{¶ 1} This appeal addresses a claim of exemption from real-property tax for several golf courses owned by appellee, the city of Cincinnati, and operated under a management contract by a private, for-profit contractor, Billy Casper Golf Management, Inc. (“Golf Management”). Paul Macke, a private golf-course operator who owns taxable real property in Hamilton County, challenged the ongoing exemption of the courses as public property used exclusively for a public purpose. After reviewing Macke’s complaints, appellant, the Ohio tax commissioner, determined that the exemption should be revoked and that the golf courses should be subject to real-property tax. Cincinnati appealed to the Board of Tax Appeals (“BTA”), which reversed the commissioner’s determination and allowed the exemption.
{¶ 2} On appeal to this court, the tax commissioner contends that Cincinnati’s contractual arrangement with a for-profit company to manage and operate the golf courses defeats the tax exemption under R.C. 5709.08 on the grounds that the golf courses are no longer public property used exclusively for a public purpose. We disagree with the tax commissioner, and we affirm the BTA’s reasonable and lawful decision.
Facts and procedural background
{¶ 3} Cincinnati owns the golf courses at issue here, and pursuant to the city charter, the Cincinnati Recreation Commission (“CRC”) has the right to furnish, equip, and operate the city-owned golf courses. CRC operates the golf courses as part of its “mission * * * to provide recreational and cultural activities enhancing health and wellness [and] creating a sense of community * * * for everyone that lives in the City of Cincinnati and the tri-state area.”
{¶ 4} The issue of the golf courses’ exemption from real-property taxation has arisen since CRC began contracting with private companies to manage and operate the courses. In 2003, CRC entered into a management contract with its
{¶ 5} The management contracts recite the city’s ownership and operation of seven (later six) public golf courses and express the city’s “desire[] to obtain management services.” The management contracts require Golf Management to provide a defined “scope of services,” as set out in a 25-page exhibit. In general, Golf Management’s services include “normal supervisory[,] management and operational services associated with public golf courses in a municipal setting.” More particularly, Golf Management’s duties include the following: (1) “exclusive responsibility and control over all areas and structures within the boundaries of the golf premises,” (2) supervision of golf clubhouse operations, including the sale of golf merchandise, golf cart operations, and golf programs, (3) establishment and implementation of “a grounds maintenance program, and agronomic and horticultural operations to assure the proper playing conditions,” and (4) provision of human-resources services for golf-course employees, all of whom are employees of Golf Management.
{¶ 6} The management contracts require Golf Management to deposit all golf-course proceeds except sales of food and beverages, merchandise, and golf lessons into a CRC account, to be disbursed in accordance with the CRC’s protocols and procedures. As the BTA found, CRC receives all golf-course operating revenues, including greens fees and cart-rental fees.
{¶ 7} Payments under the management contracts run in two directions: CRC pays Golf Management a monthly management fee, and Golf Management pays CRC a percentage of gross food, beverage, and merchandise sales. The 2003 contract called for a monthly management fee of $16,666.66, and the 2012 contract called for a monthly management fee of $13,750.
{¶ 8} Pursuant to section 14 of the 2003 contract, Golf Management was an independent contractor. The 2012 contract, however, amended that section and states, “In operating the Golf Courses, entering into cont[r]acts relating to the Golf Courses, the Contractor acts on behalf of and as an agent for the [CRC].”
{¶ 10} Cincinnati appealed to the BTA, which consolidated the cases and held a hearing on May 7, 2013. Cincinnati offered as evidence the 2003 and 2012 management contracts, along with other documents and the testimony of three persons: (1) Christopher Bigham, CRC’s director, (2) Steve Pacella, superintendent of administrative services for CRC, and (3) Joseph Livingood, senior vice president of Golf Management. The tax commissioner offered brief testimony from Macke and introduced documentation, including Cincinnati’s request for proposals (“RFP”) for golf-management services, Golf Management’s 2002 response to the RFP, and documents relating to financial matters.
{¶ 11} On March 6, 2014, the BTA issued a consolidated decision reversing the tax commissioner’s denial of exemptions based on two main considerations. First, the BTA rejected the tax commissioner’s reliance on Parma Hts. v. Wilkins,
{¶ 12} The tax commissioner appealed to this court, pursuant to R.C. 5717.04. Macke also filed a notice of appeal, but he failed to perfect his appeal as required by statute, and we therefore dismissed his notice of appeal and redesignated his briefs as amicus briefs in support of the tax commissioner’s position.
{¶ 13} The BTA’s findings of fact are entitled to deference. Satullo v. Wilkins,
{¶ 14} In Ohio, taxation is the rule, and exemption is the exception. Vought Industries, Inc. v. Tracy,
{¶ 15} The issue before us is whether the statutes allow the exemption for the golf courses in light of the largely undisputed facts. This presents a question of law for our plenary review. See Equity Dublin Assocs. v. Testa,
{¶ 16} The tax commissioner’s first proposition of law states that tax-exemption statutes “must be strictly construed, because exemptions are in derogation of the rights of all other taxpayers.” This is a correct statement of the law with which Cincinnati agrees. See, e.g., Panther II Transp., Inc. v. Seville Bd. of Income Tax Rev.,
{¶ 17} All real property in Ohio is subject to taxation unless expressly exempted. R.C. 5709.01(A). At issue here is the exemption stated in R.C. 5709.08(A)(1) for “public property used exclusively for a public purpose.” Prop
{¶ 18} The tax commissioner’s second, third, and fourth propositions of law concern the requirement that the golf courses be used exclusively for a public purpose. Collectively, those propositions state that public property is not used exclusively for a public purpose when a for-profit entity operates a for-profit business on the property, in competition with other private entities in the area, with the intent to profit, or as the functional equivalent of a lessee.
{¶ 19} We first look to R.C. 5709.121(A), which declares certain property to be used exclusively for charitable or public purposes and states:
Real property * * * belonging to * * * a political subdivision, shall be considered as used exclusively for * * * public purposes by such * * * political subdivision, if it meets one of the following requirements:
(1) It is used by such * * * political subdivision, or by one or more other * * * political subdivisions under a lease, sublease, or other contractual arrangement:
(a) [As an arts center];
(b) For other * * * public purposes.
(2) It is made available under the direction or control of such * * * political subdivision for use in furtherance of or incidental to its * * * public purposes and not with the view to profit.
The provision most applicable here is R.C. 5709.121(A)(2). Cincinnati makes the golf courses available to golfers who enjoy their accommodations, and the essence of the public purpose is to make the golf courses available for use by the public.
{¶ 20} Under R.C. 5709.121(A)(2), three elements must be satisfied in order to conclude that the golf courses in this case are used exclusively for a public purpose and are, therefore, entitled to a tax exemption. First, they must be “under the direction or control of’ Cincinnati. The BTA expressly found that Cincinnati “continues to exercise significant authority over the subject golf courses.” BTA Nos. 2011-143 through 2011-148,
{¶ 21} Second, the property’s use must be “in furtherance of or incidental to [Cincinnati’s] public purposes.” Bigham testified that CRC operates the golf courses consistent with its mission to “provide recreational and cultural activities enhancing health and wellness.” There can be no question that the golf courses continue to be used to make golfing available to the general public. Bigham testified to CRC’s mission “to really provide services for everyone.” As in South-Western City Schools,
{¶ 22} Third, the property must be made available to others not with a view to profit. Satisfaction of this requirement is the primary point of disagreement here. The tax commissioner argues that the golf courses were operated for profit because Golf Management is a for-profit enterprise seeking profit through the management contract and because the golf-course operations were designed to generate sufficient revenue to offset expénses and potentially generate a surplus. Regarding revenue sharing and profit potential, the BTA found as follows:
Under the management contract, the City receives all operating revenues, including greens fees and cart rentals fees, which it reinvests into the golf facilities. [Golf Management] only receives a flat management fee, a portion of merchandise and food and beverage sales, and may receive an incentive fee if certain revenue targets are met. This is therefore not a situation where a private enterprise is occupying publicly-owned property and profiting thereby; instead, the fruit of [Golf Management’s] labor is largely reaped by the City. [Golf Management] receives only a portion of the revenue from merchandise and food and beverage sales * * *. Such revenues are incidental and do not violate the “exclusively for a public purpose requirement” of R.C. 5709.08.
{¶ 23} The tax commissioner argues that the BTA erred by not considering Golf Management’s contractual management fee in its comparison, but the BTA
{¶ 24} The documentation regarding the municipal golf fund is also persuasive. The average revenue per year from 2007 through 2012 was $6,206,508, and the average expenses were $6,365,044, for an average loss of $158,536 per year over the six-year period. The fund sustained itself over this period with the carry-forward of the previous year’s balance, together with the surplus realized in two of the six years: 2007 with a $461,651 surplus and 2009 with a $460,344 surplus. Over the long haul, though, the municipal golf fund can fairly be characterized as operating on a close-to-break-even basis.
{¶ 25} Aside from the amount of revenue realized by either Golf Management or the municipal golf fund from operation of the golf courses, when private use of public land is sufficiently incidental to the public purpose, the land may still be characterized as being used exclusively for a public purpose. Whitehouse v. Tracy,
{¶ 26} In South-Western City Schools,
{¶ 27} The tax commissioner takes issue with the BTA’s reliance on the lack of a lease in this case to distinguish Parma Hts.,
{¶ 28} The tax commissioner’s assertion that the existence or absence of a lease has no bearing on whether an R.C. 5709.08 exemption applies is contrary to this court’s precedent. In Carney v. Cleveland,
{¶ 29} Neither Cincinnati nor CRC entered into a lease with Golf Management. Bigham testified that CRC chose not to lease the golf courses because it wanted to retain control: “We wanted to make sure that we could approve the rates, approve the operation, approve exactly what went on there on a day-to-day basis * * *.” Livingood similarly testified that Golf Management did not intend to lease the golf courses from CRC.
{¶ 30} Three circumstances additionally justify rejecting the tax commissioner’s argument that the relationship between CRC and Golf Management is the functional equivalent of that between a lessor and lessee. First, the management contracts contain no language granting Golf Management the right of possession and, in particular, the concomitant right to exclude others from the property. Although the contracts grant Golf Management “exclusive responsibility and control over all areas and structures within the boundaries of the golf premises,” that language appears in the section of the contract entitled “Scope of Services” and does not amount to a transfer of an element of ownership to Golf Management; the “Scope of Services” details Golf Management’s duties, and the grant of control simply confers the authority necessary to carry out those duties. Second, Golf Management did not act as a lessee in possession, inasmuch as it did not limit Cincinnati’s access to and supervision of the golf courses. CRC did not require Golf Management’s permission to enter onto the properties, and CRC employees went to the golf courses every day. The daily presence of city personnel negates any implication that Golf Management obtained or exercised an exclusive possessory right. Finally, the management contracts most obviously differ from a lease by the absence of any provision for rent, or any other payment that functionally constituted compensation for a right to exercise possession. See Black’s Law Dictionary 1024 (10th Ed.2014) (defining “lease” as “[a] contract by which a rightful possessor of real property coveys the right to use and occupy the property in exchange for consideration, usu. rent”). The main payment contemplated by the management contracts is a fixed management fee, which CRC pays in consideration for the performance of precisely defined duties. For these reasons, we reject the tax commissioner’s argument that Golf Management acted as the functional equivalent of a lessee.
{¶ 31} In a final argument, encompassed within the first proposition of law, the tax commissioner asserts that Cincinnati’s method of operating its golf courses
{¶ 32} With due respect to Macke’s difficult position in a city and county that are, as he put it, “saturated” with public golf courses, the decision to lower greens fees does not negate the public purpose of Cincinnati’s golf courses. To the contrary, lower greens fees arguably advance the public purpose of making the city courses more accessible to the golfing public. CRC has, in fact, refused a request by Golf Management to increase greens fees when it concluded that a rate increase would harm CRC’s public mission. Traditionally, public parks charge little or nothing for the public to access their amenities, and greater access to everyone without regard to their ability to pay constitutes a part of their public mission, not a refutation of it.
{¶ 33} The tax commissioner argues that the city behaved essentially as a commercial golf-course owner and has used the “competitive advantage” of the tax exemption to harm private competition. The testimony demonstrates that private management of Cincinnati’s golf courses has reduced Cincinnati’s overhead costs. But the fact remains that by lowering costs, Cincinnati can lower fees and still maintain the viability of its golf operations. We cannot accept the theory that those developments are inimical to the public purpose, given that reducing costs enhances public access to the recreational opportunity that Cincinnati is affording.
Conclusion
{¶ 34} The BTA acted reasonably and lawfully by determining that Cincinnati did not forfeit its exemption under R.C. 5709.08(A) when it hired a private management company to manage its golf courses. We affirm the decision of the BTA.
Decision affirmed.
Notes
. The 2012 contract involved only six golf courses; the 2003 contract involved seven.