A & H Vending Service, Inc. v. Village of Schaumburg
Docket: No. 86—3400
Court: Appellate Court of Illinois; March 10, 1988; Illinois; State Appellate Court
Plaintiffs, operators of coin-operated vending machines, sought an injunction against the Village of Schaumburg's vending-machine licensing ordinances, claiming these ordinances violated home rule powers under Article VII, Section 6 of the Illinois Constitution. They also requested refunds for licensing fees paid since January 1, 1975. The trial court dismissed the case after the plaintiffs presented their evidence. The Village's ordinances outline regulations, requirements, procedures, and fees for vending machine operations, with fees ranging from $2 to $100 depending on the machine type. The plaintiffs argued that the ordinances impose licensing fees disguised as regulatory measures for revenue, which is prohibited under Section 6(e). The village contended that the ordinances are valid under Section 6(a) as they regulate for public health and safety, and that even if interpreted as revenue measures, they are permissible under Section 6(e) due to statutory authority from the legislature. The court found that the ordinances fall within the village’s regulatory powers under Section 6(a), rendering it unnecessary to analyze the village’s additional arguments regarding tax measures under Section 6(a) and licensing for revenue under Section 6(e). Illinois courts have not clearly defined the distinction between licensing for regulation and for revenue; however, it is established that if a government entity has the power to license and regulate without the power to tax, license fees must relate reasonably to regulation costs. Conversely, when both licensing and taxing powers exist, fees can be set to generate revenue without relation to regulation costs.
The term 'license for revenue' refers to situations where a governmental unit, lacking the power to tax, seeks to generate income through its police powers. In Illinois, section 6 of article VII of the state constitution allows home rule units to regulate, license, and tax, seemingly permitting licensing for revenue purposes. However, section 6(e) expressly prohibits licensing solely for revenue. The intent behind this prohibition is unclear, as highlighted by debates from the Sixth Illinois Constitutional Convention, where delegates expressed confusion about the definition of licensing for revenue and its relation to taxation.
Case law indicates that a license fee for regulatory purposes is valid if it is reasonably related to the costs of regulation. The burden of proof lies on those challenging the fees to demonstrate a lack of this relationship. Courts have upheld licensing fees for regulatory purposes unless they are arbitrary or significantly exceed enforcement costs, provided the ordinances include genuine regulatory components.
Trial evidence included testimonies from officials responsible for administering and enforcing licensing ordinances for approximately 1,100 vending machines. These officials detailed their duties, including record-keeping, application processing, billing, collection of fees, and health inspections. Plaintiffs asserted that the ratio of revenue generated to the cost of enforcement is between four and five to one, based on employee time and salaries dedicated to these tasks.
In Quad Canteen Service Corp. v. Ruzak (1980), the court addressed whether a vending-machine ordinance constituted a licensing fee for revenue generation. The ordinance imposed average license fees of about $50 annually, while the cost of administration per machine was estimated at $3 to $4, resulting in a revenue-to-cost ratio of approximately 10 to 1. The court found the ordinance unconstitutional, noting that the fee significantly exceeded the reasonable costs associated with administration and enforcement. Key points included the lack of inspections prior to the lawsuit, the nature of the inspector, and the minimal time spent on actual inspections.
In contrast, the current case includes regulatory provisions with enforcement through an administration and inspection program. This process involves inspections by both a licensing officer and a sanitarian to ensure proper licensing and sanitary conditions. Given the broader powers granted to home rule units and the more reasonable revenue-to-cost ratio of 5 to 1 for this ordinance, the court concluded that it was not unreasonable. Therefore, the trial court's decision was affirmed.
