By Dan Trevas
The Ohio Supreme Court Tuesday reversed a pair of Ohio Board of Tax Appeals (BTA) decisions applicable to two properties in Franklin County’s South-Western City School District.
In separate unanimous per curiam opinions, the Supreme Court returned the taxable values of the properties to the assessments made by the Franklin County auditor at the urging of South-Western’s Board of Education. The Court rejected the argument that when the owners provided evidence that their properties were overvalued, the school district had to offer evidence to counter the argument and not rely completely on the county auditor’s initial assessment.
Justice Mary DeGenaro, whose term began on Jan. 28, did not participate in the cases.
Shopping Center Owners Sought $600,000 Reduction
A single-story shopping center owned by 3770 Broad Company sought a reduction in its 2012 tax year property valuation. The company asked that the county auditor’s $1.3 million valuation be reduced to $700,000, stating the property was overvalued and required repairs. The company’s complaint to the Franklin County Board of Revision also noted the property sold for $520,000 at a 2013 sheriff’s sale. South-Western Schools objected to the reduction and urged the board of revision to maintain the auditor’s original valuation.
Deno Duros, a certified appraiser hired by the owner, compared the property to sales of four similar-sized properties, and adjusting for market conditions, arrived at the $700,000 value. Duros explained at a board hearing that he did not view the interiors of the comparable properties or contact the parties involved in those sales to verify they were arm’s-length transactions. He also valued the property based on projected income, using the actual income of the owner, but did not include any other surrounding market information. He also provided a June 2012 appraisal conducted by three individuals preparing the property for the sheriff’s sale. The individuals, who did not appear at the board hearing, appraised the value at $780,000.
The board rejected Duros’s analysis, finding it incomplete. The board reduced the value to $780,000, the same as the value assigned for the sheriff’s-sale appraisal, and disregarded the $520,000 actual sale price because it did not view it as an arm’s length transaction. The school district appealed to the BTA.
BTA Sends Case Back
The BTA criticized Duros’s approach to the valuation and also found the board’s use of the sheriff’s-sale appraisal to be improper because it did not contain any supporting documentation or analysis, and none of the individuals involved in the appraisal testified before the board about the work. However, the BTA concluded the property owner sufficiently demonstrated the auditor overstated the value. It vacated the board’s decision and remanded the case to the board to make a finding based on competent evidence. In September 2015, the school district appealed to the Supreme Court, which was required at the time to hear the case.
Court Considers Reinstating Original Value
The school district argued that the BTA should have reinstated the auditor’s valuation instead of sending the case back to the board. The opinion explained that the BTA opposed reinstating the auditor’s valuation based on the precedent of the Court’s 2007 Bedford Bd. of Edn. v. Cuyahoga Cty. Bd. of Revision decision.
The Bedford decision stated that when a board of revision reduces the value of a property based on the owner’s evidence, the board’s valuation supplants the auditor’s valuation, the Court noted. When a board of education appeals to the BTA, the school district cannot simply fault the owner’s evidence and urge reinstatement of the auditor’s value, but must prove a proposed value that is different than the owner’s.
The Court ruled a school district does not need to prove a new value “when a board of revision’s determination of the value is infected with legal error.” South-Western argued it did not have to prove a new value because the board made a legal error when it used the sheriff’s-sale appraisal to value the property. The Court agreed, noting the appraisal occurred six months after the date required to set the value for the 2012 tax year, and the appraisal did not contain any factual information that could be used to base the value for the tax year. Because of the legal error, the Court concluded the Bedford rule does not apply and the school district did not have to provide any more information to challenge the value.
The Court found that since the BTA found the owner’s evidence unreliable, and the sheriff’s-sale appraisal improper, there was no need to return the case to the board. Instead, it reinstated the auditor’s original $1.3 million valuation.
Reduction Denied for Agricultural Land
In a second South-Western challenge to a BTA decision, the Court ruled to retain a $328,700 valuation for 55 acres of agricultural land tucked behind a housing subdivision. Property owners Cummins & Davis challenged the assessment and argued the property should be valued at $165,000 because not much of the property is adjacent to a road.
At a board of revision hearing contesting the 2011 tax year value, company partner Jeff Davis provided information about a comparable 55-acre vacant land sale that occurred about five miles away. He testified the comparable property was in a “much more desirable area” and was sold for about $4,902 per acre. He perceived his property to be worth about $3,000 per acre because of its limited development opportunity.
The school district did not present its own evidence of the agricultural land’s value, but questioned Davis about a notation on the printout of the comparable sale he offered that indicated the $4,902 per acre sale was not an arm’s-length transaction.
The board reduced the value of the property to $272,000. Although the board did not state how it determined the number, the school district inferred it came roughly from multiplying the 55.61 acres by the $4,902 value of the comparable property. The district appealed to the BTA. The BTA found the comparable sale was of little value as evidence, but found Davis’s testimony to be credible. Relying on the Bedford rule, it found the board’s reduction to be justified. South-Western appealed to the Supreme Court.
BOR Ruling Marred by Error
The Court again noted that the Bedford rule does not apply to valuations marred by legal error. The error here stemmed from the board of revision’s reliance on a comparable sale that was not from an arm’s length transaction. Given that error, Bedford did not constrain the BTA. The opinion stated there was not enough sufficient evidence presented to remand the case to the BTA to independently value the property. Because there was lack of evidence to challenge the auditor’s ruling, the Court reinstated the original $328,000 valuation.