The opinion
[This opinion has been published in Ohio Official Reports at 75 Ohio St.3d 601.]
FAWN LAKE APARTMENTS, APPELLANT, v. CUYAHOGA COUNTY BOARD OF
REVISION; OLMSTED FALLS BOARD OF EDUCATION, APPELLEE.
[Cite as Fawn Lake Apts. v. Cuyahoga Cty. Bd. of Revision, 1996-Ohio-443.]
Taxation—Real property—Valuation of apartment complex by Board of Tax
Appeals reasonable and lawful, when.
(No. 95-1151—Submitted February 1, 1996—Decided June 19, 1996.)
APPEAL from the Board of Tax Appeals, No. 93-D-954.
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{¶ 1} Fawn Lake Apartments, appellant, owns eleven apartment buildings
containing 288 units. The complex includes 264 garden units and 24 townhouse
units. Its recreation building houses a party room, office, and fitness center. The
complex also contains a swimming pool, tennis courts, lake with bridge and
associated asphalt paving, concrete curbs and walks, and landscaping.
{¶ 2} For tax year 1991, the Cuyahoga County Auditor placed a true value
of $7,743,000 on the property. Fawn Lake and the Olmsted Falls Board of
Education (“BOE”), appellee, each filed a complaint with the Cuyahoga County
Board of Revision (“BOR”). Fawn Lake claimed the true value of the property to
be $7,250,000; the BOE claimed a value of $8,517,300. After hearing and review,
the BOR affirmed the auditor’s value. Fawn Lake then appealed the BOR’s
decision to the Board of Tax Appeals (“BTA”).
{¶ 3} At the BTA, Fawn Lake presented the expert real estate appraisal
testimony of Robert J. Kocinski, a member of the Appraisal Institute. He testified
that the true value for the property was $7,000,000. The BOE presented the expert
real estate appraisal testimony of Sam D. Canitia, a senior member of the Society
of Real Estate Appraisers and a senior member of the American Society of
Appraisers. He testified that the true value of the property was $9,214,000.
SUPREME COURT OF OHIO
{¶ 4} After reviewing the testimony and reports of the appraisers, the BTA
chose to value the property along the lines of Kocinski’s income approach to value.
In this approach, Kocinski gave primary weight to actual rentals in estimating
income and closely followed actual expenses in estimating expenses. He also
deducted $56,320 as a reserve for replacements. After discussing financing
concerns, bank tendencies, and market indications, he selected a capitalization rate
of 10.25 percent and added a tax factor of 2.29 percent. He estimated the true value
of the property via the income approach to be $7,150,000.
{¶ 5} Though choosing this approach to determine true value, the BTA did
change some of its elements. First, the BTA concluded that Fawn Lake repaired
and replaced items as needed and that Fawn Lake had included these replacement
costs in actual ongoing operating costs. The BTA did not see any propriety in
deducting a reserve for replacements as Kocinski had, since Kocinski’s costs were
virtually the actual costs to operate the property. Second, the BTA determined that
Kocinski’s capitalization rate information was vague and unsubstantiated. Instead,
the BTA selected Canitia’s capitalization rate of nine percent because it was more
comprehensible and realistic. He had extracted it from a survey by life insurance
companies that had committed $100,000 or more on multi-family and
nonresidential mortgages.
{¶ 6} The BTA rejected Kocinski’s and Canitia’s final opinions of value,
and recalculated Kocinski’s income approach to value with the above-mentioned
changes. Accordingly, it determined the true value for the property for tax year
1991 to be $8,291,810.
The cause is now before this court upon an appeal as of right.
Fred Siegal Co., L.P.A., and Annrita S. Johnson, for appellant.
Kolick & Kondzer, Daniel J. Kolick and John P. Desimone, for appellee.
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January Term, 1996
Per Curiam.
{¶ 7} Fawn Lake contends that the BTA should have deducted a reserve for
replacements, employed a capitalization rate that reflected current returns on
mortgages and equities, and agreed with its appraisal testimony. However, we
disagree and affirm the BTA’s decision.
{¶ 8} In Freshwater v. Belmont Cty. Bd. of Revision (1991), 58 Ohio St.3d
140, 568 N.E.2d 1215, we held that a reserve for replacements was a proper item
to consider in valuing real property. However, we did not mandate that such a
reserve be accounted for in all cases. Here, the BTA, essentially, found that the
actual expenses of the property, which Kocinski followed closely, contained a
reserve for replacements. Thus, it chose not to deduct further amounts for
replacements.
{¶ 9} Kocinski’s testimony supports this conclusion. He testified that Fawn
Lake did not set aside a replacements reserve, but capitalized replacement items as
it needed them. Since this testimony supports the BTA’s finding of fact, we affirm.
Hawthorn Mellody, Inc. v. Lindley (1981), 65 Ohio St. 2d 47, 19 O.O. 3d 234, 417
N.E. 2d 1257, syllabus.
{¶ 10} As to the capitalization rate, the BTA criticized Kocinski’s rate as
unsupported. Again, the evidence, the survey of life insurance companies’
mortgage commitments, supports Canitia’s capitalization rate selection. As to
Canitia’s obtaining the rate from an annual survey rather than a quarterly study
completed near the tax lien date, the BTA “may consider pre- and post-tax lien date
factors that affect the true value of the taxpayer’s property on the tax lien date.”
Youngstown Sheet & Tube Co. v. Mahoning Cty. Bd. of Revision (1981), 66 Ohio
St.2d 398, 20 O.O.3d 349, 422 N.E. 2d 846, paragraph two of the syllabus.
{¶ 11} Finally, as to Fawn Lake’s claim that its evidence better evaluated
the property than the BOE’s evidence, we do not find that the BTA abused its
discretion in believing the testimony that it did. Wolf v. Cuyahoga Cty. Bd. of
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SUPREME COURT OF OHIO
Revision (1984), 11 Ohio St. 3d 205, 11 OBR 523, 465 N.E. 2d 50. This weighing
of evidence and granting of credibility is exactly the BTA’s statutory job.
{¶ 12} Accordingly, we affirm the decision of the BTA because it is
reasonable and lawful.
Decision affirmed.
MOYER, C.J., DOUGLAS, RESNICK, F.E. SWEENEY, PFEIFER and COOK, JJ.,
CONCUR.
WRIGHT, J., not participating.
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