The Ohio Board of Tax Appeals (BTA) failed to indicate that it considered the local school district’s criticism of tax valuations for two Grove City senior housing complexes, and the board must explain its decision in more detail, the Ohio Supreme Court ruled today.

In a 6-1 decision, the Supreme Court vacated the BTA’s approval of a combined $1.5 million valuation of Lutheran Social Services of Central Ohio Village Housing properties that the Franklin County auditor valued at nearly $2.7 million in 2008, and the Court remanded for a closer examination of the evidence. In a per curiam opinion, the Court stated there is “no impediment” to the BTA adopting the lower value as long as it explains why it rejected challenges raised by an expert hired by South-Western City Schools.

Apartments Compared With Older Facilities
In the early 2000s, Lutheran Services constructed the 44-unit Village Place senior housing apartment complex and the 46-unit Stratford Place. For tax year 2008 — a year Franklin County updated its property tax valuations — it valued Village Place at $1.25 million and Stratford Place at about $1.46 million.

Lutheran Services filed a challenge to the new value with the county Board of Revision, which conducted hearings in 2011. At those hearings the organization presented the appraisal reports of expert Donald Miller, and audio recordings of the proceedings were to be recorded on compact discs. The disc of the county proceedings regarding Stratford Place sent to the BTA was blank.

Miller presented appraisals valuing Village Place at $810,000 and Stratford Place at $730,000 based on the income generated by similar leased properties in the area as well as the sales prices of similar residential properties. The Court noted the income-approach compared Village Place with six rental properties built between 1961 and 1975, except for one that was built in 1995. For Stratford Place, he used five other rental complexes built between 1974 and 1989.

For the sales comparison for both complexes, Miller compared them with the sale of five other complexes built between 1963 and 1973. He arrived at his values by reconciling the income and sales comparison approaches.

The board of revision rejected Miller’s analysis and maintained the auditor’s values, which Lutheran Services appealed to the BTA. Lutheran Services presented Miller’s appraisals to the BTA, and South-Western schools presented Thomas Sprout, who reviewed Miller’s appraisals and criticized several aspects of them. Sprout identified comparable rents of apartments closer in age to Village Place and Stratford Place, and they had higher rents than what Miller reported.

The BTA issued a brief opinion in 2014 adopting Miller’s valuations, and made no mention of Sprout’s contrary testimony. The school district appealed to the Court, which is required to hear BTA appeals.

Court Asked to Weigh Evidence
South-Western schools argued that the BTA had a duty to consider and weigh the evidence presented by Sprout and asked the Court to rule that Miller’s appraisals lacked value and should be rejected. Today’s Court opinion stated that it accepts the school district’s first point.

“Although the BTA is not obliged to make formal findings of fact and conclusions of law, we have stated that the BTA must engage in sufficient discussion of the evidence to permit the court on appeal to determine whether the BTA acted reasonably and lawfully,” the opinion stated, citing the Court’s 2009 HealthSouth Corp. v. Levin decision.

The Court vacated the BTA’s decision, ordering it to explicitly account for the evidence it used to determine the property values and to address Sprout’s criticism.

The Court also expressed concern about the BTA’s findings for Stratford Place without relying on a recording of the county hearing. Because it received a blank disc, the BTA did not have a certified record of the board of revision hearing, and the BTA should have acted to obtain a recording or find other means to determine what transpired at the hearing, the opinion stated.

BTA Can Rely on Appraisals
South-Western schools maintained that the BTA had to reject Miller’s appraisals because he did not compare the properties to those of similar age with similar amenities, in particular complexes with common spaces that make them more valuable. Miller testified that rents paid at the Lutheran Services properties are subsidized by a federal Housing and Urban Development (HUD) program, and that he used methods complying with Ohio case law to determine the values of properties associated with HUD assistance.

“As for the quality of his comparables and the property adjustments, that determination lies within the province of the BTA as the finder of fact,” the Court concluded. “On remand, there is no impediment to the BTA again adopting the appraisal valuations so long as the BTA explains why Sprout’s criticisms do not impugn the validity of doing so.”

Chief Justice Maureen O’Connor and Justices Sharon L. Kennedy, Judith L. French, William M. O’Neill, Patrick F. Fischer, and R. Patrick DeWine joined the opinion.

Justice Terrence O’Donnell dissented without a written opinion, stating that he would affirm the BTA’s decision.

2014-1032. Lutheran Social Servs. Of C. Ohio Village Housing, Inc. v. Franklin Cty. Bd. of Revision, Slip Opinion No. 2017-Ohio-900.

Listen to oral argument audio of this case.

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