Cincinnati City School Dist. Bd. of Edn. v. Cincinnati , 2021 Ohio 2653 ( 2021 )

[Cite as Cincinnati City School Dist. Bd. of Edn. v. Cincinnati, 2021-Ohio-2653.]
IN THE COURT OF APPEALS
FIRST APPELLATE DISTRICT OF OHIO
HAMILTON COUNTY, OHIO
CINCINNATI CITY SCHOOL : APPEAL NO. C-210113
DISTRICT, BOARD OF EDUCATION, BTA CASE NO. 2019-1227
:
Appellee-Appellant,
:
vs. O P I N I O N.
:
CITY OF CINCINNATI, :
Appellant-Appellee, :
and :
HAMILTON COUNTY BOARD OF :
REVISION,
:
HAMILTON COUNTY AUDITOR,
:
and
:
TAX COMMISSIONER OF THE STATE
OF OHIO, :
Appellees. :
Appeal From: Ohio Board of Tax Appeals
Decision Appealed From Is: Affirmed
Date of Judgment Entry on Appeal: August 4, 2021
David C. DiMuzio and Matthew C. DiMuzio, for Appellant Cincinnati City School
District, Board of Education,
Taft Stettinius & Hollister LLP, Russell S. Sayre and Nicholas J. Pieczonka, for
Appellee City of Cincinnati.
OHIO FIRST DISTRICT COURT OF APPEALS
WINKLER, Judge.
Cincinnati City School District, Board of Education (the “BOE”), appeals a
decision of the Board of Tax Appeals (the “BTA”) valuing real property formerly
owned by the city of Cincinnati at $10,990,000 for the 2018 tax year. Because we
determine that the BTA’s decision is supported by sufficient reliable, probative
evidence, and is not otherwise unreasonable or unlawful, we affirm.
Background
The property at issue in this case is the former home of a multi-story Macy’s
department store and parking garage near Fountain Square, located at 505 Vine
Street in the central business district in downtown Cincinnati (the “Property”). The
city owned the Property for several years until Macy’s and the other retail tenants,
including a bookstore and a restaurant, vacated. The city then sold the leasehold
interest in the Property in December 2018 to the Cincinnati Center City Development
Corporation (“3CDC”) for $7.5 million.
For the 2018 tax year, the Hamilton County Auditor valued the Property at
roughly $19 million. The city challenged the auditor’s valuation in the Hamilton
County Board of Revision (“BOR”). The BOE filed a counter-complaint with the
BOR, requesting that the BOR adopt the auditor’s $19 million value. The BOR
agreed with the auditor’s value, and the city appealed to the BTA.
At the BTA hearing, the parties’ disagreement over the value of the Property
stemmed largely from their differing views of the utility of the current building. The
city presented testimony from Adam Gelter, 3CDC’s executive vice president. Gelter
explained that the layout of the existing building on the Property remained a barrier
to redevelopment. The building was designed for a large, retail department store
with three-and-a-half floors on three sides of the building, and four floors on one
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OHIO FIRST DISTRICT COURT OF APPEALS
corner. The building had been constructed with large floor plates, limited windows,
and post-tensioned concrete. Gelter acknowledged that the building had been
constructed in such a way as to withstand the addition of floors; however, according
to Gelter, constructing additional floors would require stabilization and extra cost.
Gelter also testified that adding additional floors would create building-code issues.
At the time of the BTA hearing, the testimony showed that 3CDC had begun
demolishing the interior of the building, and at least three-and-a-half floors had been
demolished to shell condition.
The city introduced an appraisal from Roger Thornton. Thornton echoed
Gelter’s testimony regarding the lack of utility of the building on the Property. Using
the sales-comparison approach to value the Property, Thornton relied on six
comparable sales of buildings in the central business district. Thornton made
adjustments to the comparable sales by taking into account the lack of utility of the
current building on the Property. Thornton concluded that the Property had a
proposed value of $30 per square foot for a total value of $10.99 million, including
$4.1 million for the value of the parking garage.
The BOE introduced testimony from appraiser James Burt, who disagreed
with Gelter’s and Thornton’s opinions as to the utility of the current building on the
Property. Burt testified that the building had been constructed in 1997, which made
it relatively new for downtown Cincinnati. Because the building could withstand
additional floors, Burt testified that the interior of the building did not need to be
totally gutted in order to allow for the highest and best use of the Property. Burt
testified that he was unaware of any engineering studies or other documents that
supported the city’s theory that adding additional floors would not be financially
sound.
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OHIO FIRST DISTRICT COURT OF APPEALS
Like Thornton, Burt also used the sales-comparison approach to value the
Property. Burt relied on four comparable sales, two of which overlapped with
Thornton’s. Burt, however, appraised the Property at $55 per square foot. Instead of
making downward adjustments as Thornton had for the lack of utility of the current
building, Burt made upward adjustments based on his assumption that the building
was relatively modern. Burt valued the Property at $16.73 million, including $4.1
million for the value of the parking garage.
Based on the testimony and appraisals at the BTA hearing, the BTA adopted
Thornton’s valuation and held that the Property value for the 2018 tax year totaled
$10.99 million. This appeal by the BOE followed.
Standard of Review
R.C. 5717.04 governs appellate-court review of BTA decisions. Under R.C.
5717.04, if this court determines that the BTA’s decision is “reasonable and lawful[,]”
then it must affirm. In applying the reasonable-and-lawful standard under R.C.
5717.04, appellate courts “will defer to the BTA’s factual findings, including
determinations of a property’s value, as long as they are supported by ‘reliable and
probative’ evidence in the record.” Olentangy Local Schools Bd. of Edn. v. Delaware
Cty. Bd. of Revision, 141 Ohio St.3d 243, 2014-Ohio-4723, 23 N.E.3d 1086, ¶ 21,
quoting Satullo v. Wilkins, 111 Ohio St.3d 399, 2006-Ohio-5856, 856 N.E.2d 954, ¶
14. Thus, where the BTA has before it two, competing appraisals, the BTA is afforded
wide discretion in its determination regarding the credibility of the witnesses and the
weight of the evidence. Health Care REIT, Inc. v. Cuyahoga Cty. Bd. of Revision,
140 Ohio St.3d 30, 2014-Ohio-2574, 14 N.E.3d 1009, ¶ 19, citing EOP–BP Tower,
L.L.C. v. Cuyahoga Cty. Bd. of Revision, 106 Ohio St.3d 1, 2005-Ohio-3096, 829
N.E.2d 686, ¶ 9.
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OHIO FIRST DISTRICT COURT OF APPEALS
First Assignment of Error
In its first assignment of error, the BOE argues that the BTA failed to consider
and weigh conflicting evidence. Specifically, the BOE argues that the BTA failed to
consider: (1) Burt’s expert testimony regarding the feasibility of adding more floors
to the existing building; (2) evidence from both Burt and Thornton that the
building’s current improvements with renovations remained the highest and best use
of the Property—not demolition; and (3) evidence regarding the appraisers’ sales
comparisons, including Burt’s criticisms of Thornton’s valuation.
The BOE relies on two Ohio Supreme Court cases reversing BTA decisions:
Lutheran Social Servs. of Cent. Ohio Village Hous., Inc. v. Franklin Cty. Bd. of
Revision, 150 Ohio St.3d 125, 2017-Ohio-900, 79 N.E.3d 541, and South-Western
City School Dist. Bd. of Edn. v. Franklin Cty. Bd. of Revision, 152 Ohio St.3d 122,
2017-Ohio-8384, 93 N.E.3d 947.
In Lutheran Social Servs., the property owner challenged the auditor’s
valuations of two properties with the BOR, and the board of education filed a
counter-complaint. The BOR adopted the auditor’s original valuations, and the
property owner appealed to the BTA. At the BTA hearing, the property owner relied
on testimony and appraisals from its expert, and the board of education presented
expert testimony of its own appraiser, who criticized the property owner’s appraisals.
The BTA adopted the values of the property owner’s appraisals in a conclusory
fashion, and made no mention of the expert testimony presented by the board of
education. In reversing the BTA’s decision, the Ohio Supreme Court held that
“[a]lthough the BTA is not obliged to make formal findings of fact and conclusions of
law, we have stated that the BTA must engage in sufficient discussion of the evidence
to permit the court on appeal to determine whether the BTA acted reasonably and
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OHIO FIRST DISTRICT COURT OF APPEALS
lawfully.” Lutheran Social Servs. at ¶ 12. Because the BTA had completely failed to
address the competing appraisal submitted by the board of education when adopting
the property owner’s appraisal, the Lutheran Social Servs. court reversed the BTA’s
decision.
In South-Western City School Dist., the property owner challenged the
auditor’s valuation of her property at the BOR by presenting comparable-sales
documents that she had received from her real-estate agent. The BOR agreed to
reduce the value of the home, and the school board challenged the reduction before
the BTA. On appeal to the BTA, the BOR had failed to include the homeowner’s
comparable-sales documents as part of its record. The BTA recognized that the
documents were not part of the record, but nevertheless upheld the BOR’s decision.
The school board appealed to the Ohio Supreme Court, which reversed the BTA’s
decision. The court held that the BTA had a duty to independently weigh the
evidence, and that the BTA had erroneously deferred to the BOR by upholding the
BOR’s decision.
In this case, the BTA’s decision does not suffer from a complete failure to
mention competing evidence, present in Lutheran Social Servs., or the rubber
stamping of the BOR’s decision present in South-Western City School Dist. The
BTA’s decision referred to Thornton’s and Gelter’s testimony, as well as Burt’s
competing testimony. The BTA stated that Burt had “indicated the building was
created with a superadequate foundation to permit further improvement upward.”
Nevertheless, the BTA ultimately placed greater weight on Gelter’s testimony that the
Property “suffers from serious problems and demolishing would be appropriate.”
The BTA ultimately concluded that Thornton’s appraisal was more probative because
it “better accounted for the cost to demolish and redevelop the property.”
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OHIO FIRST DISTRICT COURT OF APPEALS
The BTA held its own evidentiary hearing and had before it both competing
appraisals. Thornton’s appraisal took into account the problems with redeveloping
the building, and thus Thornton made certain downward adjustments to the
comparable sales. Burt’s appraisal, on the other hand, assumed that the current
building structure was relatively modern and could support additional floors. Thus,
Burton made upward adjustments to the comparable sales.
This is a typical case of two competing appraisals, and the BTA did not
commit a legal error in adopting Thornton’s valuation of the Property. We overrule
the first assignment of error.
Second Assignment of Error
In its second assignment of error, the BOE argues that the BTA erred in
making several factual findings that were not supported by reliable and probative
evidence in the record.
According to the BOE, the BTA erred in concluding that Thornton had valued
the Property as if it were demolished and ready for development. The BOE’s
argument assumes that the BTA’s use of the word demolition means a total
demolition of the building. However, reading the BTA’s decision as a whole and in
context with the hearing testimony, the BTA’s use of the word demolition refers only
to the interior of the structure, which had serious issues in terms of marketability,
according to Gelter. Thornton made downward adjustments to the comparable sales
to account for his opinion that the current building structure had problems.
The BOE also argues that the BTA erred in finding that Burt’s appraisal report
lacked the same types of data as Thornton’s. The BOE argues that Burt examined the
same data as Thornton, and that some of their comparable sales even overlapped.
Again, the BOE’s argument takes words in the BTA decision out of context. Reading
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OHIO FIRST DISTRICT COURT OF APPEALS
the BTA’s decision as a whole, it is clear that the data lacking in Burt’s report to
which the BTA refers is the downward adjustments to the comparable sales based on
the assumption that the current building is not conducive to the highest and best use
of the Property. Furthermore, Burt’s appraisal relied on a comparable sale of the
Duttenhofer Building, which had new mechanicals and elevator shafts, and could
have been repurposed as an office without any renovations. The Duttenhofer
Building had a sale price of $61.55 per square foot, which was much higher than the
other comparable sales used by either appraiser.
Finally, the BOE argues that the BTA erred in finding that Gelter believed the
Property should be demolished, and erred in finding that the building was a “failed
use.” According to the BOE, Gelter’s testimony fell short of definitively establishing
that the building would be demolished. The BOE again misinterprets the word
demolition as used by the BTA. At the time of the BTA hearing, every tenant had
vacated the Property, 3CDC had demolished most of the building’s interior, leaving it
in shell condition, and 3CDC had not found any tenants for the Property.
We determine that the BTA’s factual findings are supported by reliable and
probative evidence in the record. We overrule the second assignment of error.
Conclusion
In sum, the BTA’s decision is reasonable and lawful; therefore, we affirm.
Decision affirmed.
ZAYAS, P.J., and CROUSE, J., concur.
Please note:
The court has recorded its own entry this date.
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