TIF Act Does Not Limit How District Can Spend Funds Received through Unambiguous Agreement with Village

By April 30, 2014 News No Comments

In The Board of Education of Gardner-South Wilmington High School District 73 v. The Village of Gardner, the Illinois Appellate Court ordered the Village of Gardner to make payments pursuant to a license agreement it entered into with the Board of Education of Gardner-South Wilmington High School District 73. 2014 IL App (3d) 130364.

In 1986, the village adopted a redevelopment plan and established a Tax Increment Financing district. The school district owned recreational property within the TIF district and entered into an agreement with the village granting it a license to use these recreational facilities. In exchange for the license, the village agreed to pay the school district a yearly percentage of the total amount due, which was determined by the ratio of taxes that the village received from the TIF district compared to the total amount of taxes it was entitled to receive.

The village paid the school district annually until 2012. In 2012, the village withheld payment alleging that was not obligated to pay because the school district sought to spend funds on employee salaries or benefits rather than capital costs. The village argued that the TIF Act required the school district to spend the funds on capital costs and improvements. The village also argued that the parties entered into an agreement with an understanding that the school district would use the money it received to pay capital costs. Further, it argued that the agreement is ambiguous and that the case should be remanded for trial to determine whether the parties intended the school district to only use the fees paid by the village on capital costs.

The Appellate Court held that the plain language of the TIF Act does not restrict how a licensor of real property may spend the revenues it receives from a municipality when it enters into a license agreement pursuant to the TIF Act. Therefore, the court rejected the village’s argument that the TIF Act limits how the school district can spend the funds it received from the village under the license agreement. Additionally, the Appellate Court held that the village’s attempt to demonstrate an ambiguity in the agreement through extrinsic evidence was futile because the agreement itself does not contain limitations on what that school district can do with the license fees it received by the village and it included an integration clause, providing that it was “the complete and final understanding of the parties with respect to the subject matter.”

Thus, the court concluded that the village and school district entered into a valid license agreement pursuant to the TIF Act and that nothing in the TIF Act or the license agreement limits how the school district could spend the license fees it received.

 

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