Harrah's Ohio Acquisition Co., L.L.C. v. Cuyahoga Cty. Bd. of Revision (Slip Opinion)
114 N.E.3d 192
Ohio2018Background
- Thistledown racetrack (128 acres) was owned by Harrah’s; property converted to a "racino" with VLTs after Jan 1, 2013 tax-lien date. Harrah’s made ~$7M improvements between the 2010 sale and the 2013 lien date and later obtained a $50M VLT license.
- County fiscal officer valued the property at $37,658,000; Harrah’s asked to reduce to ~$23.3M; Warrensville Heights School Board sought increase to $43M (the July 2010 bankruptcy sale price). BOR kept the fiscal officer’s value; both sides appealed to the BTA.
- Both parties submitted appraisals to the BTA for tax year 2013: Harrah’s appraiser (Sangree) valued real property at $22M using a going-concern income approach minus nonreal-property allocable values (including a $50M VLT-license deduction); the school-board appraiser (Bovard) used a hypothetical leased-fee income approach and valued the property at ~$44.5M.
- The BTA adopted Sangree’s $22M valuation, rejected Bovard’s appraisal as a leased-fee analysis inappropriate for owner-occupied property, and denied the school board’s post-hearing motion for judicial notice (that some casinos operate on leased land).
- The school board appealed to the Ohio Supreme Court, arguing (1) the BTA erred in assessing appraisals (rejecting Bovard and accepting Sangree with adjustments), (2) the BTA should have taken judicial notice or reopened the record, and (3) the 2010 sale price is relevant evidence of minimum value.
Issues
| Issue | Plaintiff's Argument (Warrensville Hts.) | Defendant's Argument (Harrah’s) | Held |
|---|---|---|---|
| Whether the BTA lawfully accepted Sangree’s appraisal adjustments (license allocations and VLT deduction) | Sangree’s adjustments are legally improper and factually unsupported | Adjustments reflect separable intangible value (opportunity to obtain racing/VLT licenses) and are permissible | Court upheld that attributing value to license-related intangibles and deducting VLT value was not contrary to law |
| Whether the BTA lawfully rejected Bovard’s leased-fee appraisal for owner-occupied property | Bovard’s leased-fee methodology is valid; his figures are reliable | Bovard’s approach improperly values owner-occupied property as leased and thus may overstate value | Court held BTA erred as a matter of law in refusing to consider a leased-fee appraisal; such methodology can be appropriate and must be considered on the merits |
| Whether the BTA abused discretion by denying judicial notice / reopening the hearing to admit evidence that some casinos are leased | School board sought judicial notice of documents showing casinos on leased land; denial prevented rebuttal of Sangree’s testimony | Evidence was new and should have been offered at hearing; judicial notice does not override rules on timely presentation | Denial of judicial notice and request to reopen was reasonable and lawful because the documents existed at hearing and the general rule bars new evidence after a hearing |
| Whether the July 2010 forced/auction sale price ($43M) is relevant evidence of minimum property value | Sale price should establish at least a minimum market value despite being a distressed sale | The sale was a forced, non-arm’s-length transaction under R.C. 5713.04 and lacks evidentiary weight | Court rejected the argument; non-arm’s-length forced sale does not establish comparable market value |
Key Cases Cited
- Meijer Stores Ltd. Partnership v. Franklin Cty. Bd. of Revision, 122 Ohio St.3d 447 (2009) (appraisers may consider hypothetical leasing when valuing owner-occupied property)
- Hilliard City Schools Bd. of Edn. v. Franklin Cty. Bd. of Revision, 128 Ohio St.3d 565 (2011) (allocation of sale price to intangible assets requires proof of separable asset and transferability considerations)
- St. Bernard Self-Storage, L.L.C. v. Hamilton Cty. Bd. of Revision, 115 Ohio St.3d 365 (2007) (goodwill/business value must be shown to be severable from real property)
- Harold D. Miller, Inc. v. Pub. Util. Comm., 10 Ohio St.2d 53 (1967) (nontransferable licenses can have value to their current holder)
- Warrensville Hts. City School Dist. Bd. of Edn. v. Cuyahoga Cty. Bd. of Revision, 145 Ohio St.3d 115 (2016) (prior appeal affirming BTA’s reliance on Sangree’s earlier appraisal)
- Warrensville Hts. City School Dist. Bd. of Edn. v. Cuyahoga Cty. Bd. of Revision, 152 Ohio St.3d 277 (2017) (prior appeal rejecting the 2010 sale price as evidentiary value for later tax-year valuation)