Columbus City Sch. Bd. of Educ. v. Franklin Cnty. Bd. of Revision

• Decision Date: 08 February 2022
• Docket Number: 21AP-86, No. 21AP-87, No. 21AP-88
• Citation: 184 N.E.3d 939
• Parties: COLUMBUS CITY SCHOOLS BOARD OF EDUCATION, Appellant-Appellant, v. FRANKLIN COUNTY BOARD OF REVISION et al., Appellees-Appellees.
• Court: Ohio Court of Appeals

184 N.E.3d 939

COLUMBUS CITY SCHOOLS BOARD OF EDUCATION, Appellant-Appellant,

v.FRANKLIN COUNTY BOARD OF REVISION et al., Appellees-Appellees.

No. 21AP-86

No. 21AP-87

No. 21AP-88

Court of Appeals of Ohio, Tenth District, Franklin County.

Rendered on February 8, 2022

On brief: Rich & Gillis Law Group, LLC, Mark H. Gillis, and Kelley A. Gorry, Dublin, for appellant. Argued: Kelley A. Gorry.

On brief: Vorys, Sater, Seymour and Pease LLP, Nicholas M.J. Ray, and Lauren M. Johnson, Columbus, for appellees Aston Place Acquisition, LLC and Abigail Acquisition, LLC. Argued: Lauren M. Johnson.

DECISION

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 R.C. 5715.19 with the Franklin County Board of Revision ("BOR") seeking a $971,240 increase in the taxable value of the Abigail property and a $1,942,490 increase in the taxable value of the Aston property. Appellees did not file countercomplaints. The complaints were heard before the BOR on February 5, 2019. At the hearing, the BOE presented the testimony of Thomas D. Sprout, MAI, CPA, and appraisal reports for both properties, which were prepared by Sprout and Brian W. Barnes, MAI.¹ As reflected in the appraisal reports, Sprout testified that he applied the income and sales comparison approaches to value and concluded that the Aston property had a total value of $11,800,000, assigning $1,750,000 for the land, $175,000 for furniture, fixtures, and equipment ("FF&E"), and $9,875,000 for improvements. Applying the same methodology, Sprout concluded the Abigail property had a total value of $8,165,000, assigning $1,020,000 for the land, $69,000 for FF&E, and $7,076,000 for improvements. Both appraisal reports specified they were prepared to estimate the value of the properties for ad valorem taxes as of the tax lien date of January 1, 2017. Appellees did not present evidence or testimony at the hearing, but instead cross-examined Sprout.

{¶ 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:

[I.] 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.

[II.] 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.

[III.] 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.

[IV.] 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."

[V.] 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.

[VI.] 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.

[VII.] 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, 11 N.E.3d 222 (" East Bank II ") and Columbus City Schools Ba. of Edn. v. Franklin Cty. Bd. of Revision , 148 Ohio St.3d 700, 2016-Ohio-8375, 72 N.E.3d 637 (" Metro Partners ").

[VIII.] 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).

[IX.] 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.

[X.] 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 and 5703-25-12. Id. at 11 17.

[XI.] 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.

[XII.] 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.

[XIII.] 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

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