Town of Normal v. Hafner ( 2009 )

NO. 4-09-0121 Filed 11/20/09
IN THE APPELLATE COURT
OF ILLINOIS
FOURTH DISTRICT
TOWN OF NORMAL, ) Appeal from
Plaintiff and ) Circuit Court of
Counterdefendant-Appellee, ) McLean County
v. ) No. 07MR98
F.J. HAFNER and FRED HAFNER, )
Defendants and ) Honorable
Counterplaintiffs- ) G. Michael Prall
Appellants. ) Judge Presiding.
_________________________________________________________________
JUSTICE POPE delivered the opinion of the court:
In September 2008, defendants and counterplaintiffs,
F.J. and Fred Hafner (Hafners), filed a motion for summary
judgment seeking an order that they complied with the terms and
provisions of a real estate redevelopment agreement they entered
with plaintiff and counterdefendant, Town of Normal (Normal).
That same month, Normal moved for summary judgment on the ground
the Hafners breached the agreement by failing to pay the
prevailing wage to laborers working on the project. In December
2008, the court granted Normal's motion for summary judgment and
denied the Hafners' motion for summary judgment. The Hafners
appeal, arguing the court erred in granting Normal's motion for
summary judgment because (1) the agreement failed to include a
prevailing-wage provision; (2) the Prevailing Wage Act (Act) (820
ILCS 130/1 through 130/12 (West 2004)) is not applicable to the
agreement; and (3) if the agreement is interpreted to include a
prevailing-wage provision, Normal was not entitled to terminate
the agreement for breach of the prevailing-wage provision. We
reverse.
I. BACKGROUND
A. Factual History
On September 7, 2004, the parties entered into an
agreement for the Hafners to redevelop three properties on
Broadway Street in Normal in exchange for a portion of the
increased tax revenues generated by the redevelopment. On
September 20, 2004, the president of the board of trustees of
Normal approved the agreement in resolution No. 3584. The
resolution states Normal has adopted a Downtown Renewal Tax
Increment Redevelopment Plan for the area in which the three
Broadway properties are located. The resolution also notes one of
the purposes of the agreement is "to attract other private
development [to Normal]."
The first page of the agreement states the agreement is
intended to "alleviate certain private costs of the Redeveloper."
Under a section entitled "Representation of the Redeveloper" on
page 15, the Hafners are described as "sole proprietors." Page
six describes the specific terms of the interest subsidy as
follows:
"(a) The annual payment by the Town
shall not exceed fifty (50%) percent of the
Tax Increment generated by the project;
(b) To the extent that fifty (50%)
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percent of the Tax Increment is not
sufficient to make the full annual payment,
then any shortfall shall carryover to the
following year and become part of the annual
payment for that year;
(c) To the extent that fifty (50%)
percent of the Tax Increment exceeds the
annual payment in [a] year, the excess shall
be used to pay any previous year[']s
shortfall or shall be applied to [any] future
year[']s annual payment;
(d) The obligation of the Town to make
these annual payments, including any
obligations to pay for any shortfalls from
prior years, shall cease upon the termination
of the Redevelopment Project Area pursuant to
the Act."
Section 2.9 of the agreement states "all work with
respect to the [p]roject, the [p]roject [s]ite[,] and any other
structures or buildings on the [p]roject [s]ite shall conform to
[a]pplicable [l]aw."
Town of Normal ordinance No. 4947 was enacted to
establish wages for workers employed in public works. Section 2
of the ordinance states "[n]othing herein contained shall be
construed to apply said general prevailing rate of wages as
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herein ascertained to any work or employment except public works
construction of the Town of Normal to the extent required by the
aforesaid Act." Town of Normal Ordinance No. 4947, §2 (eff. June
8, 2004).
B. Procedural Background
In April 2007, Normal filed a complaint for declaratory
judgment, seeking a finding (1) the Hafners were required to pay
prevailing wages under the terms of the agreement; (2) the
Hafners were obligated to pay prevailing wages under the terms of
the Act; and (3) the Hafners materially breached the agreement,
rendering Normal exempt from performing its obligations under the
agreement.
In April 2008, the parties agreed to a stipulation of
facts, stating, in pertinent part: (1) on September 7, 2004, the
parties entered a redevelopment agreement providing for the
Hafners' redevelopment of three residential properties on
Broadway Street in Normal; (2) the Hafners developed 602, 604,
and 607 Broadway Street in compliance with the agreed-upon plans;
(3) the Hafners incurred costs of approximately $1,425,040; (4)
to finance the project, the Hafners took out two mortgage loans
with Soy Capital Bank & Trust in the following amounts: (a)
$825,000 for 607 Broadway Street and (b) $1 million for 602 and
604 Broadway Street; (5) as an incentive to redevelop the
property, Normal agreed to pay the Hafners 30% of the annual
interest costs incurred on the project after its completion,
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provided each annual payment did not exceed 50% of the tax
increment generated by the project that year; (6) in the event
50% of the tax increment would not cover the payment, any
shortfall would carry over to the following year and would be
paid by any subsequent excess of tax increment; (7) Normal's
obligation to make the payment would cease upon termination of
the agreement; (8) pursuant to section 2.9 of the agreement, the
parties agreed construction on the project site would conform to
applicable law; (9) the Hafners did not pay prevailing wages to
the laborers employed on the project; (10) the term "prevailing
wage" is not used in the agreement; (11) Normal did not advance
any public funds to the Hafners to redevelop the property; (12)
Normal has not made any payments to the Hafners; (13) during the
tax years 2004-06, Normal received $42,455.75 in tax increments
from the three properties; (14) if the Act is not applicable, the
Hafners are entitled to the incentive payments from Normal; and
(15) if the Act is applicable, the Hafners are not entitled to
incentive payments from Normal.
Normal moved for summary judgment in April 2008,
seeking an order declaring (1) the Hafners were obligated to pay
prevailing wages under the terms of the agreement and (2) failure
to pay prevailing wages constituted a breach of the contract,
releasing Normal from its obligation to pay the Hafners a portion
of the tax increment.
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In May 2008, the Hafners filed a countermotion for
summary judgment, arguing (1) the term "prevailing wage" does not
appear in the agreement, which counsel for Normal prepared; (2)
the Hafners' redevelopment project was not a public work under
Illinois law; (3) the Hafners were not a public body under
Illinois law; (4) no public funds were used in the construction
of the Hafners' redevelopment project; (5) the Hafners have
complied with the terms and provisions of the agreement and are
entitled to the incentive payments on the interest pursuant to
the agreement; and (6) Normal breached the agreement by failing
to timely pay the Hafners the interest incentives.
In June 2008, the trial court denied both parties'
motions for summary judgment, finding declaratory judgment was
not the proper remedy and the case posed too many issues for a
summary-judgment order.
In September 2008, the Hafners filed a counterclaim
against Normal for payment of (1) the interest incentive set
forth in the agreement and (2) reasonable attorney fees and costs
incurred as a result of Normal's breach of the agreement. Later
that month, both parties filed motions for summary judgment on
the Hafners' counterclaim.
In December 2008, the trial court granted Normal's
motion for summary judgment, denied the Hafners' motion for
summary judgment, and dismissed with prejudice the Hafners'
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counterclaim. The Hafners filed a motion to reconsider, which
the court denied in January 2009.
This appeal followed.
II. ANALYSIS
We initially note this case presents an issue of first
impression in Illinois. Previous cases have addressed the
applicability of the Act, but none have posed the specific issue
presented by the agreement between Normal and the Hafners: does
the Act apply to private developers constructing private family
residences in a tax increment financing district where the
developers receive a public incentive in the form of a portion of
the tax increment generated from the project?
We review de novo a trial court's grant of summary
judgment. Murray v. Chicago Youth Center, 224 Ill. 2d 213, 228,
864 N.E.2d 176, 185 (2007). "Summary judgment is appropriate
whenever the pleadings, depositions, admissions, and affidavits
on file, viewed in the light most favorable to the nonmoving
party, show there is no genuine issue of material fact between
the parties and that the moving party is entitled to judgment as
a matter of law." Murray, 224 Ill. 2d at 228, 864 N.E.2d at 185.
Section 1 of the Act states its purpose as follows:
"It is the policy of the State of
Illinois that a wage of no less than the
general prevailing hourly rate as paid for
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work of a similar character in the locality
in which the work is performed, shall be paid
to all laborers, workers[,] and mechanics
employed by or on behalf of any and all
public bodies engaged in public works." 820
ILCS 130/1 (West 2004).
Section 2 of the Act defines "public works" as follows:
"'Public works' means all fixed works
constructed by any public body, other than
work done directly by any public utility
company, whether or not done under public
supervision or direction, or paid for wholly
or in part out of public funds. 'Public
works' as defined herein includes all
projects financed in whole or in part with
bonds issued under the Industrial Project
Revenue Bond Act[,] *** the Industrial
Building Revenue Bond Act, the Illinois
Finance Authority Act, the Illinois Sports
Facilities Authority Act, or the Build
Illinois Bond Act, and all projects financed
in whole or in part with loans or other funds
made available pursuant to the Build Illinois
Act." 820 ILCS 130/2 (West 2004).
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Section 2 of the Act defines "public body" as follows:
"'Public body' means the State or any
officer, board or commission of the State[,]
or any political subdivision or department
thereof, or any institution supported in
whole or in part by public funds***."
(Emphasis added.) 820 ILCS 130/2 (West
2004).
Black's Law Dictionary defines "institution" as "[a]n
established organization, esp. one of a public character, such as
a facility for the treatment of mentally disabled persons."
Black's Law Dictionary 813 (8th ed. 2004). Webster's Dictionary
similarly defines "institution" as "an established organization
or corporation (as a college or university) esp. of a public
character." Merriam-Webster's Collegiate Dictionary 605 (10th
ed. 2000).
The Tax Increment Allocation Redevelopment Act (TIF Act)
states the following:
"[I]n order to promote and protect the
health, safety, morals, and welfare of the
public, that blighted conditions need to be
eradicated and conservation measures
instituted, and that redevelopment of such
areas be undertaken[,] *** it is necessary to
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encourage private investment and restore and
enhance the tax base of the taxing districts
in such areas by the development or
redevelopment of project areas." 65 ILCS
5/11-74.4-2(b) (West 2004).
On appeal, the Hafners argue the trial court erred in
granting summary judgment in favor of Normal because (1) the
agreement failed to include a prevailing-wage provision; (2) the
Act is not applicable to the agreement; and (3) if the agreement
is interpreted to include a prevailing-wage provision, Normal was
not entitled to terminate the agreement for breach of the
prevailing-wage provision. Normal contends the Hafners were
obligated to pay prevailing wages under the Act because (1) the
Hafners became a public body for purposes of the Act by agreeing
to accept public funds and (2) the redevelopment project is a
public work. Normal further argues that despite failing to
include the term "prevailing wage" in the agreement, the
agreement binds the Hafners under the Act because it is an
"applicable law." For the reasons stated below, we conclude the
court erred in granting summary judgment in favor of Normal
because the Act is inapplicable to the parties' agreement and
inapplicable to the Hafners, who are private developers.
In arguing the Hafners are a public body, Normal relies
on the same two cases the trial court cited in its order: People
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ex rel. Bernardi v. Illini Community Hospital, 163 Ill. App. 3d
987, 516 N.E.2d 1320 (1987), and Opportunity Center of
Southeastern Illinois, Inc. v. Bernardi, 204 Ill. App. 3d 945,
947, 562 N.E.2d 1053, 1054 (1990).
In Illini Community Hospital, a not-for-profit
nonsectarian hospital received tax money from its county between
1982 and 1985. Illini Community Hospital, 163 Ill. App. 3d at
988, 516 N.E.2d at 1320. The money was collected pursuant to a
statute authorizing taxation "'for the purpose of maintaining
public non-sectarian hospitals,' [citation]," and under the
definition of the statute, "'public nonsectarian hospital'
includes nonprofit community hospitals. [Citation]." Illini
Community Hospital, 163 Ill. App. 3d at 988, 516 N.E.2d at 1320.
In 1985, the hospital entered into a contract for the
construction of a canopy over the emergency-room entrance.
Illini Community Hospital, 163 Ill. App. 3d at 988-89, 516 N.E.2d
at 1320. The contract did not specify that workers would be paid
the prevailing wage. Illini Community Hospital, 163 Ill. App. 3d
at 989, 516 N.E.2d at 1320-21. After the Department of Labor
sued to enforce the Act against the hospital, the trial court
dismissed the complaint on the grounds the hospital was not
subject to the Act because it was not a public body. Illini
Community Hospital, 163 Ill. App. 3d at 989, 516 N.E.2d at 1321.
On appeal, this court reversed, finding an institution that is
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supported in whole or part by public funds is a public body.
Illini Community Hospital, 163 Ill. App. 3d at 990, 516 N.E.2d at
1321. Because the hospital received tax money pursuant to
statute, it was a public body under the Act. Illini Community
Hospital, 163 Ill. App. 3d at 990, 516 N.E.2d at 1322.
In Opportunity Center of Southeastern Illinois, a
private, not-for-profit corporation providing social,
educational, and rehabilitation programs for developmentally
disabled adults contracted for the remodeling of its building.
Opportunity Center of Southeastern Illinois, 204 Ill. App. 3d at
947, 562 N.E.2d at 1054. The parties' stipulation of facts
provided the Opportunity Center received over 50% of its annual
receipts between 1973 and 1987 from the Department of Mental
Health. Opportunity Center of Southeastern Illinois, 204 Ill.
App. 3d at 949-50, 562 N.E.2d at 1056. The trial court found the
Opportunity Center was not a "public body" under the Act.
Opportunity Center of Southeastern Illinois, 204 Ill. App. 3d at
947, 562 N.E.2d at 1054. The appellate court reversed on the
grounds the Act applies when "public money is spent on a 'fixed
work' that is being constructed by a public body." Opportunity
Center of Southeastern Illinois, 204 Ill. App. 3d at 951, 562
N.E.2d at 1056. The center was supported by public money in that
it contracted with the Department of Mental Health to provide
services to disabled adults, and it was a public body because it
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received half of its budget from public funds. Opportunity
Center of Southeastern Illinois, 204 Ill. App. 3d at 949-50, 562
N.E.2d at 1057. Thus, the remodeling project fell under the
purview of the Act. Opportunity Center of Southeastern Illinois,
204 Ill. App. 3d at 951, 562 N.E.2d at 1057.
Both Illini Community Hospital and Opportunity Center
of Southeastern Illinois are distinguishable from the present
case. In those cases, the institutions at issue consistently
received public funds over a span of years. Unlike Illini
Community Hospital and the Opportunity Center, the Hafners did
not receive public funds from Normal or other government
entities. Merely as an incentive to redevelop the Broadway
properties, Normal agreed to reimburse part of the interest the
Hafners were obligated to pay Soy Capital Bank for financing the
project out of the increased tax revenue generated as a result of
the redevelopment of the properties.
Instructive in this case is Zickuhr v. Bowling, 97 Ill.
App. 3d 534, 423 N.E.2d 257 (1981), in which the reviewing court
held a warehouse construction project financed by municipal bonds
was not subject to the Act. The court stated:
"The [Act] is applicable only in the
construction of 'public works.' Public works
as defined in the statute are projects
constructed by a public body for a public
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use. Although the public may benefit from
the construction of the warehouse, the use of
the warehouse is private in nature.
Moreover, the actual contracting and
construction of the warehouse is done by
private industry, not a public body. The
public body is no more than a financing
conduit." Zickuhr, 97 Ill. App. 3d at 539-
40, 423 N.E.2d at 262.
In the present case, the trial court opined that
failure to apply the Act to the Hafners would allow future
parties to contract around the Act by choosing a business
structure that is outside the reach of the Act while engaging in
activity the Act covers. Herein lies the error in the court's
analysis. Similar to the plaintiff's warehouse construction in
Zickuhr, the Hafners were building private residences, not public
fixtures. The project did not include construction of a public
works facility, and it was not a public service provider, such as
a hospital or community center for disabled adults. The public
funds the Hafners are entitled to under the agreement are
generated by the increased property-tax dollars assessed to their
private property, which is attributable to the improvements the
Hafners made using a private mortgage loan. Further, the type of
economic incentive Normal provided to the Hafners is commonly
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offered to private companies and developers by cities wishing to
bolster economic activity. Finding the Hafners are a public body
would mean all private entities receiving a tax benefit in future
development projects would be required to pay the prevailing wage
to laborers. As the above-referenced cases have demonstrated,
the purpose of the Act is to ensure laborers on public projects
are paid the prevailing wage, not to interfere with economic
development by private companies.
Additionally, the legislative history of the Act
supports our conclusion that the legislature did not intend
private individuals' receipt of money under the TIF Act to
qualify their redevelopment project as a public work. In
construing the meaning of a statute, a court's primary purpose is
to determine and give effect to the legislature's intent. Ready
v. United/Goedecke Services, Inc., 232 Ill. 2d 369, 375, 905
N.E.2d 725, 729 (2008). To ascertain the meaning of an ambiguous
statute, courts may use accepted principles of statutory
construction. Ready, 232 Ill. 2d at 375, 905 N.E.2d at 729.
"When construing a statute, the expression of one thing in a
provision generally excludes all others, even where there are no
negative words of prohibition." People v. Hunter, 298 Ill. App.
3d 126, 131, 698 N.E.2d 230, 232 (1998).
In 2003, with Public Act 93-16, the legislature amended
the definition of "public works." Pub. Act 93-16, §5, eff.
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January 1, 2004 (2003 Ill. Legis. Serv. 158 (West)), amending 820
ILCS 130/2 (West 2002). The words "for public use" were deleted
after the word "constructed," changing the definition to "all
fixed works constructed by any public body, other than work done
directly by any public utility company, whether or not done under
public supervision or direction, or paid for wholly or in part
out of public funds." Pub. Act 93-16, §5, eff. January 1, 2004
(2003 Ill. Legis. Serv. 158 (West)), amending 820 ILCS 130/2
(West 2002). In addition to the financing acts already
identified in the "public works" definition, the legislature
included additional financing acts as follows:
"'Public works' also includes all projects
financed in whole or in part with funds from
the Fund for Illinois' Future under [s]ection
6z-47 of the State Finance Act, funds for
school construction under [s]ection 5 of the
General Obligation Bond Act, funds authorized
under [s]ection 3 of the School Construction
Bond Act, funds for school infrastructure
under [s]ection 6z-45 of the State Finance
Act, and funds for transportation purposes
under [s]ection 4 of the General Obligation
Bond Act." Pub. Act 93-16, §5, eff. January
1, 2004 (2003 Ill. Legis. Serv. 158 (West)),
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amending 820 ILCS 130/2 (West 2002).
Before approving the above amendment, the legislature considered
House Bill 3399 (93d Ill. Gen. Assem., House Bill 3399, 2003
Sess.), which proposed changing the definition of "public works"
to also include the TIF Act. House Bill 3399 was rejected, and
the TIF Act was not included in the definition of "public works."
Pursuant to the rules of statutory construction, where
the legislature amended the definition of "public works" to
include projects financed by even more financing acts than
already appeared, yet continued to exclude the TIF Act,
particularly after considering its inclusion, we interpret the
exclusion of the TIF Act to mean projects do not become public
works by accepting the benefits of the TIF Act.
Because the Hafners, who are individual sole
proprietors, were constructing private residences on privately
owned land with financing from a private bank with a mortgage for
which the Hafners are personally liable, they were not obligated
to pay the prevailing wage. The Act, the language of the
agreement, Normal's resolution No. 3584, and ordinance 4947 all
support this finding. The Hafners are not a public body under
the Act because they are not the State nor an office, board, or
commission of the State, nor any political subdivision thereof,
nor are they an "institution" supported in whole or in part by
public funds. In addition, when a private individual uses only
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private funds to redevelop an area under the TIF Act, the project
is not a public work. Consequently, the Act did not apply to the
parties' agreement.
Further, the agreement, drafted by Normal, identifies
the Hafners as "sole proprietors" and states the agreement is
intended to alleviate "private costs" of the redeveloper.
Resolution No. 3584 specifically states the purpose of the
agreement was "to attract other private development." (Emphasis
added.) Finally, ordinance 4947 provides the prevailing wage
shall not be construed to apply to anything besides public-works
construction by Normal. See Town of Normal Ordinance No. 4947,
§2 (eff. June 8, 2004). As private multifamily residences are
not public works, the Hafners are not obligated under ordinance
No. 4947 to pay the prevailing wage. Thus, the court erred in
(1) granting Normal's motion for summary judgment and (2) denying
the Hafners' motion for summary judgment.
III. CONCLUSION
For the reasons stated, we reverse and remand for the
trial court to vacate its order granting summary judgment to
Normal and to enter an order granting summary judgment for the
Hafners.
Reversed and remanded.
TURNER and APPLETON, JJ., concur.
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