Vill. of Obetz v. McClain

• Decision Date: 20 May 2021
• Docket Number: No. 2020-0541,2020-0541
• Citation: 164 Ohio St.3d 529,173 N.E.3d 1200
• Court: Ohio Supreme Court
• Parties: The Village of OBETZ, Appellant, v. MCCLAIN, Tax Commr., et al., Appellees.

164 Ohio St.3d 529

173 N.E.3d 1200

The Village of OBETZ, Appellant,

v.MCCLAIN, Tax Commr., et al., Appellees.

No. 2020-0541

Supreme Court of Ohio.

Submitted January 12, 2021

Decided May 20, 2021.

Frost Brown Todd, L.L.C., Frank J. Reed Jr., Columbus, Eugene L. Hollins, and Thaddeus M. Boggs, Columbus, for appellant.

Dave Yost, Attorney General, and Daniel G. Kim, Assistant Attorney General, for appellee tax commissioner.

Kennedy, J. {¶ 1} This appeal as of right from a decision of the Board of Tax Appeals presents the question whether a municipality may reinstate the tax-exempt status of real property under a tax-increment-financing ("TIF") arrangement by amending the ordinance that originally authorized the TIF arrangement after the exemption has expired.

{¶ 2} R.C. 5709.40(G) provides that a TIF exemption may commence no earlier than the tax year following the effective date of the ordinance creating the TIF arrangement. Although appellant, the village of Obetz, enacted an ordinance in 2017 in an effort to reinstate the exemption after it expired in 2014, the exemption could not retroactively apply to tax years 2015, 2016, and 2017. Rather, pursuant to R.C. 5709.40(G), 2018 was the first tax year that the exemption could commence.

{¶ 3} Because the 2017 ordinance created a new exemption rather than extending the prior one, the BTA reasonably and lawfully upheld appellee tax commissioner's denial of an exemption for tax years 2015, 2016, and 2017.

{¶ 4} We therefore affirm the decision of the BTA.

Facts and Procedural History

{¶ 5} On April 7, 1997, Obetz passed Ordinance 6-97 to enact a TIF arrangement related to the development of an approximately 643,000 square-foot warehouse on property owned by Goodyear Tire & Rubber Company. The ordinance stated "that the increase in true value of the Property subsequent to the effective date of this Ordinance * * * is a public purpose for 16 years, and 25% of the [property's increased value] is hereby declared to be exempt from taxation [for 16 years]." It approved the TIF agreement with Goodyear, which required the company to deposit semiannual service payments into a TIF fund in lieu of taxes. An exhibit to the ordinance describes the public-improvement projects to be financed with the TIF fund.

{¶ 6} On October 13, 1999, the tax commissioner granted the tax exemption relating to the Goodyear TIF, finding the increased value of the property to be "legally exempt from taxation pursuant to R.C. section 5709.40 in accordance with the provisions of the municipal ordinance." In granting the exemption, the commissioner ordered that

100% of the [increased value] of the real property described above be entered upon the list of property in said county which is exempt from taxation commencing in the first year in which the real property would first be taxable were that property not exempted from taxation, and ending on the earlier of thirty years from such date of passage or the date on which the City can no longer require semiannual service payments in lieu of taxes.

{¶ 7} The tax commissioner granted a 100 percent exemption for increased property value while the ordinance provided for only 25 percent of the newly accrued value to be exempt. Further, the commissioner provided for the exemption to continue for the shorter of 30 years or the end of the obligation to make service payments, while the ordinance stated that the exemption would last for 16 years.

{¶ 8} In June 2017, an attorney for Obetz, Eugene Hollins, e-mailed the Franklin County auditor's office concerning the expiration of the exemption provided in the Goodyear TIF. Rebecca Wirthman, a deputy auditor, replied that the county auditor had erroneously determined the exemption to have a 30-year duration and stated that the exemption "should have actually ended for tax year 2015." Wirthman noted that payments had been erroneously deposited into the Goodyear TIF account since the beginning of tax year 2015 and that the state department of taxation had directed that the property be returned to the taxable list for 2015, 2016, and 2017. Wirthman also relayed to Hollins the tax department's suggestion that "if [Obetz] pass[es] an ordinance, before the end of [2017], * * * they should be able to re-TIF those parcels for 2015-2017."

{¶ 9} On December 28, 2017, Obetz enacted Ordinance 64-17 to amend the 1997 ordinance, seeking to extend the TIF exemption from 16 to 30 years, to increase the exemption from 25 percent to 100 percent of the increased value, and to expand the list of public-infrastructure projects to which TIF service payments would be applied. It also varied from the 1997 ordinance by providing for Obetz to pay appellee Hamilton Local School Board of Education 60 percent of the "net TIF funds" plus an advance payment of $200,000.

{¶ 10} After passing the 2017 ordinance, Obetz applied for a tax-incentive-program exemption. In May 2018, the tax commissioner issued a final determination denying Obetz's application. The commissioner acknowledged the discrepancies between the 1999 entry granting the exemption and the 1997 ordinance, but he noted that the entry made the exemption "subject to the limitations of the underlying ordinance," so that "the TIF exemption expired in 2014 with the exempt value of the property to be returned to the tax list in 2015."

{¶ 11} The tax commissioner explained that the 2017 ordinance could not retroactively reinstate the exemption for tax years 2015, 2016, and 2017, because R.C. 5709.40(G) provides that an exemption may begin no earlier than a tax year that "commences after the effective date of the ordinance." The commissioner reasoned that because the 2017 ordinance became effective upon enactment in late 2017, 2018 was the first tax year the exemption could commence. And because the 1997 ordinance's exemption had expired in 2014, the amendment of that ordinance related to a new exemption that could not retroactively restore the property to the exempt list for the three lapsed years. Therefore, the commissioner concluded, the auditor had "properly returned the property to the tax list for tax years 2015, 2016, and 2017."

{¶ 12} Obetz appealed to the BTA, which affirmed the tax commissioner's final determination. BTA No. 2018-1008, 2020 WL 1657890 (Mar. 22, 2020). It agreed with the commissioner that the 2017 ordinance created a new exemption rather than extending the earlier one, so that R.C. 5709.40(G) barred the exemption from applying to 2015, 2016, and 2017. Id. at *3. The BTA also rejected Obetz's argument that the commissioner was estopped from claiming that the original exemption had expired. Id.

{¶ 13} Obetz appeals and advances three propositions of law:

1. A Final Determination of the Tax Commissioner cannot be overridden or subsequently revised if it is not appealed within the statutorily prescribed window.

2. Land classified as tax exempt according to the express terms of an unchallenged Final Determination of the Tax Commissioner cannot be retroactively placed on the tax rolls by either the Tax Commissioner or a county official because the tax exempt status of land is determined as of January 1 of the tax year at issue.

3. The terms of an unchallenged twenty-year old Final Determination of the Tax Commissioner and the written direction of a known representative of a public office are sufficient to establish reasonable reliance on behalf of a municipality such that estoppel may be applied against the State.

Law and Analysis

Standard of Review

{¶ 14} We review BTA decisions to "determine whether they are reasonable and lawful."

Grace Cathedral, Inc. v. Testa , 143 Ohio St.3d 212, 2015-Ohio-2067, 36 N.E.3d 136, ¶ 16, citing R.C. 5717.04. Although we defer to the "BTA's determination of the credibility of witnesses and its weighing of the evidence subject only to an abuse-of-discretion review on appeal," HealthSouth Corp. v. Testa , 132 Ohio St.3d 55, 2012-Ohio-1871, 969 N.E.2d 232, ¶ 10, we do not defer to the BTA's resolution of legal questions but rather apply de novo review, Crown Communication, Inc. v. Testa , 136 Ohio St.3d 209, 2013-Ohio-3126, 992 N.E.2d 1135, ¶ 16.

{¶ 15} R.C. 5715.271 provides that "[i]n any consideration concerning the exemption from taxation of any property, the burden of proof shall be placed on the property owner to show that the property is entitled to exemption." Although Obetz is neither the owner of the property at issue nor the taxpayer, it is the applicant for, and proponent of, the exemption. It therefore bears the burden to show that the property is entitled to an exemption from real-property taxes. Anderson/Maltbie Partnership v. Levin , 127 Ohio St.3d 178, 2010-Ohio-4904, 937 N.E.2d 547, ¶ 16. R.C. 5715.271 further provides that the "fact that property has previously been granted an exemption is not evidence that it is entitled to continued exemption."

Tax-Increment Financing

{¶ 16} Tax-increment financing "is a method of promoting and financing the development of real property by directing ‘ "all or a portion of the increased property tax revenue that may result" ’ from the development to defraying the cost of improvements that are part of the development." Kohl's Illinois, Inc. v. Marion Cty. Bd. of Revision , 140 Ohio St.3d 522, 2014-Ohio-4353, 20 N.E.3d 711, ¶ 3, quoting Princeton City School Dist. Bd. of Edn. v. Zaino , 94 Ohio St.3d 66, 68, 760 N.E.2d 375 (2002), quoting Meck & Pearlman, Ohio Planning and Zoning Law , Section T 15.29, at 704 (2000).

{¶ 17} "Once a TIF agreement is in place, any increase in the assessed value of the designated parcels is subject, in whole or in part, to (1) an exemption from taxation and (2) a concomitant obligation of the property owner to make payments ‘in lieu of tax’ into a special fund used to pay for the development—such payments are referred to as ‘service payments.’ " Fairfield Twp. Bd. of Trustees v. Testa , 153 Ohio St.3d 255, 2018-Ohio-2381, 104 N.E.3d 749, ¶ 5, quoting R.C. 5709.73(B) and 5709.74....