[Until this opinion appears in the Ohio Official Reports advance sheets, it may be cited as
Columbus City Schools Bd. of Edn. v. Franklin Cty. Bd. of Revision, Slip Opinion No. 2016-
Ohio-7466.]




                                        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. 2016-OHIO-7466
 COLUMBUS CITY SCHOOLS BOARD OF EDUCATION, APPELLANT, v. FRANKLIN
                 COUNTY BOARD OF REVISION ET AL., APPELLEES.
  [Until this opinion appears in the Ohio Official Reports advance sheets, it
  may be cited as Columbus City Schools Bd. of Edn. v. Franklin Cty. Bd. of
                    Revision, Slip Opinion No. 2016-Ohio-7466.]
Taxation—Real-property valuation—Tax tribunals, as finders of fact, have wide
        discretion to weigh the probative force of expert opinions—Decision
        affirmed.
     (No. 2014-0885—Submitted April 5, 2016—Decided October 27, 2016.)
              APPEAL from the Board of Tax Appeals, No. 2011-3590.
                               ____________________
        Per Curiam.
        {¶ 1} This real-property-valuation case concerns the proper valuation for
tax year 2005 of a 240-unit apartment complex in northeast Franklin County.
Appellee Albany Commons, Ltd., the property owner, sought a reduction from the
original valuation of $13,600,000 to $9,720,000.              Ultimately, appellee the
                                SUPREME COURT OF OHIO




Franklin County Board of Revision (“BOR”) in a two-to-one vote adopted the
appraisal valuation of $9,338,000 proposed by James Horner, a certified appraiser
and Member of the Appraisal Institute (“MAI”). The Board of Tax Appeals
(“BTA”) affirmed.
        {¶ 2} Appellant, the Columbus City Schools Board of Education (“BOE”),
has appealed, claiming that the absence of market data and other flaws in the
appraisal made it unreasonable and unlawful for the BOR and the BTA to accept
Horner’s opinion of value. Because the tax tribunals are the finders of fact,
possessing wide discretion to weigh the probative force of expert opinions, we
reject the BOE’s contentions and affirm the decision of the BTA.
                                   Factual Background
        {¶ 3} The Albany Commons apartment complex was constructed and
rented out in a two-phase project, with the first phase completed in 2002 and the
second phase in late 2003 or early 2004.               It has a small clubhouse with a
swimming pool and a small exercise facility. Seventy-nine units have attached
garages, and 58 units have detached garages. Seventy percent of the units have
two bedrooms and 30 percent have one bedroom. The complex has a gated
entrance. The property is owned by Albany Commons, Ltd., and managed by
Oakwood Management Company.
        {¶ 4} These proceedings stem from a complaint filed by Albany Commons
for tax year 2005 (a reappraisal year in Franklin County) seeking a reduction from
the auditor’s valuation of $13,600,000 to $9,720,000. The BOR initially held a
hearing on March 23, 2009, and voted on April 3, 2009, to retain the auditor’s
valuation for tax year 2005.1 The BOR mailed the statutory decision letter on


1
  The hearing encompassed both the 2005-tax-year complaint and the 2008-tax-year complaint.
For tax year 2008, a reduction to $12,900,000 was ordered. Like the tax-year-2005 determination,
the tax-year-2008 determination was also vacated and the case reopened, but the BOE did not
appeal the redetermined value to the BTA; only the tax-year-2005 case was appealed to the BTA,
and only tax year 2005 is at issue before us in this appeal.




                                               2
                                   January Term, 2016




April 29, 2009. The BOR later vacated its 2005 determination on May 27, 2009;
notice of the vacation was mailed on May 28.2
        {¶ 5} In 2011, the BOR convened a hearing on the owner’s complaints for
2005 and 2008, at which Albany Commons presented an appraisal by James
Horner, MAI, that was based primarily on the income approach but also cited sale
comparables and appraised the property at $9,338,000 on January 1, 2005, and
$11,400,000 on January 1, 2008.
        {¶ 6} Horner’s appraisal stated that the cost approach was not relevant
because


        this type of property would be purchased almost exclusively based
        upon the quality and quantity of the income stream. There is no
        evidence to suggest that a potential buyer of the property would
        consider the cost-new, less the estimate of physical depreciation
        and functional or economic obsolescence plus the value of the land
        as being meaningful in the decision making regarding “price.”


Instead, Horner relied on a combination of income and sales-comparison
approaches, with emphasis on the former.
        {¶ 7} Horner adduced ten sales of apartment complexes from 2003 to
2010. He provided a chart that gave the following information for each sale: the
sale date, the sale price, the “going-in” capitalization rate, and the sale price per
unit. The capitalization rates ranged from 7.5 percent to 9.5 percent. The price-
per-unit figures ranged from $35,833 to $87,500.


2
  The April decision was validly vacated because the vote to vacate was taken by the BOR within
30 days of the mailing of the decision. See Columbus City Schools Bd. of Edn. v. Franklin Cty.
Bd. of Revision, 121 Ohio St.3d 218, 2009-Ohio-760, 903 N.E.2d 299, ¶ 14, 27. Accordingly, the
BOR had jurisdiction to conduct further proceedings and issue the decision that was appealed to
the BTA in this case.




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        {¶ 8} The appraisal report states that “[a] per unit comparison is a ‘weak’
barometer for estimating value because of the numerous differences from the
standpoint of location and physical characteristics.” Nonetheless, Horner did
derive a sales-comparison estimate of value by positing a price per unit for the
subject property of $40,000 for tax year 2005, leading to an estimated value of
$9,600,000 for the 240-unit complex. But the report qualifies the estimate by
stating that “this per unit analysis is used only as further support for the value as
reported within the subsequent [income approach] section.”
        {¶ 9} Notably, Horner performed no adjustments in reaching his estimate
of value by the sales-comparison method. When cross-examined about this at the
BOR hearing, he stated that “these type[s] of properties are not sold on any kind
of a per-unit basis. They are sold exclusively based upon the quality and quantity
of the income.” He noted that the properties listed were in various locations and
had “seven different kinds of apartments, with different sizes, some with garages,
some without, some with an amenity package, some [without],” and that the
“myriad of differences” meant that no potential buyer or seller would “sit down
with a computer and go and start making adjustments for these things. And it’s
just an exercise in futility to even attempt to do that.”
        {¶ 10} The main use Horner made of the sale comparables was to abstract
from them a capitalization rate that could be applied in the income approach.
Horner expressed his view that the comparable sales furnished a sound basis for
that use despite the range in time of the sales. Noting that “[t]he subject is
inferior in overall quality, amenities and location” in comparison to most of the
sold properties, Horner “estimated the overall rate for the subject to be at 8.5%,”
which he said was also supported by the band-of-investment analysis, which is set
forth in the appraisal.
        {¶ 11} Under the income approach, Horner used actual revenues and
expenses of the property over several years. In the written appraisal, Horner




                                           4
                               January Term, 2016




referred to a “file memorandum” that contained “various rent comparables which
support the current and previous rent levels for the subject.” At the BOR hearing,
Horner testified that he had looked at “old appraisals” that he had done “in that
same marketing area” and that the rents and expenses for those properties
supported the rent and expense figures for the subject property.
       {¶ 12} On cross-examination, Horner did adduce a figure of $.80 per
square foot as a market-rent figure. He also stated that the average square footage
of the one- and two-bedroom apartments at issue was 972 square feet. Later, he
stated that he had found that the income and expenses of the subject property
closely tracked the market, and so he used the subject property’s figures.
       {¶ 13} Horner said that he had reviewed the expenses in other appraisal
projects that he had worked on but had not included that data in the report because
it was “proprietary,” so he was “not at liberty” to supply that information in the
present appraisal report. However, Horner also stated that “the most accurate and
meaningful barometer for estimating net income is the actual income performance
for the past 7 years.”
       {¶ 14} To derive revenue and expense figures for 2005, Horner averaged
the 2004 and 2005 information. He indicated that he believed that blending the
information would give a more accurate indication of value, since the second
phase of the property was newly built in 2004, so 2004 was the “lease-up period”
for the apartments in that phase. The net-operating-income figure he arrived at
was $1,015,995. Horner developed a tax additur of 2.38 percent, which he added
to the previously estimated rate of 8.5 percent to derive a capitalization rate of
10.88 percent. Dividing the income figure by the capitalization rate resulted, after
rounding, in a property valuation of $9,338,000 for 2005.
       {¶ 15} On September 15, 2011, the BOR convened to decide the case.
Horner’s valuation was adopted despite objection from the treasurer’s delegate.




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        {¶ 16} The BOE appealed to the BTA. At that level, two hearings were
held, one addressing a motion for sanctions for failure to comply with discovery,
and a second addressing the value of personal property. The owner’s witness
testified that the value of personal property as of 2005 was $150,000. On that
basis, the owner asked for a reduction of value to $9,188,000.3
        {¶ 17} The BTA issued its decision on May 1, 2014. It tersely adopted the
Horner appraisal valuation without adjustment and without discussion of other
issues raised by the BOE. The BOE has appealed, and the adoption of the
appraisal valuation is the sole issue on appeal.
          Deference Is Owed to the Determination of the Tax Tribunals
        {¶ 18} In this case, an MAI appraiser presented an appraisal report that
was reviewed and adopted by both the BOR and the BTA. On appeal, the BOE
advances a single proposition of law: “An appraisal that fails to include relevant
market data and the specific adjustments made thereto is inherently unreliable and
cannot be used to determine the true value of real property for tax purposes.”
Under this proposition of law, the BOE advanced three reasons why the BTA
erred in relying on Horner’s appraisal:


                 1.       Horner’s income approach did not comply with law
        because it did not contain sufficient data to allow any reasonable
        decision to be made as to the true value of the property.
                 2.       Horner’s market approach did not comply with law
        because it did not contain sufficient data to allow any reasonable
        decision to be made as to the true value of the property.


3
  The BOE’s counsel also suggests that an improper change of value for 2005 had been made by
the auditor from $13,600,000 to $12,900,000. The BOR hearing notes do indicate that the
auditor’s valuation went from $13,600,000 at the time the complaint was filed for tax year 2005 to
$12,900,000 by the time of the 2009 and 2011 hearings for the 2005 year. Because we affirm the
BTA’s reliance on Horner’s appraisal, we need not address this point.




                                                6
                                January Term, 2016




               3.      Horner’s refusal to perform a cost approach violated
       Ohio laws governing the determination of the true value of the
       property.


       {¶ 19} Elemental to the tax appeals that come before this court is the well-
articulated and often repeated proposition that “[i]n reviewing the BTA’s
disposition of the factual issues in a property valuation case, ‘[t]his court does not
sit either as a super BTA or as a trier of fact de novo.’ ” Strongsville Bd. of Edn.
v. Cuyahoga Cty. Bd. of Revision, 112 Ohio St.3d 309, 2007-Ohio-6, 859 N.E.2d
540, ¶ 22, quoting DAK, PLL v. Franklin Cty. Bd. of Revision, 105 Ohio St.3d 84,
2005-Ohio-573, 822 N.E.2d 790, ¶ 14. “The fair market value of property for tax
purposes is a question of fact, the determination of which is primarily within the
province of the taxing authorities, and this court will not disturb a decision of the
Board of Tax Appeals with respect to such valuation unless it affirmatively
appears from the record that such decision is unreasonable or unlawful.”
Cardinal Fed. S. & L. Assn. v. Cuyahoga Cty. Bd. of Revision, 44 Ohio St.2d 13,
336 N.E.2d 433 (1975), paragraph four of the syllabus.
       {¶ 20} Thus, in this case, the BOE must affirmatively demonstrate that the
BTA’s and the BOR’s weighing of the evidence or determination of its probative
force was unreasonable or unlawful. The daunting nature of that challenge lies in
the deferential standards that we apply to the type of argument the BOE is
advancing here. Quite simply, our case law establishes that “[t]he weighing of
evidence and the assessment of its credibility” are “the statutory job of the BTA,”
which is “vested with wide discretion in determining the weight to be given to the
evidence and the credibility of the witnesses that come before it.” EOP-BP
Tower, L.L.C. v. Cuyahoga Cty. Bd. of Revision, 106 Ohio St.3d 1, 2005-Ohio-
3096, 829 N.E.2d 686, ¶ 9, citing Fawn Lake Apts. v. Cuyahoga Cty. Bd. of
Revision, 75 Ohio St.3d 601, 603, 665 N.E.2d 194 (1996), and Cardinal Fed. S. &




                                          7
                             SUPREME COURT OF OHIO




L. at paragraph three of the syllabus. As a result, the burden on the BOE is to
demonstrate an abuse of discretion on the part of the BOR and the BTA. EOP-BP
Tower, ¶ 14, citing Witt Co. v. Hamilton Cty. Bd. of Revision, 61 Ohio St.3d 155,
157, 573 N.E.2d 661 (1991).
       {¶ 21} Our review of the BOE’s objections and the record leads us to
conclude that neither legal error nor abuse of discretion has been demonstrated.
To be sure, the BOE points to matters that definitely relate to the probative force
of the Horner appraisal. But none of the points establish unlawfulness or an
arbitrary or unconscionable attitude on the part of the BTA in adopting the
appraisal. See J.M. Smucker, L.L.C. v. Levin, 113 Ohio St.3d 337, 2007-Ohio-
2073, 865 N.E.2d 866, ¶ 16 (abuse of discretion connotes an unreasonable,
arbitrary, or unconscionable attitude).
       {¶ 22} One point advanced by the BOE is the appraisal report’s reliance
on revenue and expenses of the subject property rather than market data.
Although Ohio law permits the assessor to consider both contract rent (the rent
actually charged tenants of the property at issue) and economic rent (the rent
generally charged for similar premises in the marketplace), the emphasis is
usually to be placed on economic rent. Ohio Adm.Code 5703-25-07(D)(2)
(“While the contract rental or lease of a given property is to be considered the
current economic rent should be given weight”); accord Wynwood Apts., Inc. v.
Cuyahoga Cty. Bd. of Revision, 59 Ohio St.2d 34, 391 N.E.2d 346 (1979). The
fact that emphasis is to be placed on economic rent reflects the general principles
of property valuation.     See International Association of Assessing Officers,
Property Assessment Valuation 204 (2d Ed.1996) (starting point of the income
approach involves estimating the “annual economic rent for the property at 100
percent occupancy,” where “economic rent” means “the annual rent that is
justified for the property on the basis of a careful study of comparable properties
in the area” [emphasis added]).




                                          8
                               January Term, 2016




       {¶ 23} Here, the appraisal report contains data solely from the actual rent
and expenses of the subject property. But although the appraisal lists only the
subject property’s own revenue and expenses, Horner testified that he had
reviewed the market data for the relevant time period and determined that the
subject property’s actual numbers were in line with the market data. Thus, to the
extent that the BOR and the BTA credited that testimony, the actual revenues and
expenses could be understood to reflect the market.
       {¶ 24} The gravamen of the BOE’s argument, however, lies in the absence
of the market data from the written appraisal report. Because the market data was
not included in the appraisal, the BOE argues, the appraisal was defective and
unreliable as a whole and the BTA could not rely on it.
       {¶ 25} The BOE focuses on two points in relation to this argument. First,
the lack of market data in the appraisal report meant that under the Uniform
Standards for Professional Appraisal Practice (“USPAP”) the appraisal was
required to be labeled a “restricted-use appraisal,” making it improper for the
BOR and BTA to rely on it in determining the value of the property. Second, the
failure to require that market data be included in an appraisal is unfair because it
prevents opposing litigants from questioning the input and the results and also
deprives the BOR and the BTA of the very information necessary to determine
whether credence should be accorded to the proffered opinion of value.
       {¶ 26} As to the first point, we have already rejected the assertion that the
USPAP imposes legally binding limitations on the evidence that may be
considered by the tax tribunals when valuing real property for tax purposes. See
Lowe’s Home Ctrs., Inc. v. Washington Cty. Bd. of Revision, 145 Ohio St.3d 375,
2016-Ohio-372, 49 N.E.3d 1266, ¶ 27 (“The bare fact of such violations [of
USPAP] does not by itself make it unlawful to adopt a particular appraisal,”
though such violations “could be found to affect the credibility of the appraisal
under all the circumstances of the case”). We reiterate the point here. The BOE




                                         9
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argues, based on USPAP Standards Rules attached as an appendix to its brief, that
because the appraisal report does not contain the market data on which Horner
said that he relied, the appraisal cannot be relied on by a third party, such as the
BTA here. Assuming that the argument is correct, we nonetheless conclude that it
was not unlawful for the BTA to rely upon the appraisal in conjunction with
Horner’s testimony to the BOR because no specific statute or regulation requires
the BTA to reject the appraisal on such grounds.
        {¶ 27} Quite simply, the BOE has cited no provision of Ohio law that bars
the BTA from relying on appraisal evidence by reason of a failure to comply with
professional appraisal standards. In so stating, we acknowledge that the appraiser
is required by R.C. 4763.12 and 4763.13 to abide by such standards. We also
recognize that the BOE has cited an Ohio Department of Transportation operating
manual for the proposition that ODOT bars the use of restricted-use appraisals in
the context of valuing property in conjunction with acquiring real property for
transportation projects. But the existence of a restriction in another administrative
context does not by itself constrain the BTA when determining property value for
tax purposes.
        {¶ 28} Nor do we find the BTA’s reliance on an appraisal that omits
market data to be unreasonable from a fairness standpoint. The BOE had every
opportunity to present evidence of its own to impugn the Horner appraisal but
failed to do so.
        {¶ 29} When all is said and done, the evaluation of the probative character
of the evidence and the credibility of the witness is the quintessential
discretionary authority of the finder of fact. While it certainly would have been
desirable to include the market data in the report, the degree to which that
omission affects the probative character of the opinion of value is a decision for
the BOR and the BTA rather than for this court. Horner gave his reasons for
leaving data out of the appraisal report along with his reasons for using that data




                                         10
                                January Term, 2016




in forming his opinion of value, and the BOE has not established the
unreasonableness or unlawfulness by showing an abuse of discretion in the BTA’s
decision to credit Horner’s testimony and report.
       {¶ 30} Another objection raised by the BOE is Horner’s decision to
average the 2004 and 2005 revenues in determining the tax-year-2005 valuation.
Because the property would have completed its lease-up period by 2005, the
“stabilized” rents should have been used, according to the BOE. Here again,
Horner gave his reasons in his BOR testimony, and the BOE has not established
an abuse of discretion in the BTA’s finding them to be valid.
       {¶ 31} In conjunction with this argument, the BOE relies on NFI Metro
Ctr. II Assoc. v. Franklin Cty. Bd. of Revision, 78 Ohio St.3d 105, 676 N.E.2d 881
(1997), but out decision in that case does not negate the validity of Horner’s
appraisal here. The BOE quotes a passage from our NFI decision that itself
quotes the BTA’s decision; that passage states that reliance on current rents led to
an understatement of property’s value because evidence showed that rents were
increasing. But the quoted passage is not the holding of this court, and the BOE
ignores the remainder of our NFI decision, in which we held that the BTA was
wrong about the facts. On that basis, we reversed and remanded for a new
valuation of the property. Quite simply, NFI does not stand for the proposition
for which the BOE cites it.
       {¶ 32} Finally, the BOE asserts that Horner’s decision not to perform a
cost-approach analysis makes the adoption of his valuation a reversible error. We
disagree. Although it is true that a cost-approach analysis can be probative when
the property at issue is new, the decision whether to employ that approach lay
within the expertise of the appraiser, and it is the fact-finder’s duty to evaluate the
probative force of the expert’s opinion. We will not disturb the decision below
merely because another expert might have found merit in performing a cost-
approach analysis.




                                          11
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                                    Conclusion
       {¶ 33} For the foregoing reasons, we affirm the decision of the BTA.
                                                              Decision affirmed.
       O’CONNOR, C.J., and PFEIFER, O’DONNELL, LANZINGER, KENNEDY,
FRENCH, and O’NEILL, JJ., concur.
                             _________________
       Rich & Gillis Law Group, L.L.C., and Mark H. Gillis, for appellant.
       Bluestone Law Group, L.L.C., and Charles L. Bluestone, for appellee
Albany Commons, Ltd.
                             _________________




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