Fifth District upholds Mendelsohn in Wood River TIF suit, reverses on 'blight' issue

Steve Gonzalez Jul. 21, 2008, 2:11am

The Fifth District Appellate Court affirmed in part and reversed in part a decision by Madison County Associate Judge Ralph Mendelsohn who ruled in 2006 that the city of Wood River complied with the Tax Increment Allocation Redevelopment Act in a Wal-Mart development project.

Wood River residents Randy Geisler, Michael Van Winkle and Stacey Curtis filed an appeal arguing Mendelsohn, who held a two-day bench trial in November 2006, erred in his decision holding that Wood River complied with procedural requirements set forth in the TIF Act.

Plaintiffs argued that on May 28, 2004, the Wood River city council approved a contract with a developer in which the city would pay the developer from TIF funds to acquire land, demolish an existing Wal-Mart store and construct a new Wal-Mart Supercenter.

According to the plaintiffs, an ordinance also called for the city to annex and zone a certain 16.9-acre parcel of land known as the "North Property" for inclusion in the proposed development, which was not included in a TIF area established by a 1986 TIF Plan.

They claimed an original development agreement committed Wood River to establish a business district under division 74.3 of the Illinois Municipal Code and share sales tax revenues from the business district with the developer.

They alleged that an original and amended development were illegal under the TIF Act because Wood River entered into the original development agreement with the developer before amending the 1986 TIF Plan.

Mendelsohn ruled that Wood River did not do anything wrong or illegal.

In the first issue on appeal, the plaintiffs argued that because the city did not enact Ordinance No. 1965 -- which amended the 1986 TIF Plan to provide for the project costs set forth in the original development agreement until after it entered into the original development agreement with the developer -- the city violated section 11-74.4-4(j), resulting in the invalidation of the original development agreement.

Authoring the opinion for the Fifth District, Judge Stephen Spomer wrote that plaintiffs' argument on the timing of the city's enactment of Ordinance No. 1965 was "without merit."

"As was noted by the circuit court in its order and judgment, the TIF Act includes a section separate from that which allows the City to incur project development costs, which gives the municipality the authority to '[m]ake and enter into all contracts with...developers...necessary or incidental to the implementation and furtherance of its redevelopment plan and project."

The Fifth District also ruled Mendelsohn was correct when ruling Wood River did not violate section 11-74.4-5(c) when it enacted Ordinance No. 1965 without convening the joint review board and holding a public hearing.

However, the court found that Mendelsohn erred when ruling that the new tax on District 2 conformed with Section 11-74.3-5 of the Illinois Municipal Code because the city did not make a formal finding that the area was blighted.

"Although we find that the circuit court erred in its determination that District 2 met the requirements set forth in section 11-74.3-5, the relief requested by the plaintiffs in count IV of the complaint is an inappropriate remedy for this violation," Spomer wrote.

"In their prayer for relief, the plaintiffs request that the court enter an order declaring the entire business district plan and business district agreement to be null and void, granting an injunction prohibiting the City from expending any public funds with respect to carrying out the terms, conditions, and aims of the development agreement, and for their costs of suit.

"It would be inappropriate to grant that relief, because section 11-74.3-5 only applies to the ability of the City to impose the taxes on a business district that are permitted to be imposed under subsections (12) and (13) of section 11-74.3-3.

Justices Bruce Stewart and Thomas Welch concurred with the decision.

Robert Bosslet and Terrance O'Leary of Granite City represented the plaintiffs.

Merle Bassett of Wood River represented the city.

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