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Fairfield Township Board of Trustees v. Testa

Supreme Court of Ohio

June 21, 2018

Fairfield Township Board of Trustees, Appellant,
v.
Testa, Tax Commr., et al., Appellees.

          Submitted April 10, 2018

          Appeal from the Board of Tax Appeals, No. 2015-633.

          Schroeder, Maundrell, Barbiere & Powers, Lawrence E. Barbiere, and John W. Hust, for appellant.

          Michael DeWine, Attorney General, and Christine T. Mesirow and Kody R. Teaford, Assistant Attorneys General, for appellee Tax Commissioner.

          PER CURIAM.

         {¶ 1} In this appeal, appellee tax commissioner defends the property owner's entitlement to its exemption from taxation as a house of public worship pursuant to R.C. 5709.07(A)(2). Appellant, Fairfield Township Board of Trustees, filed a complaint against the continued exemption pursuant to R.C. 5715.27(E). The township claims that by granting and continuing the public-worship exemption, the tax commissioner unlawfully relieved the church of its payment obligations as the owner of property subject to a recorded covenant. The covenant relates to a tax increment financing ("TIF") agreement entered into between the township and a previous owner of the church property.

         {¶ 2} The tax commissioner found that R.C. 5709.911 subordinated the property's original TIF exemption to the public-worship exemption, and therefore rejected the township's argument. The Board of Tax Appeals ("BTA") affirmed.

         {¶ 3} The township has appealed.

         I. Factual Background

         A. The TIF Agreement

         {¶ 4} Tax-increment financing "is a method of promoting and financing the development of real property by directing ' "all or a portion of the increased property tax revenue that may result" ' from the development toward defraying the cost of improvements that are part of the development." Kohl's Illinois, Inc. v. Marion Cty. Bd. of Revision, 140 Ohio St.3d 522, 2014-Ohio-4353, 20 N.E.3d 711, ¶ 3, quoting Princeton City School Dist. Bd. of Edn. v. Zaino, 94 Ohio St.3d 66, 68, 760 N.E.2d 375 (2002), quoting Meck & Pearlman, Ohio Planning and Zoning Law, Section T 15.29, at 704 (2000). In this case, the "development" involved "public infrastructure improvements" that included road and bridge construction, signalization of an intersection, and the extension of public utilities. See R.C. 5709.73; R.C. 5709.40(A)(7); R.C. 5709.73(B).

         {¶ 5} Once a TIF agreement is in place, any increase in the assessed value of the designated parcels is subject, in whole or in part, to (1) an exemption from taxation and (2) a concomitant obligation of the property owner to make payments "in lieu of tax" into special fund used to pay for the development-such payments are referred to as "service payments." R.C. 5709.73(B), (D); R.C. 5709.74. In this case, Fairfield Township obtained the agreement of the Fairfield City School District and the Butler County Joint Vocational School District to exempt 100 percent of the increased assessed value and extend the TIF agreement over a 20-year period in consideration of an agreement to compensate those districts with a portion of the payments to be made in lieu of taxes.

         {¶ 6} In addition to the township's TIF resolution and the TIF Compensation Agreement between the township and the school districts, the record contains the "Developer's Service Agreement, " to which there were several parties: (1) the township, (2) the county, (3) the developer, DPR Properties, Inc., and (4) a lending bank. The agreement sets forth the parties' obligations relating to the township's TIF zone. Among other things, DPR consented to the TIF and agreed to apply for exemption of the designated property from real-estate taxes. DPR committed itself and its assigns to making service payments in lieu of taxes into the township's "tax increment equivalent fund."

         {¶ 7} The term of the TIF agreement is 20 years, unless the bonds and obligations are paid off earlier. Thus, the obligation to make service payments extends from 1998 through 2018. The agreement states that it must be recorded and referenced in any deed transferring property owned by DPR. It also provides that the service-payment obligations "shall be covenants running with the land ...


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