Downtown Property Owners Sue Wheaton

Two Wheaton property owners filed a federal lawsuit against the City of Wheaton and city officials Wednesday, alleging they unfairly imposed a special tax on downtown property owners.

The suit, filed by property owners Margarita Jimenez and Robert Sandberg, alleges the city, Wheaton Mayor Mike Gresk and council members Tom Mouhelis, John Rutledge and Todd Scalzo acted in bad faith when they voted to pass the Special Service Area 7 (SSA #7) in December. Jimenez is the owner of El Zarape, 325 Front Street, and Sandberg owns property at 101 Front Street in downtown Wheaton.

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Illinois law allows municipalities to establish special service areas that impose additional property taxes on property owners in the defined area. The only way property owners can stop the tax is to file petitions signed by 51 percent of the property owners and 51 percent of the electors within the proposed area.

The suit claims that although objectors of the proposed tax filed petitions with more than the required number of signatures, the city imposed the tax.

In December, . Out of approximately 150 properties in the proposed area, 86 property owners filed petitions, Assistant City Manager Mike Dzugan told Patch in December. Out of 55 electors, or proprietors renting property, 28 filed petitions.

While opponents of the tax believed the petitions were valid, city attorney James Knippen said in December city staff rejected petitions with invalid signatures.

“We found a number of people who thought they were owners and weren’t, or at least weren’t owners of record,” Knippen said at a Dec. 19 City Council meeting.

The Dec. 19 vote establishing SSA #7 mirrored the October vote that moved the process to the public hearing stage. Council members Jeanne Ives, Evelyn Pacino-Sanguinetti and Phil Suess opposed the plan.

Ives said at the meeting there is at least one property owner on the list who has been dead since 2008, but he was considered a supporting vote. By approving the SSA based on a flawed process, she said the city has opened itself up to litigation.

Gresk said at the Dec. 19 meeting he did not think any lawsuit challenging the SSA would have merit. He said he is confident city staff followed the guidelines of the law.

The suit claims the city rejected the petitions and passed the SSA based on a group of property owners and electors that included property owners who were deceased, and people on a registered voter list who were either dead or no longer residents in the area.

Earlier this year SSA #7 was proposed by the to replace SSA #6. Under the new proposal, the DWA would reduce the tax rate from 95 cents per $100 to 45 cents. Under the current 95-cent rate, the city of Wheaton receives 60 percent of the funds and the DWA receives 40. Under the new 45-cent proposal the DWA would directly receive all the funding. DWA officials want to change the funding mechanism because many of the downtown properties are in one of three TIF district and any extra money generated through property taxes are sent into one of the TIF funds.

Knippen told TribLocal Thursday he declined comment about the suit, as it had not yet been served to the city.

Jimenez and Sandberg are requesting an injunction against the collection of taxes in support of SSA 7; a declaratory judgment that the objectors have satisfied the requirements of the act to object to the creation of the SSA, that the creation of the SSA was illegal, and that the ordinance to impose it is void; compensatory damages in a "fair and reasonable" amount; attorney’s fees; and other relief.