The Ohio Board of Tax Appeals (BTA) must address particular objections by a Madison County auto-parts maker whose property was valued by the board of revision at $28 million for tax purposes, about $16.5 million more than the company believes it is worth, the Ohio Supreme Court ruled today.

The Supreme Court remanded to the BTA for further proceedings the dispute between Jefferson Industries Corporation and the Madison County Board of Revision (BOR). Jefferson Industries is challenging the board of revisions’ calculation. The Jefferson Local School District Board of Education joined the case to argue for retention of the $28 million valuation.

In a 6-1 per curiam opinion, the Court wrote that while the BTA explained some of the reasons it overruled Jefferson Industries’ objections, it was silent on others. The Court ruled the BTA must explicitly address important “evidentiary conflicts” before the Court could determine if the BTA's decision is reasonable and lawful.

Property Improved Incrementally
Jefferson Industries disputed its 2011 tax valuation of 81 acres that has been improved with about 685,000 square feet of manufacturing, warehouse, and office space. The facilities, which are used to manufacture and stamp car frames for Honda, were constructed in 11 increments between 1988 and 2010, with the two largest taking place in 1988 and 2007.

Jefferson Industries has sought tax relief before, contesting its 2004 tax year valuation when the Madison County auditor valued the facility at $23.3 million and the Madison County BOR ordered a reduction to about $20.7 million. The company claimed the value should have been $12.25 million. The school board presented an appraisal report estimating the value at $19.75 million.

The BTA adopted the school’s $19.75 million assessment conducted by G. Franklin Hinkle II, who categorized the property as “heavy manufacturing” as opposed to an appraiser hired by the company, who categorized it as “light industrial.”

In 2011, the county auditor valued the property at $34.5 million and Jefferson Industries filed a complaint with the BOR seeking a reduction to about $18.2 million. The school board argued for the auditor’s assessment and in 2012, Ronald M. Eberly Jr., an appraiser for Jefferson Industries presented a report to the BOR that the facility should be valued at $10.4 million. The BOR concluded the property’s tax valuation should be $28 million, and Jefferson Industries appealed to the BTA.

The appraiser Hinkle testified for the school board before the BTA and presented a report to support the $28 million figure. Eberly offered specific criticisms of Hinkle’s report. In 2014, the BTA adopted the $28 million figure and noted it had previously decided many of the same points when it ruled on the 2004 dispute of the factory’s value. Jefferson Industries appealed to the Supreme Court, and because the tax statutes provide for a right of appeal, the Court was required to hear the case.

Competing Appraisals Analyzed
The Court’s opinion notes the appraisers for the company and the school board approached the valuation process differently. Eberly for Jefferson Industries used a “sales-comparison approach,” with which he compared the facility’s value against the sale price of five comparable properties sold in Ohio. Hinkle for the school board used a “cost approach” that tried to determine what it would cost in the disputed tax year to construct the property. Since he based his costs on what it takes to construct a heavy manufacturing facility, his assessment was almost $17 million more than Eberly’s.

Hinkle also conducted a sales comparison to support his cost approach, and the BTA observed his sales comparison approach supported his cost approach and his overall valuation. The Court noted Jefferson Industries faulted the BTA for an “overreliance on the cost approach,” but the Court concluded it was within the BTA's discretion to rely on Hinkle’s approach.

Conflicting Evidence Must be Addressed
Jefferson Industries argued the BTA ignored conflicting evidence that the board must address before adopting an appraiser’s opinion. The Court wrote that in cases where there are multiple appraisals, the BTA must “set forth sufficient reasons for its determination that would permit us to decide whether the board’s valuation was reasonable and lawful.” The opinion indicated several instances where the BTA did not address conflicting evidence.

The Court found disputed evidence existed regarding Hinkle’s cost approach and his sales comparisons. The Court concluded the BTA did not address Eberly’s criticism of the comparable properties Hinkle used to support his conclusion.

Citing its 1990 Gen. Motors Corp. v. Cuyahoga Cty. Bd. of Revision, the Court wrote that it can only rule on a BTA appeal if the board provides its findings and the bases for them.

“Without the board’s having explicitly addressed the evidentiary conflicts in the record, we cannot be sure that the BTA did not simply ignore the conflicting evidence; nor can we meaningfully determine whether the BTA’s decision is reasonable and lawful,” the Court concluded.

The Court indicated the BTA can adopt Hinkle’s appraisal if it states why it is not persuaded by Jefferson Industries’ objections, or the BTA may re-evaluate the evidence and perform an independent valuation of the property.

Chief Justice Maureen O’Connor and Justices Paul E. Pfeifer, Judith Ann Lanzinger, Sharon L. Kennedy, Judith L. French, and William M. O'Neill joined the opinion.

Justice Terrence O’Donnell dissented, indicating he would affirm the BTA’s decision.

2014-1594. Jefferson Industries Corp. v. Madison Cty. Bd. of Revision, Slip Opinion No. 2016-Ohio-7089.

Hear oral argument audio of this case.

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