Bd. of Educ. of the Columbus City Sch. v. Franklin Cnty. Bd. of Revision
| Decision Date | 30 September 2014 |
| Docket Number | No. 14AP–167.,14AP–167. |
| Citation | 20 N.E.3d 1086 |
| Court | Ohio Court of Appeals |
| Parties | BOARD OF EDUCATION OF THE COLUMBUS CITY SCHOOLS, Appellant–Appellee, v. FRANKLIN COUNTY BOARD OF REVISION et al., Appellees–Appellees, 621 City Park, LLC, Appellee–Appellant. |
Rich & Gillis Law Group, LLC, Mark H. Gillis, Dublin, and Kimberly G. Allison, for appellee Board of Education of the Columbus City Schools.
Ronald B. Noga, Columbus, for appellant.
SADLER
, P.J.
{¶ 1} Appellant, 621 City Park, LLC, appeals from a decision and order of the Ohio Board of Tax Appeals (“BTA”) determining the taxable value of certain real property for the tax year 2010. For the following reasons, we reverse and remand for further proceedings.
{¶ 2} Appellant owns a four-unit residential property in the German Village area of Columbus. For tax year 2010, the Franklin County Auditor (“auditor”) assigned a true value of $360,000. Appellant filed a complaint against valuation, seeking a reduction of true value to $300,000. Appellee, Board of Education of the Columbus City Schools (“BOE”), filed a counter-complaint seeking to retain the auditor's valuation.
{¶ 3} Following a hearing, appellee, Franklin County Board of Revision (“BOR”), reduced the true value of appellant's property to $290,000 for tax year 2010. The BOE filed an appeal with the BTA, and, following a hearing, the BTA reinstated the $360,000 value originally assessed by the auditor.
{¶ 4} In a timely appeal, appellant asserts the following assignments of error:
{¶ 5} On May 20, 2013, the BOR held a hearing on appellant's complaint against valuation.1 Appellant presented an appraisal report for 2011 and the testimony of Kenneth Goff, the individual who prepared the appraisal report. Mr. Goff testified that he has been a real estate appraiser for 38 years and specializes in the appraisal of one-to-four-unit residential properties. He appraised the subject property for tax year 2011 at a value of $275,000. In performing the appraisal, Mr. Goff utilized two commonly accepted valuation methods: (1) the sales-comparison method, which focuses on the prices of comparable properties that have sold recently, and (2) the income-capitalization method, which focuses on a property's capacity to generate income for the owner. According to Mr. Goff, both methods yielded similar value estimates.
{¶ 6} Mr. Goff testified as to the specifics of both valuation methods. Regarding the sales-comparison method, Mr. Goff testified that he examined sales data for three similarly situated four-unit residential properties and made adjustments relevant to the subject property for square footage, condition, and price per unit differences. He personally viewed and inspected the exterior of the three sales comparables and utilized photographs and other information provided in the multiple listing service to assess the interior of the three sales comparables.
{¶ 7} As to the income-capitalization method, Mr. Goff testified that such method is commonly used in valuation of one-to-four-unit residential properties; it is less commonly used to value industrial or more complex properties. Under the income-capitalization method, valuation is calculated based upon the product of the subject property's total gross monthly rental income and a gross rent multiplier. In calculating total gross monthly rental income for the subject property, Mr. Goff utilized gross market rents that were slightly lower than the actual gross rents received. In response to a question posed by the BOR, Mr. Goff testified that he derived the gross rent multiplier for the subject property from the gross rent multipliers for the three sales comparables.
{¶ 8} Mr. Goff admitted that he did not conduct a specific appraisal of the property for tax year 2010, and he declined to provide an opinion of value as of January 1, 2010. However, he averred that all the sales comparables used in the 2011 appraisal occurred in 2010 and could be used as part of a valuation analysis for 2010. He also noted that total residential property values in Franklin County from 2010 to 2011 essentially remained static.
{¶ 9} Appellant also presented the testimony of Thomas Willoughby, the sole member of the limited liability corporation that owns the subject property. Summarizing his educational and employment background, Mr. Willoughby testified that he holds a degree in architecture from Glasgow University, an M.B.A. in finance from Harvard University, and a Ph.D. from Cambridge University. He has been engaged full time in real estate investment in the German Village area for over 30 years and has closely followed real estate market trends in the area. Over the course of his 30–year investment history, Mr. Willoughby has owned over 100 one-to-four-unit residential properties.
{¶ 10} Mr. Willoughby testified that appellant purchased the subject property in May 2006 for $360,000. Since the time of purchase, the property has been well-maintained and has been fully occupied, with few exceptions. As of the tax lien date of January 1, 2010, the property was fully occupied at above market rents. Based both on his ownership of the subject property and his experience in the German Village real estate market, Mr. Willoughby concurred in Mr. Goff's $275,000 appraisal.
{¶ 11} Although an attorney representing the BOE appeared at the hearing and cross-examined both Mr. Goff and Mr. Willoughby, the BOE did not present any witnesses or additional information regarding the valuation of the property. Noting appellant's failure to submit an appraisal report specific to tax year 2010, the BOE attorney argued that appellant failed to meet its burden of proving entitlement to a reduction in value.
{¶ 12} On May 22, 2013, the valuation of the subject property again became the topic of a BOR proceeding. During that proceeding, the auditor recommended for tax year 2011 the BOR apply a slightly higher gross rent multiplier than that set forth in the 2011 appraisal report, resulting in a valuation of $290,000. The auditor further recommended that the BOR value the subject property for tax year 2010 the same as for tax year 2011, i.e., $290,000, based on the testimony regarding static market conditions.
{¶ 13} The BOR issued a decision on May 22, 2013, concluding that a decrease in valuation of $70,000 was warranted and that such change was effective as of tax lien date January 1, 2010. Accordingly, the BOR reduced the true value of appellant's property to $290,000 for tax year 2010.2
{¶ 14} Upon the BOE's timely appeal, the BTA conducted a hearing on January 6, 2014. Appellant once again presented the testimony of Mr. Goff and Mr. Willoughby, each of whom essentially reiterated the testimony offered at the BOR hearing, with some additions.
{¶ 15} Mr. Goff again averred that he appraised the subject property for tax year 2011 at a value of $275,000, but did not conduct an appraisal for tax year 2010. He also reiterated that the sales comparables used in the 2011 appraisal occurred in 2010 and could be used as part of a valuation analysis for 2010. Mr. Goff described the 2009 to 2011 market value trend for properties in the German Village area as “flat.” (Jan. 6, 2014 BTA Tr. 13.) He also testified that he had “no information that would indicate there would be a significant valuation difference plus or minus” between tax years 2010 and 2011. (Jan. 6, 2014 BTA Tr. 13.)
{¶ 16} Mr. Willoughby opined that the collapse of the financial markets in 2008 negatively affected the value of the subject property from 2009 to 2011. He further opined that the BOR's $290,000 valuation was an acceptable compromise between his original valuation of $300,000 (set forth in the complaint) and Mr. Goff's $275,000 valuation.
{¶ 17} Although the attorney for the BOE cross-examined Mr. Goff and Mr. Willoughby during the BTA hearing, the BOE did not present any witnesses, evidence of its own valuation, or evidence in support of the auditor's valuation. The BOE attorney argued that the BOR improperly reduced the auditor's true value for the subject property from $360,000 to $290,000 for tax year 2010. The BOE attorney contended that, because the record was devoid of any appraisal evidence as of January 1, 2010, Mr. Goff's testimony before the BOR and the BTA should be afforded no weight. The BOE attorney further argued that while Mr. Willoughby, as sole member of the limited liability corporation that owns the subject property, was competent to provide an opinion of value, his testimony was neither offered as a qualified expert, nor was his opinion based on a valuation analysis utilizing market rents or income as of tax year 2010.
{¶ 18} In its January 31, 2014 decision and order, the BTA noted that the appraisal presented by appellant valued the property as of January 1, 2011, 12 months after the tax lien date of January 1, 2010. Citing Supreme Court of Ohio case law emphasizing the importance of an expert's opinion establishing valuation as of the tax lien date in issue, the BTA found that “[i]n the absence of an appraiser's opinion of value as of the relevant tax lien date, we find that the owner failed to meet its burden of proof before this board and before the BOR.” (BTA Decision and Order, 3.) In a footnote following this statement, the BTA...
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