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Property taxes — delinquencies

Trial court correctly held that county did not violate state Property Tax Code by acquiring tax-delinquent properties with ‘no-cash’ bids and then assigning them, without any compensation, to city. The Illinois Appellate Court, 1st District, 1st Division, has affirmed a ruling by Judge Nancy J. Arnold. In a complaint filed in April 2001, a group of plaintiffs alleged that Cook County violated the state Property Tax Code by transferring to the City of Chicago, without any compensation, properties the county acquired through no-cash bids in ”scavenger” sales for tax-delinquent properties. The plaintiffs alleged that they are ”taxpayers and members of African-American and other minority groups residing in the City of Chicago.” The plaintiffs alleged that their property ”has been taken or is in jeopardy of being taken pursuant to the unlawful no-cash bid program.”The plaintiffs alleged that the city asked the county to file no-cash bids for more than 5,000 properties offered for sale at the tax scavenger sales held in 1997 and 1999. The county then acquired the properties and transferred them to the city for no compensation, and the plaintiffs contended that this arrangement violated the Property Tax Code. The plaintiffs claimed that the properties are predominantly located in minority communities and that the delinquent taxpayers are predominantly black, Hispanic and other disadvantaged minorities.

The plaintiffs argued that under the statute, the county was trustee for the taxing districts such as the Chicago Board of Education and Cook County Forest Preserve District and that those taxing districts needed to impose higher taxes on the plaintiffs to compensate for the revenue lost. The plaintiffs also contended that under the statute, the county, as trustee for the taxing districts, is required to obtain cash consideration sufficient to cover costs and allow for some distribution to taxing districts. In count 1 of the complaint, the plaintiffs sought to enjoin the county from acquiring properties through no-cash bids and transferring them to the city for no compensation. In count 2, the plaintiffs who own property sought just compensation from the defendants for their properties if the city acquires them through the allegedly illegal no-cash bid program. Count 3 of the complaint alleged that the program has disparate impact on racial minorities, thereby violating regulations of the Department of Housing and Urban Development. Count 4 charged that the program confers benefits on white contractors and that those benefits prove the city and county intended racial discrimination. The defendants moved to dismiss the complaint on the basis that the plaintiffs lacked standing. The trial judge dismissed counts 1, 3 and 4 with prejudice but gave the plaintiffs leave to redraft count 2. The plaintiffs elected to stand on the complaint, and the judge then dismissed the complaint with prejudice.

The appeals court affirmed. The court said the statute expressly gives the county the option of either selling or assigning the tax-delinquent property and the city, as a taxing district, is expressly made a possible assignee. Therefore, the court said if it were to construe the statute to require a sale, the provision for assignment appears to be superfluous.

The appeals court said the statute requires only apportionment of amounts received if the county receives any amount for the properties it acquires by no-cash bids. The statute expressly allows no-cash bids and the assignments to the city alleged in the complaint, the court said. This system was created, the court said, so the county may ”clean up a hopeless and difficult tax delinquency situation and place taxable property on the tax rolls again.”

The court said the statute expressly allows the county the flexibility to decide whether to sell the property, assign the property to a private party, assign the property to a taxing district or to retain and manage the property. Under the plaintiffs’ construction of the statute, the properties most ”most desperately in need of drastic measures, the properties available at scavenger sales, would not benefit from the flexibility the legislature granted the county.”

Lucius Swilley, et al. v. County of Cook, et al., No. 1-02-2748. Justice Jill K. McNulty wrote the court’s opinion with Justices Joseph Gordon and Margaret Stanton McBride concurring. Released May 10, 2004.

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