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BT Property LLC v. Franklin County Board of Revision

Court of Appeals of Ohio, Tenth District

May 11, 2017

BT Property LLC, Appellant/Cross-Appellee,
v.
Franklin County Board of Revision et al., Appellee/Cross-Appellee, Board of Education of the Hamilton Local School District, Appellee/Cross-Appellant.

         APPEALS from the Board of Tax Appeals BTA Nos. 2015-308, 2015-225, 2015-309, 2015-310

         On brief:

          Stephen Swaim, for appellant. Argued: Stephen Swaim.

          Rich & Gillis Law Group, LLC, Mark H. Gillis, and Kimberly G. Allison, for cross-appellant.

         Argued:

          Kimberly G. Allison.

          DECISION

          SADLER, J.

         {¶ 1} Appellant/cross-appellee, BT Property, LLC ("BT Property"), appeals a decision of the Board of Tax Appeals ("BTA") determining the value of four properties for tax years 2012, 2013, and 2014. Appellee Board of Education of the Hamilton Local Schools ("school board") submits a cross-appeal challenging only the BTAs determination of square footage of the main truck terminal located on one of the subject properties. For the following reasons, we affirm the BTA's decision.

         I. FACTS AND PROCEDURAL HISTORY

         {¶ 2} This case concerns the tax valuation of an owner-occupied industrial property comprised of four parcels in the city of Obetz, which is located within Franklin County and the Hamilton Local School District. The parties reference these parcels within the context of three "sites." Site 1 consists of parcel numbers 152-000716 and 152-000717, together forming approximately 28.6 acres. Both parcels on Site 1 are zoned PID (planned industrial district).

         {¶ 3} A truck terminal facility sits on Site 1. The truck terminal facility was constructed in 1972 to serve as a United Postal Service ("UPS") sorting facility; UPS continues to use the facility for this purpose. The structure of the truck terminal facility is comprised of one large room with 96 to 129 exterior door openings each raised approximately three feet from the ground, an internal truck repair area, employee common spaces, and office areas located at the perimeter of the building. The facility has a clear ceiling height of approximately 19 to 20 feet, and the non-office areas of the facility are heated but not cooled. The floor of the main room of the facility is roughly at ground level and is the same level as the exterior area where trucks park to unload or load cargo. Functionally, a truck backs up against the wall underneath a door opening, and a raised conveyer system on the interior side of the wall is used to distribute the truck's cargo.

         {¶ 4} Additional improvements on Site 1 include a truck wash-tunnel building, an air containerization building, and a guard house. At the northeast corner of Site 1, BT Property expressly granted the city of Columbus a perpetual easement for the purpose of a sewage pumping station. The easement is improved with a brick pumping station and wire fencing. According to the deed of easement, BT Property "retains the right to use the subject real property for all purposes which do not in any way impair the [city's] use or interfere with the * * * 'improvement' or access thereto." (Hatcher Appraisal at 57.)

         {¶ 5} Site 2, also zoned PID, equates to parcel number 152-001441, a roughly 10-acre plot used for parking and agriculture. Site 3, an unimproved property of approximately 11 acres, equates to parcel number 152-001442 and is zoned PCD (planned commercial district).

         {¶ 6} In an original assessment for the tax year 2012, the Franklin County Auditor valued the four parcels, in total, at a "true value[]" of $6, 645, 100. (BTA Decision at 2.) Broken down by parcel, the auditor valued parcel number 152-000716 at $2, 450, 900, parcel number 152-000717 at $3, 529, 100, parcel number 152-001441 at $398, 300, and parcel number 152-001442 at $266, 800. BT Property filed a tax year 2012 complaint with the Franklin County Board of Revision ("BOR") requesting a reduction in value for the four parcels. The school board filed a counter-complaint in support of the auditor's value. After a hearing, the BOR retained the auditor's value for tax years 2012, 2013, and 2014 for each parcel.

         {¶ 7} BT Property appealed the BOR's decisions on each parcel to the BTA, and the BTA consolidated the appeals. At the BTA hearing, BT Property submitted the testimony and appraisal report of David Hatcher, and the school board submitted the testimony and appraisal report of Thomas Sprout.

         {¶ 8} Hatcher testified to using a sales comparison approach and an income approach to value Site 1. Hatcher did not use a cost approach because of the age of the building and resultant difficulties in determining depreciation. According to Hatcher, the highest and best use of the property, as improved, is "industrial." (Nov. 16, 2015 Tr. at 39.) Hatcher characterized the main building, with its doors shut and personal property removed, as basically a warehouse. Hatcher noted that most warehouses have some sort of truck docks and that if the walls underneath the door openings were removed, trucks could drive into the warehouse. However, Hatcher also testified that the building "doesn't even meet the good qualifications of a warehouse because the clear height, the ceiling height, is only 19 foot, " while modern warehouse and distribution centers have ceiling height "up in that 22, * * * clear up to 42 foot high" range. (Tr. at 13.) Hatcher agreed that if the ground level of the warehouse floor was raised to accommodate typical types of docks with fork lift access to truck cargo, the clear height of the building would be further reduced to 15 or 16 feet. Hatcher differentiated the building from a regular truck facility because of the lack of typical docks and the shape of the main building, which is not as narrow as truck docking facilities.

         {¶ 9} Due to his characterization of the property, Hatcher predominately used warehouse sales comparables to value the property under the sales comparison approach and used all warehouse distribution facilities to determine value under the income approach. Based on the income approach with support from the sales comparison approach, Hatcher arrived at $2, 900, 000 as the value for Site 1 for 2012, 2013, and 2014. To arrive at this value, Hatcher used 151, 379 as the square footage of the main facility, a number that he testified to obtaining from the owner of the property and that was the auditor's number. He did not confirm with the owner that the auditor's number was correct. Furthermore, Hatcher valued both Sites 2 and 3 at $420, 000 for all three years based solely on a sales comparison approach.

         {¶ 10} In contrast, according to Sprout, the highest and best use of the property, as improved, is the "present improvements" and found that the main facility on Site 1 constituted a "special use type of property." (Sprout Appraisal at 35; Tr. at 67.) As such, Sprout utilized the cost approach and the sales approach to value the property. Sprout did not use the income approach because truck terminals are typically owner-occupied and because aspects of the facility at issue would not provide an accurate indication of value under the income approach.

         {¶ 11} Sprout testified that a truck terminal is a specific asset type defined as a loading dock facility allowing truck freight operators to redistribute loads of their truck fleets at an intermediate transfer point whereas a traditional warehouse is a large building where raw materials or manufactured goods may be stored before their export or distribution for sale. In Sprout's opinion, the facility is a special use type of truck terminal in that it was specifically built for UPS to distribute their packages, including designing a docking system and doors to accommodate their conveyor belt package transport system and a central area bigger than typical truck terminals to accommodate both a large number of delivery people and sorting bins as well as an internal truck repair area. Sprout did not believe that warehouses were sufficiently comparable to the subject property to provide a credible analysis. Sprout added value for the separate car wash building and the air containerization building but not the guard house.

         {¶ 12} Under the cost approach analysis, Sprout added the vacant value of the land based on a market analysis of comparable sales to the depreciated value of the improvements present on the site to arrive at a value for Site 1 of $5, 020, 000 for 2012 and 2013 and $5, 600, 000 for 2014. Sprout also valued the property under the sales approach. Due to his characterization of the property, Sprout predominately used truck terminal sales as comparables. Sprout reconciled the valuations under the cost and sales approaches to value Site 1 at $5, 050, 000 for 2012 and 2013 and $5, 600, 000 for 2014, and valued Site 2 at $534, 600 and Site 3 at $366, 800 for all three years.

         {¶ 13} Regarding the square footage numbers he utilized in arriving at value, Sprout testified that the property owner provided him with the numbers. He added the 166, 961 square footage of the main building to 23, 642 square feet for the car wash and 2, 450 square feet for the air containerization building. Sprout agreed there was a discrepancy in the car wash number and agreed that reducing the acreage for certain public road easements is appropriate. Sprout disagreed that the acreage on Site 1 should be reduced for the easement granted to the city of Columbus, even considering the building and fencing. Sprout noted that he did not receive anything from the property owner indicating they would not be able to use the property and noted that the easement was likely "helping out the UPS situation." (Tr. at 95.)

         {¶ 14} The BTA determined that Sprout's appraisal report constituted competent and probative evidence on which it could rely and found that Sprout's appraisal more accurately reflects the value of the subject property. Based on the appraisal evidence and testimony of both appraisers, the BTA agreed with Sprout's special use property finding and found that a cost approach, supported by the sales approach and his testimony before the board, reflected the true value of the property in this case. Ultimately, the BTA found Sprout's conclusions of value under the cost approach to be reliable indications of value on which the BTA may rely, with two exceptions: the acreage number utilized and the square footage number utilized.

         {¶ 15} Regarding acreage, the BTA reduced the acreage to account for right-a-ways, which Hatcher's acreage numbers reflected and to which Sprout agreed were appropriate. However, the BTA refused to further reduce the acreage of Site 1 based on the permanent easement granted to the city of Columbus for the purpose of a sewage pumping station. The BTA noted that Sprout disagreed with such a reduction and, based on the BTAs own review of the record, found that Hatcher failed to provide probative evidence that the easement results in a diminution of value of the property.

         {¶ 16} Regarding square footage, the BTA noted discrepancies between Hatcher's and Sprout's cited numbers. Hatcher assigned 151, 379 square feet for the trucking structure, 132 square feet for the truck wash, and omitted the air containerization building. Sprout assigned 166, 961 square feet to the trucking structure, 23, 642 square feet to the truck wash, and 2, 450 square feet to the air containerization building. The BTA decision states that both Hatcher and Sprout testified to obtaining the square footage from the property owner, that Hatcher admitted to misstating the square footage of the truck wash, and that Sprout admitted his trucking structure number was identified as an "extraordinary assumption in his report, " conceded that his truck wash number was incorrect, and agreed that 3, 750 was a more appropriate number. (BTA Decision at 6.) "Based upon the foregoing, county property record cards, and testimony from both Mr. Hatcher and Mr. Sprout, " the BTA found the appropriate square footages to be 151, 379 for the primary trucking improvement, 3, 750 square feet for the truck wash, and 2, 450 square feet for the air containerization building. (BTA Decision at 6.) The BTA adjusted the value of Site 1 as a result of altering the square footage used in Sprout's cost approach model.

         {¶ 17} The BTA ultimately determined the year 2012 true value for parcel number 152-000716 to be $1, 756, 300, parcel number 152-000717 to be $2, 528, 920, parcel number 152-001441 to be $495, 400, and parcel number 152-001442 to be $367, 850. For the year 2013, the BTA valued parcel number 152-000716 at $1, 731, 350, parcel number 152-000717 at $2, 493, 010, parcel number 152-001441 at $495, 400, and parcel number 152-001442 at $367, 850. Regarding the year 2014, the BTA concluded that the BOR exceeded its jurisdiction in issuing a decision determining the value for 2014 when that was still an "open" year subject to challenge by a complaint and ordered the BOR to vacate its decision on 2014. (BTA Decision at 2.)

         {¶ 18} BT Property filed a timely appeal to this court, and the school board filed a timely cross-appeal regarding the BTAs ...


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