Board of Educ. of South-Western City Schools v. Kinney, SOUTH-WESTERN

• Citation: 24 OBR 414,494 N.E.2d 1109,24 Ohio St.3d 184
• Decision Date: 02 July 1986
• Docket Number: SOUTH-WESTERN,No. 85-1585,85-1585
• Court: United States State Supreme Court of Ohio
• Parties: , 33 Ed. Law Rep. 463, 24 O.B.R. 414 BOARD OF EDUCATION OF theCITY SCHOOLS, Appellant, v. KINNEY, Tax Commr., et al., Appellees.

Page 184

24 Ohio St.3d 184

494 N.E.2d 1109, 33 Ed. Law Rep. 463, 24 O.B.R. 414

BOARD OF EDUCATION OF the SOUTH-WESTERN CITY SCHOOLS, Appellant, v. KINNEY, Tax Commr., et al., Appellees.

No. 85-1585.

Supreme Court of Ohio.

July 2, 1986.

Syllabus by the Court

A party that challenges the constitutionality of the application of a tax statute in a particular situation is required to raise that challenge at the first available opportunity during the proceedings before the Tax Commissioner, and a failure to do so constitutes a waiver of that issue.

Section 2, Article XII of the Ohio Constitution provides that statutes may be enacted exempting public property from taxation if the property is used exclusively for any public purpose. R.C. 5709.01 states that all real property in Ohio is subject to taxation unless expressly exempted therefrom. R.C. 5709.08 states that " * * * public property used exclusively for a public purpose shall be exempt from taxation." This case requires us to apply R.C. 5709.08, and to review the tax-exempt status of a publicly owned and managed golf course, a small portion of which is used with the intention of generating profit for private concerns.

In 1971, the city of Columbus acquired a 196.5 acre parcel known as the Bolton Field Golf Course, and it has enjoyed tax-exempt status since that date. The course, which is managed by the city Parks & Recreation Division, includes a clubhouse containing a large maintenance area, lobby, snack shop, pro-shop and an efficiency apartment. The snack shop is leased to a private concessioner for twenty-two percent of its gross sales. The course pro is a city employee who is paid a small salary, and who draws the balance of his income from the sale of pro-shop merchandise. The efficiency apartment is rented for $80 per month to a non-city employee.

The course is open to the general public. In 1980, standard green fees were $4.50 per eighteen holes, while junior and senior golfers received reduced rates. The course operates on a break-even budget, but lost about $3,400 in 1980. The loss was subsidized by the city.

On December 31, 1980, appellant, the Board of Education of the South-Western City Schools, filed a complaint with the then Commissioner of Tax Equalization challenging the tax-exempt status of several properties owned by the city of Columbus, including the Bolton Field Golf Course. The case was assigned to an attorney examiner and on May 19, 1982, he recommended that the golf course retain its tax-exempt status. ¹ The school board objected to the recommendation and on July 28, 1982, the commissioner denied the complaint. In 1985, the Board of Tax Appeals agreed with the attorney examiner's recommendation and affirmed the order of the commissioner.

The cause is now before this court upon an appeal as of right.

Teaford, Rich, Belskis, Coffman & Wheeler and Jeffrey A. Rich, Columbus, for appellant.

Anthony J. Celebrezze, Jr., Atty. Gen., and James C. Sauer, Columbus, for appellee Tax Com'r.

Ronald J. O'Brien, City Atty., and Debi Everson, Columbus, for appellee City of Columbus.

DOUGLAS, Justice.

The school board's first argument is that the golf course's tax-exempt status somehow violates the equal protection guarantees of the Ohio and United States Constitutions. The city of Columbus, on the other hand, contends that this issue is not properly before the court since it was neither raised, nor considered, in the proceedings below.

As a general rule, this court will not consider matters which were not presented to the Board of Tax Appeals. Neil House Hotel Co. v. Bd. of Revision (1946), 147 Ohio St. 231, 70 N.E.2d 646 , paragraph one of the syllabus. It has been stated that there should be a "constitutional issue" exception to the general rule because the Board of Tax Appeals has no authority to declare statutes unconstitutional. See McCreary v. Bowers (1958), 106 Ohio App. 445, 446, 155 N.E.2d 224 , appeal dismissed (1958), 168 Ohio St. 64, 150 N.E.2d 850 . The school board's attorney stated during oral argument that raising the constitutional issue in the proceedings below would have been futile. We disagree. First of all, a fundamental distinction must be recognized between the constitutional application of legislation to particular facts, and the constitutionality of the legislation itself. In this case, the school board challenges the constitutional application of legislation to particular facts. Specifically, it argues " * * * with respect to this case, the operation of R.C. 5709.08 does result in * * * discrimination against members of the same class as to deny owners of private golf courses the equal protection of the laws. * * * "

One who challenges the constitutional application of legislation to particular facts is required to raise that challenge at the first available opportunity during the proceedings before the administrative agency. Cf. Sun Finance & Loan Co. v. Kosydar (1976), 45 Ohio St.2d 283, 284, fn. 1, 344 N.E.2d 330 . Otherwise, it would be impossible to develop the factual record necessary for the resolution of the case. Petrocon v. Kosydar (1974), 38 Ohio St.2d 264, 313 N.E.2d 373 . ² Had the equal protection issue in this case, for instance, been raised during the proceedings before the attorney examiner, it is entirely possible that the city of Columbus would have developed an evidentiary record sufficient to show that the statute was applied constitutionally. By waiting until now to raise the issue, the school board has deprived the city of an opportunity to develop the record on this point. This itself raises due process considerations. Furthermore, the school board's failure to raise the constitutional issue during the proceedings below has prevented this court from receiving the expert commentary of the Tax Commissioner and the Board of Tax Appeals on the equal protection issue. Finally, this court has repeatedly stated that it reviews decisions of the Board of Tax Appeals on appeal, and that it is not a trier of fact de novo. Operation Evangelize v. Kinney (1982), 69 Ohio St.2d 346, 347, 452 N.E.2d 200 .

For all of the foregoing reasons, we hold that a party that challenges the constitutionality of the application of a tax statute in a particular situation is required to raise that challenge at the first available opportunity during the proceedings before the Tax Commissioner, and a failure to do so constitutes a waiver of that issue.

The school board's next argument is that the golf course is not entitled to tax-exempt status because it is not used exclusively for a public purpose. Specifically, the school board argues that the snack shop and proshop are operated to generate profit for private concerns, and that the efficiency apartment is operated to the benefit of a private person.

Before addressing the school board's argument, we emphasize that our scope of review is limited and that we will not overturn the Board of Tax Appeals' decision if it is reasonable and lawful. Operation Evangelize, supra.

R.C. 5709.121 defines the term "exclusively" as follows:

"Real property * * * belonging * * * to the state or a political subdivision, shall be considered as used exclusively for * * * public purposes by * * * the state, or political subdivision, if it is * * *:

" * * *

"(B) * * * made available under the direction or control of * * * the state, or political sub...