Blog / 04.10.2017

Ohio Supreme Court Issues Two More Decisions Regarding Appeals of Real Estate Tax Valuations

By Connie S. Carr

Here we go again….the Ohio Supreme Court has been busy with more appeals of real estate tax valuations. Two more decisions on this topic have been recently issued by the court.

The first is Johnston Coca-Cola Bottling Co., Inc. v. Hamilton Cty. Bd. of Revision, Slip Opinion No. 2017-Ohio-870, which was decided by the court on March 14, 2017. The property owned by Johnston Coca-Cola Bottling Co., Inc. (“Coke”) was a manufacturing and distribution facility (over 400,000 sq.ft.) located on 34.46 acres in Cincinnati. Coke had filed a complaint seeking the reduction in property value for tax year 2011 and provided an appraisal that set the property value at $6,800,000. The Board of Revisions (the “BOR”) rejected Coke’s complaint and kept the county valuation of $13,571,760. On appeal to the Board of Tax Appeals (the “BTA”), Coke provided a new appraisal in which the property was valued at $8,550,000. The county submitted a new appraisal prepared by its in-house certified general appraiser who valued the property at $14,000,000. The BTA issued its decision increasing the property’s value to the $14,000,000 recommended by the county’s appraiser. It found the county’s appraisal to be more persuasive, in part due to his reliance on more localized sales comparables that were in or closer to Cincinnati. Coke appealed to the Ohio Supreme Court and lost again.

Here’s what we learned from the court’s decision:

  • The BTA decision to adopt one appraisal as more persuasive than the competing appraisal is within its discretion. Absent a clear abuse of that discretion the court is not going to overturn the BTA.
  • The fact that an appraisal was offered by a county employee does not, in and of itself, make the appraisal less credible or probative absent evidence of actual bias.
  • The county appraiser consideration of the property’s ‘present use’ in order to determine which sales comparables were the most appropriate is permitted so long as it’s not the sole measure of value, was used appropriately, and other factors relevant to the property’s ‘exchange value are also considered. (‘Exchange value’ means the amount for which a property would sell on the open market by a willing seller to a willing buyer.)

The second decision was Lutheran Social Servs. of Cent. Ohio Village Hous., Inc. v. Franklin Ct. Bd. of Revision, Slip Opinion No. 2017-Ohio-900, decided by the court on March 16, 2017. The case involved two government-subsidized housing developments for the elderly owned by Lutheran Social Services of Central Ohio Village Housing, Inc. (“Lutheran Services”). Property 1 was a 44-unit apartment complex on 3.339 acres that the county valued at $1,250,000. Property 2 was a 46-unit apartment complex located on 3.938 acres that the county valued at $1,456,400. Lutheran Services filed a complaint challenging the property valuation for tax year 2008 and the South-Western City Schools Board of Education (the “BOE”) filed a counter complaint seeking to retain the county auditor’s values.

The BOR held hearings and Lutheran Services presented appraisal reports and testimony and argued for valuations of Property 1 at $780,000 and for Property 2 at $740,000. The BOR adopted the county auditor’s original valuation in both instances and Lutheran Services appealed to the BTA. When the BOR record was sent to the BTA the BOR certified compact discs supposedly containing audio recordings of the hearings but the CD for Property 2 was blank.

At the consolidated BTA hearing on the two properties, Lutheran Services relied on the appraisal reports and testimony previously presented to the BOR. The BOE presented testimony of an appraiser to the BTA, who had reviewed the appraisals provided by Lutheran Services and was critical of the appraisals. The BTA issued a brief decision adopting the opinions of value provided by the appraiser for Lutheran Services. However, the decision only provided the BTA conclusion that the appraisals were probative. No mention was made by the BTA regarding the contrary testimony provided at its hearing by the BOE’s witness. Also, when the BTA record was forwarded to the court upon the BOE’s appeal, the CD for the BOR hearing on Property 2 was sent with a note that it was blank, but no mention was made in the BTA decision about the defect in the record. The court vacated the BTA’s decision and remanded the case back to the BTA for further proceedings.

What we learned by the court’s requirement of a ‘do-over’ by the BTA:

  • While the BTA is not obligated to make formal findings of fact and conclusions of law, it must engage in sufficient discussion regarding the evidence presented to it so the court has some ability to determine whether the BTA acted reasonably or lawfully, or not.
  • The BTA cannot adopt one side’s argument without at least addressing the contrary evidence and testimony presented at its hearing by the opposing party. It must explicitly account for the evidence in reaching its decision regarding the value of each property.
  • The BTA cannot adopt one party’s evidence/testimony in the absence of a hearing record certified by the BOR, without exercising its statutory power to recover the missing hearing record or otherwise obtain the pertinent evidence.
  • The BTA is not prevented from readopting the appraisals submitted by Lutheran Services so long as it explains by the critical testimony offered by the BOE’s witness does not impugn the validity of their reliance on such appraisals. Absent an abuse of discretion, the court on a rehearing could very likely uphold the BTA second time around.
  • The appraiser for Lutheran Services appeared to have complied with prior case law that requires valuations of government-subsidized property using market rent and expenses. If the BTA readopts the appraisals and adequately addresses the reasons for not agreeing with the BOE’s offered testimony, Lutheran Services might finally win the day. It will only have taken nearly a decade.

As these decisions show, the court will give significant deference to the BTA’s findings of a question of fact, weighing evidence and assessing credibility of appraisals as such actions are the statutory job of the BTA. However, the court cannot read minds. The BTA’s reasoning needs to be laid out in the record and damaged/missing evidence must be addressed.