CHICAGO - A Cook County Circuit Court judge yesterday upheld the constitutionality of a 1% restaurant tax that would be used to help back $937 million of revenue bonds for the expansion of the McCormick Place convention center in Chicago.
Judge Earl Arkiss ruled that the Illinois General Assembly was within its power and acted reasonably when it established a special taxing district for the restaurant tax,according to John Schmidt, the chairman, Metropolitan Pier and Exposition Authority, which will issue the bonds.
"I can't claim to be surprised," he said yesterday. "We've always asserted there was never really any issue about the restaurant tax."
Judge Arkiss's decision came less than a week after he dismissed seven other counts contained in a lawsuit filed by restaurant owners and patrons in a special downtown Chicago and city airport taxing district where the tax would be levied. Those counts concerned how the tax was approved by the Illinois General Assembly last year.
Brian Williams, a lawyer for the plaintiffs, said the judge's ruling and dismissal of the other counts would likely be appealed to the state Supreme Court. He said a final decision on the next step would be announced after the judge's ruling is reviewed with his clients.
Attorneys for the plaintiffs and officials at the Metropolitan Pier and Exposition Authority, which will issue the bonds, have said they expect the state's high court to ultimately rule on the tax.
The restaurant tax was part of a tax package the legislature approved for backing bonds for the 1 million-square-foot convention center expansion.
Mr. Schmidt has said most of the bonds are scheduled to be issued later this summer in a deal headed by Smith Barney, Harris Upham & Co. and Donaldson, Lufkin and Jenrette Securities Corp. He also said the issuance of about $200 million of the bonds would be delayed until the restaurant tax lawsuit is resolved.
Authority officials have dismissed any potential impact on the bonds from a second lawsuit that challenges the constitutionality of a per-ride departure tax on limousine, bus, and taxi service from Chicago's O'Hare International and Midway airports. That suit is pending in DuPage County Circuit Court.
Like the restaurant tax suit, the departure tax suit, filed by suburban Chicago limousine firms, charges that the tax violates the equal protection and uniformity clauses of the Illinois Constitution.
Mr. Schmidt said last week that the contested portion of the departure tax accounts for only about $7 million of revenues a year. That amount could be covered, he said, by other state-approved taxes for the expansion project or by the state's back-up security for the bonds, which calls for state salestax revenues to fill in any gap in debt service from the tax package.
