Title: West Carrollton City Schools Board of Education v. Montgomery County Board of Revision

State: ohio

Issuer: Ohio Supreme Court

Document:

[Until this opinion appears in the Ohio Official Reports advance sheets, it may be cited as W. 
Carrollton City Schools Bd. of Edn. v. Montgomery Cty. Bd. of Revision, Slip Opinion No. 2017-
Ohio-4328.] 
 
 
 
NOTICE 
This slip opinion is subject to formal revision before it is published in an 
advance sheet of the Ohio Official Reports.  Readers are requested to 
promptly notify the Reporter of Decisions, Supreme Court of Ohio, 65 
South Front Street, Columbus, Ohio 43215, of any typographical or other 
formal errors in the opinion, in order that corrections may be made before 
the opinion is published. 
 
 
SLIP OPINION NO. 2017-OHIO-4328 
WEST CARROLLTON CITY SCHOOLS BOARD OF EDUCATION, APPELLANT, v. 
MONTGOMERY COUNTY BOARD OF REVISION ET AL., APPELLEES. 
[Until this opinion appears in the Ohio Official Reports advance sheets, it 
may be cited as W. Carrollton City Schools Bd. of Edn. v. Montgomery Cty. Bd. 
of Revision, Slip Opinion No. 2017-Ohio-4328.] 
Taxation—Real property—Valuation—Board of Tax Appeals did not act 
unreasonably or unlawfully in retaining auditor’s valuation and acquired 
no duty to perform independent valuation—Neither 2008 land-sale price 
nor property owner’s actual construction costs affirmatively negate 
auditor’s 2011 valuation of land with improvements—Board of Tax 
Appeals’ decision affirmed. 
(No. 2015-0389—Submitted April 4, 2017—Decided June 20, 2017.) 
APPEAL from the Board of Tax Appeals, No. 2012-4862. 
____________________ 
 
 
SUPREME COURT OF OHIO 
 
2
Per Curiam. 
{¶ 1} Appellant, West Carrollton City Schools Board of Education 
(“BOE”), challenges the decision of the Board of Tax Appeals (“BTA”), which 
retained the auditor’s update-year valuation of $4,716,690 for 2011.  The BOE 
argues that the subject property, two contiguous parcels developed by appellee 
Carmax Auto Superstores, Inc., should be valued by reference to the 2008 purchase 
of the land for $5,850,000 along with actual construction costs of $7,015,740 for 
subsequent improvements.  Appellee Montgomery County Board of Revision 
(“BOR”) and the BTA both disagreed and retained the auditor’s value. 
{¶ 2} On appeal to this court, the BOE argues that the BTA acted 
unreasonably and unlawfully by refusing either to rely on the land-sale price and 
actual-cost evidence to value the property or to perform an independent valuation 
of the property.  We disagree, and we therefore affirm the decision of the BTA. 
FACTUAL BACKGROUND 
{¶ 3} On January 9, 2008, the two parcels at issue—vacant land at that time, 
amounting to about 15 acres—were purchased by Carmax for $5,850,000.  The 
BOE filed a complaint seeking an increase in the value for tax year 2008 of the land 
from the $578,100 valuation determined by the auditor to its sale price.  The BOR 
ordered an increase but not to the full amount of the sale price, and the BOE 
appealed to the BTA, which found that the sale was a recent arm’s-length 
transaction.  BTA No. 2009-K-3910, 2012 WL 4338747, *7 (Sept. 11, 2012).  On 
that basis, the BTA granted the requested increase to $5,850,000.  Id. at *8. 
{¶ 4} During 2008 and 2009, Carmax constructed on the subject property a 
used-car sales center comprising about 45,435 square feet of interior space.  
Construction records indicate actual costs, and Carmax spent a total of 
$7,015,740.76 to construct the building and other improvements. 
{¶ 5} 2011 was a triennial update year in Montgomery County, and the 
auditor set the value of the subject property at $4,716,690—the components of the 
January Term, 2017 
 
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valuation being $52,460 for the smaller, undeveloped parcel and $4,664,230 for the 
main parcel (a land value of $2,476,800 plus improvements valued at a 
“replacement cost new” amounting to $2,187,430). 
{¶ 6} The BOE filed a complaint seeking an increase to the 2008 land-sale 
price of $5,850,000.  At the BOR hearing, the BOE relied on evidence of the sale 
and Carmax presented sworn testimony from its counsel.  The BOR retained the 
auditor’s valuation, and the BOE appealed to the BTA, where the BOE presented 
cost evidence along with Carmax’s stipulation that it spent $7,015,740.76 to 
construct the building and other improvements.  Carmax presented the testimony 
of an appraiser, Michael N. Moorhead, who had appraised the unimproved property 
as of January 1, 2008.  That appraisal had been admitted in the prior case but was 
not introduced here. 
{¶ 7} As for the tax-year-2011 valuation, Moorhead did not perform a 
complete new appraisal but reviewed additional market data at Carmax’s request.  
One comparable land sale for $1,800,000 for approximately 14 acres occurred in 
January 2014.  As for the value of the improvements, Moorhead testified that a cost 
approach would be appropriate only in conjunction with using the market-sales and 
income approaches.  Moorhead also opined that the facility was a special-purpose 
building.  Lastly, Moorhead pointed out that additional costs do not necessarily add 
to the market value of a property. 
{¶ 8} In its decision, the BTA made no mention of Carmax’s construction 
costs as a basis for determining a value for the improvements.  The BTA rejected 
using the sale price to value the land because the sale occurred more than 24 months 
before the January 1, 2011 update valuation, relying on the authority of Akron City 
School Dist. Bd. of Edn. v. Summit Cty. Bd. of Revision, 139 Ohio St.3d 92, 2014-
Ohio-1588, 9 N.E.3d 1004.  BTA No. 2012-4862, 2015 WL 750651, *2 (Feb. 5, 
2015).  Finding an absence of competent and probative evidence of value, the BTA 
retained the auditor’s original value.  Id. 
SUPREME COURT OF OHIO 
 
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ANALYSIS 
R.C. 5713.03 Bars the Direct Use of the Land-Sale Price Because of the 
Subsequently Added Improvements 
{¶ 9} R.C. 5713.03 addresses the use of a sale price to value real property 
and creates exceptions to the general rule in favor of using a recent, arm’s-length 
sale price to determine value.  Relevant here is the exception providing that a sale 
price “shall not be considered the true value of the property sold if subsequent to 
the sale * * * [a]n improvement is added to the property.”  R.C. 5713.03(B). 
{¶ 10} Between Carmax’s 2008 acquisition of the property and the January 
1, 2011 lien date, Carmax spent more than $7 million constructing the used-car 
facility on the formerly vacant land.  Under the statute’s plain terms, the 2008 land-
sale price “shall not be considered” the property’s value as of 2011.  R.C. 
5713.03(B). 
{¶ 11} Moreover, the improvement exception is itself a factor that relates to 
the recency of the sale.  This court has stated that the recency rule of R.C. 5713.03 
“encompasses all factors that would, by changing with the passage of time, affect 
the value of the property.”  Cummins Property Servs., L.L.C. v. Franklin Cty. Bd. 
of Revision, 117 Ohio St.3d 516, 2008-Ohio-1473, 885 N.E.2d 222, ¶ 35.  Adding 
an improvement is a factor intrinsic to the property itself that affects its value. 
{¶ 12} Instead of relying on the improvement exception of R.C. 5713.03, 
however, the BTA invoked a more general proposition set forth in Akron City 
School Dist. Bd. of Edn., 139 Ohio St.3d 92, 2014-Ohio-1588, 9 N.E.3d 1004, at  
¶ 26: “a sale that occurred more than 24 months before the lien date and that is 
reflected in the property record maintained by the county auditor or fiscal officer 
should not be presumed to be recent when a different value has been determined 
for that lien date as part of the six-year reappraisal.”  Because the improvement 
exception more specifically bars direct use of the sale price to value the property, 
we need not determine whether the holding of Akron applies here. 
January Term, 2017 
 
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Neither the 2008 Land-Sale Price nor the Actual Construction Costs 
“Affirmatively Negate” the Auditor’s Valuation 
{¶ 13} The BOE argues that evidence in the record “affirmatively negates” 
the auditor’s valuation as of 2011 and that the BTA therefore should have 
performed an independent valuation of the property.  See Colonial Village Ltd. v. 
Washington Cty. Bd. of Revision, 123 Ohio St.3d 268, 2009-Ohio-4975, 915 N.E.2d 
1196, ¶ 24-25.  The BOE is mistaken. 
{¶ 14} First, the 2008 sale price of $5,850,000 for the land does not 
“affirmatively negate” the auditor’s 2011 valuation of the land and improvements 
in the aggregate at $4,716,690.  For one thing, the land-sale price is not recent, for 
the reasons discussed already.  Second, the appraiser testified at the BTA hearing 
that he had developed the opinion that the vacant land was worth $2,600,000 as of 
2008.  Also, a comparable property indicated a value of $1,800,000.  Under the 
circumstances, the 2008 sale price cannot be taken at face value as a refutation of 
the auditor’s valuation. 
{¶ 15} Second, the actual construction costs that Carmax incurred do not 
negate the auditor’s valuation.  Although Carmax stipulated to having incurred over 
$7 million in construction costs for its facility, those historical costs do not 
necessarily establish what the property would have sold for in 2011.  The cost 
approach involves estimating “what a potential buyer would expect to pay in 
constructing a replacement for the existing building,” a significant number because 
the “ ‘prospective purchaser will not rationally pay $15,000 for a house, or for 100 
shares of stock, or for a shipment of wheat if, without serious delay, he can build 
or buy equally satisfactory substitutes for $10,000.’ ”  Dayton-Montgomery Cty. 
Port Auth. v. Montgomery Cty. Bd. of Revision, 113 Ohio St.3d 281, 2007-Ohio-
1948, 865 N.E.2d 22, ¶ 12, quoting 1 Bonbright, The Valuation of Property 157 
(1937).  A buyer might not look to his seller’s actual costs because the seller may 
have overspent, and the buyer could therefore conclude that a property of equal 
SUPREME COURT OF OHIO 
 
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utility would cost less.  That is why cost valuation relies on the auditor’s consulting 
cost schedules to generate a replacement cost new for the improvements at issue.  
See Ohio Adm.Code 5703-25-12(A) and (B). 
{¶ 16} The BOE’s attempted reliance on Dayton-Montgomery Cty. Port 
Auth. does not advance its cause.  In that case, we did not favor actual costs over 
costs derived from the auditor’s schedules.  Instead, we held that the close 
correspondence between actual costs and cost-schedule projections negated the 
auditor’s use of an upward “grade-factor adjustment.”1  The present case does not 
involve a grade-factor adjustment, and for that reason Dayton-Montgomery Cty. 
Port Auth. is simply inapposite. 
{¶ 17} Equally unavailing is the BOE’s suggestion that an actual-cost 
valuation is proper because the property is a special-purpose property to the extent 
that it is specially adapted to Carmax’s needs as a retailer.  The special-purpose 
doctrine is applicable when the special adaptation to the owner’s currently 
successful use has been shown to be detrimental to the property’s marketability—
i.e., the property suffers built-in economic or functional obsolescence or is 
constructed with superadequacies2 that make it unattractive in the general market 
for that type of property.  See Rite Aid of Ohio, Inc. v. Washington Cty. Bd. of 
Revision, 146 Ohio St.3d 173, 2016-Ohio-371, 54 N.E.3d 1177, ¶ 29 (recognizing 
that the “ ‘ “special purpose exception is applied to a building in good condition 
being used currently and for the foreseeable future for the unique purpose for which 
it was built” ’ ”), quoting Dinner Bell Meats, Inc. v. Cuyahoga Cty. Bd. of Revision, 
12 Ohio St.3d 270, 272, 466 N.E.2d 909 (1984), quoting Fed. Reserve Bank of 
                                                 
1 A grade-factor adjustment is sometimes performed when the county’s appraiser concludes that the 
quality of improvements being appraised is superior or inferior to the model used by the county’s 
cost schedules; a factor is developed and applied to increase or decrease the replacement cost new 
of the property.  Hawk v. Washington Cty. Bd. of Revision, BTA No. 94-B-644, 1995 WL 50724, 
*3 (Feb. 3, 1995). 
2 “Superadequacy” refers to an “excess in the capacity or quality of a structure” in relation to “market 
standards.”  Appraisal Institute, The Dictionary of Real Estate Appraisal 226 (6th Ed.2015). 
January Term, 2017 
 
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Minneapolis v. State, 313 N.W.2d 619, 623 (Minn.1981); see Meijer Stores Ltd. 
Partnership v. Franklin Cty. Bd. of Revision, 122 Ohio St.3d 447, 2009-Ohio-3479, 
912 N.E.2d 560, ¶ 24 (“we have also held that the constitutional prohibition [of 
legislation requiring consideration of current use to the exclusion of market value 
in the valuation of property] does not bar consideration of current-use value in the 
context of the ‘special-purpose property’ doctrine”), citing Dinner Bell Meats at 
271. 
{¶ 18} There is no finding of “special purpose” by the BTA here, but even 
if there were, that would not necessarily justify reliance on actual costs as opposed 
to the county’s cost schedules.  Although the decisions cited in the BOE’s brief 
demonstrate that the BTA in some instances has preferred actual costs to the use of 
cost schedules, we are not aware of any binding legal principle that requires actual 
costs to be preferred when performing a cost valuation of the property.  Indeed, 
there is a clear danger in relying on actual costs to the exclusion of cost schedules: 
the owner and potential seller of the property may be understood to have spent too 
much on the improvements, and a buyer may calculate that it could obtain an  
“ ‘equally satisfactory substitute’ ” for the property by paying significantly less, 
Dayton-Montgomery Cty. Port Auth., 113 Ohio St.3d 281, 2007-Ohio-1948, 865 
N.E.2d 22, at ¶ 12, quoting Bonbright at 157.  Moreover, the one special-purpose 
decision cited by the BOE that endorses the cost approach is Dinner Bell Meats, 
and the record in that case was clear that the appraiser whose cost valuation was 
adopted performed his cost approach using cost schedules from the Marshall 
Valuation Service. 
{¶ 19} Because the auditor’s value was not negated by the evidence in the 
record, the BTA acquired no duty to perform an independent valuation and the BTA 
therefore did not act unreasonably or unlawfully in retaining the auditor’s value. 
 
 
SUPREME COURT OF OHIO 
 
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CONCLUSION 
{¶ 20} For the foregoing reasons, we reject the BOE’s contentions on 
appeal and affirm the decision of the BTA. 
Decision affirmed. 
O’CONNOR, C.J., and O’DONNELL, KENNEDY, FRENCH, O’NEILL, and 
FISCHER, JJ., concur. 
DEWINE, J., concurs in judgment only. 
_________________ 
 
Rich & Gillis Law Group, L.L.C., Mark H. Gillis, and Karol C. Fox, for 
appellant. 
 
John R. Koverman Jr., for appellee Carmax Auto Superstores, Inc. 
_________________