The opinion
[Cite as Dublin City Schools Bd. of Edn. v. Franklin Cty. Bd. of Revision, 139 Ohio St.3d 193,
2013-Ohio-4543.]
DUBLIN CITY SCHOOLS BOARD OF EDUCATION, APPELLEE, v. FRANKLIN
COUNTY BOARD OF REVISION ET AL., APPELLEES;
EAST BANK CONDOMINIUMS II, L.L.C., APPELLANT.*
[Cite as Dublin City Schools Bd. of Edn. v. Franklin Cty. Bd. of Revision,
139 Ohio St.3d 193, 2013-Ohio-4543.]
Taxation—Valuation of real property—Burden of proof—Burden to present
competent and probative evidence—Board of Tax Appeals acted
unreasonably and unlawfully in reinstating county auditor’s valuation.
(No. 2012-1432—Submitted June 4, 2013—Decided October 16, 2013.)
APPEAL from the Board of Tax Appeals, Nos. 2009-Q-1282
through 2009-Q-1301 and 2009-Q-1408.
____________________
O’DONNELL, J.
{¶ 1} East Bank Condominiums II, L.L.C. (“East Bank”), appeals from a
decision of the Board of Tax Appeals (“BTA”) reversing the property valuation of
the Franklin County Board of Revision regarding 21 condominium units and
reinstating the county auditor’s valuation of those condominium units as
requested by the countercomplaints filed by the Dublin City Schools Board of
Education. Many of the 21 units remained unfinished to varying degrees as of the
2008 tax lien date. Specifically, we are concerned with whether the BTA
properly utilized the auditor’s valuation of the 21 units when the only evidence in
the record appears to negate the auditor’s determination. Because the property
owner presented expert evidence of valuation and because the board of education
failed to present any evidence, we reverse the determination of the BTA and
establish the 2008 valuation in accordance with the property owner’s evidence of
$3,100,000.
*Reporter’s Note: See opinion upon reconsideration that appears at 139 Ohio St.3d 212, 2014-
Ohio-1940, ___ N.E.3d ___.
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Factual Background and Procedural History
{¶ 2} East Bank began construction of the East Bank II condominium
complex in 2006. The business plan involved first completing the construction of
the building’s infrastructure and then completing each of its 28 condominium
units to suit the buyer. According to East Bank, as of January 1, 2008, the tax lien
date, three of the 28 units were completed and sold, four units were finished but
unsold, and 21 units remained unsold and unfinished.
{¶ 3} The Franklin County auditor assessed the true value of each parcel
individually for the tax year 2008 and determined that the aggregate true value of
the 21 units was $8,139,300. East Bank objected and filed complaints for each of
the unfinished and unsold units, challenging the valuation of the property with the
board of revision. Subsequently, the school board filed countercomplaints
seeking to retain the auditor’s valuation of the condominium units.
{¶ 4} At the board of revision hearing, East Bank presented the
testimony of East Bank managing partner George Babyak, as well as the appraisal
report and testimony of Thomas Horner. Although an attorney representing the
board of education appeared at the board of revision hearing and cross-examined
Babyak, the board of education did not present any witnesses or additional
information regarding the valuation of the property.
{¶ 5} Thus, the only evidence of value presented at the hearing came
from Horner’s appraisal and testimony. Using a “condominium analysis,” Horner
opined that the 21 units had a “net present market value” or “as-is value” of
$3,100,000. Horner testified that he considered the 21 units as a “single economic
unit” because they are “owned by one owner” and “[t]hat owner can only sell all
units at one time to one investor.” He utilized a comparable sales analysis using
condominium sales and marketing activity of East Bank I and East Bank II and
then made reductions based on the estimated cost to finish the remaining units.
This analysis yielded “gross sale proceeds” of $6,492,294. Considering the units
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to be a “single economic unit,” Horner applied what he called a “bulk discount” to
arrive at an estimated value of $3,100,000, which is approximately 48 percent of
$6,492,294.
{¶ 6} After its review, the board of revision accepted Horner’s valuation
of $3,100,000 as the total fair market value for the 21 units, stating, “We were
given no additional information on behalf of the county complainant school board
in this matter, and * * * we recognize Mr. Horner as being an expert in the area of
real estate appraisal.” The school board then appealed the board of revision’s
decision to the BTA.
{¶ 7} At the BTA hearing, East Bank once again presented Babyak and
Horner as witnesses. At that time, Horner had additional data from condominium
sales occurring in the four-year period after the tax lien date. He testified to a
revised cash flow analysis using the actual historical sales, which included
investor discounts for some units ranging from $75,000 to $105,800. Taking into
account the various investor discounts and the construction costs to complete the
units, he retrospectively concluded that the cash flow analysis resulted in a value
of $2,900,000.
{¶ 8} Although the board of education’s attorney cross-examined
Babyak and Horner during the BTA hearing, the school board did not present any
witnesses, evidence of its own valuation, or evidence in support of the auditor’s
valuation.
{¶ 9} After reviewing the evidence, the BTA concluded that East Bank
“failed to present competent and probative evidence to either this board or the
BOR in support of its requested decreases in value.” Dublin City Schools Bd. of
Edn. v. Franklin Cty. Bd. of Revision, BTA Nos. 2009-Q-1282 through 2009-Q-
1301 and 2009-Q-1408, 2012 WL 3166815, *6 (July 24, 2012). Specifically, the
BTA found that Horner’s use of the bulk discount was improper under M/I Homes
of Cincinnati, L.L.C. v. Warren Cty. Bd. of Revision, BTA No. 2009-V-3796,
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2010 WL 3724159 (Sept. 21, 2010). Id. at *5. It further determined that it could
not rely on the rest of Horner’s appraisal report for multiple reasons. Id. First,
the BTA took issue with the fact that Horner’s calculation of each parcel’s value
was based on comparable sales of units within East Bank I and East Bank II, but
the report contained withdrawn listings and listing prices—not sale prices—of the
East Bank I units. Id. Second, it found no evidence that the “cost to finish,”
which Horner deducted from each unit’s estimated retail price, conformed to
market costs. Id. And third, in response to East Bank’s argument that the auditor
had assessed the units as finished units as opposed to unfinished units, the BTA
held that it could not make the appropriate adjustments to the valuation since
there was no evidence as to the completion percentage of each unit. Id. at *6. It
therefore reversed the board of revision’s adjustments and reinstated the auditor’s
valuation of the 21 units. Id.
{¶ 10} East Bank appealed the BTA’s decision to this court, contending
first that the BTA’s decision is unlawful and unreasonable because it reverted to
the auditor’s value when the board of education had introduced no evidence in
support of the auditor’s valuation. Second, East Bank argues that the BTA did not
hold the board of education to its burden of proof and that it improperly shifted
the burden of proof to East Bank. Third, East Bank asserts that the BTA erred as
a matter of law by precluding the use of bulk discount factors in East Bank’s
valuation and that the BTA acted unreasonably and unlawfully by not valuing the
21 units as a single economic unit. Next, East Bank maintains that the record
demonstrates that the units were unfinished on the tax lien date and also
establishes the costs to complete the units, and it urges that the BTA acted
unreasonably and unlawfully in not applying a discount based upon unfinished
property. Finally, East Bank argues that the BTA abused its discretion in
rejecting the board of revision’s determination that East Bank presented the
requisite evidence of value.
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{¶ 11} In response, the board of education asserts that Horner’s appraisal
is an “investment value appraisal,” which “does not constitute competent and
probative evidence of the true value of real property.” The board of education
further argues that because East Bank did not satisfy its initial burden to prove
that Horner’s appraisal evidenced the true value of the property, the BTA did not
improperly shift the burden of proof to East Bank. The board of education also
maintains that “[t]he BTA is not required to accept the opinion of an appraiser
concerning the cost to finish a condominium unit without any facts or figures to
support that opinion or that the true value of the unit must be reduced on a dollar-
for-dollar basis by the amount of the costs to finish the unit.”
{¶ 12} Thus, we must decide whether the BTA properly reinstated the
auditor’s valuation of the condominium units at issue.
Standard of Review
{¶ 13} Pursuant to R.C. 5717.04, this court reviews decisions of the BTA
to determine whether they are “reasonable and lawful.” Our review of a question
of law is not deferential but de novo. Akron Centre Plaza, L.L.C. v. Summit Cty.
Bd. of Revision, 128 Ohio St.3d 145, 2010-Ohio-5035, 942 N.E.2d 1054, ¶ 10.
This court will affirm a decision of the BTA only if the BTA correctly applies the
law. HIN, L.L.C. v. Cuyahoga Cty. Bd. of Revision, 124 Ohio St.3d 481, 2010-
Ohio-687, 923 N.E.2d 1144, ¶ 13. And, we will uphold the BTA’s determination
of fact if the record contains reliable and probative evidence supporting the
BTA’s determination. Satullo v. Wilkins, 111 Ohio St.3d 399, 2006-Ohio-5856,
856 N.E.2d 954, ¶ 14.
Burdens of Proof
{¶ 14} We have established that the taxpayer bears the burden to establish
the right to a deduction and a taxpayer is “ ‘not entitled to the deduction claimed
merely because no evidence is adduced contra his claim.’ ” Dayton-Montgomery
Cty. Port Auth. v. Montgomery Cty. Bd. of Revision, 113 Ohio St.3d 281, 2007-
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Ohio-1948, 865 N.E.2d 22, ¶ 15, quoting W. Industries, Inc. v. Hamilton Cty. Bd.
of Revision, 170 Ohio St. 340, 342, 164 N.E.2d 741 (1960).
{¶ 15} When a party appeals a board of revision’s decision to the BTA,
the appellant, whether it be a taxpayer or a board of education, has the burden to
prove its right to a reduction or increase in the board of revision’s determination
of value. Columbus City School Dist. Bd. of Edn. v. Franklin Cty. Bd. of
Revision, 90 Ohio St.3d 564, 566, 740 N.E.2d 276 (2001). To prevail on appeal
before the BTA, the appellant must present “competent and probative evidence”
supporting the value the appellant asserts. Id.
{¶ 16} In this case, East Bank had the burden to prove its right to a
reduction when it challenged the auditor’s valuation of the 21 units before the
board of revision. See Dayton-Montgomery at ¶ 15. To meet this burden, East
Bank presented testimony from its managing partner and an appraiser. The board
of revision adopted East Bank’s valuation, thereby shifting the burden of going
forward with evidence to the board of education on appeal to the BTA to present
“competent and probative evidence to make its case.” Columbus City School
Dist. at 566. However, the board of education did not present any evidence to
support its own valuation or the auditor’s valuation and instead chose to attack
Horner’s valuation through cross-examination. The board of education thereby
failed to sustain its burden. Since the board of education failed to meet its burden
on appeal and the only evidence in the record—the testimony of Babyak and
Horner—negates the auditor’s determination, we now turn to the question of
whether the BTA acted reasonably and lawfully by reinstating the auditor’s
valuation.
Reinstatement of the Auditor’s Valuation
{¶ 17} In FirstCal Indus. 2 Acquisitions, L.L.C. v. Franklin Cty. Bd. of
Revision, 125 Ohio St.3d 485, 2010-Ohio-1921, 929 N.E.2d 426, ¶ 31, we
explained: “[T]he auditor’s initial determination of value for a given tax year
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possesses an increment of prima-facie probative force.” But, when a taxpayer
presents evidence contrary to the auditor’s valuation and no evidence is offered to
support the auditor’s valuation, the BTA may not simply reinstate the auditor’s
determination. Dayton-Montgomery, 113 Ohio St.3d 281, 2007-Ohio-1948, 865
N.E.2d 22, at ¶ 27; Bedford Bd. of Edn. v. Cuyahoga Cty. Bd. of Revision, 115
Ohio St.3d 449, 2007-Ohio-5237, 875 N.E.2d 913, ¶ 11-12. Instead, “once the
BTA had determined that the record contained evidence tending to negate the
county’s original valuation, the BTA’s duty was to ‘determine whether the record
as developed by the parties contain[s] sufficient evidence to permit an
independent valuation of the property.’ ” Vandalia-Butler City Schools Bd. of
Edn. v. Montgomery Cty. Bd. of Revision, 130 Ohio St.3d 291, 2011-Ohio-5078,
958 N.E.2d 131, ¶ 26, quoting Colonial Village, Ltd. v. Washington Cty. Bd. of
Revision, 114 Ohio St.3d 493, 2007-Ohio-4641, 873 N.E.2d 298 (“Colonial
Village I”), ¶ 25. Here, the board of education produced no evidence to support
its valuation or the auditor’s valuation of the units, nor did it identify the
procedures or methods the auditor used in valuing those units.
{¶ 18} In Dayton-Montgomery, the port authority challenged the auditor’s
valuation before the board of revision, which slightly decreased the value of the
property. After rejecting the port authority’s valuation as “incomplete” and the
board of revision’s adjustment as lacking a “credible explanation,” the BTA had
reinstated the auditor’s valuation. Id. at ¶ 9. In reversing, we held that
when the evidence presented to the board of revision or the BTA
contradicts the auditor’s determination in whole or in part, and
when no evidence has been adduced to support the auditor’s
valuation, the BTA may not simply revert to the auditor’s
determination. Whenever it does so, the BTA is acting unlawfully
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by making a finding of value that is affirmatively contradicted by
the only evidence in the record.
Id. at ¶ 27.
{¶ 19} We reaffirmed this principle in Bedford. Relying on our holding in
Dayton-Montgomery, we found that the BTA’s reinstatement of the auditor’s
determination of value as the default value was “not justified, because the
taxpayer had presented evidence contrary to the auditor’s determination to the
board of revision.” Bedford at ¶ 12. We found that the evidence the board of
education presented on appeal to the BTA, which simply consisted of testimony
suggesting that the parcel at issue should be valued not individually but instead in
conjunction with other parcels, “did not amount to independent evidence of value
that would undermine the BOR’s determination” and “did not support reinstating
the auditor’s valuation, because the auditor did not value the property in
conjunction with other parcels any more than the BOR did.” Id. at ¶ 13.
{¶ 20} During oral argument, the board of education directed the court to
our decision in Colonial Village, Ltd. v. Washington Cty. Bd. of Revision, 123
Ohio St.3d 268, 2009-Ohio-4975, 915 N.E.2d 1196 (“Colonial Village II”), to
assert that if the evidence presented is not reliable and is not probative, then the
BTA should revert to the auditor’s valuation as the default value. The board of
education’s application of Colonial Village II to this case is misplaced. First, the
facts of Colonial Village II are distinguishable from the facts of this case because
there, the board of revision initially adopted the auditor’s valuation. Id. at ¶ 18.
Thus, after finding that the taxpayer had not met its burden on appeal, the BTA
affirmed the conclusion of the board of revision in reinstating the auditor’s
valuation. In contrast, here, the board of revision adopted the taxpayer’s
valuation. Since East Bank presented competent, credible evidence of valuation
and other evidence negating the auditor’s valuation and the board of education did
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not present any evidence to support its valuation or the auditor’s valuation, the
BTA abused its discretion in reinstating the auditor’s valuation. Second, the
board of education fails to recognize that while we stated in Colonial Village II
that “the BTA is justified in retaining the county’s valuation of the property when
an appellant fails to sustain its burden of proof at the BTA,” id. at ¶ 23, we then
acknowledged that an exception to this general rule arises when the record
affirmatively negates the validity of the county’s valuation. Id. at ¶ 24. This case
falls under that exception as well because East Bank established a different
valuation and the board of education offered no evidence to support its valuation
or the auditor’s valuation.
{¶ 21} As in Dayton-Montgomery and Bedford, the BTA’s reinstatement
of the auditor’s valuation was “not justified, because the taxpayer had presented
evidence contrary to the auditor’s determination to the board of revision.”
Bedford, 115 Ohio St.3d 449, 2007-Ohio-5237, 875 N.E.2d 913, at ¶ 12. In
Vandalia-Butler, we clarified our holding in Bedford and explained: “Even if
some evidence tends to negate the auditor’s valuation, it is proper to revert to that
valuation when the BTA finds that the owner has not proved a lower value and
there is otherwise ‘no evidence from which the BTA can independently determine
value.’ ” (Emphasis deleted.) Id., 130 Ohio St.3d 291, 2011-Ohio-5078, 958
N.E.2d 131, at ¶ 24, quoting Simmons v. Cuyahoga Cty. Bd. of Revision, 81 Ohio
St.3d 47, 49, 689 N.E.2d 22 (1998). But here, evidence existed from which the
BTA could independently determine value. It is clear from a review of the record
that the auditor’s valuation of the property was too high. Specifically, there is no
evidence indicating that the auditor accounted for the unfinished state of the units
or the units’ depreciation in value due to market conditions, and the historical
sales evidence provided by East Bank further contradicts the auditor’s valuation.
{¶ 22} Under Ohio law, “[i]f a building, structure, fixture or other
improvement to land is under construction on January first of any year, its
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valuation shall be based upon its value or percentage of completion as it existed
on January first.” (Emphasis added.) Ohio Adm.Code 5703-25-06(G). East
Bank asserts that the majority of the 21 units were 50 percent complete, two units
were 60 percent complete, and two units were 80 percent complete.
{¶ 23} In response to East Bank’s argument that the auditor assessed the
units based on the full finished retail value of the units, the BTA held that “no
evidence has been provided as to the completion percentage of each unit to allow
this board to make appropriate adjustments to the properties’ values.” (Emphasis
added.) Dublin City Schools Bd. of Edn., 2012 WL 3166815, at *6. But this
finding of the BTA contradicts the record, which contains evidence of completion
percentages of the units. East Bank provided competent evidence as to the
completion percentages. Horner accounted for these in his appraisal, and both
Horner and Babyak testified regarding the unfinished state of the units. In
addition, a review of the property record cards indicates that the auditor
considered 16 of the units to be only 85 percent complete as of the tax lien date.
However, the record is unclear as to whether the auditor made adjustments for the
costs for completion in his valuation. Since the record contains evidence
regarding the completion percentages and there is no evidence to demonstrate that
the auditor actually factored the completion percentages into the assessed
valuation, the BTA acted unreasonably and unlawfully in reinstating that
valuation.
{¶ 24} There is also no indication that the auditor considered the
property’s depreciation in value due to the downturn in the economy. Horner’s
appraisal provides a “Residential Market Summary,” which explains the
substantial drop in “residential activity” for condominiums and single family
homes between 2006 and 2007. Horner also testified that “[b]etween the time that
this building was proposed, planned and built, the market dropped significantly.”
Further demonstrating the difficult market, East Bank in 2008 considered selling
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the entire building, including the 21 condominium units at issue, because of the
downturn in the economy. East Bank did not pursue the informal offers it
received ranging from $1.5 million to $3 million, because these amounts would
not have covered the loan value. Considering the market conditions presented
before the board of revision and the BTA and the absence of any evidence in the
record addressing whether the auditor took those market conditions into account,
additional grounds exist for determining that the BTA unreasonably adopted the
auditor’s valuation.
{¶ 25} Lastly, the actual historical sales raise doubt as to the accuracy of
the auditor’s valuation. Many of the sales of East Bank II condominiums
occurring after the tax lien date involved investor discounts ranging from $75,000
to $105,800. Using these sales figures and the actual construction costs to
complete the units, Horner opined at the BTA hearing that the cash flow analysis
resulted in a value of $2,900,000. This evidence further demonstrates that the
auditor’s valuation does not reflect the true market value.
{¶ 26} When confronted with such clear evidence negating the auditor’s
valuation, the BTA acted unreasonably and unlawfully in adopting the auditor’s
valuation rather than determining the taxable value of the property. It acted
“unlawfully by making a finding of value that is affirmatively contradicted by the
only evidence in the record.” Dayton-Montgomery, 113 Ohio St.3d 281, 2007-
Ohio-1948, 865 N.E.2d 22, at ¶ 27.
Conclusion
{¶ 27} When a board of revision adopts the valuation of property
presented by the taxpayer over the auditor’s valuation, the burden shifts to the
contesting party on appeal to demonstrate the true value of the property. When
the party challenging a board of revision’s determination fails to present any
evidence supporting its valuation or the auditor’s valuation and the only evidence
in the record negates the auditor’s valuation, the BTA must determine if there is
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sufficient evidence in the entire record for the BTA to perform an independent
analysis. Here, the board of education did not present any evidence before the
board of revision or the BTA. Thus, it failed to meet its burden. Because the
evidence in the record negated the auditor’s valuation of the East Bank property
and because evidence existed from which the BTA could have conducted its own
independent valuation, it acted unreasonably and unlawfully in failing to do so
and in instead reinstating the auditor’s valuation. Accordingly, we reverse the
determination of the BTA and adopt the only evidence of valuation contained in
the record presented by East Bank through its expert, resulting in a valuation of
$3,100,000.1
Judgment accordingly.
PFEIFER, KENNEDY, and O’NEILL, JJ., concur.
O’CONNOR, C.J., and LANZINGER and FRENCH, JJ., concur in part and
dissent in part.
____________________
O’CONNOR, C.J., concurring in part and dissenting in part.
{¶ 28} Although I agree with the majority that the Board of Tax Appeals
(“BTA”) erred by reinstating the Franklin County auditor’s valuation of the 21
condominiums at issue in this case (at an aggregate value of $8,139,300 for tax
year 2008), I do not agree that the case law compels us to order reinstatement of
the decision of the county board of revision. I therefore concur in part and dissent
in part.
ANALYSIS
{¶ 29} Appellant, East Bank Condominiums II, L.L.C., at the hearing
before the board of revision, presented the appraisal report and testimony of
1. We need not consider whether the bulk sale approach was appropriate in this instance because
we determine that the BTA acted unreasonably and unlawfully in not conducting its own
independent valuation of the property taking into account the unfinished state of some, if not all,
of the units, the depreciation in value, and the sales history.
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Thomas Horner. The board of revision adopted Horner’s appraisal’s aggregate
valuation of $3,100,000, which reflected not only an adjustment for the unfinished
state of the condominiums, but also a decrease to 48 percent of what Horner
termed the “gross sale proceeds” (sometimes called the “gross sale price”) of the
unfinished units. The BTA correctly found that although Horner’s “bulk
discount” is an appropriate appraisal method for financial institutions that lend to
condominium development projects, it does not apply to appraisals of real
property for tax purposes under Ohio law. Dublin City Schools Bd. of Edn. v.
Franklin Cty. Bd. of Revision, BTA Nos. 2009-Q-1282 through 2009-Q-1301 and
2009-Q-1408, 2012 WL 3166815, *5 (July 24, 2012) (“We believe East Bank’s
reliance on * * * FIRREA guidance is misplaced; while it may be true that, for
purposes of appraising properties for financing purposes, it is appropriate to apply
a bulk discount, the present matter concerns appraisal for tax valuation
purposes”).2 Moreover, the BTA has a duty to independently weigh evidence.
That duty is critically important here because the deficiency in the Horner
appraisal that the BTA identified is a legal flaw rather than a factual one, and
therefore there was no necessity that the board of education present additional
evidence to substantiate that flaw.
{¶ 30} I would affirm the BTA’s decision to the extent that it rejected the
bulk-sale approach to valuing the condominiums and thus dissent from the
majority’s acceptance of that method of valuation. However, I concur in the
majority’s conclusion that the BTA should have determined a discount for the
unfinished states of the condominiums on the tax-lien date. To remedy that
defect, I would reverse the BTA’s reinstatement of the auditor’s valuation and
2. FIRREA is short for the Financial Institutions Reform, Recovery, and Enforcement Act of
1989, an act of Congress that in the wake of the savings-and-loan scandal of the 1980s enacted
measures designed in part to improve the integrity of lending practices. Herbst v. Resolution Trust
Corp., 66 Ohio St.3d 8, 9, 607 N.E.2d 440 (1993).
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remand this cause to the BTA for determination of a proper percentage discount
as required by Ohio Adm.Code 5703-25-06(G).
The Horner appraisal’s bulk-discount approach runs afoul of the
well-established economic-unit doctrine
{¶ 31} Because this case involves the valuation of 21 condominium units
as of January 1, 2008, the analysis must begin with the recognition that each unit
constitutes a separate parcel, in spite of the fact that they all are contained in a
common building. The division into separate parcels for property-taxation
purposes is a requirement imposed by law. “Each unit of a condominium
property * * * is deemed a separate parcel for all purposes of taxation and
assessment of real property.” R.C. 5311.11.
{¶ 32} In a county auditor’s capacity as assessor of the real estate tax, the
auditor is charged with the duty to “view and appraise or cause to be viewed and
appraised at its true value in money, each lot or parcel of real estate.” R.C.
5713.01(B). Read together, Article XII, Section 2 of the Ohio Constitution and
R.C. 5713.03 require the auditor, when determining the true value of each parcel,
to use either an actual arm’s-length sale price showing the value of the property or
an appraisal determining what that sale price would be. Conalco, Inc. v. Monroe
Cty. Bd. of Revision, 50 Ohio St.2d 129, 363 N.E.2d 722 (1977), paragraph one of
the syllabus; State ex rel. Park Invest. Co. v. Bd. of Tax Appeals, 175 Ohio St.
410, 412, 195 N.E.2d 908 (1964); see also Berea City School Dist. Bd. of Edn. v.
Cuyahoga Cty. Bd. of Revision, 106 Ohio St.3d 269, 2005-Ohio-4979, 834 N.E.2d
782, ¶ 9-10. The Horner appraisal did not comply with this constitutional and
statutory framework.
{¶ 33} In the valuation section of the appraisal report, Horner stated that
his appraisal aimed at determining “a bulk purchase value [that] represents what
the owner would sell all of the units to a single purchaser [for].” The report
proceeded to explain that “[t]he investor,” i.e., the bulk purchaser, would then be
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“entitled to the future profit from the individual sales, but would also incur the
cost of holding and selling the units during the absorption period.” Given this
premise for the appraisal, the BTA here justifiably relied on its earlier decision in
M/I Homes of Cincinnati, L.L.C. v. Warren Cty. Bd. of Revision, BTA No. 2009-
V-3796, 2010 WL 3724159 (Sept. 21, 2010), to characterize Horner’s approach as
“an analysis [that] arrives at an investment value, rather than real market value,”
of the condominiums as parcels of real property. 2012 WL 3166815, at *4.
Simply stated, the Horner appraisal did not value the individual condominiums in
terms of what they would ultimately have sold for in the market. Instead, the
appraisal projected a bulk-sale price that a developer-buyer or an investor would
have paid for all the units together. That bulk price would inevitably have been
less than the ultimate sale price of the individual units, because a bulk purchaser
would have paid only an amount that would have yielded a profit once the
condominiums were sold individually. Thus, the actual sale prices were
discounted to a current investment value, but our precedent is clear that it is the
sale prices themselves that must be the properties’ values for tax purposes.
{¶ 34} This discounting process becomes graphically visible later in the
valuation section of the appraisal report, which shows the allocation of the “as-is
price” to each condominium on a per-square-foot basis and then shows the
discount taken for each condominium to 48 percent of that price. In addressing a
similar type of appraisal, the Oregon Supreme Court cogently stated that because
a developer’s discount “reduces the market price of the properties by a rate of
return based on expected profit, taking into account the expected time necessary
to sell the lots,” it does not “assess the value of the properties if put to their
highest and best use, but reduces their value to arrive at the value of the properties
considered as an investment.” First Interstate Bank of Oregon, N.A. v. Dept. of
Revenue, 306 Or. 450, 454-455, 760 P.2d 880 (1988).
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{¶ 35} Additional evidence that the bulk-discount analysis does not
indicate the tax value of the individual units is found in Horner’s reliance on the
FIRREA exhibit introduced at the BTA hearing. That exhibit includes a
statement that for a condominium building with five units or more, a financing
institution “may not use the aggregate retail sales prices of the individual units as
the market value to calculate the [loan-to-value] ratio.” That is the rule on which
Horner’s bulk discount is based. It states in so many words that the bulk-discount
valuation is not equivalent to the sale price of the condominiums. However, the
sale price must be the proper measure of value for tax purposes.
{¶ 36} Under certain circumstances, Ohio law may permit multiple
parcels to be valued as a single economic unit. But those circumstances are not
present here.
{¶ 37} For example, in Park Ridge Co. v. Franklin Cty. Bd. of Revision,
29 Ohio St.3d 12, 504 N.E.2d 1116 (1987), this court noted that an “economic
unit” for tax-valuation purposes may in some situations comprise multiple parcels
or a portion of a larger parcel, and stated the test for determining a property’s
status as an economic unit: “For tax valuation purposes, property with a single
owner, for which the highest and best use is a single unit, constitutes a tract, lot,
or parcel.” (Emphasis added.) Id. at paragraph two of the syllabus. See also
Strongsville Bd. of Edn. v. Cuyahoga Cty. Bd. of Revision, 77 Ohio St.3d 402,
404-406, 674 N.E.2d 696 (1997) (citing and applying the Park Ridge syllabus). A
determination to value a property as an economic unit therefore depends, as a
matter of law, on a finding that the highest and best use of the parcels at issue
consists of continued use under common ownership. On this record, the BTA was
justified in not making such a finding. Indeed, no evidence in the record would
have supported it.
{¶ 38} Far from furnishing support for such a finding, Horner’s appraisal
negates it. Several statements in the appraisal indicate that the ultimate sales of
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the condominiums were anticipated to be as individual units. Moreover, the
section of Horner’s appraisal specifically discussing highest and best use states
that “[b]ased on those uses that are legally permissible, physically possible and
financially feasible, the maximally productive use of the site involves 28 total
living units.” Although this part of the appraisal does not explicitly state that the
“living units” will be individually owned, the statement certainly does not assert
that the highest and best use constitutes continued common ownership. This case
does not involve an apartment building, in which a single landlord owns the entire
building and rents out individual units; this case involves condominiums. Taken
in context, the “highest and best use” determination must be that the
condominiums will ultimately be individually owned and are not an economic
unit.
{¶ 39} In addition to Horner’s original appraisal, the majority refers to
Horner’s analysis of actual subsequent sales that he later offered at the BTA
hearing as though that analysis somehow corroborates the propriety of the bulk
discount in the original appraisal. It does not.
{¶ 40} The majority fails to recognize that the subsequent-sale analysis
merely repeats the very same flaw that the BTA identified in the original
appraisal. Once again, Horner does not value the individual units according to the
price at which they would sell (or the price at which they did, in fact, sell).
Rather, Horner for a second time discounts from that “retail” sale price to
determine what an investor would have paid in bulk on January 1, 2008, with a
view to making a profit. The bulk-sale price of $2,900,000 that Horner presented
to the BTA turned out to be lower than the $3,100,000 projected in the original
appraisal because the sale prices turned out to be lower than projected.
{¶ 41} On redirect examination during the BTA hearing, Horner
confirmed this point. He was asked whether the revised $2,900,000 figure
“reduced lower the net present value [i.e., the bulk-discount valuation of
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$3,100,000] you came up with in your original appraisal.” Horner answered:
“Correct.” Moreover, Horner testified that the subsequent sales indicated “an
average of $146 per square foot.” That number, projected over the 42,627 total
square feet of the 21 units still to be sold as of January 1, 2008, would have
amounted to gross sale proceeds for all 21 units of $6,223,542 (as opposed to the
gross sale proceeds of $6,492,294 projected in the original appraisal). Horner’s
revised “net present value” of $2,900,000 was about 47 percent of the gross sale
proceeds of $6,223,542, just as the original appraisal’s net present value of
$3,100,000 was about 48 percent of $6,492,294. Thus, the flawed methodology
did not change, even though subsequent sales were used.
{¶ 42} The BTA acted reasonably and lawfully in determining that the
board of revision had erred by relying on the Horner appraisal’s bulk-discount
approach. I must dissent from the majority’s conclusion to the contrary.
Because the BTA’s duty is to independently weigh the evidence,
it may reverse a decision of a board of revision even if
no new evidence is presented before the BTA
{¶ 43} I also disagree with the majority’s view that because the board of
education presented no new evidence at the BTA hearing to controvert the Horner
appraisal, the BTA was required to affirm the board of revision’s decision to
adopt that appraisal. This reasoning cannot be reconciled with the BTA’s duty to
perform a fully independent weighing of the evidence presented at all levels when
determining the value of real property.
{¶ 44} Although the majority opinion cites Vandalia-Butler City Schools
Bd. of Edn. v. Montgomery Cty. Bd. of Revision, 130 Ohio St.3d 291, 2011-Ohio-
5078, 958 N.E.2d 131, the holding in that case does not support the majority’s
analysis.
{¶ 45} In Vandalia-Butler, the property owner filed a complaint and
presented evidence before the board of revision, just as in the present case. Id. at
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January Term, 2013
¶ 3-4. The board of revision adopted a lower valuation based on the owner’s
evidence, just as in the present case. Id. at ¶ 6. At the BTA hearing, the board of
education argued that the owner’s evidence was insufficient, but it presented no
new evidence, just as in the present case. Id. at ¶ 8-9.
{¶ 46} Although the BTA expressed reservations about the quality of the
evidence the owner had presented to the board of revision, the BTA stated the
issue as whether there was sufficient evidence to support the board of revision’s
determination. Id. at ¶ 9. The BTA ultimately adopted the board of revision’s
valuation in spite of its explicit reservations. Id. at ¶ 10.
{¶ 47} On appeal, we unanimously found error as a matter of law, vacated
the BTA’s decision, and remanded to the BTA for further proceedings. We stated
that “the BTA’s crucial error in this case lay in its exclusive reliance on the
BOR’s evaluation of the evidence rather than its own.” Id. at ¶ 14. We
specifically faulted the BTA for exercising excessive deference to the board of
revision’s decision. Id. at ¶ 19. On remand, we ordered the BTA to determine
whether sufficient evidence permitted it to perform an independent valuation; if
there was sufficient evidence, the BTA was to perform that valuation. If there
was not, the BTA was to revert to the auditor’s determination. Id. at ¶ 26-28.
{¶ 48} Our discussion in Vandalia-Butler of the independent role of the
BTA should apply equally to the situation here. Although the unfinished state of
the condominiums had to be taken into account when valuing them, the majority
fails to recognize the validity of the BTA’s reasonable and lawful rejection of the
Horner appraisal’s bulk-discount approach. The BTA’s duty to independently
weigh evidence permitted it to reject that bulk-discount approach regardless of
whether the school board presented further evidence before the BTA, and its
decision should be affirmed to that extent. Our precedent is clear and should be
followed here.
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The BTA should have performed an independent determination of the
discounted value of the condominiums because of their unfinished state
{¶ 49} Finally, I concur with the majority that the BTA erred by failing to
ensure that the value assigned to the condominiums reflected a discount based on
their unfinished state as of January 1, 2008, the tax-lien date. But instead of
requiring reinstatement of the board of revision’s decision, which relied on the
erroneous bulk-sale approach, this error calls for a remand to the BTA for a
proper determination of the percentage discount required by Ohio Adm.Code
5703-25-06(G), which provides that “[i]f a building, structure, fixture or other
improvement to land is under construction on January first of any year, its
valuation shall be based upon its value or percentage of completion as it existed
on January first.”
{¶ 50} The property-record cards in this case set forth percentage-of-
completion figures, but do not evidence whether the auditor properly applied a
discount. Additionally, the Horner appraisal took into account the percentage of
completion. I would remand to the BTA with the instruction that the BTA
perform an appropriate reduction to account for the unfinished state of the
condominiums, basing its finding on the entire record or, if need be, on additional
evidence adduced pursuant to the BTA’s authority to “make * * * investigation
concerning the appeal” under R.C. 5717.01.
CONCLUSION
{¶ 51} I concur in the majority’s conclusion that the auditor’s valuation
was too high, but dissent from the remainder of the majority’s opinion and its
order that the board of revision’s valuation must be reinstated.
LANZINGER and FRENCH, JJ., concur in the foregoing opinion.
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January Term, 2013
FRENCH, J., concurring in part and dissenting in part.
{¶ 52} I join the separate opinion of Chief Justice O’Connor concurring in
part and dissenting in part. I also write to address additional concerns I have with
the majority opinion.
{¶ 53} I agree with the majority that the Dublin City Schools Board of
Education failed to meet its burden of proof before the Board of Tax Appeals
(“BTA”). I also agree that the BTA erred when it adopted the auditor’s valuation.
I respectfully disagree, however, with the majority’s analysis as to why the board
of education failed to meet its burden of proof. The majority opinion implies that
an auditor’s appraisal can never, by itself, constitute probative evidence of value.
Because this holding contradicts our case law, I cannot endorse it.
{¶ 54} I also respectfully dissent from the majority’s decision to adopt
East Bank’s valuation of the property, rather than remand this case to the BTA for
an independent determination of value. The majority accepts East Bank’s
valuation without reason or analysis, and our case law requires a remand.
ANALYSIS
Burdens of Proof
{¶ 55} In this case, the board of education sought retention of the
auditor’s property valuation. This valuation was based on the auditor’s separate
appraisals for the condominium units. All 21 appraisals were in the record before
the BTA. When the board of education appealed to the BTA, however, it
produced no additional evidence supporting the auditor’s appraisals. Based solely
on the fact that the board of education produced no new evidence, the majority
concludes that the board of education failed to meet its burden of proof before the
BTA.
{¶ 56} The majority’s conclusion assumes, incorrectly, that a BTA
appellant seeking retention of an auditor’s valuation must necessarily support the
auditor’s valuation with additional proof. This assumption contradicts our
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precedent. A party need not, as a matter of course in every case, confirm an
auditor’s appraisal with further evidence in order to meet its burden of proof.
Colonial Village, Ltd. v. Washington Cty. Bd. of Revision, 123 Ohio St.3d 268,
2009-Ohio-4975, 915 N.E.2d 1196 (“Colonial Village II”), ¶ 30-31 (“we reiterate
that the county does not have the affirmative burden to establish as a general
matter the accuracy of any appraisals that underlie its valuation of the property”
[emphasis sic]); Vandalia-Butler City Schools Bd. of Edn. v. Montgomery Cty. Bd.
of Revision, 130 Ohio St.3d 291, 2011-Ohio-5078, 958 N.E.2d 131, ¶ 24, fn. 3;
Simmons v. Cuyahoga Cty. Bd. of Revision, 81 Ohio St.3d 47, 49, 689 N.E.2d 22
(1998). To the contrary, an auditor’s appraisal can stand alone as probative
evidence of value. FirstCal Indus. 2 Acquisitions, L.L.C. v. Franklin Cty. Bd. of
Revision, 125 Ohio St.3d 485, 2010-Ohio-1921, 929 N.E.2d 426, ¶ 31 (“the
auditor’s initial determination of value for a given tax year possesses an increment
of prima-facie probative force”).
{¶ 57} We unanimously endorsed this principle in Vandalia-Butler.
There, we explained that an appellant need not always affirmatively prove the
accuracy of an auditor’s valuation to the BTA; the appellant’s burden may be
merely to show that the board of revision erred. Id. at ¶ 24, fn. 3. Vandalia-
Butler dealt with a nearly identical set of facts: a local school board sought
retention of the auditor’s valuation, lost at the board of revision, appealed to the
BTA, and produced no new supporting evidence to the BTA. Id. at ¶ 3, 8-9. On
appeal to this court, the county-appellee advanced the same argument the majority
accepts now—that the school board failed to meet its burden of proof at the BTA
because it did not put forth any additional support for the auditor’s valuation. Id.
at ¶ 24, fn. 3. We dismissed this argument, stating:
[We] reject the county’s contention that the school board had the
burden to prove the validity of the auditor’s valuation at the BTA.
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January Term, 2013
While it is true that the party that appeals to the BTA in a valuation
case typically does bear the burden of showing a different value,
* * * the school board’s appeal in this case rested upon a claim of
legal error. In prosecuting such a claim, the appellant’s burden is
to show the presence of reversible error, and proof of a new value
may not be necessary when the appeal seeks a return to the
auditor’s valuation.
(Citation omitted.) Id. Our precedent is clear. A party need not always offer
additional support for an auditor’s appraisal.3 The appraisal can, by itself,
constitute probative evidence of value.4
{¶ 58} There are, of course, exceptions to this rule. See, e.g., Dayton-
Montgomery Cty. Port Auth. v. Montgomery Cty. Bd. of Revision, 113 Ohio St.3d
281, 2007-Ohio-1948, 865 N.E.2d 22, ¶ 24. This case presents one such
exception: an auditor’s valuation cannot stand alone when the record
affirmatively negates the validity of the auditor’s appraisal. Id. at ¶ 27; Colonial
Village II, 123 Ohio St.3d 268, 2009-Ohio-4975, 915 N.E.2d 1196, at ¶ 24. In
that scenario, a party must produce proof beyond the auditor’s appraisal. Dayton-
Montgomery at ¶ 27, 30. Here, we need not even consider East Bank’s evidence
to determine that the auditor’s appraisal is invalid. The appraisal is deficient on
3. During oral argument, East Bank’s counsel conceded that an auditor’s appraisal can be valid on
its face, without supporting evidence.
4. I also stress that an auditor’s appraisal does not lose probative value merely because a board of
revision rejects it. A board of revision’s decision “lack[s] * * * any presumption of validity.”
Columbus Bd. of Edn. v. Franklin Cty. Bd. of Revision, 76 Ohio St.3d 13, 16, 665 N.E.2d 1098
(1996). The decision does not, therefore, set a baseline that the parties start from once they reach
the BTA. Nor does it impose a handicap that the BTA appellant must overcome with new
evidence. The BTA reviews cases de novo, without giving any deference to what the board of
revision decided. Id. at 15; Vandalia-Butler, 130 Ohio St.3d 291, 2011-Ohio-5078, 958 N.E.2d
131, at ¶ 13-14, 19.
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its face. Specifically, the property-record cards do not indicate whether the
auditor applied the percentage-of-completion discounts required by Ohio
Adm.Code 5703-25-06(G). Because of this deficiency, the board of education
had to produce additional support for the auditor’s valuation. It did not, thereby
failing to meet its burden of proof.
{¶ 59} I therefore concur with the majority in two respects: (1) the board
of education had to produce additional support for the auditor’s appraisal and (2)
because the board of education did not produce this support, it did not meet its
burden of proof. I cannot, however, join the majority’s analysis as to why the
board of education had to produce more evidence. The majority opinion suggests
that a party must always produce additional support for an auditor’s appraisal.
This approach contradicts our precedent. I would hold that the board of education
had to produce more evidence in this case only because the auditor’s appraisal
was deficient on its face.
Remand Is the Proper Remedy
{¶ 60} Because the auditor’s appraisal was deficient on its face and the
board of education presented no evidence to cure the deficiency, the BTA erred in
adopting the auditor’s valuation. Columbus City School Dist. Bd. of Edn. v.
Franklin Cty. Bd. of Revision, 90 Ohio St.3d 564, 567, 740 N.E.2d 276 (2001)
(the BTA cannot adopt a value that is unsupported by the record); Dayton-
Montgomery at ¶ 27 (“when the evidence * * * contradicts the auditor’s
determination in whole or in part, and when no evidence has been adduced to
support the auditor’s valuation, the BTA may not simply revert to the auditor’s
determination”). Instead, the BTA should have conducted its own analysis of the
evidence and independently determined the taxable value of the property.
Vandalia-Butler, 130 Ohio St.3d 291, 2011-Ohio-5078, 958 N.E.2d 131, at ¶ 26
(“When there is sufficient evidence to permit the BTA to perform an independent
valuation * * * the BTA must do so”); Colonial Village, Ltd. v. Washington Cty.
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January Term, 2013
Bd. of Revision, 114 Ohio St.3d 493, 2007-Ohio-4641, 873 N.E.2d 298 (“Colonial
Village I”), ¶ 23-25. As the majority points out, at ¶ 23 of the opinion, the record
appears to contain enough evidence for the BTA to independently determine
value. And as the chief justice notes in her separate opinion at ¶ 50, the BTA may
always order the presentation of additional evidence if necessary. R.C. 5717.01;
Columbus City School Dist. at 567 (remanding to the BTA for an independent
determination of value and noting that under R.C. 5717.01, the BTA “ ‘may order
the hearing of additional evidence, and may make such investigation concerning
the appeal as it deems proper’ ”).
{¶ 61} The appropriate remedy for the BTA’s failure to conduct an
independent valuation is, not surprisingly, a remand for the BTA to conduct an
independent valuation. Colonial Village I at ¶ 1 (ordering remand for the BTA to
conduct an independent valuation of the property after the BTA had unlawfully
upheld the auditor’s valuation); Vandalia-Butler at ¶ 27 (remanding because the
BTA did not conduct an independent analysis of value); Dayton-Montgomery,
113 Ohio St.3d 281, 2007-Ohio-1948, 865 N.E.2d 22, at ¶ 28 (remanding for the
BTA to independently determine value). Instead of ordering this remand, though,
the majority summarily resolves this case by adopting the same valuation the
board of revision adopted—East Bank’s $3,100,000 appraisal. But the majority
opinion offers no explanation as to why East Bank’s valuation is correct or as to
how the majority arrived at this conclusion.
{¶ 62} The majority could not have accepted East Bank’s valuation
simply out of deference to the board of revision. Decisions of boards of revision
“lack * * * any presumption of validity.” Columbus Bd. of Edn. v. Franklin Cty.
Bd. of Revision, 76 Ohio St.3d 13, 16, 665 N.E.2d 1098 (1996); see also Dayton-
Montgomery at ¶ 24. This court would commit serious error if it accepted East
Bank’s evidence “on the grounds that the board of revision was persuaded” by
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that evidence. Vandalia-Butler at ¶ 14. Doing so would constitute “the very
deference that the case law prohibits.” Id.
{¶ 63} East Bank asserts that automatic deference to the board of revision
is appropriate here because the board of education did not meet its burden of
proof at the BTA. This argument is unpersuasive. The mere fact that the board of
education failed to prove the legitimacy of its preferred value tells us only that the
board of education’s value loses. It does not tell us that the board of revision’s
value wins. In every case, the BTA must conduct a de novo review of the
evidence and independently determine the taxable value of the property.
Columbus Bd. of Edn. at 15; Vandalia-Butler, 130 Ohio St.3d 291, 2011-Ohio-
5078, 958 N.E.2d 131, at ¶ 13-14, 19.
{¶ 64} Although the board of revision is not entitled to automatic
deference, this court could still adopt the board of revision’s valuation if the court
independently found that the record supports the board of revision’s decision.
Vandalia-Butler at ¶ 21 (the board of revision’s value may be adopted “if and only
if” the evidence is independently found to support the board of education’s value
[emphasis sic]); Bedford Bd. of Edn. v. Cuyahoga Cty. Bd. of Revision, 115 Ohio
St.3d 449, 2007-Ohio-5237, 875 N.E.2d 913, ¶ 15. But the majority does not
make any such finding. To the contrary, it openly declines to consider whether
East Bank’s appraisal methods were appropriate. Majority opinion at ¶ 27, fn. 1.
The end result is puzzling: the majority refuses to analyze whether East Bank’s
appraisal was valid, but then—without explanation—accepts the appraisal as
valid.
{¶ 65} Ultimately, the majority could not adopt East Bank’s valuation
based on deference to the board of revision, and it did not adopt East Bank’s
valuation based on its own analysis of the evidence. Furthermore, I agree with the
chief justice that if the majority had reviewed the evidence, it would find that East
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January Term, 2013
Bank’s appraisal method was not valid. Accordingly, our precedent compels a
remand to the BTA.
CONCLUSION
{¶ 66} I concur in the majority’s holding that the board of education had
to support the auditor’s valuation with additional evidence. I also agree that
because the board of education did not produce more evidence, it did not meet its
burden of proof. I respectfully dissent from the majority opinion to the extent that
it holds that the board of education was required to produce more evidence as a
general rule. The additional support is required in this case only because the
auditor’s appraisal was deficient on its face. I also respectfully dissent from the
majority’s adoption of East Bank’s valuation. There is no basis for adopting East
Bank’s valuation, and the majority offers none. We should vacate the BTA’s
decision and remand for the BTA to conduct an independent determination of
value.
O’CONNOR, C.J., and LANZINGER, J., concur in the foregoing opinion.
____________________
Rich & Gillis Law Group, L.L.C., Mark H. Gillis, Jeffrey A. Rich, and
Karol C. Fox., for appellee Dublin City Schools Board of Education.
Zeiger, Tigges & Little, L.L.P., Marion H. Little Jr., and Matthew S.
Zeiger, for appellant.
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