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Illinois Appellate Court Again Sides with School Districts on Working Cash Fund Bond Tax Rate Objections

K-12 Education Property Tax

After a very difficult 2020, Illinois school districts received a well-deserved present on December 24 when the First District Illinois Appellate Court issued a decision rejecting a tax rate objection and upholding the legality of a property tax levy for repayment of working cash fund bonds when the bond proceeds were permanently transferred from a school district’s working cash fund to pay for the maintenance and repair of buildings.  This decision is consistent with an earlier decision from the Second District Appellate Court and comes as a relief to the many school districts concerned about this threat to their financial stability. 

The recent First District decision, 1400 Wolf Road, LLC, et al. v. Pappas, tracks very closely with a previous Second District decision, 1001 Ogden Partners v. Henry.  The Ogden Partners decision arose in DuPage County when the same objection was filed against the levies for working cash fund bonds of many DuPage school districts.  The Second District ruled in favor of the school districts, establishing a favorable precedent in the collar counties.  However, that precedent was not binding on the First District Appellate Court, which serves Cook County.  As a result, objectors pursued the same arguments against many Cook County school districts hoping to obtain a different result.  Such a split between districts would have created serious issues for a significant number of school districts since a split likely would have prompted the Illinois Supreme Court to resolve the differences in the opinions. 

However, as 2020 ended, the First District agreed with the Second District.  The 1400 Wolf Road decision finds the arguments raised by the objectors to be “virtually identical” to those raised in the Second District and agrees with the reasoning of the Ogden Partners decision. Like the Ogden Partners decision, the 1400 Wolf Road decision is based on the conclusion that maintaining and repairing schools is a legitimate corporate purpose of a school district; and therefore, issuing working cash fund bonds to achieve that legitimate corporate purpose is authorized by the relevant provisions of the School Code.  The Court also found that the explicit provisions of the Bond Issue Notification Act (BINA) were strictly followed.  The Court refused to read into the law additional requirements regarding the information provided in the BINA notices or the timing of the required BINA hearings.  Finally, the Court rejected objectors’ arguments that the issuance of the bonds somehow violated the Local Government Debt Reform Act (LGDRA) and that the transfer of the bond proceeds somehow violated the Property Tax Extension Limitation Law (PTELL).

Franczek P.C. has been heavily involved in both the 1400 Wolf Road decision and the Ogden Partners decision.  We represented the Cook County school district involved in the 1400 Wolf Road decision.  We also were one of several law firms representing the 16 DuPage County school districts involved in the Ogden Partners decision and also presented oral argument to the Second District on behalf of the group.  At this time, a few procedural issues remain with the 1400 Wolf Road decision.  As always, we will update you on any significant developments in the case.