Youngstown Metropolitan Housing Authority v. Evatt

• Decision Date: 26 April 1944
• Docket Number: 29646.,29645
• Citation: 55 N.E.2d 122,143 Ohio St. 268
• Parties: YOUNGSTOWN METROPOLITAN HOUSING AUTHORITY v. EVATT, Tax Com'r, et al. (two cases).
• Court: Ohio Supreme Court

55 N.E.2d 122

143 Ohio St. 268

YOUNGSTOWN METROPOLITAN HOUSING AUTHORITY v. EVATT, Tax Com'r, et al. (two cases).

Nos. 29645, 29646.

Supreme Court of Ohio

April 26, 1944

Syllabus by the Court.

1. Section 2, Article XII of the Constitution of Ohio is a limitation upon the legislative power to enact laws exempting property from taxation; therefore the General Assembly, in the enactment of general laws for such purpose, may not exceed the limitations provided in the Constitution.

2. General laws exempting real or personal property from taxation are to be strictly construed and exemption may not be granted unless the right thereto is clearly shown.

3. Where a metropolitan housing authority issues bonds, part of which are sold to a federal agency and part to private individuals, and with the proceeds thereof purchases land and erects buildings containing family dwelling units leased or rented to selected families and later such authority conveys the title to the completed project to a private corporation in trust, for the purpose of securing the payment of the principal and interest upon such bonds, such property is not public property used exclusively for a public purpose and is not exempt from taxation under the provisions of Section 5351, General Code.

4. Property leased or rented only to persons who can pay rent in such sum as will maintain such property and in addition thereto will create a reserve in an amount sufficient to pay the interest and principal upon outstanding bonds which in amount equal the entire value of the property, is not being used exclusively for charitable purposes and is not exempt from taxation under the provisions of Section 5353, General Code.

5. No provision of the federal or state Constitution is violated by the taxation of property so purchased, used and held.

6. To be exempt from taxation under federal statutes property must be owned by the United States or some instrumentality thereof.

Appeals from Board of Tax Appeals.

The General Assembly, by the provisions of Section 1078-3 General Code, created a State Board of Housing. That board, by authority of the provisions of Section 1078-30, General Code, determined that there was need for a housing authority in that portion of Mahoning county comprising the cities of Youngstown, Campbell and Struthers, and on November 22, 1933 adopted a resolution and thereby created the Youngstown Metropolitan Housing Authority District and the Youngstown Metropolitan Housing Authority (hereinafter called the authority).

On February 14, 1938, that authority entered into an agreement with the city of Youngstown by the terms of which the city agreed to eliminate unsafe or unsanitary dwelling units within the territorial limits of that city of a number equal to or greater than 500, that being the number of new dwelling units to be provided in a low-rent housing project to be developed by the authority. The contract contains other provisions and terms which are not pertinent to the present controversy.

On March 23, 1938, the authority passed resolutions approving in form and substance and ordering the execution of two contracts between it and the United States Housing Authority (hereinafter called the U.S. H. A.), designated as a loan contract and an annual contributions contract. By the terms of these contracts, which were executed by authority of those resolutions, the U.S. H. A. agreed to purchase honds to be issued by the authority in the aggregate principal amount of $2,835,000 (but not to exceed 90% of the cost of the project); and also agreed to make annual contributions to the authority not to exceed three and one-half per cent of the cost of the project or to exceed $121,275 per annum from the time of completion of the project as determined by the U.S.H. A., to May 15, 1998, provided the authority received local contributions which equal at least 20% of such annual contribution.

Certain other pertinent provisions of the contracts will be hereinafter noted.

Thereafter, during the years 1938 and 1939, the authority proceeded to acquire numerous parcels of real estate, removed the buildings therefrom, consolidated the property, and named it The Westlake Terrace Housing Project. Between the years 1939 and 1942 the authority erected upon the consolidated property 64 buildings containing 618 housing units.

On April 15, 1940, the authority adopted a resolution authorizing its officers to issue bonds of the authority in the sum of $3,465,000 to pay the cost of the land and buildings. Thereafter the authority issued its bonds in two series, A and B. Series A bonds were issued and sold in the sum of $489,000 to a Cincinnati firm of bond dealers; $411,000 of these bonds are outstanding and unpaid; series B bonds in the sum of $2,976,000 were authorized, of which $2,626,000 were issued and sold to the U.S. H. A.

On that same day the U.S. H. A. and the authority entered into a consolidated loan and annual contributions contract consolidating the contracts of March 23, 1938, and modifying the same in certain respects, and the authority on that day conveyed by deed of trust to The City Trust & Savings Bank of Youngstown, Ohio, the property comprising the housing project.

By the terms of that trust indenture the trustee was to hold the property described therein until such time as the authority shall have paid or made provision for the payment of the principal and interest on all outstanding bonds issued by the authority, and upon written evidence thereof the trustee (The City Trust & Savings Bank) shall release the property from the trust.

It was further provided that the indenture did not constitute a mortgage and further that it was not to be construed as conferring upon the bondholders or the holders of coupons appertaining thereto the remedy of foreclosure or any other remedy pursuant to which the property could be sold or the interest of the authority in the project could be divested or forfeited.

The project was completed prior to tax listing day in 1942, at a cost of approximately $3,115,000 which was the amount of bonds sold. The completed project was assessed on the tax duplicate of Mahoning county at a value of $1,750,400.

In pursuance of the contracts the authority adopted rules establishing a schedule of rents and income-limits and prescribing the method of determination as to who was eligible for tenancy of the housing units. Among other things consideration was given to the needs of the applicant, his ability to pay the rent, and whether the family income was within the salary range.

The housing units were rented to tenants satisfactory to the authority.

In the year 1942, while the housing units were fully occupied, it was disclosed that 282, or about 45% of the families had incomes in excess of the maximums fixed by the rules of the authority, and thereupon the authority with the consent of the Office of Price Administration increased the rents approximately $16,000 per year.

On November 17, 1942, the authority filed two applications with the Board of Tax Appeals, one (No. 6325) seeking exemption from taxation, for the year 1942, of the property known as The Westlake Terrace Housing Project; the other (No. 6326) for remission of taxes in the sum of $71,585.53 assessed against the same property for the years 1939, 1940 and 1941. Upon application, William S. Evatt, Tax Commissioner, and E. E. Bodin, a taxpayer of Mahoning county, were made parties to both proceedings.

After hearing all the evidence, upon consideration thereof, the Board of Tax Appeals denied both applications.

Separate appeals were perfected; the appeal from the decision of the board on the application for exemption (No. 6325) and the appeal from the decision on the application for remission of taxes (No. 6326) are numbered 29645 and 29646, respectively, upon the docket of this court.

The cases were argued and submitted together and will be disposed of as one case.

Hammond, Hoyt & Rand, of Youngstown, and Eagleson & Laylin, of Columbus, for appellant.

Thomas J. Herbert, Atty. Gen., and Perry L. Graham, of Columbus, for Tax Commissioner.

William A. Ambrose, Pros. Atty., of Youngstown, and W. Ray Skirvin, of Cincinnati, for appellees.

BELL Judge.

The question to be determined is whether the decisions of the Board of Tax Appeals are unreasonable or unlawful.

Appellant claims that for the year 1939 the land was exempt under the provisions of Section 5351, General Code; that for the years 1940, 1941 and 1942 the land and buildings constituting the project were exempt under the provisions of Sections 5351 and 5353, General Code; and also that the property was exempt under the provisions of the federal Constitution and statutes.

For the purposes of our decision we shall presume that the authority was created legally and that it acted in accordance with law. We shall confine our considerations to the question of whether the property is exempt under any of the claims made by appellant.

The cornerstone of a democracy is that he who enjoys the privileges, benefits and protection thereof should bear his proportionate share of the expense, therefore funds produced by taxation are the very lifeblood of government, without which it soon would become impotent. That consideration forms the background for the rule that he who seeks exemption of property from taxation must show by clear and convincing proof his right thereto. In all doubtful cases exemption is denied.

In construing constitutional and statutory provisions relating to exemption of property from taxation, there are two schools of thought, one that such provisions should be liberally construed, the other that they should be strictly construed.

By the decisions it is established in...