The opinion
[Until this opinion appears in the Ohio Official Reports advance sheets, it may be cited as
Rover Pipeline, L.L.C. v. Harris, Slip Opinion No. 2025-Ohio-2806.]
NOTICE
This slip opinion is subject to formal revision before it is published in an
advance sheet of the Ohio Official Reports. Readers are requested to
promptly notify the Reporter of Decisions, Supreme Court of Ohio, 65
South Front Street, Columbus, Ohio 43215, of any typographical or other
formal errors in the opinion, in order that corrections may be made before
the opinion is published.
SLIP OPINION NO. 2025-OHIO-2806
ROVER PIPELINE, L.L.C., APPELLANT, v. HARRIS, TAX COMMR., APPELLEE.
[Until this opinion appears in the Ohio Official Reports advance sheets, it
may be cited as Rover Pipeline, L.L.C. v. Harris, Slip Opinion No.
2025-Ohio-2806.]
Taxation—Public-utility property—R.C. Ch. 5727—Board of Tax Appeals has wide
discretion in determining weight to be given to evidence and credibility of
witnesses when faced with “battle of appraisals”—Board’s adoption of tax
commissioner’s appraisal evidence was reasonable and lawful—Board’s
decision affirmed.
(No. 2024-0484—Submitted June 4, 2025—Decided August 13, 2025.)
APPEAL from the Board of Tax Appeals, No. 2020-1540.
_________________
FISCHER, J., authored the opinion of the court, which KENNEDY, C.J., and
DEWINE, BRUNNER, DETERS, HAWKINS, and SHANAHAN, JJ., joined.
SUPREME COURT OF OHIO
FISCHER, J.
{¶ 1} Under Ohio law, the taxable property of a public utility shall be
assessed at its true value in money. See R.C. 5727.10. At issue in this appeal is the
true value for tax year 2019 of an interstate natural-gas pipeline owned and operated
by appellant, Rover Pipeline, L.L.C. The Board of Tax Appeals (“board” or
“BTA”) rejected the report proposed by Rover’s appraiser, finding that the value
proposed by appellee Tax Commissioner Patricia Harris’s appraiser reflected the
best evidence of the pipeline’s value. Rover appealed the board’s decision to this
court. Rover’s challenge is multifaceted, but the crux of its argument is that the
board vastly overvalued the pipeline. Because Rover has not shown that the board
committed reversible error, we affirm.
I. BACKGROUND
{¶ 2} The record in this case is voluminous and is amply described in the
board’s decision. See BTA No. 2020-1540 (Mar. 7, 2024). We recount only those
facts that are necessary to put the case in its proper context and to frame the legal
issues presented by the parties.
A. Planning and building the pipeline
{¶ 3} Rover’s pipeline is over 700 miles long and transports natural gas
from the Marcellus and Utica shale basins located in Ohio, West Virginia, and
Pennsylvania to markets across the United States and Canada. The Ohio portion of
the pipeline runs from the east–central area of the State to a location in Defiance
County, where it turns north and heads into Michigan. The pipeline has the capacity
to transport 3.25 billion cubic feet of natural gas per day.
{¶ 4} Beginning in 2013 and 2014, Rover determined that it could profit
from the installation of a pipeline in the basins, which could ease a bottleneck that
had emerged from insufficient infrastructure. Before commencing the pipeline’s
construction and operation, however, Rover first had to apply for and receive
approval from the Federal Energy Regulatory Commission (“FERC”). See
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Alabama Mun. Distribs. Group v. Fed. Energy Regulatory Comm., 100 F.4th 207,
209 (D.C. Cir. 2024), citing 15 U.S.C. 717f(c)(1)(A). In determining whether to
approve such an application, FERC will often check whether an applicant has
collected precedent agreements—“long-term contracts with shippers who would
use the pipeline to transport natural gas”—which demonstrate demand for the
project. Oberlin v. Fed. Energy Regulatory Comm., 39 F.4th 719, 722 (D.C. Cir.
2022).
{¶ 5} To facilitate FERC’s approval, Rover negotiated several precedent
agreements with shippers in the region. The agreements accounted for 95 percent
of the pipeline’s capacity. As a representative example, one agreement authorized
a shipper to transport specified quantities of natural gas through Rover’s pipeline
at a fixed price for 15 years, with an option to extend.
{¶ 6} Rover’s negotiations with the shippers were informed by its
understanding of the project’s construction costs and the return Rover could earn
on its investment. Rover initially estimated that it would cost $4.2 billion to
construct the pipeline. Based on that estimate, it structured its precedent
agreements to achieve a 13 percent return on equity.
{¶ 7} FERC approved Rover’s application in February 2017, but the
project’s actual cost—$6.3 billion—vastly exceeded Rover’s expectations. Two
factors contributed to this increase.
{¶ 8} First, abnormally high levels of rainfall caused construction delays
and increased costs. During periods of inactivity because of heavy rainfall, idle
workers continued to be paid per the terms of their employment agreements. The
same goes for leased equipment, which sat onsite while the conditions were too wet
for construction. While the project area historically received 37.38 inches of rain
annually, during construction, the area received 61.08 inches of rain, annualized.
{¶ 9} Second, in April 2017, Rover ran into an environmental problem
when one of its contractors released two million gallons of bentonite-based drilling
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SUPREME COURT OF OHIO
fluid while drilling underneath the Tuscarawas River. The drilling fluid surfaced
in a wetland near the river, covering approximately 6.5 acres. Rover notified FERC
of the incident, and, in response, FERC ordered Rover to, among other things, stop
drilling activities in certain locations and double the number of environmental
inspectors per work area. Construction on the pipeline stalled for four to five
months because of regulatory actions taken by FERC and Ohio’s Environmental
Protection Agency.
{¶ 10} In November 2018, the pipeline was completed and became
available for commercial operation.
B. The Blackstone transaction
{¶ 11} In July 2017, the investment firm Blackstone acquired a 49.9 percent
equity stake in ET Rover Pipeline, L.L.C., Rover’s “corporate great-grandparent,”
BTA No. 2020-1540 at 7 (Mar. 7, 2024), eventually paying $1.51 billion for its
ownership interest.1 Because ET Rover Pipeline owned a 65 percent interest in
Rover, Blackstone thus acquired a 32.435 percent indirect ownership interest in
Rover.
{¶ 12} ET Rover Pipeline thus retained a controlling interest by the
slimmest of margins under the terms of the deal—50.1 percent to Blackstone’s 49.9
percent. Nevertheless, Blackstone gained access to 32.435 percent of the cash
flows generated by Rover’s pipeline.
C. Proceedings before the tax commissioner
{¶ 13} Ohio’s public-utility-property tax is set forth in R.C. Ch. 5727. It is
undisputed that Rover is subject to the tax as a “pipe-line company.” See R.C.
5727.01(D)(5) (defining “pipe-line company” as a taxpayer “engaged in the
1. The actual purchaser was BCP Renaissance, L.L.C., which is held by Blackstone. For purposes
of this appeal, the parties have characterized Blackstone as the purchaser; accordingly, we do the
same. Blackstone paid for its interest in installments, with the bulk of the payments made during
the fourth quarter of 2017.
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January Term, 2025
business of transporting natural gas, oil, or coal or its derivatives through pipes or
tubing, either wholly or partially within this state”). As a pipeline company,
Rover’s taxable property subject to assessment by the tax commissioner for the
2019 tax year consisted of its tangible personal property located in Ohio on
December 31 of the preceding year—here, December 31, 2018 (i.e., the tax-lien
date)—but not including property otherwise exempted by law. See R.C.
5727.06(A)(3)(c); see also R.C. 5727.06(C) (providing that the lien attaches on
December 31 of the year preceding the tax year at issue). The taxable property of
a pipeline is assessed at 88 percent of its true value. R.C. 5727.111(D).
{¶ 14} To facilitate administration of the tax, Rover filed an annual report
(later amended) with the tax commissioner on a prescribed form, enabling the tax
commissioner to make any assessment or apportionment the tax required. See R.C.
5727.08. Afterward, the tax commissioner issued Rover an amended assessment
certificate. See R.C. 5727.23. In turn, Rover filed a petition for reassessment. See
R.C. 5727.47.
{¶ 15} The tax commissioner’s review culminated in a final determination
affirming the assessment, which, according to Rover, assigned a value of $3.983
billion to the Ohio portion of the pipeline. In doing so, the tax commissioner
applied R.C. 5727.11(A), which provides that “the true value of all taxable property
. . . required by section 5727.06 of the Revised Code to be assessed by the tax
commissioner shall be determined by a method of valuation using cost as
capitalized on the public utility’s books and records less composite annual
allowances as prescribed by the commissioner.” By law, the tax commissioner may
use another method if she finds that application of the statutory method “will not
result in the determination of true value of the public utility’s taxable property.”
Id.; accord Texas E. Trans. Corp. v. Tracy, 1997-Ohio-233, ¶ 17.
{¶ 16} Although Rover proposed alternative valuation methods, the tax
commissioner determined that the alternative methods did not show a defect in the
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SUPREME COURT OF OHIO
statutory method; rather, the alternative methods were, in her view, no more than
opinions of alternative values. Nor was the tax commissioner persuaded by Rover’s
attempt to decrease the value of its pipeline based on delays attributable to weather
or regulatory actions. The tax commissioner reasoned that rainy weather was to be
expected and that weather delays should have been budgeted for. She further
reasoned that the regulatory actions were related to Rover’s regulatory violations
and that the resulting costs were within Rover’s control. Rover appealed to the
board.
D. Proceedings before the board
{¶ 17} Rover and the tax commissioner both presented appraisal evidence
at the board’s hearing. Rover presented an appraisal report prepared by Robert
Reilly, who prepared a unit appraisal. Unlike the cost-based method preferred
under R.C. 5727.11(A), in a unit appraisal, the “professional appraiser determines
the ‘unit’ to be appraised (such as the public utility’s operating properties),
estimates the market value of that unit, and allocates an appropriate portion of the
unit to the taxing jurisdiction.” Ohio Bell Tel. Co. v. Levin, 2009-Ohio-6189, ¶ 9;
see also Texas E. Trans. at ¶ 15 (distinguishing between the statutory method and
the unit-appraisal method). Reilly prepared a unit appraisal because, as he indicated
in his appraisal report, he viewed the pipeline as “operat[ing] as a single physically,
functionally, and economically integrated unit of property.” Reilly characterized
the pipeline as a special-purpose property, which this court has described as a
property being “built for a unique purpose . . . in good condition, and . . . used for
that purpose—both presently and for the foreseeable future,” Johnston Coca Cola
Bottling Co., Inc. v. Hamilton Cty. Bd. of Revision, 2017-Ohio-870, ¶ 17.
{¶ 18} Reilly, using both the cost and income approaches to value, opined
two values under each approach. For the cost approach, Reilly opined values of
$3.206 billion and $3.227 billion; for the income approach, Reilly opined values of
$3.591 billion and $3.851 billion. Reilly did not use the sales-comparison approach
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January Term, 2025
due to the lack of data reflecting prior sales of property comparable to the pipeline.
Reilly weighted the cost approach more heavily than the income approach, opining
a reconciled value of $3.317 billion for the pipeline as a whole as of December 31,
2018. Reilly reduced that value to $2.562 billion by applying the Ohio-allocation
percentage of 77.252 percent, which he then further reduced to $1.792 billion by
excluding the cost of exempt property.
{¶ 19} For her part, the tax commissioner jettisoned the appraisal method
she had used in her final determination, which relied on the statutory method in
R.C. 5727.11(A), and presented an appraisal report prepared by Brent Eyre. Like
Reilly, Eyre valued the pipeline as a unit, characterized it as a special-purpose
property, and relied on the cost and income approaches to value. But Eyre opined
a value of $6.226 billion under the cost approach and $5.119 billion under the
income approach, and he weighted each approach equally, opining a reconciled
value of $5.670 billion for the pipeline as a whole as of December 31, 2018. Eyre
reduced that value to $4.380 billion by applying the Ohio-allocation percentage of
77.252 percent, which he then further reduced to $3.669 billion by excluding the
cost of exempt property.
{¶ 20} The tax commissioner also presented a report prepared by Bradford
Cornell, who addressed the effect of the Blackstone transaction on the pipeline’s
value. In Cornell’s view, the Blackstone transaction implied that the true value of
the pipeline as a whole was at least $4.66 billion, which he calculated by dividing
Blackstone’s contribution of $1.510 billion by its 32.435 percent indirect interest
in Rover. This value, Cornell testified, provided “the floor of the value for the
entire entity.” Cornell further observed that based on the calculations he had
reviewed, the implied value could be extended “north[ward]” to “probably around
$5 billion.”
{¶ 21} The board issued a lengthy decision determining that Eyre’s
appraisal constituted the best evidence of value, and it thus reversed the tax
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commissioner’s final determination and remanded the matter with instructions that
Rover’s pipeline be valued according to Eyre’s appraisal. BTA No. 2020-1540 at
164 (Mar. 7, 2024). In doing so, the board assigned special significance to the
Blackstone transaction and the actual costs of construction, clarifying that while
these data points were not “conclusive,” they nevertheless established “guideposts”
for its decision. Id. at 109.
{¶ 22} Regarding the Blackstone transaction, the board found what it called
a “straight line” between Blackstone’s purchase of its interest in ET Rover Pipeline
and the pipeline itself. Id. at 112. The board credited the testimony of Cornell,
who testified that Blackstone’s purchase was a means of gaining access to cash
flows from the pipeline. Based on Cornell’s testimony, the board found it “clear”
that “[t]he value purchased by Blackstone was tied to the hard assets” of the
pipeline. Id. at 114. It was thus proper, the board reasoned, to view the transaction
as probative in determining the pipeline’s value. Id. at 123.
{¶ 23} Turning to costs, the board determined that it was appropriate to
account for actual costs in determining the pipeline’s value because it was special-
purpose in character and newly constructed as of the tax-lien date. Id. at 124-125.
In support of this determination, the board cited, among other things, this court’s
observation that the cost approach is helpful in estimating the value of new or
relatively new construction, see Musto v. Lorain Cty. Bd. of Revision, 2016-Ohio-
8058, ¶ 47, and a passage from The Appraisal of Real Estate 530 (15th Ed. 2020),
explaining that the cost approach may be used to value special-purpose properties
that are infrequently exchanged on the market.
{¶ 24} The board was highly critical of Reilly’s appraisal. First, the board
determined that Reilly had sacrificed his independent judgment by allowing Rover
to dictate key figures to him, thereby converting “what began as an independent fee
appraisal . . . into a group project.” BTA No. 2020-1540 at 2 (Mar. 7, 2024).
Second, the board found that Reilly had conflated aspects of the cost approach with
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January Term, 2025
the income approach, thus “mak[ing] his income approach a load-bearing pillar of
the cost approach.” Id. at 3. And last, the board found that Reilly’s opinion of
value could not be reconciled with the Blackstone transaction or the pipeline’s
actual costs. Id. at 126. As to the former, the board reasoned that if Reilly’s
reconciled value of $3.317 billion were correct, that would mean that Blackstone
substantially overpaid for its interest, which the board found implausible due to
Blackstone’s dealmaking sophistication. Id. As to the latter, Reilly’s reconciled
value was almost 50 percent below the pipeline’s actual costs, prompting the board
to question how “a pipeline in its infancy became so obsolete so fast.” Id. at 2.
{¶ 25} Turning to Eyre’s appraisal report, the board found it reasonable that
his reconciled value fell between the imputed value of the Blackstone transaction
and the project’s actual costs. Id. at 164. The board did fault Eyre for not analyzing
the Blackstone transaction in his written appraisal report, but as a whole, it found
that Eyre’s appraisal reflected the best evidence of value, and it ordered that the
pipeline be valued according to his opined value. Id.
{¶ 26} Rover then appealed to this court.
II. ANALYSIS
{¶ 27} We must affirm a BTA decision that is reasonable and lawful. R.C.
5717.04; Adams v. Harris, 2024-Ohio-4640, ¶ 23. Our standard of review is well
established: legal issues are subject to de novo review, Dauch v. Erie Cty. Bd. of
Revision, 2017-Ohio-1412, ¶ 12, but issues relating to the credibility of witnesses
and the weighing of the evidence are subject to abuse-of-discretion review, Johnson
v. Clark Cty. Bd. of Revision, 2018-Ohio-4390, ¶ 9.
{¶ 28} This case featured a “battle of appraisals,” Target Corp. v. Greene
Cty. Bd. of Revision, 2009-Ohio-2492, ¶ 14, which is a shorthand phrase to describe
the class of cases in which the board is called on to review competing appraisal
evidence. “When it reviews appraisals, the BTA is vested with wide discretion in
determining the weight to be given to the evidence and the credibility of the
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witnesses that come before it.” EOP-BP Tower, L.L.C. v. Cuyahoga Cty. Bd. of
Revision, 2005-Ohio-3096, ¶ 9. To this end, we have “decline[d] to bind the BTA
to a particular method of valuation because the imposition of rigid methodological
strictures would necessarily impinge upon the BTA’s wide discretion to weigh
evidence and assess the credibility of witnesses.” Youngstown Sheet & Tube Co. v.
Mahoning Cty. Bd. of Revision, 66 Ohio St.2d 398, 402 (1981). Because this court
is not a “super BTA or a trier of fact de novo,” EOP-BP Tower at ¶ 17, it matters
not “whether we might have weighed the evidence differently from the [board] if
we had been making the original determination,” Jewel Cos., Inc. v. Porterfield, 21
Ohio St.2d 97, 99 (1970). Unless it “affirmatively appears from the record” that
the board’s value determination is unreasonable or unlawful, we “will not disturb
[it].” Cuyahoga Cty. Bd. of Revision v. Fodor, 15 Ohio St.2d 52 (1968), syllabus.
{¶ 29} An overarching theme of Rover’s argument is that the board’s
decision is suffused with what it calls “legal error.” Yet, this case does not, for
example, call on us to determine the meaning of a statute. See, e.g., Progressive
Plastics, Inc. v. Testa, 2012-Ohio-4759, ¶ 15 (“A dispute over the meaning of
statutes presents a question of law, and our review in that regard is not deferential
but de novo.”). As Rover’s brief makes clear, the statutory meaning of “true value”
as written into Ohio’s tax laws is well understood: it is the “‘amount for which that
property would sell on the open market by a willing seller to a willing buyer,’ ”
Boothe Fin. Corp. v. Lindley, 6 Ohio St.3d 247, 248 (1983), quoting State ex rel.
Park Investment Co. v. Bd. of Tax Appeals, 175 Ohio St. 410, 412 (1964); see also
Grabler Mfg. Co. v. Kosydar, 43 Ohio St.2d 75, 77 (1975) (extending Park
Investment Co. to personal-property cases). To paraphrase, true value is “market
value.” Boothe Fin. Corp. at 248. And, as noted above, the determination of true
(or market) value presents a question of fact. Texas E. Transm., 1997-Ohio-233, at
¶ 19.
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January Term, 2025
{¶ 30} To be sure, some of Rover’s arguments implicate the proper
boundaries of valuation doctrine, which is used to implement the true-value
standard. And we agree that the proper scope of these valuation doctrines present
legal questions. But this case turns primarily on how the board weighed the
competing appraisal evidence in determining the pipeline’s true value, which
triggers a “highly deferential” abuse-of-discretion standard of review, Arbors E.
RE, L.L.C. v. Franklin Cty. Bd. of Revision, 2018-Ohio-1611, ¶ 13.
{¶ 31} With these background principles in mind, we now turn to Rover’s
four propositions of law.
A. Whether the board valued Rover as a business rather than the pipeline itself
(Rover’s Proposition of Law No. 1)
{¶ 32} In its first proposition of law, which Rover divides into two subparts,
Rover claims that the board erred by adopting Eyre’s valuation, which Rover
contends reflected its value as a business rather than the true value of its pipeline.
We disagree.
1. Terminology
{¶ 33} The first subpart of Rover’s argument focuses on the terms of art that
Eyre used in describing his appraisal method. In Rover’s view, Eyre’s treatment of
the pipeline as a “going concern” led him to value Rover as a business.
{¶ 34} In the real-property-valuation context, we have articulated what may
be termed an “isolation principle,” stating that “an appraiser must exercise care to
isolate the value of the realty from the value of the business.” HCP EMOH, L.L.C.
v. Washington Cty. Bd. of Revision, 2018-Ohio-4750, ¶ 14; see also Arbors E. RE,
2018-Ohio-1611, at ¶ 19 (collecting cases and discussing the isolation principle).
There can be little doubt that an appraiser of a pipeline must apply a similar
isolation principle given that the public-utility-property tax applies to the “true
value in money” of the public utility’s “taxable property,” R.C. 5727.10, not the
value of its business. Id.; see also Texas E. Trans., 1997-Ohio-233, at ¶ 17 (“the
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SUPREME COURT OF OHIO
ultimate goal imposed by R.C. 5727.10 clearly is to determine the true value of the
property taxed” [emphasis in original]).
{¶ 35} Rover claims that Eyre veered from this principle by characterizing
the objective of his appraisal as obtaining the valuation of the pipeline as a “going
concern.” By doing so, Rover maintains, Eyre swept in value unrelated to the
pipeline itself. To illustrate, Rover points to Eyre’s appraisal report, in which he
included the following quote from The Appraisal of Real Estate 23-24 (10th Ed.
1992): Going-concern value “includes an intangible enhancement of the value of
an operating business enterprise which is produced by the assemblage of the land,
building, labor, equipment, and marketing operation.” Rover faults Eyre’s
statement in which he said that “[b]y operating together as a unit, the operating
assets achieve their highest and best use.”
{¶ 36} Rover fails to specify what Eyre’s terminology translates to in terms
of tax dollars owed under R.C. Ch. 5727. Moreover, we reviewed Eyre’s appraisal
and cannot locate any line-item denomination for “intangible enhancement” that
sweeps in the value of such things as labor, marketing, or general business acumen.
Indeed, in asking us to remand the case to the board so that it may explore the issue
further, Rover effectively admits that its argument is short on numerical details.
There is no need to order such relief—Rover had ample opportunity to explore the
issue during the board’s multi-day evidentiary hearing.
{¶ 37} The first subpart of Rover’s argument in support of its first
proposition of law contains additional problems. Eyre’s use of the term “going
concern” might at first glance appear troublesome because, given the term’s
ordinary understanding, its use here suggests that Eyre valued Rover based on the
value of “the enterprise itself as an active business with future earning power, as
opposed to the liquidation value of the business or of its assets,” Black’s Law
Dictionary (12th Ed. 2024) (defining “going-concern value”). But Eyre disavowed
in his appraisal report that he did this, clarifying that as he uses the term, “‘[g]oing
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January Term, 2025
concern’ . . . is not synonymous with enterprise value.” Eyre was careful to note
as well that his use of the term “intangible enhancement” did not signify that he had
swept the value of intangible assets into his appraisal.
{¶ 38} The board understood Eyre’s method as he described it, and we need
not second-guess it. See Olmsted Falls Bd. of Edn. v. Cuyahoga Cty. Bd. of
Revision, 2009-Ohio-2461, ¶ 27 (“we will not second-guess the precise weight that
the BTA accords to each increment of evidence when it determines the value of real
property”). Although the board recognized that Eyre’s method bore a similarity to
the method of valuing a business, it rejected the idea that he had valued Rover as a
business. Rather, in the board’s view, inclusion of an intangible enhancement
simply “reflects the benefit created by the unitary operation of the tangible personal
property that is not attributable to cost or other intangible assets.” BTA No. 2020-
1540 at 157 (Mar. 7, 2024). That finding is borne out by Eyre’s statement that the
pipeline derives its value from the interaction of its component parts, not from the
component parts on an item-by-item basis: “A mile of pipe in the ground has value,
not because you can sell it for scrap, but because it is connected to an integrated
pipeline system.” Eyre is hardly alone here, for Reilly performed a unit appraisal
as well, observing in his appraisal report that this method was proper because it
accounted for the “pipeline’s operat[ion] as a single, physically, functionally, and
economically integrated unit of property.”
2. The pipeline’s useful life
{¶ 39} The second subpart of Rover’s argument in support of its first
proposition of law contends that Eyre rendered a business valuation by assuming
for the purpose of his income approach that the pipeline would exist in perpetuity—
an assumption, it says, that is more suitable to valuing a business than valuing a
piece of property. A better assumption, according to Rover, is that the pipeline
should be expected to have a useful life of 30 years. Rover levels similar arguments
against Eyre’s assumptions related to deterioration and capital expenditures, saying
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that those assumptions fail to realistically account for wear and tear over time. In
all, Rover claims that Eyre’s mistakes led him to overvalue the pipeline by about
$1.7 billion.
{¶ 40} The issues that Rover points to relate to Eyre’s application of the
discounted-cash-flow analysis. The model is technical, but at a high level, it
reflects Eyre’s attempt to value the pipeline by calculating the pipeline’s future cash
flows and then discounting them back to the tax-lien date. To simplify, Eyre
calculated cash flows for 2019 through 2021, which he drew from Rover’s planning
documents. But because the pipeline was not expected to lie dormant after 2021,
he determined that he needed a way to account for cash flows that extended beyond
2021. To do this, Eyre calculated what he described as a “terminal value,” which
reflects a value computation that assumes the realization of cash flows in perpetuity.
Eyre testified that his terminal-value calculation assumes that future cash flows
would keep up with inflation, capital expenditures would remain the same as they
were across the average of 2019 through 2021, and depreciation would increase
slightly. Having computed a terminal value, Eyre then discounted the explicit cash
flow forecasts and the terminal value back to present value on the assessment date
of December 31, 2018, which he then added to the present value of the cash flows
from 2019 through 2021 to achieve a total discounted-cash-flow value. The board
found Eyre’s approach reasonable and his calculation persuasive. BTA No. 2020-
1540 at 162 (Mar. 7, 2024).
{¶ 41} By urging this court to rule out the possibility that an appraiser could
ever do such a thing as, say, value cash flows in perpetuity, Rover thus seeks to
have us announce a rule of law that would bind the board to a particular method of
valuation. We have long declined to take this step. See Youngstown Sheet & Tube,
66 Ohio St.2d at 402 (“We decline to bind the BTA to a particular method of
valuation because the imposition of rigid methodological strictures would
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January Term, 2025
necessarily impinge upon the BTA’s wide discretion to weigh evidence and assess
the credibility of witnesses.”).
{¶ 42} Rover rejoins by attempting to distinguish the concepts of business
value and property value, pointing to Newark Morning Ledger Co. v. United States,
507 U.S. 546, 564-565 (1993), for the proposition that a business’s goodwill lacks
a determinate useful life. But that observation scarcely prescribes a binding rule
for this court to apply that would require us to invalidate the board’s adoption of
Eyre’s approach. Just as this court is not composed of “accountants []or engineers,”
Dayton v. Pub. Util. Comm., 174 Ohio St. 160, 162 (1962), neither are we
composed of appraisers whose function is to announce rules that the legislature did
not prescribe for determining the useful life of utility property, rates of depreciation,
or capital expenditures, see id., quoting West v. Chesapeake & Potomac Tel. Co. of
Baltimore City, 295 U.S. 662, 689 (1935) (Stone, J., dissenting) (observing that a
judicial determination of the value of a public utility’s property casts “‘courts . . .
into the most speculative undertaking imposed upon them in the entire history of
English jurisprudence’ ”).
{¶ 43} Without presenting any positive law that requires an appraiser to use
or not use a particular valuation method, Rover’s argument necessarily reduces to
a request that we reweigh the appraisal evidence presented to the board, which is
not our function. See EOP-BP Tower, 2005-Ohio-3096, at ¶ 9.
{¶ 44} We reject Rover’s first proposition of law.
B. Whether the board’s adoption of Eyre’s cost-approach valuation swept in
value unrelated to the cost of constructing the pipeline (Rover’s Proposition of
Law No. 2)
{¶ 45} In its second proposition of law, Rover takes aim at Eyre’s cost-
approach valuation, arguing that he swept in excess costs that have nothing to do
with the true value of the pipeline. Rather than sweep in those costs, Rover insists,
Eyre should have excluded them. We reject this proposition.
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{¶ 46} The cost approach seeks to determine what a potential buyer would
expect to pay in constructing a replacement for the existing property. Dayton-
Montgomery Cty. Port Auth. v. Montgomery Cty. Bd. of Revision, 2007-Ohio-1948,
¶ 12. The idea underlying this approach is that “‘[a] prospective purchaser will not
rationally pay $15,000 for a house, or for 100 shares of stock, or for a shipment of
wheat if, without serious delay, he can build or buy equally satisfactory substitutes
for $10,000.’” (Bracketed text in original.) Id., quoting 1 Bonbright, The Valuation
of Property, 157 (1937).
{¶ 47} Eyre used the historical-cost-less-depreciation method, which
assigns primacy to the property’s cost at the time it was originally acquired or
constructed and placed in service. Eyre used the information from FERC’s
regulatory forms to perform much of his analysis, supplementing it with
information taken from Rover’s public financial statements. To calculate a value,
Eyre began by identifying the value of the “utility plant in service” and then
adjusted for “accumulated depreciation and amortization,” “construction work in
progress,” “plant materials and supplies,” and “gas owed to system gas.”
{¶ 48} After applying the cost approach, Eyre checked its reliability against
a “market analysis,” which entailed calculating a market-to-book ratio. Broadly
speaking, Eyre strove in his market analysis to identify whether the value he opined
under the cost approach, which he drew from “values on the books,” should be
adjusted in view of market data associated with companies in the natural-gas
industry whose stock and debt securities are publicly traded. Based on his
calculated market-to-book ratio, Eyre determined that no reduction in value was
necessary.
{¶ 49} Rover maintains that Eyre tainted his approach by sweeping in what
it calls “cost overruns” that added no value to the pipeline. These overruns, it says,
consist of delays attributable to aberrant rainfall and the environmental incident
caused by the release of drilling fluid. Because “freak weather events” do not speak
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to the cost of constructing a substitute pipeline, the argument runs, such events
would not confront a builder of a substitute pipeline. By the same logic, a substitute
builder would not expect to be beset by environmental troubles.
{¶ 50} Viewed in isolation, Rover makes a fair point—a rational buyer of
the pipeline would not assign value to the costs caused by aberrant weather and
environmental mishaps because, ideally, those events would not happen. But
pipelines are constructed in the real world, and, as the board found, “[t]he
construction of an interstate natural gas pipeline covering hundreds of miles is a
massive planning, financial, and logistical enterprise,” BTA No. 2020-1540 at 8
(Mar. 7, 2024). Given the enormity of the undertaking, it follows that any number
of unforeseen contingencies await a pipeline builder. Of course, it can be imagined
that, unlike here, the builder would luck out with good weather and no
environmental setbacks. But it can also be imagined that for all its good fortune in
dealing with the weather and the environment, the builder would be plagued by
unexpected labor and material shortages. Or perhaps the project would stall during
construction because of protracted litigation associated with permitting. The point
is that because the future is fraught with uncertainty, the prudent builder must
incorporate a contingency into its budget to generate a realistic forecast of what the
project will actually cost. This is where Rover’s argument begins to flounder.
{¶ 51} As the board explained, if Rover’s “budgeting process was faulty or
incomplete, then what Rover called an overrun may be a technical or literal overrun
from the budget, but not an overrun from what should have properly been budgeted
based on like or similar projects.” (Emphasis in original.) Id. at 132. Based on its
review of the evidence, the board determined that it was “clear” that Rover’s budget
was “atypically small” and contained “shortcomings,” id. at 133, that were not
assignable as a “trifling bookkeeping mistake,” id. at 134. The record amply
supports this determination.
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{¶ 52} According to Eyre’s testimony at the board hearing, a report by
Lummus Consultants, which Rover had hired, found that Rover’s budgeted
contingency of 1.3 percent was “low” and should have been at least 10 percent.
Beth Hickey, who oversaw Rover in her capacity as executive vice-president of
commercial operations for one of Rover’s parent companies, testified that the
contingency was “pretty small.” And Eyre explained that even a 10 percent
contingency would be low, testifying that he had seen budgets in the range of 35 to
50 percent for large construction projects and that Rover should have budgeted a
contingency in that range because the pipeline crossed several jurisdictions and
streams.
{¶ 53} Rover counters that even if it had applied a 10 percent contingency,
its cost overruns still would have dwarfed the contingency. We presume that Rover
is referring here to Reilly’s calculations, which he took from Veritas Consulting.
The problem with Rover’s argument is that the board determined that the data
compiled by Veritas was “unreliable,” id. at 131, “lack[ed] support,” id. at 127, and
was “concern[ing],” id. at 134. Rover does not address the board’s determinations
vis-à-vis Veritas’s calculation in its brief, so we take the board’s determinations as
we find them. Rover’s reliance on Standard Oil Co. v. Glander, 155 Ohio St. 61
(1951), rev’d on other grounds sub nom. Standard Oil Co. v. Peck, 342 U.S. 382
(1952), does not alter the analysis. There, the taxpayer and the tax commissioner
stipulated to this court that an “‘overrun,’ or excessive cost of construction,” should
be eliminated from the assessment. Id. at 78. In view of the stipulation, that
decision supplies no binding rule to apply here.
{¶ 54} It is true that Eyre expressed some openness to the idea that at least
some costs related to the April 2017 environmental incident could be written off as
an expense rather than accounted for as a capital cost. But he testified that Rover
itself reported the costs on forms it provided to FERC as a valid cost of construction
by capitalizing the costs into its plant in-service account. The board found that
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“Eyre was well within his expertise to opine on those forms.” BTA No. 2020-1540
at 137 (Mar. 7, 2024). And Rover cites no authority that forbids an appraiser from
using a cost approach to value based on information the pipeline’s owner reported
to FERC by Rover.
{¶ 55} The board also read Dominion Resources, Inc. v. United States, 219
F.3d 359 (4th Cir. 2000), as articulating support for the view that at least some of
the costs of environmental cleanup should have been deducted as an expense rather
than recognized as a capital cost. But the board was unable to make a firm
determination regarding the amount of the deduction based on the information that
Rover had reported to FERC. BTA No. 2020-1540 at 139 (Mar. 7, 2024).
{¶ 56} Without a clear rule of law to apply here, the issue once again boils
down to the board’s evaluation of the evidence. In seeking to undermine the
board’s rationale, Rover argues that it had “powerful incentives” to budget its costs
accurately based on FERC’s regulations. Rover further observes that had it
included a larger contingency, FERC might have viewed the contingency as an
overbudgeting ploy to increase its rates. At most, these arguments establish that
the board could have evaluated the evidence differently, not that it abused its
discretion in evaluating the evidence in the way that it did. See Hilliard City
Schools Board of Edn. v. Franklin Cty. Bd. of Revision, 2018-Ohio-4282, ¶ 14.
{¶ 57} Rover’s argument that Eyre erred in not separately deducting the cost
overruns as unforeseen functional obsolescence is similarly flawed. This court has
described functional obsolescence as “‘a flaw in the structure, materials, or design
of the improvement when compared with the highest and best use and most cost-
effective functional design requirements at the time of appraisal.’” Higbee Co. v.
Cuyahoga Cty. Bd. of Revision, 2006-Ohio-2, ¶ 52, quoting The Appraisal of Real
Estate 403 (12th Ed. 2001). We further explained:
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“Functional obsolescence is attributable to defects within the
property . . . . Functional obsolescence, which may be curable or
incurable, can be caused by a deficiency, which means that some
aspect of the subject property is below standard in respect to market
norms. It can also be caused by a superadequacy, which means that
some aspect of the subject property exceeds market norms.”
(Ellipses in original.) Id.
{¶ 58} Based on this description, the board rejected Rover’s attempt to
identify cost overruns under the rubric of functional obsolescence. BTA No. 2020-
1540 at 128-129 (Mar. 7, 2024). We agree with the board’s determination.
Functional obsolescence speaks to a flaw in the property itself, such as a building
containing inadequate electric wiring. See Adm.Code 5703-25-12 (defining
functional obsolescence when valuing “buildings, structures, fixtures and
improvements to land”). Rover’s argument, however, pertains to external factors
(i.e., weather and regulatory actions). And the record here does not contain
evidence indicating that the pipeline is inferior or superior with respect to market
norms.
{¶ 59} Rover also asserts that Eyre ignored the existence of functional
obsolescence. Rover first challenges Eyre’s determination that it was unnecessary
to create a separate deduction for functional obsolescence because he had deducted
depreciation based on the figures reflected on FERC’s forms. Although Eyre’s
application of the cost approach does not contain an explicit line item denominated
as “functional obsolescence,” he testified before the board that FERC defines
“depreciation” as encompassing obsolescence and that therefore, the deductions in
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his report were proper. The board determined that Eyre’s approach had logical and
legal support but added that it was “at times unsatisfying.”2 Id. at 161.
{¶ 60} Rover questions Eyre’s reliance on FERC’s method of considering
obsolescence under the umbrella of depreciation, arguing that because FERC is not
charged with determining market value, the depreciation estimate that Eyre drew
from FERC’s form rested on different assumptions rooted in different purposes.
But Rover fails to identify an authoritative text that forbids what Eyre did. For this
reason, the board was left to assign the weight it thought appropriate to Eyre’s
handling of functional obsolescence. Because we are not a “super board of tax
appeals,” we do not reweigh the board’s determination. DAK, PLL v. Franklin Cty.
Bd. of Revision, 2005-Ohio-573, ¶ 16.
{¶ 61} Relatedly, Rover questions Eyre’s statement that the appropriate
method to measure obsolescence is to craft an income approach to value. Because
Eyre opined a value under his application of the income approach that was $1
billion less than the value yielded by his application of the cost approach, Rover
reasons, his application of the cost approach failed to account for massive
obsolescence. Rover further insists that by averaging his cost-approach valuation
with his income-approach valuation, Eyre corrupted his reconciled value,
incorrectly skewing it upward by half a billion dollars. But Rover has failed to
show that the board abused its discretion in assigning the weight it thought
appropriate to place on Eyre’s handling of obsolescence. See Hilliard City Schools
Bd. of Edn., 2018-Ohio-4282, at ¶ 14.
{¶ 62} Last, Rover faults Eyre for invoking the Western States Association
of Tax Administrators handbook to support his view that it would be improper to
2. The board cites PacifiCorp v. State, 360 Mont. 259, ¶ 40-48 (2011), describing it as a decision in
which the Supreme Court of Montana found that “it was not improper to rely on [FERC]
depreciation to capture obsolescence,” BTA No. 2020-1540 at 161 (Mar. 7, 2024). For an
alternative view, see PacifiCorp v. Idaho State Tax Comm., 153 Idaho 759, 768-769 (2012), which
the board also discussed. Rover does not address either decision in its briefs.
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deduct functional obsolescence under his application of the cost approach. Rover
reasons that it was improper for Eyre to rely on the handbook because he cowrote
it. But Rover provides no analysis to support this argument. The lack of
“meaningful analysis to support [an] argument . . . is grounds alone to reject it.”
Adams, 2024-Ohio-4640, at ¶ 62.
C. Whether the board erred in analyzing the effect of the Blackstone transaction
(Rover’s Proposition of Law No. 3)
{¶ 63} Rover’s third proposition of law challenges the board’s
determination that the Blackstone transaction was an important guidepost in
determining the pipeline’s value. Rover divides its challenge into two
subarguments. First, it claims that the transaction is an invalid datum to assist in
establishing the pipeline’s value because Blackstone purchased an indirect equity
interest. Second, it asserts that, if anything, the transaction establishes a ceiling for
valuing the pipeline. In simpler terms, the first subargument advances a qualitative
claim regarding the character of the transaction, and the second advances a
quantitative claim regarding the transaction’s imputed value. Each is considered in
turn below.
1. Indirect equity interest
{¶ 64} The board characterized the Blackstone transaction as a “very
important clue but not dispositive evidence of value.” BTA No. 2020-1540 at 109
(Mar. 7, 2024). In doing so, it determined that the “most credible testimony”
analyzing the transaction came from Cornell, the tax commissioner’s expert who
testified that the transaction should be understood as creating a floor value with an
upward range. Id. Rover maintains, however, that the transaction should not have
been considered probative, because Blackstone acquired an indirect equity interest
in Rover, not the pipeline itself. We are unconvinced.
{¶ 65} In support of this argument, Rover cites Salem Med. Arts & Dev.
Corp. v. Columbiana Cty. Bd. of Revision, 1998-Ohio-248, and Gahanna-Jefferson
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Pub. Schools Bd. of Edn. v. Franklin Cty. Bd. of Revision, 2000-Ohio-216. In
Salem, this court determined that a company’s stock price could not be used to
establish the value of realty, because the “stock[’s] price fails to account for the
complexities of corporate finance.” Salem at ¶ 10. Because “stock value represents
the company’s value,” we reasoned that appraisal or expert accounting testimony
was necessary to prove the value of the real property separate from the company’s
value. Id. at ¶ 11. A related issue involving the sale of partnership interests arose
in Gahanna-Jefferson. There, this court concluded that because the sale of the
partnership interest constituted the sale of personal property and not real property,
the former could not be used to value the latter. Gahanna-Jefferson at ¶ 17. “[A]s
we declared in Salem, other evidence can be used to prove the value of the real
property separate from the partnership interests.” Id. at ¶ 19.
{¶ 66} We revisited these two decisions in Columbus City Schools Bd. of
Edn. v. Franklin Cty. Bd. of Revision, 2020-Ohio-353 (“Palmer House”), a case
involving the effect of what this court termed a “Drop Down LLC sale” on the value
of an apartment complex. In Palmer House, a school board argued that the sale of
the entity constituted the presumptive value of the real estate. But the owner,
relying on Salem and Gahanna-Jefferson, argued that the sale of the entity could
never be viewed as equivalent to a sale of the entity’s real-estate asset. We observed
that Salem and Gahanna-Jefferson announced a “broad principle,” Palmer House
at ¶ 35, but clarified that those two decisions did not establish an “iron rule,” id. at
¶ 36. Rather than apply a categorical prohibition, we assigned primacy to the
evidence presented to the board—specifically, a contract that “identifie[d] itself as
a purchase agreement for the real estate at issue.” Id. at ¶ 38. That evidence, we
explained, furnished a basis for the board to reasonably conclude that that sale,
unlike the sales at issue in Salem and Gahanna-Jefferson, reflected the contracting
“parties’ intent to sell and purchase income-producing real estate.” Id. at ¶ 39.
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{¶ 67} In this case, the board determined that its evaluation of the effect of
the Blackstone transaction on the pipeline’s value was “consistent” with Palmer
House. BTA No. 2020-1540 at 115 (Mar. 7, 2024). We agree, but it is worth noting
that in Palmer House, this court determined that the “Drop Down LLC sale”
provided the key to achieving a direct valuation of the property. See Palmer House
at ¶ 15, 50 (affirming the board’s decision to value the property based on the sale
price less the value of nontaxable personal property). Here, in contrast, the board
did not directly value the pipeline based on the Blackstone transaction; instead, the
transaction was used as a guidepost. Even so, Palmer House is instructive and
clarifies that in a proper case, the sale of an income-producing property does not
lose its character as such even if, as we termed it, other “assets” and
“considerations” are included within the sale, id. at ¶ 40. Notwithstanding the
presence of these other “assets” and “considerations” in Palmer House, import was
placed on whether the real estate generated income, whether that income was
integral to the value of the real property, and whether other income was derived
from the real property that would relate to value beyond the real property, id. at
¶ 42. In our view, this case presents a similar situation.
{¶ 68} Recall that Blackstone paid $1.51 billion for a 49.9 percent interest
in ET Rover Pipeline, thereby giving Blackstone a 32.435 percent indirect interest
in Rover by way of ET Rover Pipeline’s 65 percent interest in Rover. The board
found persuasive Cornell’s testimony addressing the transaction’s significance. In
Cornell’s view, the Blackstone transaction implied that the true value of the pipeline
as a whole was at least $4.66 billion, which he called a “floor,” and which he
calculated by dividing Blackstone’s contribution of $1.510 billion by its 32.435
percent indirect interest in Rover. Cornell further observed that based on the
calculations he had reviewed, the implied value could be extended “north[ward]”
to “probably around $5 billion.” According to Cornell, the transaction was a means
for Blackstone to gain access to cash flows from the completed pipeline. Cornell
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drew this conclusion based on his review of Rover’s balance sheet, which showed
that Rover’s “overwhelming” asset “by several orders of magnitude” was the
pipeline.
{¶ 69} As in Palmer House—and unlike in Salem and Gahanna-
Jefferson—here, the board was thus presented with evidence that provided a
reasonable basis for it to conclude that notwithstanding Blackstone’s formal
purchase of an equity interest in Rover’s partial parent, the sale was, in substance,
a means for Blackstone to acquire an interest in an income-producing property.
Because the record provides support for the board’s view that the “value purchased
by Blackstone was tied to the hard assets” of the pipeline, BTA No. 2020-1540 at
114 (Mar. 7, 2024), and that the pipeline was “the only asset of meaningful value,”
id. at 119, there is no merit to Rover’s argument that nontaxable assets should have
been excluded.
{¶ 70} Rover argues that a member of Blackstone’s dealmaking team—who
had a more expansive conception of Rover’s assets—presented unrebutted
testimony that Blackstone’s purchase of its interest in Rover’s assets included
“other, non-taxable assets.” But the board found that the evidence on this point was
in conflict, and it is the board’s job, not ours, to resolve evidentiary conflicts. See
Buckeye Terminals, L.L.C. v. Franklin Cty. Bd. of Revision, 2017-Ohio-7664, ¶ 14,
31 (evidentiary conflicts present a matter for the board to weigh). Similarly, the
board did not find that the Blackstone member testified that Rover held assets other
than those integral to the pipeline’s operation. BTA No. 2020-1540 at 119 (Mar.
7, 2024). In any event, Rover fails to specify the value of these apparently
nontaxable assets in terms of dollars, thereby reinforcing the board’s finding that
no value is accounted for beyond that of the pipeline. See St. Bernard Self-Storage,
L.L.C. v. Hamilton Cty. Bd. of Revision, 2007-Ohio-5249, ¶ 25 (because the
taxpayer “failed to prove the existence of any business value separable from the
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value of the real property, the allocation to goodwill simply did not pertain to any
such separable value”).
{¶ 71} Nor does Rover succeed in downplaying Palmer House as turning
on “idiosyncratic” facts by way of a structured sale involving a “Drop Down LLC.”
That characterization is mistaken—what mattered in that case was that the board
was presented with a reasonable basis for it to conclude that the parties’ intent in
conducting the transaction was to transfer income-producing real estate. The board
had a similar basis here regarding the pipeline.
{¶ 72} Last, Rover gets no traction in pointing to Arbors E. RE, 2018-Ohio-
1611, which involved the transfer of a nursing-home facility. There, this court
stressed that because such facilities conduct general-business activity and real-
estate activity, the two must be kept separate when valuing only the real estate. Id.
at ¶ 19. Here, in contrast, there is but one income-producing activity, and that
activity traces directly to the pipeline. See Palmer House at ¶ 41-42 (finding the
logic of Arbors E. RE inapt for this reason).
2. Ceiling or floor
{¶ 73} Rover’s second subargument in support of its third proposition of
law maintains that if the Blackstone transaction is probative of anything, it is that
the transaction establishes a ceiling rather than a floor on the pipeline’s value. We
disagree.
{¶ 74} Rover says that the Blackstone transaction can be considered (1) the
functional equivalent of a bulk sale or (2) a sale of the pipeline itself. If the
Blackstone transaction is considered a bulk sale, Rover reasons, then the imputed
price of $4.66 billion cannot rise further, because, the argument runs, the value of
one piece of property within a bulk sale cannot exceed the price of the sale. If the
Blackstone transaction is considered a sale of the pipeline itself, Rover asserts, then
the imputed price of $4.66 billion cannot rise further, because the sale of the
pipeline is the best evidence of value.
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{¶ 75} In a bulk-sale case, the best evidence of true value is the properly
allocated price from a recent arm’s-length sale. Conalco, Inc. v. Monroe Cty. Bd.
of Revision, 50 Ohio St.2d 129 (1977), paragraphs one and two of the syllabus; St.
Bernard Self-Storage, 2007-Ohio-5249, at ¶ 15 (“Unlike a simpler transaction
where a single parcel of real property is sold individually, a bulk sale may involve
the sale of all the assets of a business, whereby a parcel of real property constitutes
one of many business assets sold at the same time for an aggregate sale price.”).
Outside the bulk-sale realm, the principle is functionally the same for the sale of a
discrete piece of property—the price from a recent arm’s-length sale is the best
evidence of the property’s value, Grabler Mfg. Co. v. Kosydar, 43 Ohio St.2d 75,
77-78 (1975). These principles stand for the idea that “[i]n some cases, a recent
arm’s-length sale furnishes a direct indication of value . . . .” Rich’s Dept. Stores,
Inc. v. Levin, 2010-Ohio-957, ¶ 26 (declining to apply the principle because the
taxpayer had not shown evidence of a bulk sale).
{¶ 76} Here, the board did not use the Blackstone transaction to directly
value the pipeline. The board’s wariness of doing so can be explained at least in
part by the fact that at the time of the transaction, the pipeline was partially
complete. When a property undergoes improvements between the time of the sale
and the tax-lien date, as here, a finding of recency becomes difficult to sustain. See
Cummins Property Servs., L.L.C. v. Franklin Cty. Bd. of Revision, 2008-Ohio-1473,
¶ 35, superseded by statute as stated in Rancho Cincinnati Rivers, L.L.C. v. Warren
Cty. Bd. of Revision, 2021-Ohio-2798, ¶ 25. Similarly, this court has observed that
in bulk-sale cases, which is the characterization that Rover leans most heavily on,
“‘complexities of the sale’ may justify looking to appraisal evidence rather than the
sale price to value the property,” Cincinnati School District Bd. of Edn. v. Hamilton
Cty. Bd. of Revision, 2017-Ohio-7650, ¶ 11. That the board rendered a 165-page
decision in this case attests to the complexities attending the value question.
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{¶ 77} Rather than using the Blackstone transaction to directly value the
pipeline, the board saw it as establishing a guidepost, containing “useful market
information” to check the reliability of the opinions of value advanced in this case.
BTA No. 2020-1540 at 108 (Mar. 7, 2024). That approach was perhaps
unorthodox, but we find no legal error in the board’s doing what it did. The board’s
task here, as Rover agrees, was to find the pipeline’s true value. Rover points to
nothing in the language of R.C. Ch. 5727 that forbids the board’s guidepost-as-a-
check approach. And it is not our role to announce a judge-made prohibition not
prescribed by law. See Wheeling Steel Corp. v. Porterfield, 24 Ohio St.2d 24, 27-
28, (1970). Consequently, the validity of the board’s handling of the transaction
turns largely on its assessment of the evidence.
{¶ 78} The board viewed Cornell’s testimony regarding the Blackstone
transaction as the “most credible,” noting that he saw the transaction as creating a
floor with an upward range. BTA No. 2020-1540 at 109 (Mar. 7, 2024). Cornell’s
floor-with-an-upward-range description rests on two ideas. First, he explained that
Blackstone was investing in a completed pipeline, not a development partner,
though the pipeline was not yet complete at the time of the transaction. At the time
of the transaction, which took place in July 2017, the pipeline was still being
constructed. It was not until November 2018, one month before the December 31,
2018 tax-lien date, that the pipeline was completed and available for full
commercial operation. In light of the improvements made to the pipeline from the
time of the Blackstone transaction to the tax-lien date, the board’s determination
that the pipeline’s value had a floor with an upward range is amply supported.
Indeed, the point of this case is to determine the value of the pipeline as of the tax-
lien date. Given that the pipeline only increased in value as the tax-lien date
approached, Rover’s view that the transaction established a ceiling on the pipeline’s
value roughly a year and a half before the tax-lien date is not convincing.
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{¶ 79} Cornell’s second reason for viewing the transaction as creating a
floor with an upward range rests on Blackstone’s purchase of what he termed in his
expert report an “indirect, minority, illiquid interest.” Cornell cited academic
studies finding that “minority, illiquid interests frequently trade at discounts to the
true value of the entire property.” As he explained before the board, “[c]ontrol has
value.” Cornell discerned that in the 50.1/49.9 percent ownership split between ET
Rover and Blackstone, ET Rover negotiated for control and, in doing so, was
willing to give Blackstone a discount on its minority ownership stake.
{¶ 80} Rover faults Cornell’s minority-interest rationale, claiming that it
contradicts the board’s precedent on transfers of fractional interests. Not so. Under
the board’s precedent, the validity of which is unquestioned in this appeal, a sale of
a fractional interest may serve as a probative indicator of value provided that it is
considered and tested against other evidence of value. See, e.g., Roc Syl Assocs. v.
Cuyahoga Cty. Bd. of Revision, BTA Nos. 2008-A-1390, 2008-A-1391, and 2009-
A-836, 2011 WL 3561194, *3 (Aug. 9, 2011) (collecting cases). The board did
precisely this. Paragraph after paragraph of the board’s decision assesses the
Blackstone transaction, Reilly’s opinion of value, and Eyre’s opinion of value. And
the board found that the Blackstone transaction supported Eyre’s appraisal. BTA
No. 2020-1540 at 123-124, 164 (Mar. 7, 2024).
{¶ 81} We reject Rover’s third proposition of law.
D. Whether the board erred by adopting Eyre’s appraisal notwithstanding its
identification of alleged errors (Rover’s Proposition of Law No. 4)
{¶ 82} In its fourth proposition of law, Rover argues that the board erred by
adopting Eyre’s valuation despite identifying what Rover calls “legal errors” in his
analysis. First, Rover points to the board’s statement that it found “unsatisfying”
Eyre’s view that “‘in theory,’ regulatory depreciation should capture
obsolescence,” id. at 161. Second, Rover emphasizes that the board “fault[ed]”
Eyre for not doing a more thorough analysis of the Blackstone transaction in his
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written report, id. at 110. In view of these alleged errors, Rover says that at a
minimum, this court should vacate the board’s decision and remand the case with
instructions that the board render an independent determination of value or,
alternatively, direct the tax commissioner to do so. We are unpersuaded.
{¶ 83} In the real-property-valuation context, we have said that the board
“is not required to adopt the appraisal methodology espoused by any expert or
witness.” Hotel Statler v. Cuyahoga Cty. Bd. of Revision, 1997-Ohio-388, ¶ 19.
That precept has special force here, Rover argues in its merit brief, because the
board “determined that none of the testifying appraisers correctly determined true
value.” (Emphasis in original.) On Rover’s telling, because the board found that
no appraiser correctly did his job, the board was required to independently find
value or direct the tax commissioner to do so—not select what it viewed to be, in
Rover’s words, the “least flawed” appraisal, as an arbitrator would do in a “baseball
arbitration.” See, e.g., Rain CII Carbon, L.L.C. v. ConocoPhillips Co., 2011 WL
2565345, *1 (E.D. La. Jun. 27, 2011) (observing that in a baseball arbitration, each
party submits a proposal and the arbitrator selects one of the two). In support of
this argument, Rover cites, among other decisions, Cincinnati Milacron Industries,
Inc. v. Brown Cty. Bd. of Revision, in which this court observed that the board is
permitted “to render its own independent decision as to the valuation of the property
in issue,” 35 Ohio St.3d 32, 33 (1988), citing R.C. 5717.03.
{¶ 84} Rover puts words in the board’s mouth by saying that the board
characterized Eyre’s appraisal as containing “legal errors.” The board’s decision
plainly conveys that the board viewed Eyre’s appraisal as constituting the “best”
evidence of value, BTA No. 2020-1540 at 164 (Mar. 7, 2024)—not, as Rover says,
the “least flawed.” What is more, as to the first alleged error, Rover’s merit brief
conveys a misleading impression of what the board said. Rover quotes a portion of
the board’s statement in which it found “unsatisfying” Eyre’s view that “‘in theory,’
regulatory depreciation should capture obsolescence.” But Rover fails to quote the
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immediately following clause, in which the board found that there was “logical and
legal support for [Eyre’s] idea,” id. at 161. Turning to the second alleged error,
while true that the board stated that it would have preferred that Eyre had analyzed
the Blackstone transaction in his written appraisal report, it is also true that Eyre
testified that he viewed the transaction as reflecting a value of at least $4.8 billion
and that the board viewed that testimony as “valid” for its consideration, id. at 164.
{¶ 85} By Rover’s logic, Eyre apparently had to render a perfect appraisal
to justify the board’s adoption of his appraised value. But this court has not held
the board to so high a standard. See Hilliard City Schools Bd. of Edn., 2018-Ohio-
4282, at ¶ 14 (affirming order in which the board adopted an appraiser’s opinion of
value containing “alleged weak points” rather than another appraiser’s opinion of
value, which the board found less probative); Health Care REIT, Inc. v. Cuyahoga
Cty. Bd. of Revision, 2014-Ohio-2574, ¶ 58 (lead opinion) (characterizing an
appraiser’s valuation as “somewhat perplexing” but affirming the board’s order
adopting the valuation because the challenger had not shown that the board erred
in rejecting the valuation proposed by the challenger’s appraiser).
{¶ 86} Given the complexities this case entails, it is hardly surprising that
the board was able to identify blemishes on Eyre’s appraisal. That the board was
able to do so is not evidence that the board erred in adopting his opined value,
because analytical perfection by an appraiser is not the touchstone for analysis.
Indeed, it is well understood that property appraisal “‘is incapable of mathematical
precision and implicates methods of judgment.’” United States v. 0.376 Acres of
Land, 838 F.2d 819, 825 (6th Cir. 1988), quoting United States v. 1,378.65 Acres
of Land, 794 F.2d 1313, 1318-1319 (8th Cir. 1986); see also United States v. 14.38
Acres of Land, 80 F.3d 1074, 1077 (5th Cir. 1996), quoting United States v. 68.94
Acres of Land, 918 F.2d 389, 393 (3d Cir. 1990) (“‘there are no infallible means
for determining with absolute conviction what a willing buyer would have paid a
willing seller’ ”); Latimore v. Citibank Fed. Savings Bank, 151 F.3d 712, 715 (7th
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SUPREME COURT OF OHIO
Cir. 1998) (“appraisal is not an exact science”); In re Bate Land & Timber L.L.C.,
877 F.3d 188, 197 (4th Cir. 2017) (“[v]aluation is not an exact science” [cleaned
up]).
{¶ 87} We reject Rover’s fourth proposition of law.
III. CONCLUSION
{¶ 88} Accordingly, we affirm the board’s decision.
Decision affirmed.
__________________
Gibson, Dunn & Crutcher, L.L.P., Jonathan C. Bond, and Sanford W. Stark;
Zaino Hall & Farrin, L.L.C., Stephen K. Hall, Thomas M. Zaino, Richard C. Farrin,
and Robert C. Maier; and Norton Rose Fulbright and Andrew P. Price, for
appellant.
Dave Yost, Attorney General, T. Elliot Gaiser, Solicitor General, and
Samantha L. Cowne, Assistant Attorney General, for appellee.
Steptoe and Johnson, L.L.P., John Kevin West, Timothy M. McKeen, and
John C. Ferrell, urging reversal for amici curiae Ohio Oil & Gas Association and
Ohio Manufacturers’ Association.
Calfee, Halter & Griswold, L.L.P., James F. Lang, and Matthew B. Barbara,
urging reversal for amicus curiae Ohio Chamber of Commerce.
Bricker Graydon, L.L.P., Brodi J. Conover, and Rebecca C. Princehorn, for
amici curiae Napoleon Area City School District, Henry County; Cindy Funk,
Ashland County Auditor; Cindi Henry, Belmont County Auditor; Lynn Fairclough,
Carroll County Auditor; Robyn Sheets, Crawford County Auditor; Jill Little,
Defiance County Auditor; Brett Kolb, Fulton County Auditor; Charity
Rauschenberg, Hancock County Auditor; Allison Anderson, Harrison County
Auditor; Elizabeth Fruchey, Henry County Auditor; E.J. Conn, Jefferson County
Auditor; Denise Stoneking, Monroe County Auditor; Ruth Hayes, Noble County
Auditor; Patrick Dropsey, Richland County Auditor; Julie Adkins, Seneca County
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January Term, 2025
Auditor; Alan Harold, Stark County Auditor; Larry Lindberg, Tuscarawas County
Auditor; Russell Robertson, Wayne County Auditor; Matt Oestreich, Wood County
Auditor; Buckeye Association of School Administrators; Ohio Association of
School Business Officials; Ohio School Boards Association; Ohio Prosecuting
Attorneys Association; Ohio Township Association; and Ohio Library Council.
__________________
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