Harrah's Ohio Acquisition Co., L.L.C. v. Cuyahoga Cty. Bd. of Revision

[Cite as Harrah's Ohio Acquisition Co., L.L.C. v. Cuyahoga Cty. Bd. of Revision, 2020-Ohio-4214.]
COURT OF APPEALS OF OHIO
EIGHTH APPELLATE DISTRICT
COUNTY OF CUYAHOGA
HARRAH’S OHIO ACQUISITION
COMPANY, L.L.C., ET AL., :
Plaintiffs-Appellees, :
No. 108765
v. :
CUYAHOGA COUNTY BOARD OF
REVISION, ET AL., :
Defendants-Appellants. :
JOURNAL ENTRY AND OPINION
JUDGMENT: AFFIRMED
RELEASED AND JOURNALIZED: August 27, 2020
Civil Appeal from the Ohio Board of Tax Appeals
Case Nos. 2014-4596, 2014-4810, 2014-4818, and 2014-4896
Appearances:
Paul M. Jones, Jr., for appellee Harrah’s Ohio Acquisition
Company, L.L.C.
The Law Office of Thomas A. Kondzer, L.L.C., Thomas A.
Kondzer, and Joseph A. Volpe, for appellant Warrensville
Heights City School District Board of Education.
LARRY A. JONES, SR., J.:
In this appeal, defendant-appellant, Warrensville Heights City School
District Board of Education (“BOE”), challenges the June 7, 2019 decision of the
Ohio Board of Tax Appeals (“BTA”) regarding the value of certain property for the
tax year 2013, which is set forth in Harrah’s Ohio Acquisition Co., L.L.C. v.
Cuyahoga Cty. Bd. of Revision, BTA Nos. 2014-4596, 2014-4810, 2014-4818, and
2014-4896, 2019 Ohio Tax LEXIS 1278 (June 7, 2019). Specifically, the BTA found
the property’s value for the tax year 2013 was $21.5 million. For the reasons that
follow, we affirm.
Procedural and Factual History
The property at issue in this case consists of two parcels located in
Warrensville Heights, which collectively comprise a 128-acre horse-racing facility
with a track, an eight-story grandstand, barns, and other structures. In July 2010,
the property was purchased by plaintiff-appellee Harrah’s Ohio Acquisition
Company, L.L.C. (“Harrah’s”) for $43 million. According to Harrah’s, between
January 1, 2012 and January 1, 2013, it spent approximately $7 million on
improvements to the property. Shortly after the tax lien date, it obtained a video
lottery terminal (“VLT”) license; the license cost $50 million. In April 2013,
Harrah’s began operating as Thistledown Racino.
The Cuyahoga County fiscal officer valued the property at
$37,658,000 for the tax year 2013. Both Harrah’s and the BOE filed complaints
with the Cuyahoga County Board of Revision (“BOR”) seeking changes in that
valuation.1 Harrah’s sought a decrease in value to $23,315,888 (the fiscal officer’s
1The fiscal officer valued the property at $16.3 million for the tax year 2012. That
valuation was affirmed by the Ohio Supreme Court. Warrensville Hts. City School Dist.
2012 valuation plus the improvements), and the BOE sought an increase in value to
$43 million (the 2010 purchase price).
The BOR held a hearing on the complaints. Harrah’s relied on the
2012 valuation, testimony from its chief financial officer Amy Kuzdowicz, CPA, and
an appraisal by David Sangree (“Sangree”). The BOE continued to rely on the 2010
purchase price and objected to Sangree’s appraisal. After consideration of the
testimony and evidence, the BOR declined to make a change to the property’s
valuation. Harrah’s and the BOE both appealed to the BTA and a hearing was held.
Harrah’s presented Sangree’s report and testimony. In his report,
Sangree utilized three approaches to value the property: an income-capitalization
approach, a sales-comparison approach, and a cost approach. Sangree testified that
he believed the value of the property as of January 1, 2013, was $22 million. In
reaching his opinion, Sangree relied primarily on his income-capitalization and
sales approaches.
Under his income-capitalization approach, Sangree valued the entire
real property. Thus, because he only used the value of the real property, Sangree
deducted the value attributable to property other than real property, which meant
he deducted the value of the VLT license ($50 million), the value of personal
Bd. of Edn. v. Cuyahoga Cty. Bd. of Revision, 152 Ohio St.3d 277, 2017-Ohio-8845, 95
N.E.3d 359.
In a prior appeal about this property to the Ohio Supreme Court, the court affirmed the
BTA’s decision valuing the property at $13.8 million for the tax year 2010; the value was
based on an appraisal submitted by Harrah’s. Warrensville Hts. City School Dist. Bd. of
Edn. v. Cuyahoga Cty. Bd. of Revision, 145 Ohio St.3d 115, 2016-Ohio-78, 47 N.E.3d 144.
property ($30.7 million), and about $4.5 million, to account for the fact that the
racino did not begin operating until April 2013. Sangree’s valuation for the tax year
2013 under the income-capitalization approach was $21.5 million.
Under his sales-comparison approach, Sangree used four sales of
what he deemed comparable properties; the sales occurred between August 2003
and October 2010. He then made quantitative adjustments to the sales to come up
with an adjusted range. Sangree reconciled the three approaches he utilized, giving,
as mentioned, primary weight to the income-capitalization and sales approaches, to
arrive at a final valuation of $22 million for the 2013 tax year.
The BOE presented the appraisal report and testimony of Douglas
Bovard (“Bovard”); Bovard testified that the value of the property as of January 1,
2013, was $44.5 million. Bovard reached his opinion by also relying on an income-
capitalization approach. But unlike Sangree’s income-capitalization approach,
Bovard assumed that the property would be leased to a racino operator at market
rent, and assumed that a typical lease of this type would call for a percentage rate of
a racino’s “wagering handle.” Because there was a scarcity of racetrack and casino
leases, Bovard analyzed racetrack-property leases from 1986 to 1996 to estimate
what those percentages would be. Those percentages included live on-track
wagering handle, wagering handle from Thistledown races that are simulcast to
other betting facilities, wagering handle for races simulcast to Thistledown, and net
revenue from VLTs.
Bovard also determined the value of the property under a cost
approach and a discounted-cash flow (“DCF”) approach. He testified that he used
these approaches as a “check” on his conclusion under his income-capitalization
approach that the property’s 2013 value was $44.5 million.
In contrast, however, Sangree testified that he did not believe that
casinos are commonly leased and that he was not aware of any leases in Ohio
involving a racino property. Thus, he believed that his method ─ rather than
Bovard’s lease-value method ─ was the best one to determine the value of the
property.
The BTA issued its conclusion in a March 17, 2016 decision. Harrah’s
Ohio Acquisition Co., L.L.C. v. Cuyahoga Cty. Bd. of Revision, 2016 Ohio Tax LEXIS
585 (Mar. 17, 2016). It found the income-capitalization approach to be the most
accurate way to determine the value of the property. The BTA noted the differences
between Sangree’s and Bovard’s methodologies under the approach. It noted that
Bovard had hypothesized the conditions under which a landlord might lease the
property, and concluded that he had determined a “leased-fee value.” Id. at 6.
According to the BTA, Bovard’s leased-fee value “‘taint[ed] the validity of [his] entire
report.’” Id., quoting JGT Ents., Inc., v. Logan Cty. Bd. of Revision, BTA No. 00-A-
890, 2002 Ohio Tax LEXIS 393, 7-8 (Mar. 8, 2002). Thus, the BTA declined to
consider Bovard’s conclusions as to the value of the property, and adopted Sangree’s
$22 million valuation. The BOE appealed to the Ohio Supreme Court. Harrah’s
Ohio Acquisition Co., L.L.C. v. Cuyahoga Cty. Bd. of Revision, 154 Ohio St.3d 340,
2018-Ohio-4370, 114 N.E.3d 192.
In its first proposition of law, the BOE contended that Sangree’s
appraisal contained numerous flaws but, in contrast, Bovard’s appraisal was legally
sound and more reliable. The Ohio Supreme Court held that the BTA’s refusal to
consider Bovard’s appraisal was legal error because the appraiser could take the
possibility of encumbering the property with a lease into account when valuing it
consistent with R.C. 5713.03’s directive to determine the “‘true value of the fee
simple estate, as if unencumbered,’” so long as the appraisal assumed a lease that
reflected the relevant real estate market. Id. at ¶ 27, quoting Appraisal Institute, The
Appraisal of Real Estate, 441 (14th Ed.2013).
The court noted that “[a]lthough the BTA ultimately may disagree
with Bovard’s factual assumptions about the lease terms, his methodology was not
defective as a matter of law, and the BTA should have considered it.” Id. The court
further noted that the BTA failed to consider the “perceived strengths and
weaknesses of Bovard’s appraisal.” Id. at ¶ 28. “Because the BTA did not consider
those questions or weigh Bovard’s appraisal against the other evidence in any
meaningful way, we vacate the BTA’s decision and remand the case for the BTA to
fully consider and address the evidence.” Id.
On remand, the BTA issued the June 7, 2019 decision from which the
BOE now appeals.2
Assignments of Error and Issues for Review
The BOE assigns the following 12 assignments of error for our review:
I. The Board of Tax Appeals acted contrary to Ohio law, acted
unreasonably, abused its discretion and made factual findings
without evidentiary support in the record, committed reversible
error, abused its discretion, and acted contrary to Ohio law when
it concluded that the appraisal report and income capitalization
approach utilized by the board of education’s appraisers, Mr.
Douglas F. Bovard and Mr. Daniel L. McCown, MAI, reflected
“business value” and, therefore, reflected the “business value”
and not the “realty value” of the subject property and then
rejected the appraisers’ value in its entirety.
II. The Board of Tax Appeals acted contrary to Ohio law, acted
unreasonably, abused its discretion and made factual findings
without evidentiary support in the record when it held, contrary
to established appraisal practice and the reality of the gaming
industry, that the income capitalization approach utilized by the
board of education’s appraisers valued not only the real estate
value of the subject property but also included a business value.
III. The Board of Tax Appeals acted contrary to Ohio law, acted
unreasonably, abused its discretion and made factual findings
without evidentiary support in the record when it determined,
contrary to the appraisal evidence that was presented by both the
property owner and the board of education, that “no weight”
should be given to the cost approach of valuation used by both
appraisers.
IV. The Board of Tax Appeals acted contrary to Ohio law, acted
unreasonably, abused its discretion and made factual findings
2The BTA did not have another hearing on remand; rather, it issued its decision after
considering the “notices of appeal, the statutory transcripts certified pursuant to R.C.
5717.01, the record of this board’s hearing * * *, the parties’ written arguments, and the
court’s decision.” Harrah’s Ohio Acquisition Co., L.L.C. v., 2019 Ohio Tax LEXIS 1278 at
1-2.
without evidentiary support in the record when it determined
that “no weight” should be given to the cost approach, but did
not explain the basis for this particular determination.
V. The Board of Tax Appeals acted contrary to Ohio law, acted
unreasonably, abused its discretion and made factual findings
without evidentiary support in the record when it valued the
subject real estate on the basis of the property owner’s appraisal,
which was not an appraisal of the fee simple interest in the real
estate but instead was an appraisal of the business activity that
was conducted on the real estate.
VI. Contrary to its obligations under Ohio law to explain the basis
for its findings, the Board of Tax Appeals committed reversible
error when it valued the Thistledown real estate on the basis of
the property owner’s appraisal evidence but utterly failed to
explain the basis for its decision to ignore the fundamental flaws
in the property owner’s appraisal, including but not limited to
the following: a.) the appraiser’s valuation of the Thistledown
business rather than the Thistledown real estate; b.) the
appraiser’s reliance on erroneous acreage information in its
comparable land sales, which then resulted in erroneous values,
all of which shows a lack of reliability and credibility in the
report; c.) the appraiser’s use of an improper capitalization rate;
and d.) the appraiser’s reliance on a series of improper and
unsupported deductions which the appraiser made from the
business value of the entity to arrive at his value of the real estate.
VII. The Board of Tax Appeals acted contrary to Ohio law, acted
unreasonably, abused its discretion and made factual findings
without evidentiary support in the record when it when it failed
to recognize or even consider the steps that were undertaken by
the board of education’s appraisers to exclude business value
from their valuation of the Thistledown real estate.
VIII. The Board of Tax Appeals acted contrary to Ohio law, acted
unreasonably, abused its discretion and made factual findings
without evidentiary support in the record when it valued the
subject real estate on the basis of the property owner’s appraisal,
which valued the business, not the real estate, assuming that on
January 1, 2013 the property was used for the operation of video
lottery terminals when in fact video lottery terminals were not
operating on the property until April of 2013. The Board of Tax
Appeals, without any evidentiary support, then compounded its
error by accepting unsupported deductions for the value of the
video lottery license, in spite of the fact that a video lottery
license was not issued until April of 2013.
IX. The Board of Tax Appeals committed reversible error, abused its
discretion, and acted contrary to Ohio law when it issued an
internally inconsistent opinion. The Board of Tax Appeals stated
that it was valuing the property based on the opinion of value of
the property owner’s appraiser, which value was
$21,500,000.00. However, earlier in the opinion, the Board of
Tax Appeals stated that the opinion of value of the property
owner’s appraiser was $22,000,000.00. The Board of Tax
Appeals never explained this internal inconsistency.
X. Contrary to its obligations under Ohio law to explain the basis
for its findings, the Board of Tax Appeals committed reversible
error in failing to explain the basis for its decision to accept the
appraisal report of the property owner.
XI. In its second and most recent decision in this matter, following
remand from the Ohio Supreme Court, the Board of Tax Appeals
committed reversible error, abused its discretion, and acted
contrary to Ohio law when it disregarded the Ohio Supreme
Court’s clear remand instructions from Harrah’s Ohio
Acquisition Company, LLC v. Cuyahoga Cty. Bd. of Rev., 2018-
Ohio-4370, and failed to give consideration to the board of
education’s appraisal.
XII. The Board of Tax Appeals acted contrary to Ohio law, acted
unreasonably, abused its discretion and made factual findings
without evidentiary support in the record when it failed to
consider and weigh the board of education’s appraisal testimony
against the property owner’s appraisal testimony and other
evidence in this case in any “meaningful way,” as directed by the
Ohio Supreme Court in its remand of this case to the Board of
Tax Appeals in the case of Harrah’s Ohio Acquisition Company,
LLC v. Cuyahoga Cty. Bd. of Rev., 2018-Ohio-4370.
The parties have addressed these assignments of error under the
umbrella of the following three larger issues:
I. The second and most recent June 7, 2019 decision of the board
of tax appeals regarding the value of the subject property for tax
year 2013 should be vacated by this honorable Court, since the
board’s decision is, once again, based on an incorrect legal
conclusion, and, in particular, the board’s decision is directly
contrary to the clear holding and remand instructions that were
issued by the Ohio Supreme Court in Harrah’s Ohio Acquisition
Company, LLC v. Cuyahoga Cty. Bd. of Rev., 154 Ohio St.3d
340, 2018-Ohio-4370.3
II. Given that the board of tax appeals has again failed to fully
consider and address the board of education’s appraisal evidence
in its June 7, 2019 decision on the basis of the BTA’s erroneous
legal conclusion regarding the board of education’s appraisal,
the board of education submits that this honorable court should
consider the weaknesses and strengths of both appraisals and
then utilize the more credible and reliable evidence of the board
of education in order to set the value of the property for tax year
2013. In the alternative, should this honorable court elect not to
consider the two appraisals and utilize the most credible and
reliable evidence of record in order to set the value of the
property, then the board of education submits that this
honorable court should vacate the June 7, 2019 decision of the
board of tax appeals and again remand the matter to the board
with instructions for the board to fully consider and address all
of the appraisal evidence submitted in this case.4
III. In the event that this honorable court decides not to consider and
utilize the most credible and reliable evidence of record in order
to set the value of the subject property for tax year 2013, this
honorable court should, at a minimum, reverse and remand the
BTA’s June 7, 2019 decision with instructions for the BTA not
only to fully address all of the record evidence but to adequately
explain the basis for its findings.5
Law and Analysis
3This issue corresponds to assignments of error nos. 1, 2, 11, and 12.
4This issue corresponds to assignments of error nos. 5, 6, 7, and 8.
5This issue corresponds to assignments of error nos. 3, 4, 6, 9, and 10.
As mentioned, in its first March 17, 2016 decision in this case, the BTA
summarily dismissed Bovard’s appraisal because it believed that his leased-fee
approach “overstated the total value of the property.” Harrah’s Ohio Acquisition
Co., L.L.C., 2016 Ohio Tax LEXIS 585, at 18. Specifically, the BTA found that
because the appraisal failed to value the fee simple estate, it “‘taint[ed] the validity
of the entire report.’” Id., quoting JGT Ents., Inc., 2002 Ohio Tax LEXIS 393.
Relying on its decision in Meijer Stores Ltd. Partnership v. Franklin Cty. Bd. of
Revision, 122 Ohio St.3d 447, 2009-Ohio-3479, 912 N.E.2d 560, the Ohio Supreme
Court remanded for the BTA’s consideration of Bovard’s appraisal.6
In reviewing the BTA’s June 7, 2019 decision, our inquiry is limited
under the Ohio Supreme Court’s decision in Harrah’s Ohio Acquisition, 154 Ohio
St.3d 340, 2018-Ohio-4370, 114 N.E.3d 192, to whether the BTA, on remand,
considered and weighed Bovard’s appraisal “against the other evidence in any
meaningful way[.]” Id. at ¶ 28.
Standard of Review
An appellate court reviews a decision of the BTA to determine
whether it is reasonable and lawful. R.C. 5717.04; HIN, L.L.C. v. Cuyahoga Cty. Bd.
of Revision, 124 Ohio St.3d 481, 2010-Ohio-687, 923 N.E.2d 1144, ¶ 13; Cousino
Constr. Co. v. Wilkins, 108 Ohio St.3d 90, 2006-Ohio-162, 840 N.E.2d 1065, ¶ 10.
“It is well settled that [an appellate] court will defer to factual determinations of the
6In Meijer, the court recognized that property owners may be able to realize the value of
their property by encumbering it with a lease, and an appraiser may take that possibility
into account when valuing it. Id. at ¶ 23.
BTA if the record contains reliable and probative support for them.” Strongsville
Bd. of Edn. v. Wilkins, 108 Ohio St.3d 115, 2006-Ohio-248, 841 N.E.2d 303, ¶ 7;
Am. Natl. Can Co. v. Tracy, 72 Ohio St.3d 150, 152, 648 N.E.2d 483 (1995).
BTA’s June 7, 2019 Decision
In its decision issued after the Supreme Court remand, the BTA
considered Bovard’s previous testimony in determining a lease-rate valuation for
the property. Bovard explained that his “research into actual leases of pari-mutuel
racetrack facilities * * * indicates that rentals for such facilities are generally based
upon a percentage of the wagering handle from” live races, simulcast races, and VLT
revenue.7 Bovard admitted that there were not a lot of racetrack and casino leases,
so he had to utilize pari-mutuel racetrack leases with lease periods from March 1984
through September 1996; the leases were for properties located in Illinois,
Pennsylvania, California, Oregon, and Iowa. Bovard also relied on two confidential
off-track-wagering-facility leases from 1990 and 1992.
Based on the above data, Bovard estimated the percentage applicable
for each type of revenue. He estimated the wagering handles for the subject property
and a 1 percent management-fee expense. He determined a 10 percent discount rate
7“Pari-mutuel betting is the most common form of horse-racing betting. Rather than
placing a bet against the race track, like one would with a bookie, horse racing bettors are
wagering against each other. A horse racing track takes a minimal commission from all
wagers as a fee for handling horse racing bets. It does not collect anything else when a
bettor loses.” https://www.thesportsgeek.com/sports-betting/horse-racing/pari-
mutuel-betting/(Accessed July 17, 2020).
based on the Korpacz net-lease-market survey8 and the Realtyrates.com land-lease-
market survey, a residual-capitalization rate of 8 percent based on the same sources,
and a 2 percent cost-of-residual sale. Applying his estimates in a DCF analysis,
Bovard arrived at a value of $47.8 million for the real property as of January 1, 2014.
He also performed a direct-capitalization analysis on his estimated net operating
income, using an 8 percent capitalization rate, to arrive at a value of $48.5 million
as of January 1, 2014. To derive a value under the income approach as of tax lien
date (January 1, 2013), Bovard changed the first-year income in his DCF analysis to
account for the fact that VLTs were not operating until April 2013. The change
resulted in a value of $44.7 million. Further, Bovard capitalized the second-year net
operating income from his DCF analysis at 8 percent and discounted the value-to-
present worth, to determine a value of $44.2 million under the capitalization
approach as of January 1, 2013. Bovard ultimately determined the value of the
property as of January 1, 2013, was $44.5 million.9
The BTA considered Sangree’s valuation, which, as mentioned, relied
mainly on an income-capitalization approach. It noted that many of the BOE’s
criticisms of Sangree’s approach were rejected by the Ohio Supreme Court in
Harrah’s Ohio Acquisition, 154 Ohio St.3d 340, 2018-Ohio-4370, 114 N.E.3d 192.10
8The Korpacz net-lease-market survey is a commercial data reference publication relative
to market, income, and capitalization rates.
9Additionally, Bovard completed a cost-approach-to-value that indicated a value of $48
million. He did not complete a sales-comparison approach for the property as improved.
10The BTA noted, for example, that the court rejected the BOE’s contention that it was
contrary to law to attribute a separate value to Harrah’s opportunity to acquire racing and
After reviewing Sangree’s report and testimony, the BTA concluded that his income-
capitalization approach produced the best value of the property. Specifically, the
BTA held that, “[u]pon review of Mr. Sangree’s income approach and related
testimony, we find his opinion of value of [$21.5 million] as of January 1, 2013 is
reasonable, well supported, and the best evidence of the property’s value as of the
tax lien date.” In finding Sangree’s valuation more credible and reliable than
Bovard’s valuation, the BTA noted that Bovard’s valuation ran “afoul” of a problem
the court had addressed in a then-recent case, HCP EMOH, L.L.C. v. Washington
Cty. Bd. of Revision, 155 Ohio St.3d 378, 2018-Ohio-4750, 121 N.E.3d 370, which
will be discussed below.
First Issue
Under the first issue, the BOE contends that the BTA’s June 7, 2019
decision should be vacated because the BTA once again relied on an incorrect legal
conclusion, in conflict with the Ohio Supreme Court’s remand instructions in
Harrah’s Ohio Acquisition. Upon review, we disagree.
The Ohio Supreme Court’s mandate was for the BTA to give
consideration to Bovard’s approach. We find that it did. Ultimately, however, it
rejected Bovard’s approach, and adopted Sangree’s approach; but it gave Bovard’s
approach the consideration the Ohio Supreme Court mandated.
VLT licenses or that it was contrary to law to deduct the value of VLT license. Harrah’s
Ohio Acquisition, 154 Ohio St.3d 340, 2018-Ohio-4370, 114 N.E.3d 192, at ¶ 17, 24. The
BTA also noted that the court did not find any error in the BTA’s assessment of the overall
reliability and credibility of Sangree’s report. Id. at ¶ 25.
In its decision on remand, the BTA detailed what it believed to be
Bovard’s flawed approach. Specifically, the BTA found Bovard’s analysis of 1984 to
1996 leases from pari-mutuel racetracks in Illinois, Pennsylvania, California, Iowa,
and Oregon to be a flawed basis on which to establish a hypothetical lease rate for
the property at issue here. The BTA relied on the Ohio Supreme Court’s decision in
HCP.
In HCP, 155 Ohio St.3d 378, 2018-Ohio-4750, 121 N.E.3d 370, the
court considered the legality of appraising property based on a lease rate derived
from the income generated by the business operating on the property. The property
at issue in HCP was an assisted-living facility, and the appraiser used a “leases-
coverage analysis” to isolate the cash flow attributed only to the realty of the
property. The lease-coverage ratio was derived from the net operating income of the
going concern of the business. The court found the approach to be legally flawed
because the appraiser did not adequately isolate the income attributable to the real
property. See id. at ¶ 7-10. In so finding, the HCP court cited its decision in Higbee
Co. v. Cuyahoga Cty. Bd. of Revision, 107 Ohio St.3d 325, 2006-Ohio-2, 839 N.E.2d
385.
In Higbee, a city and its board of education sought review of the BTA’s
valuation of retail property. In resolving the valuation issue, the Higbee court stated
the following principle:
If it is the real property that is being valued, its valuation cannot be
made to vary depending on the success or lack thereof of the businesses
located on the property. Admittedly, the location of a property may
influence the sales made by a merchant at that property. However, the
merchant’s business practices may also influence sales. The business
factors and the real-property factors must be separated when the real
property is being valued for tax purposes. How the business factors
and the real-property factors are separated in valuing real property is a
matter of proof.
Id. at ¶ 44.
Based on HCP and Higbee, the BTA found Bovard’s valuation invalid
because the “lease rate he derived is based on a percentage of the various types of
revenue from the business conducted at the subject property.” Harrah’s Ohio
Acquisition Co., L.L.C., 2019 Ohio Tax LEXIS 1278, at 12. In contrast, the BTA found
Sangree’s income approach, which deducted non-realty items, to be the more
reliable and probative valuation of the property.
The BOE contends that the BTA ignored the Ohio Supreme Court’s
remand instructions by applying HCP in its June 2019 decision. According to the
BOE, the BTA assumed that HCP overruled the Ohio Supreme Court’s decision in
Harrah’s Ohio Acquisition, 154 Ohio St.3d 340, 2018-Ohio-4370, 114 N.E.3d 192,
and if the court in Harrah’s Ohio Acquisition, supra, thought that HCP and Higbee
applied to this case, it would have applied it, which it did not; thus, those cases are
irrelevant to the BTA’s consideration of Bovard’s income approach. We disagree.
The conclusion regarding Bovard’s approach that the Ohio Supreme
Court reached in Harrah’s Ohio Acquisition was not as to the merits of his approach;
rather, the court concluded that the BTA committed legal error by wholly
disregarding Bovard’s income approach. Thus, because the court did not consider
the merits of Bovard’s approach, there was no need to discuss HCP and Higbee.
HCP and Higbee provided the BTA with insight in fulfilling the
Supreme Court’s directive on remand, which was to fully consider Bovard’s
approach. The BTA found that those cases demonstrated the flaw in Bovard’s
valuation; that is, his valuation would vary depending on the success or lack thereof
of the business, rather than establishing a lease rate that reflected realty value.
Moreover, the Supreme Court’s decision in Harrah’s Ohio
Acquisition did not require the BTA to accept all the assumptions of Bovard’s
approach as reliable. Rather, the court specifically stated that the “BTA ultimately
may disagree with Bovard’s factual assumptions about the lease terms.” Id. at ¶ 27-
28. The Supreme Court’s reference to Meijer, 122 Ohio St.3d 447, 2009-Ohio-3479,
912 N.E.2d 560, in Harrah’s Ohio Acquisition, does not, as the BOE contends, stand
for a wholesale endorsement of Bovard’s methodology. As mentioned, Meijer
stands for the general proposition that property owners may be able to realize the
value of their property by encumbering it with a lease, and an appraiser may take
that possibility into account when valuing it. See fn. 6, infra, citing Meijer at ¶ 23.
But notably, Meijer did not involve a percentage-rent approach to establish a lease
rate.
We are not persuaded by the BOE’s reliance on Saratoga Harness
Racing, Inc. v. Williams, 91 N.Y.2d 639, 697 N.E.2d 164 (1998), or Northfield Park
Assoc. v. Summit Cty. Bd. of Revision, BTA No. 86-A-277 (Jan. 25, 1991). Saratoga
is a New York case that has no binding authority here. Northfield Park Assoc., a
BTA decision, similarly is not binding on this court; moreover, it is a 29-year-old
decision.
Further, we are not persuaded by the BOE’s contention that the Ohio
Supreme Court endorsed Bovard’s methodology in its entirety. As stated, the court
found that using the income-approach-to-value, owner-occupied real estate is a
valid methodology. But the court was silent on whether market rents Bovard used
would be the appropriate rental rates under his approach. Thus, the court did not
“align its endorsement of Bovard’s methodology as a matter of law,” as the BOE
contends.
Thus, in light of the above, and upon review, we find that the BTA
fulfilled the Ohio Supreme Court’s mandate. Unlike in its 2016 decision, which
summarily dismissed Bovard’s report, the 2019 decision considered Bovard’s
approach in a meaningful manner; it considered both his report, his testimony, and
case law regarding valuation. However, after weighing it against the other evidence
(i.e., Sangree’s valuation method), the BTA found that Bovard’s approach was not
reliable. The BTA fulfilled the mandate, and we decline to disturb its judgment: the
BTA is “vested with wide discretion in determining the weight to be given to the
evidence and the credibility of the witnesses that come before it.” NWD 300
Spring, L.L.C. v. Franklin Cty. Bd. of Revision, 151 Ohio St.3d 193, 2017-Ohio-7579,
87 N.E.3d 199, ¶ 13, quoting 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.
Accordingly, we find no merit to the first issue and, therefore,
overrule the first, second, eleventh, and twelfth assignments of error.
Second and Third Issues
Under its second issue for our review, the BOE requests that we
“consider the weaknesses and strengths of both appraisals and then utilize the more
credible and reliable evidence of the board of education in order to set the value of
the property for tax year 2013.” Alternatively, under both the second and third
issues, the BOE requests that we vacate the June 7, 2019 decision and remand the
case “with instructions for the board to fully consider and address all of the appraisal
evidence submitted in this case [and] to adequately explain the basis for its
findings.”
Under these issues, the BOE is asking us to decide issues of fact, weigh
the reliability of the evidence, and weigh the credibility of the testimony.
Specifically, the BOE asks us to address the following: (1) Sangree’s downward
adjustments in his sales-comparison approach for the value of racing and potential
VLT licenses; (2) Sangree’s deduction for the value of the VLT license from the
market value of the going concern; and (3) the reliability and credibility of Sangree’s
report. All these issues were addressed by the Ohio Supreme Court in Harrah’s Ohio
Acquisition, 154 Ohio St.3d 340, 2018-Ohio-4370, 114 N.E.3d 192, and they were
not subject to the Ohio Supreme Court’s remand order.11 Specifically, the court’s
11See Harrah’s Ohio Acquisition at ¶ 17 regarding the first issue (It was proper for Sangree
to “attribute separate value to a property owner’s opportunity to acquire racing and VLT
licenses.”); id. at ¶ 24 regarding the second issue (Sangree’s deduction for the value of the
mandate was for the BTA to fully consider and address Bovard’s valuation. As
mentioned, we are bound by the BTA’s determinations if the record contains reliable
and probative support for them. Strongsville Bd. of Edn., 108 Ohio St.3d 115, 2006-
Ohio-248, 841 N.E.2d 303, at ¶ 7; Am. Natl. Can Co., 72 Ohio St.3d 150 at 152, 648
N.E.2d 483. We find that the record here contains reliable and probative support
for the BTA’s determination.
In light of the above, we find no merit to the second issue and,
therefore, overrule the fifth, seventh, and eighth assignments of error; and the sixth
assignment of error in part.
In regard to the third issue, the BOE asks us to reverse the BTA’s June
7, 2019 decision on the authority of Cleveland Pub. Library v. Cuyahoga Cty.
Budget Comm., 28 Ohio St.3d 390, 504 N.E.2d 421 (1986). Again, we decline to do
so. In Cleveland Pub. Library, the appellants were public libraries that sought
review of a decision by the BTA ordering the allocation of certain classified property
tax funds among the appellants and appellees, which consisted of other public
libraries. The court found that the BTA did not offer factual findings on which to
base its allocation of the funds. Thus, because of the BTA’s failure to set forth its
basis of determination with any degree of specificity, the court found it impossible
VLT license was reasonable because the VLT license is nonreal property that has value as
part of the going concern.); and id. at ¶ 25 regarding the third issue (rejecting BOE’s
“invitation to interfere with the BTA’s discretion in assessing these details of Sangree’s
appraisal”).
to review the BTA’s decision for reasonableness or lawfulness. That is not the case
here.
As already discussed, on remand, the BTA considered Bovard’s
approach as it was mandated to do, and gave specific reasoning as to why it did not
find it reliable. We will not second-guess the decision, or substitute our judgment
for the decision. Further, there is no need to remand for further proceedings; the
BTA fulfilled the Ohio Supreme Court’s mandate.
In light of the above, the third issue is without merit and, therefore,
the third, fourth, ninth, and tenth assignments of error are overruled; and the
remaining portion of the sixth assignment of error is overruled.
Having overruled all assignments, the June 7, 2019 decision of the
BTA is affirmed in all respects.
Judgment affirmed.
It is ordered that appellee recover from appellant costs herein taxed.
The court finds there were reasonable grounds for this appeal.
It is ordered that a special mandate be sent to the Ohio Board of Tax Appeals
to carry this judgment into execution.
A certified copy of this entry shall constitute the mandate pursuant to Rule 27
of the Rules of Appellate Procedure.
LARRY A. JONES, SR., JUDGE
MARY J. BOYLE, P.J., and
EILEEN A. GALLAGHER, J., CONCUR