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Columbus City Schools Board of Education v. Franklin County Board of Revision

Supreme Court of Ohio

May 11, 2017

Columbus City Schools Board of Education, Appellee,
v.
Franklin County Board of Revision et al., Appellees; Network Restorations III, L.L.C., Appellant.

          Submitted February 28, 2017

         Appeal from the Board of Tax Appeals, No. 2011-714.

          Rich & Gillis Law Group, L.L.C., Mark H. Gillis, and Kimberly G. Allison, for appellee Columbus City Schools Board of Education.

          Timothy A. Pirtle, for appellant.

          PER CURIAM.

         {¶ 1} This real-property-valuation case concerns several residential parcels, all part of a government-subsidized low-income-housing project in Franklin County, and their value for 2008, 2009, and 2010. The property owner, Network Restorations III, L.L.C., presented an appraisal that was adopted by the Franklin County Board of Revision ("BOR"), but the Columbus City Schools Board of Education ("BOE") appealed to the Board of Tax Appeals ("BTA"), which reversed and reinstated the county auditor's higher valuations.

         {¶ 2} On appeal, the property owner asserts that its appraiser followed the proper principles applicable when valuing government-subsidized housing and that the BTA misinterpreted the applicable case law. The proper legal analysis for the type of property at issue in this case is set forth in Woda Ivy Glen Ltd. Partnership v. Fayette Cty. Bd. of Revision, 121 Ohio St.3d 175, 2009-Ohio-762, 902 N.E.2d 984. Because we find that the BTA's rejection of the owner's appraisal rests upon an erroneous interpretation of Woda, we reverse the decision of the BTA.

         BACKGROUND

         {¶ 3} At issue are 42 parcels scattered throughout Franklin County, some of which have been improved with renovated low-income housing. There are 35 buildings with 150 rental units-a mix of one-bedroom, two-bedroom, and three-bedroom units. For tax year 2008, which was a triennial update year in Franklin County, the county auditor valued the properties individually, combining a cost approach and a "gross rent multiplier" approach to arrive at a value for each parcel, which when combined amounted to $4, 456, 910.[1] For tax year 2009, the auditor increased the values because some of the properties had been renovated; the aggregate valuation for 2009 was $5, 490, 700, which was carried over to tax year 2010.

         {¶ 4} After filing a complaint that sought a reduced aggregate value of $3, 600, 000, the owner presented lay testimony and an expert opinion of value at the BOR hearing. The testimony established that to participate in the "low-income-housing tax credit" program, the owner was required to and did execute and record a restrictive covenant. The covenant bound the current owner and its successors to continue to use the property to provide low-income housing on very specific terms over a 30-year period.

         {¶ 5} The owner's expert witness was Donald E. Miller II, a member of the Appraisal Institute, who testified in support of his appraisal report before the BOR. Placing primary reliance on an income approach, which he checked using a sales-comparison approach, Miller opined that the aggregate property value was $2, 830, 000 for 2008. Miller specifically discussed the low-income-housing tax credit and the rent subsidies enjoyed by the properties at issue, which made it possible to renovate the units and to rent the units to low-income persons who could not afford market rents. He then premised his report on those circumstances.

         {¶ 6} Miller identified two types of subsidy. The first was acquisition and renovation assistance through the federal low-income-housing tax credit ("LIHTC"), which was enacted in 1986 and codified at 26 U.S.C. 42. The LIHTC is a device for raising capital for low-income-housing projects that by themselves generate little (if any) profits-investors are attracted by federal income tax credits that are tied to the amount of capital invested in the housing projects. Woda, 121 Ohio St.3d 175, 2009-Ohio-762, 902 N.E.2d 984, at ¶ 16-17.

         {¶ 7} The second form of subsidy was housing-assistance payments ("HAP"), which were available to tenants through Section 8 of the Housing Act of 1937, as amended. 42 U.S.C. 1437f We have addressed this subsidy before in the context of real-property-valuation cases. See Alliance Towers, Ltd. v. Stark Cty. Bd. of Revision, 37 Ohio St.3d 16, 20, 523 N.E.2d 826 (1988), fn. 4 (lead opinion); Colonial Village Ltd. v. Washington Cty. Bd. of Revision, 114 Ohio St.3d 493, 2007-Ohio-4641, 873 N.E.2d 298, ¶ 20.

         {¶ 8} Miller's opinion of value rested on his finding of highest and best use. Noting the blight in the neighborhoods in which the parcels at issue are located, Miller found that the highest and best use would be "intensive residential if special funding is made available." Under the income approach, Miller noted that the properties at issue operate as LIHTC properties and that the owner receives HAP-subsidized rents, as the residents are unable to afford the LIHTC rents. Miller stated that "[g]iven the subsidized rents and the reality that this appraisal may be ...


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