Takings argument

The casinos argued that a taking has occurred because the fees exacted by the Act primarily benefited private parties, rather than the public good. Whether the exaction is viewed as surcharge, a fee, or a tax, it is unconstitutional because it is being used for a private interest. Relying on language in Kelo v. City of New London, the casinos argue that “the sovereign may not take the property of A for the sole purpose of transferring it to another private party B, even though A is paid just compensation.”^[2] Moreover, the State would not be allowed to take private “land for the purpose of conferring a private benefit on a particular private party… Nor would the [State] by allowed to take property under the mere pretext of a public purpose, when its actual purpose was to bestow a private benefit.”^[2] The casinos’ argument is that money is a private property interest and should not be treated differently than personal or real property for a takings analysis when it is taken and given to a private party.

Uniformity Clause argument

Further, the casinos argued that the Act violated the Uniformity Clause of the Illinois Constitution. This Clause essentially states that whenever a law is passed that classifies the subjects or objects of non-property taxes or fees, the classifications must be reasonable and the classes must be taxed uniformly. Any classification must be based on a “real and substantial difference between the people taxed and those not taxed” and bear “some reasonable relationship to the object of the legislation or to public policy.” Casinos stated that the Act singled out riverboat casinos as the only class of businesses that are required to pay a tax to support the racetrack. Thus, it creates two classes of casinos: ones with adjusted gross receipts over $200 million; and those without adjusted gross receipts over $200 million. When pressed for an explanation as to why the tax was imposed only on those casinos with the receipts over $200 million, the Legislature stated that those casinos with AGR over $200 million were in the best position to bear the added expense of the tax. However, the “ability to pay” rationale does not provide a permissible justification for imposing the tax on only some of the casinos.

The Takings Clause

Turning to the casinos’ takings claim, the court found that the takings clause did not apply because generally, a tax could never be found to be a taking. Firstly, the court finds that the power of the State to tax and the power of eminent domain are separate constitutional powers. Thus, the takings clause is not a limitation on the taxing power of the Legislature. The casinos’ attempt at distinguishing the tax in this case by calling it a fee, fails on the same principle: a takings analysis cannot apply to fees exacted because the exaction of fees falls under the power to raise revenue for public purposes. Because the just compensation portion of the takings clause only applies to the exercise of eminent domain, it cannot be held to apply to a completely separate power under the Constitution.

Further, the Court held that the Act served a public use or public purpose. “If the purpose sought to be achieved by the legislation is a public one and it contains elements of public benefit, then the question of how much benefit the public derives is for the legislature, not the courts.” The Court found that the principal purpose of the Act was to stimulate economic activity at the racetracks, including the creation of jobs and the attraction of sports and entertainment. Moreover, the emphasis of the Act was to benefit the entire horse racing industry, not the individual track owners. Even though the owners will obviously benefit from the increased economic activity at the tracks, it is an indirect benefit. The ultimate result of the infusion of funds will increase the horse racing activity, which in turn stimulates the horse breeding and agricultural industries in the state.

Lastly, the court found that a takings analysis would not be appropriate in any case because the “thing” taken was not physical or intellectual property, rather it was money. Relying on the dissent in Eastern Enterprises v. Apfel,^[3] the court noted that the private property upon which the clause traditionally has focused is a specific interest in physical or intellectual property. In Northern Illinois Home Builders Ass’n v. County of Du Page,^[4] cited by the casinos, the Supreme Court of Illinois applied a takings analysis to fees levied on new home builders was inextricably tied to real property. The court distinguished this case law by stating that the tax in this case did not involve physical property because the casinos were not land based, but rather riverboat casinos. Thus, the money exacted through the tax was not intertwined to real property and nothing physical was taking within the meaning of the federal Constitution. Therefore, a takings analysis would not apply.