Columbus City Schools Bd. of Edn. v. Franklin Cty. Bd. of RevisionColumbus City Schools Bd. of Edn. v. Franklin Cty. Bd. of Revision
Rendered on February 8, 2022
On brief: Rich & Gillis Law Group, LLC, Mark H. Gillis, and Kelley A. Gorry, for appellant. Argued: Kelley A. Gorry.
APPEALS from the Ohio Board of Tax Appeals
DORRIAN, J.
{1} Appellant, Columbus City Schools Board of Education (“BOE“) appeals from two decisions and orders (“decisions“) of the Ohio Board of Tax Appeals (“BTA“) that increased the value of two properties in Franklin County owned by appellees, Aston Place Acquisition, LLC and Abigail Acquisition, LLC. Although the BTA adopted the total values for both properties as determined by the BOE appraiser, the BTA rejected the distribution of value between the land and improvements as determined by the appraiser and instead adopted the land and improvements values for the properties consistent with the original distributions of the Franklin County Auditor (“auditor“). For the following reasons, we reverse.
I. Facts and Procedural History
{2} In this matter, the BOE sought increases on the value of two properties owned by appellees in Franklin County located at 111 W. Third Avenue (“the Aston property“) and 369 S. Gay Street (“the Abigail property“). The following facts are not disputed. The Aston property is a 59-unit apartment complex with improvements on 0.89 acres. The Aston property was constructed in 2013 and is subject to a 100 percent tax abatement for the value of vertical improvements for a period of 15 years. The auditor assigned the Aston property a total value of $8,450,000, assigning $775,400 for the land and $7,674,600 for improvements for tax year 2017. The Abigail property is a 69-unit apartment complex with improvements on 0.292 acres. The Abigail property was constructed in 2011 and is subject to a 100 percent tax abatement for the value of vertical improvements for a period of up to 15 years. The auditor assigned the Abigail property a total value of $6,825,000, assigning $651,900 for the land and $6,173,100 for improvements for tax year 2017.
{3} On March 29, 2018, the BOE filed two complaints pursuant to
{4} On March 19, 2019, the BOR issued two written decisions on the two properties following oral decisions issued March 14, 2019. With regard to the Aston property, the BOR found the fair market value for tax lien date January 1, 2017 and 2018 to be $8,450,000, reflecting no change from the value assigned by the auditor. With regard to the Abigail property, the BOR found the fair market value for tax lien date January 1, 2017 and 2018 to be $7,193,100, reflecting an increase of $369,100 from the value assigned by the auditor. On March 26, 2019, the BOE filed notices of appeal from the BOR‘S March 19, 2019 decisions for both properties. On April 17, 2019, Abigail Acquisition, LLC, filed an appeal from the BOR‘s March 19, 2019 decision on the Abigail property.
{5} In a motion dated April 25, 2019, Abigail Acquisition, LLC moved to consolidate the cases on the Aston property and the Abigail property before the BTA because “[t]he appeals involve common questions of law and fact in that 1) the parties in each appeal are identical and 2) the cases involve the valuation of the same property for identical tax years.” (Mot. to Consolidate at 1.) On April 25, 2019, the BTA granted the motion to consolidate the cases. Both the BOE and appellees waived hearing before the BTA and submitted the case on written briefs.
{6} On February 1, 2021, the BTA issued a decision regarding the Abigail property in which it adopted Sprout‘s total value for the Abigail property of $8,165,000 and his value of FF&E of $69,000. However, the BTA disagreed with Sprout‘s determination of the value of the land and improvements and instead assigned the value between the land and improvements consistent with the auditor‘s initial valuation, resulting in a land value of $773,300 and improvements value of $7,322,700. On February 17, 2021, the BTA issued a decision regarding the Aston property in which it adopted Sprout‘s total value for the Aston property of $11,800,000 and his value of FF&E of $175,000. However, the BTA disagreed with Sprout‘s determination of the value of the land and improvements and instead assigned the value between the land and improvements consistent with the auditor‘s initial valuation, resulting in a land value of $1,066,750 and improvements value of $10,558,250.
{7} The BOE filed a motion for reconsideration of the BTA‘s February 1, 2021 decision on the Abigail property. On March 1, 2021, the BTA issued its decision denying the BOE‘s motion for reconsideration.
II. Assignments of Error
{8} The BOE appeals and assigns the following 14 errors for our review:
- The BTA erred in rejecting the land valuation of the Board of Education‘s appraiser for the subject property because the appraiser valued the land as if it was vacant.
- The BTA erred in holding that improved land cannot be valued as if it was vacant for the purposes of ad valorem real property taxation.
- The BTA committed reversible legal error in interpreting its holding in Milanov v. Franklin Cty. Bd. of Revision, BTA Case Nos. 2016-1936 et al., 2018 Ohio Tax LEXIS 1101 (May 11, 2018) as being applicable to the instant matter.
- The BTA erred in holding that in Milanov, it “disregarded dueling appraisal reports that valued land improved with condominiums subject to a tax abatement because they valued the land as unimproved vacant land.”
- The BTA erred in failing to recognize that Milanov involved land that had been platted and subdivided into separate residential condominium units pursuant to
R.C. Chapter 5311 Whereas the subject property is an unsubdivided single parcel of land improved with an apartment complex. - The BTA committed reversible legal error in applying Milanov and holding that the Board of Education‘s appraisal applied a “bulk discount” to the valuation of the subject land in violation of
R.C. 5311.11 . - The BTA committed reversible legal error in applying Milanov and holding that the Board of Education‘s appraisal violated the Supreme Court‘s decisions in Dublin City Schools Bd. of Edn. v. Franklin Cty. Bd. of Revision, 139 Ohio St.3d 212, 2014-Ohio-1940, 111 N.E.3d 222 (“East Bank II“) and Columbus City Schools Bd. of Edn. v. Franklin Cty. Bd. of Revision, 148 Ohio St.3d 700, 2016-Ohio-8375, 72 N.E.3d 637 (“Metro Partners“).
- The BTA‘s holding that improved land cannot be valued as if it was unimproved directly violates the directives set forth in the Ohio Administrative Code (“O.A.C.“), Section 5703-25-11, since those directives require the valuation of land as if vacant and at its highest and-best-use.
O.A.C. 5703-25-11(A), (C) . - The BTA erred in failing to recognize that the Ohio Administrative Code‘s directives for the valuation of land for ad valorem real property taxation follows general appraisal principles for the valuation of land as “[e]ven if a site is already improved, the site is valued as though vacant and available for development to its highest and best use.” Appraisal of Real Estate (14th Ed. 2013) at p. 362.
- The BTA‘s holding violates the Supreme Court‘s decision in Polaris Amphitheater Concerts, Inc. v. Delaware Cty. Bd. of Revision, 118 Ohio St.3d 330, 2008-Ohio-2454, 889 N.E.2d 103, because the Court held that the BTA should value land consistent with the directives set forth in
O.A.C. Sections 5703-25-07 ,5703-25-11 and5703-25-12 . Id. at ¶ 17. - The BTA‘s holding invalidates the cost approach to value any real property in Ohio as the critical first step in valuing property via the cost approach is to “[e]stimate the value of the site as though vacant and available to be developed at its highest and best use.” Appraisal of Real Estate (14th Ed.2013) at p. 568.
- The BTA‘s holding violates the Supreme Court‘s decisions in Dinner Bell Meats v. Cuyahoga Cty. Bd. of Revision, 12 Ohio St.3d 270, 466 N.E.2d 909 (1984) and Meijer, Inc. v. Montgomery Cty. Bd. of Revision, 75 Ohio St.3d 181, 661 N.E.2d 1056 (1996) since the Court recognized that the cost approach is the most applicable valuation method for special purpose properties and newly constructed properties.
The BTA erred in rejecting the land valuation of the Board of Education‘s appraiser as it was the only competent and probative evidence of the subject‘s land value in the record. - The BTA erred in rejecting the land valuation of the Board of Education‘s appraiser as it affirmatively negated the Auditor‘s original value and the property owner failed to present any rebuttal evidence of the subject‘s land value.
For ease of discussion, we first consider the BOE‘s thirteenth and fourteenth assignments of error.
III. Thirteenth and Fourteenth Assignments of Error
{9} In its thirteenth and fourteenth assignments of error, the BOE asserts the BTA erred in adopting the auditor‘s original land values for the properties. The BOE asserts the BTA‘s decisions were an abuse of discretion because Sprout‘s appraisals affirmatively rebutted the auditor‘s values and no contrary evidence was presented.
A. Applicable Law
{10}
{11} Several Ohio Administrative Code provisions governing the determination of the true value of property are relevant to the instant matter.
- The preferred method is the market data or comparative process requiring the collection and analysis of actual arms-length sales and other market information on comparable sites made within a reasonable time of the date of the appraisal with adjustments for variations. This method should be used except in unusual circumstances.
- The allocation method in which the land value is estimated by subtracting the value of the improvements from a known sale price. This is primarily used in an area where there are very few sales of vacant land and the improvements to land are of a generally uniform type.
- The land residual method estimates land value by capitalizing the residual income imputable to land as derived from actual or hypothetical new improvements assuming highest and best use. This method is useful in arriving at land value when there are few or no sales or as a check against the market approach.
- The development method can be used in valuing land ready for development by estimating value as fully developed and subtracting the development, administrative and entrepreneurial costs.
In arriving at the value of the depreciated improvements by the market data approach the value of the entire property is estimated by the use of comparable sales after allowing for variations. The land value determined according to rule 5703-25-11 of the Administrative Code is then subtracted to arrive at the value of the improvements in their present or depreciated condition.
The building residual technique is used to estimate improvement values by the income approach. After land value is arrived at the value of the improvements is estimated by capitalizing the net income remaining after deduction for all expenses including interest on the land value.
{13}
B. Jurisdiction and Standard of Review
{14}
{15} Thus, “[w]hen reviewing a BTA decision, we determine whether the decision is reasonable and lawful; if it is both, we must affirm.” NWD 300 Spring, L.L.C. v. Franklin Cty. Bd. of Revision, 151 Ohio St.3d 193, 2017-Ohio-7579, ¶ 13. A judgment is unreasonable when “there is no sound reasoning process” to support such judgment. AAAA Ents., Inc. v. River Place Community Urban Redevelopment Corp., 50 Ohio St.3d 157, 161 (1990).
{16} We defer to the BTA‘s factual findings as long as they are supported by reliable and probative evidence in the record. Corex Partners, L.L.C. v. Franklin Cty. Bd. of Revision, 10th Dist. No. 19AP-322, 2020-Ohio-3865, ¶ 7, citing Bd. of Edn. of the Westerville City Schools v. Franklin Cty. Bd. of Revision, 146 Ohio St.3d 412, 2016-Ohio-1506, ¶ 26. See Lowe‘s Home Ctrs., L.L.C. v. Brooklyn City Schools Bd. of Edn., 10th Dist. No. 19AP-179, 2020-Ohio-464, ¶ 13, quoting Hercules Galion Prods., Inc. v. Bowers, 171 Ohio St. 176 (1960) (stating that “neither this Court nor any appellate court designated by
{17} However, our review is plenary on questions of law. Westerville City Schools at ¶ 26, quoting Gahanna-Jefferson Local School Dist. Bd. of Edn. v. Zaino, 93 Ohio St.3d 231, 231-232 (2001) (stating that a ” ‘court will not hesitate to reverse a BTA decision that is
C. Analysis
{18} In this case, as to both properties, the BTA found Sprout‘s appraisal reports to be “competent, credible, and probative evidence of the subject property‘s value.” (Abigail and Aston Decisions at 10.)2 However, the BTA did not agree with Sprout‘s determination of the value of the land and improvements with regard to both properties. Specifically, the BTA stated that “[w]e agree that [Sprout‘s] land value is not reflective of the subject property‘s value as it existed on the tax lien date, as improved land, not as vacant land.” (Decisions at 6-7.) In support of this determination, the BTA cited to its decision in Milanov v. Franklin Cty. Bd. of Revision, BTA No. 2016-1936, 2018 Ohio Tax LEXIS 1101 (May 11, 2018), in which it stated that it “disregarded dueling appraisal reports that valued land improved with condominiums subject to a tax abatement because they valued the land as unimproved vacant land.” (Decisions at 6-7.) As a result, the BTA stated that “[w]e see no reason to stray from our prior decision in this matter and accord no weight to Sprout‘s conclusion of vacant land value.” (Decisions at 6-7.) Furthermore, based on its rejection of Sprout‘s determination of the value of both properties’ land and improvements, the BTA did not conduct an independent valuation of the value of the land and improvements. Rather, the BTA found it “appropriate to allocate value consistent with the [auditor‘s] initial valuation.” (Abigail Decision at 10; Aston Decision at 11.) In support of this conclusion, the BTA cited to FirstCal Indus. 2 Acquisitions, L.L.C. v. Franklin Cty. Bd. of Revision, 125 Ohio St.3d 485, 2010-Ohio-1921, ¶ 31.
{19} In its motion for reconsideration of the BTA‘s decision on the Abigail property, the BOE argued that the BTA erred in applying Milanov to “hold[] that improved land cannot be valued as if it was vacant.” (BOE Mot. for Recon. at 8.) In its decision on reconsideration on the Abigail property, the BTA stated that the “BOE overstates the potential impact of the Board‘s citation to Milanov. The Board weighed the evidence in this case and determined that Sprout‘s land valuation should be given no weight in the
{20} On appeal, the BOE asserts the BTA erred in adopting the auditor‘s original land values because Sprout‘s appraisal reports provided clear evidence negating the auditor‘s original land values. In support of this argument, the BOE points to the Supreme Court‘s decision in Copley-Fairlawn City School Dist. Bd. of Edn. v. Summit Cty. Bd. of Revision, 147 Ohio St.3d 503, 2016-Ohio-1485. Appellees respond that the BTA evaluated the evidence in the record and concluded that Sprout‘s appraisals failed to properly value the land component because the methodology failed to consider the valuation of the land component.
{21} In Copley-Fairlawn, the Supreme Court recognized a “category of cases in which ‘the evidence presented to the board of revision or the BTA contradicts the auditor‘s determination in whole or in part‘; in such cases, ‘when no evidence has been adduced to support the auditor‘s valuation, the BTA may not simply revert to the auditor‘s determination.’ ” Copley-Fairlawn at ¶ 17, quoting Dayton-Montgomery Cty. Port Auth. v. Montgomery Cty. Bd. of Revision, 113 Ohio St.3d 281, 2007-Ohio-1948, ¶ 27. This category of cases is considered to be a ” ‘narrow exception’ to the usual rule that the BTA is justified in retaining the county‘s valuation of the property when an appellant ‘fails to sustain its burden of proof at the BTA.’ ” Id., quoting Colonial Village, Ltd. v. Washington Cty. Bd. of Revision, 123 Ohio St.3d 268, 2009-Ohio-4975, ¶ 23-24. Under this exception, the BTA is under a legal duty “to determine whether the record as developed by the parties contain[s] sufficient evidence to permit an independent valuation of the property,” and, if so, then the BTA is required to “perform such a valuation.” Colonial Village at 25. The court construed these cases to hold that ” ‘[w]hen confronted with * * * clear evidence negating the auditor‘s valuation,’ the BTA ‘act[s] unreasonably and unlawfully in adopting the auditor‘s valuation rather than determining the taxable value of the property.’ ” Copley-Fairlawn at ¶ 18, quoting Dublin City Schools Bd. of Edn. v. Franklin Cty. Bd. of Revision, 139 Ohio St.3d 193, 2013-Ohio-4543, ¶ 26 (“Dublin City Schools I“), reconsideration
Pursuant to [the] rule [in Bedford], “when the board of revision has reduced the value of the property based on the owner‘s evidence, that value has been held to eclipse the auditor‘s original valuation” and the board of education as appellant before the BTA may not rely on the auditor‘s valuation as a default valuation. Worthington City Schools Bd. of Edn. v. Franklin Cty. Bd. of Revision, 140 Ohio St.3d 248, 2014-Ohio-3620, * * * ¶ 35. Instead, “the BOR‘s adopting a new value based on” the owner‘s evidence has the effect of ” ‘shift[ing] the burden of going forward with evidence to the board of education on appeal to the BTA.’ ” Worthington City Schools at 35, 41, quoting Dublin City Schools I at ¶ 16.
{22} In Copley-Fairlawn, the property owner filed a complaint with the Summit County BOR seeking a decrease in valuation for the subject property and the local BOE filed a counter-complaint seeking retention of the Summit County auditor‘s valuation. The property owner filed an appraisal report in support of his complaint, but the appraiser was not present at the BOR hearing for cross-examination; the BOE did not submit any evidence. Upon a decision of the BOR reducing the value of the subject property, the BOE appealed to the BTA. The BTA issued a decision reversing the BOR and reinstating the auditor‘s initial valuation. The BTA held that the BOR‘s determination to reduce the value was ” ‘unsupported by competent and probative evidence.’ ” Id. at ¶ 13. The BTA stated that the BOR erred by relying on the appraisal submitted by the property owner because the appraisal “(1) was not authenticated at the hearing by its author, (2) had been prepared for refinancing purposes (rather than tax-assessment purposes), and (3) opined a value for six months prior to the tax-lien date.” Id. Furthermore, the BTA “sweepingly characteriz[ed]” the evidence in the case “as the type that led to mere speculation on the part of the finder of fact,” thereby “treat[ing] all the evidence presented at the BOR hearing as incompetent to support a determination of value.” Id.
{24} In FirstCal, two Franklin County school boards filed complaints seeking increases in value on five separate parcels that were listed on a conveyance-fee statement filed by the property owner, FirstCal. The FirstCal conveyance-fee statement included multiple properties in various counties of Ohio and in other states that were sold for a single sale price. The BOR and BTA “allocate[ed] the aggregate sale price for the Franklin County parcels to the individual parcels” by “assign[ing] to each parcel a share of the aggregate Franklin County sale price in proportion to that parcel‘s percentage of the aggregate amount of value that the auditor determined for all the parcels.” Id. at ¶ 30. Thus, “[t]he
{25} FirstCal challenged the allocation of the aggregate sale price for the Franklin County parcels to the individual parcels. The court noted that FirstCal‘s argument was “anomalous” in that it “embraces the auditor‘s original valuations as the most probative evidence of value,” but then “disclaims the valuations’ significance as to the relative value of the parcels to one another.” Id. at ¶ 33. The court stated that “[a]lthough not rising to the level of a presumptively correct valuation, pursuant to Colonial Village, the auditor‘s initial determination of value for a given tax year possesses an increment of prima-facie probative force, and the percentages derived from those valuations are ‘corroborating’ in the absence of better evidence.” Id. at ¶ 31. Therefore, the court found that “the proportion of each parcel‘s assigned value to the aggregate value of the parcels possesses the same increment of prima facie probative force.” Id. The court stated that “FirstCal was free at the BOR and the BTA to rebut that probative force by presenting its own contrary evidence,” but “[i]t did not do so.” Id.
{26} Here, while we agree with the BTA that FirstCal is relevant to the present matter in a comparative sense, we find the reasoning of FirstCal, and, by extension Colonial Village, actually undercuts rather than supports the BTA‘s allocation of value consistent with the auditor‘s initial determination. We begin by noting that the facts in FirstCal are distinct from those in this case in several respects. First, FirstCal involved the allocation of an aggregate sale price to individual parcels, whereas this case involves the value of improvements and land for two separate properties. Second, and more importantly, in FirstCal the property owner did not present evidence to rebut the probative force of the auditor‘s initial allocation of value. Here, the BOE presented extensive evidence in the form of Sprout‘s appraisal reports and testimony regarding the value of the subject properties, specifically including the value of the land and improvements. Appellees did not present any evidence to the contrary, but instead “chose to rely upon its cross-examination of Sprout and argument challenging the probative value of the appraisal report[s].” (Decisions at 10.) As noted by the BTA in its decision, “a party‘s election to forego the presentation of valuation evidence and rely solely upon argument and cross-examination is not without risk.” (Decisions at 10.)
{28} Here, as in Copley-Fairlawn, Sprout‘s appraisal reports furnished evidence that, when considered in conjunction with Sprout‘s testimony, negated the validity of the auditor‘s valuation in whole or in part, and furnished an independent basis for valuing the property. Nevertheless, despite finding Sprout‘s reports overall to be competent, credible, and probative evidence with regard to the total value of the subject properties that negated the auditor‘s initial valuation, the BTA rejected Sprout‘s conclusions as to the determination of the value of the land and improvements of the properties. The BTA stated in its decisions that Sprout‘s conclusions as to the land value of the properties were to be “accord[ed] no weight” because Sprout‘s “land value is not reflective of the subject property‘s value as it existed on the lien date, as improved land, not as vacant land.” (Decisions at 6-7.) However, on reconsideration in the Abigail property case, the BTA stated that it “did not hold * * * that improved land cannot be valued via the sales comparison approach as if vacant,” but rather that the BTA “weighed the evidence in this case and determined that Sprout‘s land valuation should be given no weight in the allocation of value among land and building.” (BTA Decision on Recon. at 2.) Thus, based on its decision on reconsideration, it appears the BTA did not reject Sprout‘s determination of the value of the land and improvements because of his use of the sales comparison methodology. Left unsaid is the basis for the BTA‘s decision to give no weight to Sprout‘s analysis of the value of the properties’ land and improvements.
{29} Notably, this case presents even stronger evidence in favor of negating the auditor‘s initial valuation than was present in Copley-Fairlawn. Specifically, the appraisal reports in this case were authenticated at the BOR hearing by its author, were prepared for
{30} Based on the clear evidence negating the auditor‘s valuation, the absence of other evidence in support of the auditor‘s valuation, the BTA‘s contradictory statements regarding its rationale for rejecting Sprout‘s determination of the value of the properties’ land and improvements, the absence of other supporting reasons in its decisions, and considering the BTA‘s adoption of the total values reached by Sprout after having found his appraisal reports to be competent, credible, and probative evidence of the subject property‘s value, we find the BTA‘s decision was unreasonable and unlawful under Copley-Fairlawn as to the determination of the value of the land and improvements of the subject properties. Because the BOE‘s evidence, in the form of Sprout‘s appraisals, contradicts the auditor‘s determination in whole or in part and no evidence was presented to support the auditor‘s valuation, the BTA was under a “legal duty” to conduct “an independent valuation of the property.” Colonial Village at ¶ 25. By adopting the auditor‘s original allocation of value without conducting its own independent valuation, the BTA violated that legal duty. As a result, we must reverse and remand for the BTA to conduct an independent determination of value based on all the evidence set forth in the record. Copley-Fairlawn at ¶ 31.
{31} Accordingly, we sustain the BOE‘s thirteenth and fourteenth assignments of error.
IV. Remaining Assignments of Error
{32} Having sustained the BOE‘s thirteenth and fourteenth assignments of error, thereby necessitating we remand these matters to the BTA for further proceedings, the BOE‘s remaining assignments of error are rendered moot.
V. Conclusion
{33} Having sustained the BOE‘s thirteenth and fourteenth assignments of error, rendering the remaining assignments one through twelve moot, we reverse the decisions
Judgments reversed; causes remanded.
LUPER SCHUSTER, P.J., and MENTEL, J., concur.