limitations of article IV, section 20, but has held that this section does not prohibit the appropriation of State funds to private corporations or individuals where the money appropriated is to be spent for a public purpose. (Poole v. City of Kankakee, 406 Ill. 521, 531, 94 N.E.2d 416; Cremer v. Peoria Housing Authority, 399 Ill. 579, 587, 78 N.E.2d 276; People ex rel. McDavid v. Barrett, 370 Ill. 478, 19 N.E.2d 356; Hagler v. Small, 307 Ill. 460, 138 N.E. 849.) In Fairbank v....