Warrensville Heights City School District Board of Education v. Cuyahoga County Board of Revision
145 Ohio St. 3d 115
| Ohio | 2016Background
- Thistledown Racetrack (128 acres, grandstand, barns) in Cuyahoga County was owned by Magna/ New Thistledown and placed in Chapter 11; bankruptcy court authorized sale.
- Harrah’s submitted the winning bankruptcy auction bid and purchased assets for $43,000,000 in mid-2010; deed filed July 28, 2010 after racing-license approval.
- Purchase agreement transferred real estate plus equipment, permits, intellectual property, goodwill, and required transfer/request of the racing license; earlier winning bid had showed $89.5 million with contingent payments.
- For tax year 2010 the county valued the parcels at $14,264,000; the school board sought an increase to $43,000,000 based on the sale, while Harrah’s sought a decrease to about $13.8 million (or lower).
- The Board of Tax Appeals (BTA) rejected the sale price as establishing true value, concluded the bankruptcy sale was an auction/forced sale under R.C. 5713.04, accepted an appraiser’s allocation and valuation of $13,800,000, and the Ohio Supreme Court affirmed.
Issues
| Issue | School Board's Argument | Harrah’s Argument | Held |
|---|---|---|---|
| Whether the 2010 sale price is binding evidence of true value for taxation | The recent arm’s-length sale ($43M) is the best evidence and must be accepted | The sale was at a bankruptcy auction/forced sale and not indicative of true real-property value | Sale price rejected; bankruptcy auction/forced sale excluded under R.C. 5713.04 |
| Whether the transaction was an "auction" or forced sale | Sale was arm’s-length between willing parties | Sale occurred in a supervised bankruptcy auction with creditor-driven urgency | Sale was an auction and, given bankruptcy context, a forced sale |
| Whether purchase price was allocated to non-real-property assets (license, goodwill, FF&E) | No proven allocation away from real property; $43M reflects real-property value | Agreement and evidence show substantial allocation to license, FF&E, contingent payments, and goodwill | Evidence (appraisal and testimony) showed allocation away from real property (license ~$27.95M, FF&E ~$1.2M) |
| Whether appraisal evidence could be considered after the sale | Sale price precludes reliance on appraisal | Because sale was a forced/auction sale, appraisal may be used to determine true value | BTA properly considered appraisal and valued property at $13.8M |
Key Cases Cited
- Berea City School Dist. Bd. of Edn. v. Cuyahoga Cty. Bd. of Revision, 106 Ohio St.3d 269 (2005) (recent arm’s-length sale generally establishes true value)
- Cummins Property Servs., L.L.C. v. Franklin Cty. Bd. of Revision, 117 Ohio St.3d 516 (2008) (reinforces treatment of recent arm’s-length sales)
- Olentangy Local Schools Bd. of Edn. v. Delaware Cty. Bd. of Revision, 141 Ohio St.3d 243 (2014) (burden to prove an auction/forced sale was nonetheless arm’s-length rests with proponent)
- Cincinnati School Dist. Bd. of Edn. v. Hamilton Cty. Bd. of Revision, 127 Ohio St.3d 63 (2010) (sale must be voluntary to qualify as arm’s-length)
- Strongsville Bd. of Edn. v. Cuyahoga Cty. Bd. of Revision, 112 Ohio St.3d 309 (2007) (duress/compelling business circumstances can render sales unrepresentative of true value)
- Lakeside Ave. Ltd. Partnership v. Cuyahoga Cty. Bd. of Revision, 75 Ohio St.3d 540 (1996) (discusses factors indicating sales under compulsion are not indicative of true market value)