Fairfield Twp. Bd. of Trustees v. Testa (Slip Opinion)
104 N.E.3d 749
Ohio2018Background
- Fairfield Township entered a TIF agreement (1998) covering increased assessed value for certain parcels, creating a 20-year obligation for service payments running with the land and recorded as covenants.
- DPR (developer) initially agreed to apply for and maintain the TIF exemption; parcel later conveyed to Tri-City Church of God in 2011.
- Church applied for and received a house-of-public-worship tax exemption in 2013; tax commissioner determined R.C. 5709.911 subordinated the TIF exemption to the church exemption.
- Township sued to terminate the church’s exemption (R.C. 5715.27(E)), arguing the recorded covenant requires continued service payments and thus limits the exemption; commissioner and BTA rejected the township’s challenge.
- The township did not take statutorily available steps after Sub.H.B. 427 to preserve the TIF priority (refile TIF application or re-record notice), and thus conceded it failed to preserve service-payment rights.
Issues
| Issue | Plaintiff's Argument (Township) | Defendant's Argument (Tax Commissioner/Church) | Held |
|---|---|---|---|
| Whether a recorded covenant requiring service payments can prevent a later owner from claiming a house-of-public-worship exemption that would supplant the TIF exemption | Covenant runs with the land and remains enforceable against the church, so the church cannot avoid service payments by claiming the exemption | R.C. 5709.911 (as applied via H.B. 427) makes pre‑existing TIF exemptions subordinate to other statutory exemptions unless the political subdivision preserved its rights; thus the public-worship exemption controls and no service payments are due | The statute controls; the house-of-public-worship exemption has priority and the covenant cannot be enforced to require service payments |
| Whether the recorded covenant survives notwithstanding a statutory scheme that subordinates TIF exemptions and cancels service-payment obligations | Covenant should bind successors and survive statutory changes | A covenant that conflicts with public policy/statute (R.C. 5709.911) cannot be enforced to circumvent statutory priorities | Covenant unenforceable to require payments conflicting with R.C. 5709.911 |
| Whether Kohl’s v. Marion County requires a different result because covenants may have nonstatutory force | Kohl’s suggests covenants can bind outside statutory scheme and thus could bar a later exemption | Kohl’s did not address a direct statutory conflict; here R.C. 5709.911 directly governs priority of exemptions and supersedes the covenant | Kohl’s is inapposite; statutory priority controls over the covenant |
| Whether the township may bring an as-applied contract‑impairment challenge under the Ohio Constitution | The statute retroactively impairs an existing contractual covenant and violates Article II, §28 | Township failed to use statutory preservation mechanisms, so any loss was self-inflicted; lacks standing to assert as‑applied impairment | Township lacks standing to raise the as-applied impairment claim; challenge dismissed |
Key Cases Cited
- Drees Co. v. Hamilton Twp., 132 Ohio St.3d 186 (2012) (townships are creatures of statute and cannot enforce tax obligations the statutes no longer authorize)
- Kohl’s Illinois, Inc. v. Marion Cty. Bd. of Revision, 140 Ohio St.3d 522 (2014) (deed covenants do not necessarily create jurisdictional bars to statutory review; covenants may be enforceable as defenses)
- Cincinnati City School Dist. Bd. of Edn. v. Conners, 132 Ohio St.3d 468 (2012) (deed restrictions conflicting with statutory policy can be invalidated as against public policy)
- Palazzi v. Estate of Gardner, 32 Ohio St.3d 169 (1987) (one not within the class affected or not injured by the statute may not raise a constitutional challenge)
- Toledo City School Dist. Bd. of Edn. v. State Bd. of Edn., 146 Ohio St.3d 356 (2016) (discussion of limits on constitutional retroactivity/contract‑impairment claims by political subdivisions)
- Dixon v. Van Sweringen Co., 121 Ohio St. 56 (1929) (covenants against public policy are unenforceable)
Decision: Affirmed (BTA/tax commissioner).