City of Cincinnati v. Testa
38 N.E.3d 847
Ohio2015Background
- City of Cincinnati (via Cincinnati Recreation Commission, CRC) owns six municipal golf courses; CRC contracted with for-profit Billy Casper Golf Management, Inc. (Golf Management) to manage operations under 2003 and 2012 management agreements.
- Contracts give Golf Management detailed operational duties (grounds, clubhouse, HR, daily control) and pay it a fixed management fee plus small shares of food/beverage/merchandise and potential incentive fees; CRC receives all operating revenues (greens fees, cart rentals) and approves rates and major decisions.
- Private operator Paul Macke challenged the courses’ continued real-property tax exemption under R.C. 5709.08, alleging privatization, profit motive, and competitive harm; Ohio Tax Commissioner revoked exemptions; BTA reversed and restored exemptions.
- BTA found CRC retained significant direction and control, Golf Management’s revenue share was incidental, the municipal golf fund largely broke even, and no lease transferred possessory rights to the private manager.
- Ohio Supreme Court reviewed de novo whether the courses remained "public property used exclusively for a public purpose" under R.C. 5709.08(A) and R.C. 5709.121(A)(2).
Issues
| Issue | Plaintiff's Argument (Macke/Commissioner) | Defendant's Argument (Cincinnati/CRC) | Held |
|---|---|---|---|
| Whether municipal property loses R.C. 5709.08 exemption when a for-profit company manages operations | Privatization/for-profit manager makes use not "exclusively for a public purpose"; functional lease and profit motive defeat exemption | CRC retained control, received most revenues, and private receipts were incidental; management contract ≠ lease | Exemption stands: management by for-profit does not alone defeat exclusivity requirement |
| Whether Golf Management’s compensation and revenue sharing show "view to profit" | Management’s fee, revenue shares, and incentive structure show profit motive and commercial competition harming private operators | Management fee is flat service compensation; revenue retained by manager is minimal/incidental; overall municipal fund did not profit | Payments to manager are not equivalent to private profit from public property; use is not ‘‘with a view to profit’’ |
| Whether the arrangement is functionally equivalent to a lease (which would transfer possessory/ownership elements) | The management contract gives exclusive control and is the practical equivalent of a lease | No lease granted; CRC kept supervision, access, rate-setting, and no rent/consideration for possession was paid | Not a lease: absence of right to exclude, continued city access/supervision, and lack of rent distinguish it from lease cases |
| Whether competition/fee reductions show abuse of exemption to harm private competitors | Lowered greens fees and reduced overhead show the city operating commercially and using exemption to undercut private courses | Lower fees further CRC’s public mission of access; reducing costs to increase public access is consistent with public purpose | Competitive effects do not negate public purpose; lowering fees can advance public access and does not defeat exemption |
Key Cases Cited
- Parma Hts. v. Wilkins, 828 N.E.2d 998 (Ohio 2005) (lease to private operator led to denial of municipal exemption)
- Carney v. Cleveland, 180 N.E.2d 14 (Ohio 1962) (leased airport property to private lessees lost public-property exemption)
- South-Western City Schools Bd. of Edn. v. Kinney, 494 N.E.2d 1109 (Ohio 1986) (municipal golf course exemption upheld; incidental private revenue acceptable)
- Whitehouse v. Tracy, 648 N.E.2d 503 (Ohio 1995) (incidental private use of public land did not destroy exemption)
- Cleveland v. Carney, 174 N.E.2d 254 (Ohio 1961) (incidental private parking did not defeat public-use exemption)