The opinion
[This opinion has been published in Ohio Official Reports at 73 Ohio St.3d 715.]
CLEVELAND BOARD OF EDUCATION, APPELLEE, v. CUYAHOGA COUNTY BOARD
OF REVISION; FIRST UNION REAL ESTATE EQUITY & MORTGAGE
INVESTMENTS, APPELLANT.
FIRST UNION REAL ESTATE EQUITY & MORTGAGE INVESTMENTS, APPELLANT,
V. CUYAHOGA COUNTY BOARD OF REVISION; CLEVELAND BOARD OF
EDUCATION, APPELLEE.
[Cite as Cleveland Bd. of Edn. v. Cuyahoga Cty. Bd. of Revision,
1995-Ohio-165.]
Taxation—Real property valuation—Decision of Board of Tax Appeals not
overruled when based upon sufficient probative evidence.
(Nos. 94-1517 and 94-1690—Submitted June 15, 1995—Decided October 11,
1995.)
APPEALS from the Board of Tax Appeals, Nos. 92-H-630, 92-H-631, 92-H-632,
93-J-724, 93-J-725 and 93-J-764.
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{¶ 1} The property at issue in this case consists of nine tax parcels
containing 2.05 acres, located at the northwest corner of the intersection of Superior
Avenue and West Third Street in Cleveland, Ohio. First Union Real Estate Equity
& Mortgage Investments (“First Union”) acquired the property in 1977 and has
used it since that time as a surface parking lot, capable of accommodating two
hundred ninety-six cars. In June 1986, First Union subleased the property to
APCOA for a term ending December 31, 1991.
{¶ 2} The property is located in the southeast corner of an area known as
the historic warehouse district, and is also part of the central business district. It is
currently zoned for limited retail business, with a building height restriction of two
hundred fifty feet.
SUPREME COURT OF OHIO
{¶ 3} For the tax year 1990, the parcels were assessed by both the Cuyahoga
County Auditor and Board of Revision at a true value of $3,243,440. For the tax
year 1991, the assessments by the county auditor and board of revision were
$13,456,330 and $7,289,990, respectively. Appeals were taken to the Board of Tax
Appeals (“BTA”) by the Cleveland Board of Education for the tax year 1990, and
by First Union and the Cleveland Board of Education for the tax year 1991.
{¶ 4} Separate hearings were held before the BTA for the 1990 and 1991
assessment years. First Union and the Cleveland Board of Education each
presented appraisal testimony to establish true value. While the approaches of the
two appraisers differed, they did agree on two points: (1) the cost approach to value
was not applicable, and (2) the property was one of the most desirable remaining
undeveloped future office locations in Cleveland’s central business district.
{¶ 5} Michael S. Folkman, First Union’s appraiser, testified that the
property’s current use as a parking lot was its highest and best use and that because
future development of the site was not expected soon, the property’s use as a
parking lot should not be considered an interim use. He believed that it would be
approximately fifteen years before development of the property would be
financially feasible. Folkman used the income method to arrive at his true value of
$3,650,000 for 1990 and $3,750,000 for 1991. The values were based on a
stabilized net operating income from the parking lot of $475,600 for 1990 and
$490,000 for 1991, and a capitalization rate of 13.14 percent for 1990 and 13.02
percent for 1991.
{¶ 6} Folkman also used a market data approach, based on comparable
sales, as though the property were to be sold as a site for current development. This
value was $26,800,000. However, because Folkman did not believe that the site
would be developed for about fifteen years, he calculated the present value by
taking the estimated current development value of $26,800,000 and discounting it,
based on a rate of 12.5 percent, for fifteen years, to arrive at a current market value
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January Term, 1995
of $4,600,000. However, Folkman stated that he gave very little weight to his
market data approach.
{¶ 7} In contrast, the appraiser for the Cleveland Board of Education,
Richard C. Racek, stated that the property’s use as a parking lot was an interim use,
and the highest and best use for the property was eventual commercial
development. Racek stated that it was impossible to predict when the property
would be developed. Using the market approach to value, Racek testified that he
was relying on “recent sales of similarly used property in order to make a
determination of value.” Racek looked at seven comparable sales, six of them
involving comparable parking lots, like the subject property. Racek believed that
in “appraising a parking lot, it’s best to use sales of other parking lots” because the
buyers of a parking lot “are better at it than any appraiser can be because they are
in the marketplace doing it.” Based on his market data approach, Racek arrived at
a current market value of $80 per square foot for both 1990 and 1991, which
translated into true values of $7,290,000 and $7,145,000, respectively. Because he
believed the current use was an interim use, Racek declined to use the income
method for determining value. His basic reason was that “[p]arking lots in
Cleveland’s Central Business District do not generate enough parking revenues to
justify their land values, and those values are established by what other people have
been paying for parking lots.”
{¶ 8} The BTA in each case chose to adopt Racek’s appraisal as the best
evidence of true value, based on his market comparables, stating that it could not
accept First Union’s appraiser’s income approach. The BTA determined the true
value of the property to be $7,290,000 for 1990 and $7,289,990 for 1991. First
Union filed its appeals as of right with this court for the tax years 1990 (case No.
94-1517) and 1991 (case No. 94-1690).
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SUPREME COURT OF OHIO
Armstrong, Mitchell & Damiani, Timothy J. Armstrong and Deborah J.
Papushak, for appellee.
Kadish & Bender, Kevin M. Hinkel and David G. Lambert, for appellant.
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Per Curiam.
{¶ 9} We affirm the decisions of the Board of Tax Appeals.
{¶ 10} Because there had been no recent sale of the property in question,
both First Union and the board of education relied upon expert appraisers in order
to establish its true value. State ex rel. Park Invest. Co. v. Bd. of Tax Appeals
(1964), 175 Ohio St. 410, 25 O.O.2d 432, 195 N.E.2d 908.
{¶ 11} First Union contends that the BTA erred in accepting Racek’s
appraisal, claiming that Racek erroneously valued the property based on its future
highest and best use, rather than its current use as a parking lot. First Union
contends that Porter v. Cuyahoga Cty. Bd. of Revision (1977), 50 Ohio St. 2d 307,
4 O.O.3d 460, 364 N.E.2d 261, supports its position that its property should be
valued solely on the basis of its use as a parking lot. We disagree.
{¶ 12} In Porter, the county appraised all the land in question at one value,
without regard to the individual zoning classification of each parcel. We held that
under the facts of that case, it was unreasonable, without support in the record, to
value property at more than the value a willing buyer would pay for it as zoned. In
this case zoning is not an issue; however, First Union contends that because no one
knows when the property will be developed, no use other than a parking lot should
be considered.
{¶ 13} In this case, as contrasted to Porter, there was evidence in the record
that buyers were willing to pay more for parking lots in the area than their value
purely as parking lots. Further, in Porter we stated that “pursuant to Section 2,
Article XII of the Ohio Constitution, valuations of property cannot be limited to
considerations of current use only, since other factors comprising market value such
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January Term, 1995
as ‘location and speculative value’ are excluded.” Id. at 312, 50 O.O.2d at 463, 364
N.E.2d at 265. See, also, State ex rel. Park Invest. Co. v. Bd. of Tax Appeals (1972),
32 Ohio St. 2d 28, 33, 61 O.O.2d 238, 241, 289 N.E.2d 579, 582.
{¶ 14} The BTA thoroughly examined the testimony of both appraisers and
concluded that the market comparables used by Racek were “well chosen and
properly adjusted” and represented “the best evidence of value in this case.” In
R.R.Z. Assoc. v. Cuyahoga Cty. Bd. of Revision (1988), 38 Ohio St. 3d 198, 201,
527 N.E.2d 874, 877, we stated that the BTA’s decision on true value “is a question
of fact which will be disturbed by this court only when it affirmatively appears from
the record that such decision is unreasonable or unlawful,” and we would “not
overrule BTA findings of fact that are based upon sufficient probative evidence.”
Id. In this case the valuations by the BTA are supported by the evidence.
{¶ 15} First Union also contends that although separate hearings were held
for tax years 1990 and 1991, and the BTA issued separate decisions, the BTA failed
to make an independent determination of true value for 1991. First Union contends
that for 1991, the BTA did not identify the evidence relied upon in reaching this
decision. We find no support for First Union’s contention. The BTA reviewed the
evidence and testimony for 1991 and found that the property had not changed in
value since 1990.
{¶ 16} The decisions of the BTA, being neither unreasonable nor unlawful,
are hereby affirmed.
Decisions affirmed.
MOYER, C.J., DOUGLAS, RESNICK, F.E. SWEENEY and COOK, JJ., concur.
WRIGHT AND PFEIFER, JJ., concur separately.
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PFEIFER, J., concurring.
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{¶ 17} While I agree with the majority that the record supports the Board of
Tax Appeals’ decision, my concurrence in no way should be interpreted as a vote
of support for the “highest and best use” method of valuing property.
WRIGHT, J., concurs in the foregoing concurring opinion.
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