The Montgomery County Auditor’s $1.1 million reduction in the property tax value of a West Carrollton Carmax Auto Superstore was affirmed by the Ohio Supreme Court today.

The Supreme Court ruled that West Carrollton City Schools Board of Education’s challenge to the revision failed to point to any evidence that would negate the auditor’s decision. The auditor decided to reduce the Carmax property to about $4.7 million for tax year 2011 after assessing it for about $5.85 million in 2008. In a per curiam opinion, the Court found that the auditor was not obligated to use the property’s sale price or factor in the $7 million Carmax paid to construct the facility when it updated the county tax records.

Price Jumped When Land Purchased
Carmax purchased 15 acres of vacant land in 2008 for $5.85 million to construct its 45,000 square-foot used car sales center. For the tax year 2008, the West Carrollton school board asked the Montgomery County Board of Revision to increase the property’s value from its prior vacant lot value of $578,100 to the $5.85 million sale price. The board of revision increased the value, but not to the sale price, and the school board appealed to the Ohio Board of Tax Appeals (BTA), which in 2012 increased the 2008 value to $5.85 million. That was the final value determined for 2008.

When the county updated its property values in 2011, the auditor valued the sales center at $4,716,690, of which $2,476,800 was attributed to the land value and the remainder to the improvements. The school board challenged the valuation and sought to increase it back to the 2008 sales price. The school board also noted that construction records indicated Carmax spent about $7 million in 2008 and 2009 to construct the sales center and make other improvements.

The board of revision rejected the school board’s request. At the BTA, appraiser Michael N. Moorhead testified that he reviewed the 2008 appraisal and additional market data at Carmax’s request. He noted one comparable land sale of $1.8 million and said that basing the value on the cost of the improvements would be faulty because the additional costs Carmax spent to build the facility to suit its needs does not necessarily add to the market value of the property.

The BTA rejected the use of the sale price because the sale occurred more than 24 months before the valuation update, and retained the auditor’s $4.7 million valuation. The school board appealed to the Supreme Court, which is required to hear appeals of BTA decisions.

Improvement Barred Use of the Land-Sale Price For 2011
The Court explained that under R.C. 5713.03 the general rule to value property is to use the sale price of a recent arm’s length sale. The Court agreed with the BTA that the 2008 land sale was not “recent,” but for a different reason.  The Court noted that R.C. 5713.03(B) states that the sale price should not be considered if an “improvement is added to the property.” Because Carmax spent $7 million since the sale to improve the property, the improvement provision of the statute excludes the use of the earlier land-sale price to determine the property’s value, the opinion stated.

The school board argued the evidence of the earlier sale price plus the improvement costs “affirmatively negate” the auditor’s 2011 assessment, and maintained the BTA should perform its own independent valuation. The Court disagreed, noting that the sale price was not recent and that other appraisals valued the land at about $2.48 million or $2.6 million as of 2008. Additionally, the appraiser Moorhead found a comparable property for sale for about $1.8 million.  All that evidence supported a lower value for the land in 2011.

As for relying on Carmax’s construction costs, the Court concluded that on the basis of its prior decisions actual costs may not be as instructive as the county’s cost schedules, given that the seller may have overspent, in which case the buyer could find an equally suitable facility for much less. The Court found the BTA acted reasonably by adopting the auditor’s value for tax year 2011.

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

Justice R. Patrick DeWine concurred in judgment only.

2015-0389. W. Carrollton City Schools Bd. of Edn. v. Montgomery Cty. Bd. of Revision, Slip Opinion No. 2017-Ohio-4328.

Hear oral argument audio of this case.

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