Gary G. Vogelgesang, Clermont County Auditor v. Cecos International, Inc.
| Decision Date | 15 March 1993 |
| Docket Number | CA92-07-077,93-LW-1772 |
| Parties | GARY G. VOGELGESANG, CLERMONT COUNTY AUDITOR, Appellant/Cross-Appellee v. CECOS INTERNATIONAL, INC., Appellee/Cross-Appellant CASE |
| Court | Ohio Court of Appeals |
Donald W. White, Clermont County Prosecuting Attorney, Elizabeth Mason, 123 North Third Street, Batavia, Ohio 45103, for appellant/ cross-appellee.
Baker & Hostetler, Edward J. Bernert, Daniel J. Gunsett and George H Boerger, 65 East State Street, Suite 2100, Columbus, Ohio 43215, for appellee/cross-appellant.
Appellant/cross-appellee, Gary G. Vogelgesang, Clermont County Auditor ("Auditor"), appeals a decision of the Board of Tax Appeals ("BTA") that determined the taxable value of a now-closed hazardous waste facility owned by appellee/cross-appellant, CECOS International, Inc. ("CECOS"). The tax year in question is 1987 and the applicable tax lien date is January 1, 1987.The subject property consists of approximately 207.96 acres located at 5092 Aber Road, Williamsburg, Ohio ("the facility") The facility was comprised of a sanitary landfill, administrative buildings, shop and maintenance buildings, a truck wash, leachate[1] storage facilities and eleven secure chemical management facility ("SCMF") cells.[2] As of the tax lien date, Cell Nos. 1-8 were closed,[3] Cell No. 9 was receiving waste and nearly completed, Cell No. 10 had recently started receiving waste, and Cell No. 11 was excavated and under construction. CECOS also planned to construct additional cells, Nos. 12-15.
The facility has a history of intervention by both the Ohio and U.S. Environmental Protection Agencies ("OEPA" and "EPA," respectively) which we will briefly review. CECOS's parent company, Browning-Ferris Industries, Inc., purchased the facility in 1983. In late 1983, CECOS had to stop the construction of Cell No. 8 due to a sagging side wall caused by water bearing sand deposits. The OEPA required CECOS to submit a proposal for reconstruction of the failed slope. This failure resulted in a temporary shutdown of the entire facility.
Next, in November 1984, a pumping problem caused water to be discharged from Cell No. 7 into a drainage ditch. The OEPA subsequently closed the facility. The OEPA allowed CECOS to reopen when it agreed to comply wish the Final Findings and Orders issued by the Director of the OEPA on November 26, 1984. These orders required CECOS to submit plans addressing surface water management and construction of a truck wash facility.
The OEPA next closed the facility in May 1985 when a hydrogeology study revealed widespread groundwater contamination. The OEPA permitted CECOS to reopen three months later on the condition that a detailed hydrogeologic assessment of the facility would be performed. CECOS's groundwater assessment consultant released its report in May 1986, which confirmed the existence of groundwater contamination. The sources of the contamination were Cell Nos. 1 and 2, which the previous owner constructed, and the intermediate landfill.
CECOS's problems continued in July 1986 when it discovered a large sand deposit or "channel sand" during the construction of Cell No. 11. CECOS also found channel sand in proposed Cell Nos. 12-14. Channel sand is detrimental to the operation of a SCMF cell as it increases the possibility of water mobility and contamination. As a result of the channel sand discovery, the OEPA, in February 1987, ruled that Cell Nos. 11 and 12 were unsuitable for the disposal of hazardous waste. The OEPA also required Cell Nos. 13 and 14 to be reduced in size.
Also during 1987, the EPA issued an administrative order calling for corrective action at the facility. Specifically, the EPA order forced CECOS to create measures controlling potential releases of contamination and to remediate already contaminated areas.
In August 1988, CECOS voluntarily closed the facility in order to comply with the OEPA's water management requirements. One month later, the facility neared the end of operations as both the OEPA and the EPA denied its "Part B" final operating permit.[4]
Finally, on April 6, 1990, CECOS signed a consent decree with the Ohio Attorney General through which it agreed to permanently close the facility. CECOS also pleaded guilty to one count of violating Ohio's hazardous waste laws and agreed to pay $3.5 million in civil penalties. In addition, CECOS retained liability for closure and post-closure costs and agreed not to transfer the facility to any entity which would engage in hazardous waste operations.
The present case began in 1988 when the Northeastern Local School District filed a complaint with the Clermont County Board of Revision ("Board") objecting to the Auditor's valuation of the facility. The Auditor had assessed the facility at a true value of $1,814,000 and a taxable value of $634,900. The Board then reassessed the facility at a true value of $45,246,260 and a taxable value of $15,836,191. CECOS appealed the Board's reassessment to the BTA on December 30, 1988.
In its decision, the BTA relied primarily on the report of CECOS's appraiser, William McCann. In his report, McCann first formulated a preliminary estimate of market value "assuming the facility was not defective." McCann's preliminary analysis consisted of two steps. First, McCann utilized the three standard valuation methods, the cost approach, the market approach and the income approach, to compute three estimations of value.[5] Second, McCann reconciled the three figures and, giving the most weight to the market and income approaches, concluded that the facility had a value of $2,150,000 on January 1, 1987 assuming no environmental defects.
To account for what McCann characterized as "defects" at the facility, he then deducted $44,200,000 in estimated liabilities from the reconciled amount and concluded that the facility had a negative value of $42,050,000. The liability deduction included the cost of compliance with the 1984 OEPA Final Findings and Orders, the cost of remediating contaminated Cell Nos. 1 and 2, closure costs, and post-closure costs.
The BTA agreed with McCann's calculation of value until the deduction far liabilities. Finding the liabilities to be speculative, premature costs not incurred as of January 1, 1987, the BTA refused to deduct those amounts from McCann's initial determination of value. Thus, the BTA ruled that the true value of the facility as of January 1, 1987 was $2,150,000, over $43,000,000 less than the Board's total.
On appeal, the Auditor presents a single assignment of error:
THE REVIEWING BODY ABUSED ITS DISCRETION TO THE SUBSTANTIAL PREJUDICE OF APPELLANT IN ADMITTING TESTIMONY, OVER APPELLANT'S OBJECTION, REGARDING EVENTS OCCURRING TWO YEARS AFTER THE TAX LIEN DATE WHERE SUCH EVIDENCE WAS OFFERED TO DEMONSTRATE THE VALUE OF APPELLEE'S REAL PROPERTY.
In its cross-appeal, CECOS presents two assignments of error:
Three basic principles guide our analysis on both the appeal and the cross-appeal. First, it is not the function of an appellate court to substitute its judgment for that of the BTA on factual issues pertaining to the taxable fair market value of property. Jacob B. Sweeney Equip. Trust v. Limbach (1991), 74 Ohio App.3d 82, 87. Second, BTA findings of fact that are based upon sufficient probative evidence will not be overruled. Witt Co. v. Hamilton Cty. Bd. of Revision (1991), 61 Ohio St.3d 155, 157. Third, the revisory jurisdiction of this court is limited to determining whether the decision of the BTA is reasonable and lawful. Sweeney Equip. Trust at 87; R.C. 5717.04.
We first address the Auditor's appeal. In his sole assignment of error, the Auditor contends that the BTA's decision was unreasonable and unlawful because it considered McCann's appraisal report and corresponding testimony in determinIng value. The Auditor objects to the BTA's use of the report and testimony because they allegedly "substantially rely" on two post-tax lien date events. These events are the OEPA's denial of the RCRA Part B permit on September 8, 1988 and the EPA's denial of the RCRA Part B permit on September 29, 1988.
Real property in Ohio must be appraised at its "true value in money' for taxation purposes. R.C. 5713.01, 5713.03. "True value in money" is defined as follows for purposes of this case:
The fair market value or current market value of property and is the price at which property should change hands on the open market between a willing buyer and a willing seller, neither being under any compulsion to buy or to sell and both having a knowledge of all the relevant facts.
Ohio Adm.Code 5705-3-01(A)(1). In addition, "[a]ll relevant facts tending to influence the market value of land should be considered, including, but not limited to, size, topography, soil and subsoil, drainage, utility connections, street or road, land pattern, neighborhood type and trend, amenities, zoning, restrictions, easements, hazards, etc." Ohio Adm.Code 5705-3-07(B). The best evidence of the true value in money of real property is an actual, recent sale of the property in an arm's-length transaction. Conalco v. Bd. of Revision (1977), 50 Ohio St.2d 129, paragraph one of the syllabus. In the absence of such a sale, Ohio Adm.Code 5705-3-03(D) allows a true value estimate based on the market, income, and cost approaches to value.
The Ohio Supreme Court addressed the time frame during which the BTA may examine the circumstances affecting...
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