Submitted April 10, 2018
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.
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
3} The township has appealed.
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
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 ...