Tax Protest Suit Against Algonquin Township – Part 2

What follows is the argument part of Tim Dwyer’s tax protest suit against Algonquin Township:



Under the case law developed in the State of Illinois, the tax levies adopted by
Algonquin Township in 2014 remains excessive and illegal.

It is well-settled that taxing bodies retain broad discretion in estimating the amounts needed to carry out the lawful objectivities of the taxing district. People ex rel. Toynton v. Commonwealth Edison Company, 285 Ill.App.3d 357, 674 N.E.2d 809 (3rd Dist. 1996).

There is likewise a presumption that the taxing body, in adopting its levy, has properly discharged its legal duty, and has not abused its discretion.

In Re Application of Rosewell, 159 Ill.2d 393, 639 N.E.2d 559 (Ill. 1994).

A tax objector has the burden to demonstrate that the levy, or a portion thereof, was unnecessary. People ex rel. v. Stuckart, 277 Ill. 567, 115 N.E. 744 (Ill. 1917).

The validity of a tax levy is to be determined as of the date of the levy, and its validity is not altered by subsequent events. In Re Application of DuPage County Collector, 294 Ill.App.3d 868, 691 N.E.2d 405 (2nd Dist. 1998).

There are no issues of dispute with regard to the fact that, at the time it adopted its 2014 levies, the Township had reserve funds of $11,711,225. See Exhibit C, page 11.

There is likewise no dispute that the Township had a three-year expense of $4,598,404. Exhibits A-C.

It is likewise well-settled that an unnecessary accumulation of money in the public treasury contravenes Illinois law, and taxing bodies may not levy taxes faster than they are likely to be needed. People ex rel. Toman v. Edward Hines Lumber, Co., 385 Ill. 366, 52 N.E.2d 720 (Ill. 1944).

In the event a challenged levy is void, in the sense that the taxing body exceeded its lawful authority in imposing its levy, courts may sustain the taxpayer’s objection because the taxing body lacks discretion to impose an unlawful levy. People ex rel. Weber v. Commonwealth Edison Company, 287 Ill.Appl.3d 784, 679 N.E.2d 103 (3rd Dist. 1997).

In the controversy at bar, Central Illinois Public Service Company v. Miller, 42 Ill.2d, 248 N.E.2d 89 (Ill. 1969), remains a seminal case.

In Miller, the Supreme Court held that where the taxing bodies had a surplus and the end of the fiscal year, in addition to the taxes receivable for the prior fiscal year, of 2-3 times the average, three-year annual expense, the levy was invalid.

The Miller court held that given the excessive amount of reserves, any levy would be invalid. Miller has been recognized by various Illinois Courts, and it has been held that the Miller “formula” is not rigid, but case specific, and not to be applied with mathematical prevision. Tonyton, 825 Ill.App.3d at 362.

On the other hand, the Miller decision is not the only factor in determining whether a tax levy is void relative to excessive accumulation. In Re Application of Rosewell (Mariotta v. Metropolitan Water Reclamation District)1, 159 Ill.2d 393, 639 N.E.2d 559 (Ill. 1994).

In Mariotta, the Illinois Supreme Court held that surpluses were to be expected upon the application of conservative budgeting practices; however, the taxpayers are prejudiced if such surpluses are not included by the taxing body in the following year’s budgets in order to reduce the appropriation and levy imposed by the taxing district. 159 Ill.2d at 406-407. (Emphasis added).

Mariotta was decided 35 years after the Miller decision, and subsequent to the legislature’s adoption of the Property Tax Limitation and Extension Act (“PTELL”).

In the case of In Re application of County Collector of Cook County2, 332 Ill.App.3d 277, 774 N.E.2d 832, (1st Dist. 2002), (cert. denied, 201 Ill.2d 568 (2002)), the First District held that a tax levied for a particular purpose is intended to provide for the needs of the ensuing year and not to provide a fund for possible future needs, rendering a tax levy largely in excess of the requirements for the particular purpose during the ensuring year as illegal and void. 332 Ill.App.3d at 290-91.

In Ken Oak, the circuit court sustained the taxpayer’s objections, holding that the City of Chicago had underestimated the funds available for the Public Building Commission (“PBC”), and that the 1989 levy for the PBC of $86,000,000 was void, as a matter of law.

In defense of its PBC tax levy, the City of Chicago invoked Miller, as well as its home rule powers, both of which were summarily rejected by the First District.

In Ken Oak, the First District, Citing Miller and Mariotta, affirmed the principle that it remains unconstitutional to impose unnecessary or illegal ad volerem taxes.

The Ken Oak Court held that where the City of Chicago had a surplus in its Public Building Commission Fund approximately equal to the amount of its PBC levy, that levy was void by virtue of long-standing Illinois law.

Notably, the Ken Oak Court held that:

The City relies on In re Application of McHenry County Collector (Walgenback v. Chicago & Northwestern Rwy. Co.), 41 Ill.App.3d 106, 110, 354 N.E.2d 42, 45 (1976), for the proposition that an abuse of discretion is shown only when the intent of the taxing body in making the levy is to provide a surplus for other purposes or is grossly excessive and shows an intent to accumulate funds faster than are likely to be needed. However, this case meets those criteria.

In this case, the PBC Fund had a surplus approximately as large as the 1989 levy for that fund. This surplus exceeded the average expenditures for the prior three years. (Emphasis added).

The City also relies on Belke v. County of Peoria, 169 Ill.App.3d 839, 120 Ill.Dec. 384, 523 N.E.2d 1295 (1988), to argue that Miller only applies where the taxing body had a continuing, accumulating surplus.

The discussion of Miller in Belke is dicta, using concepts from Miller to discuss a statute that this court ultimately did not even apply in Belke. 169 Ill.App.3d at 844-45, 523 N.E.2d at 1298-99.

As such, Belke can hardly be considered to support the City’s claim.

More significantly, Miller is just one case reflecting long-standing Illinois law that a tax levied for a particular purpose is intended to provide for the needs of the ensuing year and not to provide a fund for possible future needs, rendering a tax levy largely in excess of the requirements for the particular purpose during the ensuing year illegal and void. E.g., People ex rel. Brenza v. Morrison Hotel Corp., 4 Ill.2d 542, 547, 123 N.E.2d 488, 492 (1954) (and cases cited therein).

This rule is not based on a continuing, accumulating surplus.

Indeed, the objection in Miller was that the amount on hand in the general assistance fund, together with funds due from the previous year’s levy, made a levy for the following year unnecessary and illegal. Miller, 42 Ill.2d at 543, 248 N.E.2d at 90.

The objection was not based on a pattern, but the ultimate accumulation. (Emphasis added).
774 N.E.2d at 850.

There is no question that both before and after the Algonquin Township Board of Trustees adopted its 2014 tax levies, the Township had substantially more in cash and investments ($11,711,225) than its three-year average annual expenditure of $4,598,404. See Exhibit C.

Not only did Algonquin Township have a surplus in excess of its entire levy as did the City of Chicago in Ken Oak, but the District had that excess both well before the 2014 tax levy and after the levy was issued.

When the District issued its levies in December of 2014 of $4,048,991 and $1,800,379 (cumulative total, $5,849,370) , it had $11,711,225 in cash and investments. See Exhibit C.

Indeed, when the Township issued its levies in 2014, it had cash and investments well in excess of the ratio in the City of Chicago in Ken Oak. 332 Ill.App. 3d, at 290-91.

In Ken Oak, the City of Chicago had a surplus of “approximately” that which the City spent annually on the PCB Fund, and the Court struck down the levy. 332 Ill.App. 3d at 290.

In the case at bar, the Township had and has a surplus well in excess of its annual levy and its annual expenditures in that the Township has been sitting on over $10 million for at least three fiscal years, but the levies have not decreased. See Exhibits A, B and C.

With regards to using public funds obtained via tax levies, the law is well-established in Illinois.

In People ex rel. Kelly v. B.& O.R. Railroad Company, 376 Ill. 393, 33 N.E.2d 604 (Ill. 1941) our Illinois Supreme Court held:

In levying taxes to meet the requirements of expenditures the amount of money on hand and in the process of collection should be considered.

The unnecessary accumulation of money in the public treasury is unjust to the people and it is against the policy of law to raise taxes faster than they are likely to be needed.
33 N.E.2d at 607.

The Kelly Court further held:

The policy of the law is that no taxing district shall be permitted to accumulate unnecessary surplus from taxes collected but should confine their levies to the amount actually needed to be determined annually. 33 N.E.2d at 607.

In People ex rel. Brenza v. Morrison Hotel, 4 Ill.2d 542, 123 N.E.2d 488 (Ill. 1955) the Illinois Supreme Court held:

It is well-settled rule that levies which result in an unnecessary accumulation of funds are invalid.

The authority to levy a tax for building purposes is intended to provide for the needs of the ensuing year and not to provide a fund for possible future needs. (People ex rel. Reeves v. Bell, 309 Ill. 387) and a tax levy in an amount largely in excess of the requirements for the particular purpose during the ensuing year is illegal and void. (People ex rel. Brenza v. Fleetwood, 413 Ill 530, at page 551; People ex rel. Toman v. Signode Steel Strapping Co., 380 Ill 633). (Emphasis added). 4 Ill.2d at 547.

In the case of Elk Grove Twp. Rural Fire Protection District v. Mt. Prospect, 228 Ill.App.3d 228, 592 N.E.2d 549 (1st Dist. 1992) the Appellate Court, First District, held:

. . .The cited authorities also provide each of the parties here with the power to contract for fire protection and emergency medical service.

They further provide the authority to levy taxes for such purposes. What they do not provide, however, is the authority to execute blanket tax levies for extended periods of time.

Illinois case law does not support the proposition that taxes may be levied for needs beyond the ensuing year; rather it provides that tax levies may be adopted after yearly enactment of a budget and appropriation ordinances . . .

Furthermore, taxes are not to be levied for possible future needs, or with the view towards accumulating funds for future needs. (Citations) (Emphasis added). 228 Ill.App.3d at 232.

The Elk Grove court further held:

A tax levied in amounts largely in excess of requirements of a particular purpose during the ensuing year is illegal and void. (See People ex rel. Brenza v. Morrison Hotel Corp. (1954), 4 Ill.2d 542, 123 N.E.2d 488).

Counsel for the Village argues that the cited authority is not relevant, as the Brenza Court actually found that the accumulation of tax funds for libraries was appropriate, and further that the tax at issue is not largely in excess of the requirements of fire protection.

Although counsel is correct that the Brenza court approved the accumulation of tax funds for libraries, what he has neglected to note is that the reason the accumulation of tax money was appropriate is because such accumulation was specifically authorized by the library act (citation), which expressly authorized the accumulation of funds for construction and purchase of libraries.

The Brenza court specifically noted the general rights of taxpayers to have separately stated the purpose for which public money is appropriated and the illegality of excess accumulations. (Emphasis added).

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More tomorrow


Tax Protest Suit Against Algonquin Township – Part 2 — 1 Comment

  1. “A tax objecter has the burden”.

    Tim has to go through all this idiotic minutia, to simply get your elected officials to do the right thing.


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