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River Forest hit with wrongful taxation lawsuit

Nonprofit school claims it was coerced into paying property taxes

March 6th, 2018 2:30 PM

Keystone Montessori School, 7415 North Ave. in River Forest | ALEXA ROGALS/Staff Photographer

By Nona Tepper

Keystone Montessori School has filed a complaint against the village of River Forest, alleging trustees forced the nonprofit to pay real estate taxes in exchange for zoning rights.

Keystone seeks $1.1 million in reimbursement for property taxes they paid for two decades, and an end to its agreement with the village.

"We have long tried working with village officials to get this injustice fixed," Vicki Shea, administrative director at Keystone Montessori School, said in a statement. "The village is placing a significant burden on our school families; they pay taxes to support the River Forest public schools, then they pay tuition to Keystone to educate their children at no cost to River Forest, and finally, through their tuition they also pay taxes on the school building to benefit River Forest public schools even further. Is that fair?"

Keystone was incorporated as a nonprofit in 1994, according to a lawsuit filed March 6 in the Cook County Circuit Court. The private school educates children in kindergarten through eighth grade and also provides "educational support" to infant and pre-kindergarten children.

When Keystone first opened, it rented space from the River Forest Community Center, according to the complaint. Then in 1997, Keystone looked to buy the former Washington School building at 7970 Washington Blvd, from River Forest Elementary School District 90, the lawsuit said.

But, according to the complaint, River Forest officials wanted to generate property tax revenue from the Washington School site.

So, "the village board killed the sale of the Washington School building to Keystone, by pressuring the school district to renege on its agreement," the lawsuit reads. 

In July 1998, the complaint states, then-Village President Frank Paris called Keystone, telling the school it should move to the former site of Margie's Bridal Salon on North Avenue.

After consulting an architect, Keystone signed a four-month lease with an option to own, and started renovations on Margie's, according to the suit.

The lawsuit said classes began and renovations were two-thirds complete in October 1998 when village officials told Keystone that the zoning would be changed to accommodate the school only if the property continued to generate property tax revenue for the village, essentially forcing the nonprofit into agreeing never to seek a property tax exemption.

"With classes already underway for the year, a great deal of money already invested in remodeling the building, and nowhere else to go, Keystone concluded that losing the property would mean closing the school," the lawsuit states.

Keystone signed an agreement in 1998 saying it would pay property taxes as long as it was on the property, and has since paid about $96,000 in annual real estate taxes to River Forest, according to the complaint. In a statement, the village of River Forest said it was disheartened that Keystone has filed a lawsuit over an agreement it "voluntarily signed and entered into."

Over the years, the lawsuit states, Keystone made at least five formal requests to the village to reduce its tax burden. The village noted it's assisted Keystone at least three times in issuing and refinancing $2.5 million in bonds for Keystone's benefit by using the village's tax-exempt governmental bonding authority, the village said in a statement.

But when it came to erasing Keystone's property tax burden, "village trustees voted down Keystone's repeated offers to amend the agreement each time," the lawsuit states.

Keystone argues its agreement with the village constitutes illegal contract zoning and violates the Illinois tax code, which the lawsuit said states that "all property of schools, not sold or leased or otherwise used with a view to profit, is exempt [from property taxes]."

The complaint further alleges that River Forest is deliberately discriminating against Keystone by treating it differently than other nonprofit private schools in the village. Of the three other private, nonprofit schools in the village, Keystone Montessori, 7415 North Ave., is the only one that pays property taxes, the school said.

"Not only does the village obtain property tax revenue from the school, which the state has declared schools exempt from, but it also obtains additional financial benefits in the form of educational cost savings, which relieve the village of additional educational burdens," the lawsuit states. 

Because the private school educates up to 200 students per year, Keystone argues that it saves the village about $329,912 a year in public education costs.

The village said it plans to "vigorously defend" itself against Keystone's complaint, and that the school is now forcing River Forest to use taxpayer dollars in this defense.

"The village is saddened that Keystone Montessori has chosen to file a lawsuit against the village for an agreement that it signed and executed 20 years ago. Why now 20 years later?" Village President Catherine Adduci said in a statement. "Through this lawsuit, Keystone Montessori has made it clear they want the residents of River Forest to pay their property tax bill, and the board and I cannot consciously agree to that. The village is always willing to work with its businesses and partners in the community, but we also have a greater responsibility to protect the interests of all taxpayers in River Forest."

CONTACT: ntepper@wjinc.com

This story has been updated to include comments from the village.