Dublin City Schools Bd. of Edn. v. Franklin Cty. Bd. of Revision , 124 N.E.3d 359 ( 2018 )

[Cite as Dublin City Schools Bd. of Edn. v. Franklin Cty. Bd. of Revision, 2018-Ohio-4621.]
IN THE COURT OF APPEALS OF OHIO
TENTH APPELLATE DISTRICT
Dublin City Schools Board of Education, :
Appellant-Appellee, :
v. :
No. 17AP-692
Franklin County Board of Revision et al., : (BTA No. 2016-425)
Appellees-Appellees, : (REGULAR CALENDAR)
(McDonald's Corporation, :
Appellee-Appellant). :
D E C I S I O N
Rendered on November 15, 2018
On brief: Rich & Gillis Law Group, LLC, Mark H. Gillis, and
Karol C. Fox, for appellee Dublin City Schools Board of
Education. Argued: Karol C. Fox.
On brief: Bluestone Law Group, LLC, Charles L. Bluestone,
and Patrick J. Heery, for appellant McDonald's Corporation.
Argued: Charles L. Bluestone.
APPEAL from the Ohio Board of Tax Appeals
SADLER, J.
{¶ 1} Appellant, McDonald's Corporation, appeals a decision of the Ohio Board of
Tax Appeals ("BTA") in favor of appellees Dublin City Schools Board of Education ("BOE"),
Ohio Tax Commission, and the Franklin County Board of Revision ("BOR"). For the
reasons that follow, we affirm.
No. 17AP-692 2
I. FACTS AND PROCEDURAL HISTORY
{¶ 2} The subject property is a 1.626-acre parcel improved with a 5,320 square foot
McDonald's restaurant originally constructed in 1985 and remodeled in 1997. The Franklin
County Auditor valued the property at $1,400,000 for the 2014 tax year. Appellant, the
owner of the property, filed a complaint against valuation with the BOR seeking to lower
the subject property value to $1,064,000. The BOE filed a counter-complaint to retain the
auditor's value. At the BOR hearing,1 appellant amended its complaint to seek a valuation
of $1,015,000 to conform to the value reached by its appraiser and expert witness, Steven J.
Weis, MAI. The BOE cross-examined Weis but did not present new evidence. The BOR
issued a decision adopting Weis's appraisal value for the 2014 and 2015 tax years. The BOE
appealed to the BTA, and a hearing was held to address the subject project in the instant
case as well as two other Franklin County McDonald's properties.2
A. Evidence Presented At the BTA Hearing – Competing Appraisals
{¶ 3} At the BTA hearing, appellant introduced the testimony and certified
appraisal of Weis. According to Weis's appraisal, the subject property is well maintained,
includes a "play-land" addition, and is designed to function as a modern, single tenant retail
property. (Weis Appraisal Report at 21.) Its highest and best use is a "[r]estaurant" since
site improvements contribute value over the value of the land, and an alternative use would
not be cost effective as a conversion of the property would require substantial capital. (Weis
Appraisal Report at 26; Tr. Vol. I at 17, 63.)
{¶ 4} To arrive at a final opinion of value, Weis utilized a sales comparison
approach and an income capitalization approach and then reconciled the two approaches.
For his sales comparison approach, Weis utilized six comparable properties, including
properties currently or formerly utilized as a Burger King, Outback Steakhouse, Spain
Restaurant, Luce Restaurant, Fiesta Jalisco, and a sushi bar. Each comparable property is
located within the Columbus region, roughly within the "northwest Columbus quadrant."
(Tr. Vol. I at 19.) Weis made adjustments to the comparable properties to account for size,
1 As noted in the BTA decision, because of a technical problem, the BOR failed to provide a recording of the
BOR hearing.
2 Appellant also appealed the BTA decisions involving the two other Franklin County McDonald's properties
and submitted identical assignments of error and supporting arguments for each case. This court sua sponte
coordinated the three appeals (Nos. 17AP-691, 17AP-692, and 17AP-693) for purposes of oral argument.
Separate opinions are issued with respect to each property.
No. 17AP-692 3
location, and other physical and functional characteristics. Under the sales comparison
approach, Weis arrived at a rounded value of $1,010,000 for the subject property.
{¶ 5} For his income approach, Weis utilized lease rates from nine comparable
properties, including Panda Wok, Cold Stone Creamery, McAllister's Deli, Jimmy Johns,
an ice cream shop, BiBiBop, Polaris Kabab, Level One Bar, and Mellow Mushroom. Four
of the comparable properties are located in Dublin and five are located in Columbus. From
the comparable properties, Weis determined that rent for the subject property would be
$18 per square foot, and the net operating income would be $85,388. Weis determined an
overall capitalization rate of 8.41 percent derived from secondary data sources and a direct
comparison method using an assortment of fast food chains, restaurants, free-standing
retail (non-restaurant), retail, and office sites. Under the income approach, Weis arrived
at a rounded value of $1, 020,000 for the subject property. Finally, Weis reconciled the two
approaches, giving "moderate to significant weight" to both approaches to arrive at a final
opinion of value of $1,015,000.3 (Weis Appraisal Report at 49.)
{¶ 6} The BOE introduced the certified appraisal of Thomas D. Sprout, MAI, CPA,
and Brian W. Barnes, MAI, and the testimony of Sprout. Sprout was qualified as an expert
prior to his testimony. The stated purpose of the Sprout appraisal is to provide an opinion
of the "market value of the unencumbered fee simple interest in the subject property."
(Sprout Appraisal Report at 10.) Sprout defines market value as "[t]he most probable price
which a property should bring in a competitive and open market under all conditions
requisite to a fair sale." (Sprout Appraisal Report at 8.)
{¶ 7} According to the Sprout appraisal, the subject property operates as a
McDonald's restaurant, and its highest and best use as improved is a "national fast food
restaurant."4 (Sprout Appraisal Report at 17; see also Tr. Vol. I at 153-54, 166.) While
Sprout believes the definition of "special-purpose property" fits the subject property, he did
not base his opinion of value on this designation and did not use the cost approach
3 Weis testified that "[m]athematically [the weight was] equal" but that he "probably would use more weight
on the sales comparison approach." (Tr. Vol. I at 39-40.)
4 Sprout's appraisal states the property's highest and best use " 'as vacant' would be a national single tenant
user consistent with zoning provisions of the City of Columbus," and the "highest and best use of the site 'as
improved' would be the existing improvements occupied by a national restaurant as they contribute beyond
the value of the site 'as if vacant.' " (Sprout Appraisal Report at 18; see also Tr. Vol. I at 153-54.)
No. 17AP-692 4
valuation method typically associated with special-use properties. (Sprout Appraisal
Report at 6; see also Tr. Vol. I at 152-53, Vol. II at 262.)
{¶ 8} Like Weis, Sprout arrived at his opinion of value using a sales comparison
approach and an income capitalization approach and reconciling the two approaches. For
the sales comparison approach, Sprout identified eight buildings he deemed functionally
similar to the subject property and then made adjustments to the sales of these properties
for size, location, and physical condition. The comparable properties operated as Skyline
Chili, Chipotle, Taco Bell, Arby's, Graeter's, and a Tom+Chee/Visionworks. Half of the
comparable properties were located within the Columbus region, with the other properties
located in Monroe, Springfield, Dayton, and Mansfield. Sprout made adjustments to the
comparable properties to account for differences in market conditions, land ratio, building
size, location, condition/quality, presence of a "drive-thru," and leased-fee rates. (Sprout
Appraisal Report at 30.) Under the sales comparison approach, Sprout arrived at a value
between $1,595,000 and $1,730,000 for the subject property.
{¶ 9} For the income capitalization approach, Sprout compared the subject
property primarily to other fast food restaurants to determine market rent of $27.50 per
square foot. Specifically, the comparable properties Sprout used in his income approach
included nine restaurants (two Steak 'n Shakes, Wendy's, two Arby's, two Chipotles, Skyline
Chili, a former Burger King) and one non-restaurant general retail site (a former Hollywood
Video). Six of the comparable properties are located in the Columbus region while the other
four properties are located in Monroe, Springfield, Dayton, and Mansfield. Sprout used the
market rent for each property in developing a stabilized profit and loss statement for
capitalization purposes. Sprout then determined an overall capitalization rate of 7.50
percent after conducting a "[b]and of [i]nvestment [a]nalysis," considering the
capitalization rates from 12 "sales of fast food restaurants/smaller retail buildings
throughout southwest, north central, and Central Ohio," and consulting the national
publication, "PwC Real Estate Survey." (Sprout Appraisal Report at 47, 48; see also Tr. Vol.
I at 176.) Under the income approach, Sprout arrived at a value of $1,725,000 for the
subject property. Finally, Sprout reconciled the two approaches, indicating the income
approach provides the "primary indication of value," for a final opinion of value of
$1,725,000. (Sprout Appraisal Report at 50.)
No. 17AP-692 5
{¶ 10} Regarding Weis's appraisal, Sprout testified that he disagreed with the
dataset, particularly the selection of comparable properties, Weis utilized as compared to
the highest and best use of this particular property. To Sprout, location was one of a
number of factors to consider in selecting comparable properties. (Tr. Vol. I at 187, 243-
44, Vol. II at 261-62, 336.)
B. BTA Decision
{¶ 11} The BTA considered the parties' arguments and appraisal evidence. The BTA
noted that Weis and Sprout differed on how broadly or narrowly to define the property's
highest and best use, which led to the divergence in their selection of comparable properties
under the sales comparison and income approaches to value, and their reliance on each
approach to derive final conclusions of value.
{¶ 12} Ultimately, the BTA found Sprout's analysis of value on the tax lien date to
constitute the most credible, competent, and probative evidence of value. First, the BTA
found Sprout's conclusion as to highest and best use most appropriate. The BTA noted that
the Supreme Court of Ohio in Johnston Coca-Cola Bottling Co., Inc. v. Hamilton Cty. Bd.
of Revision, 149 Ohio St. 3d 155, 2017-Ohio-870, held that the BTA may accept an appraisal
report that considers the present use of property as long as the appraisal's highest and best
use analysis is consistent with the property's present use and does not exclude other factors
relevant to the exchange value. According to the BTA:
Sprout considered the unique physical nature of the subject
property in his highest and best use analysis, in which he
determined that the physical components of the building make
it most suitable for continued use consistent with its original
purpose as a national fast-food restaurant. While this may not
be as broad as "restaurant," as Weis concluded, it is not so
narrow as to limit it to one user, as in the case of a specific
meatpacking company or particular big box store. * * * Also in
Johnston Coca-Cola, the court noted that this board properly
relied upon the present use of the property at issue to
determine "which comparables identified by the appraisers
were 'more analogous' under the sales-comparison approach."
Id. at ¶ 16.
(BTA Decision and Order at 3.) Pursuant to Johnston Coca-Cola at ¶ 17, the BTA found no
error in Sprout's conclusion that the subject property fit the definition of a "special-purpose
No. 17AP-692 6
property" given that Sprout testified he did not appraise the property as if it were a special-
purpose property. (BTA Decision and Order at 4.)
{¶ 13} Corresponding with its decision regarding highest and best use, the BTA
found Sprout's selection of comparable properties to best represent the market in which the
subject property would operate, and Weis's selection of comparable properties, which were
"dissimilar" from the subject property—"sit-down" restaurants, at least one property
converted to a different use, and vacant properties—undervalued the subject property.
(BTA Decision and Order at 4.)
{¶ 14} Regarding capitalization rates utilized by the appraisers, the BTA expressed
concern that Weis's capitalization rate was derived from properties that were dissimilar to
the subject property. The BTA found Sprout's capitalization rate, which was based on fast
food restaurants, reflective of the subject property's most likely use. Furthermore, the BTA
found appellant's arguments regarding Sprout's qualifications and Sprout's use of
qualitative adjustments instead of quantitative adjustments to lack merit.
{¶ 15} Considering all the above, the BTA found the BOE satisfied its evidentiary
burden on appeal and its evidence to be the most credible, competent, and probative
indication of the subject property's value. Therefore, the BTA ordered the value of the
subject property for tax years 2014 and 2015 to be increased to $1,725,000.
{¶ 16} Appellant filed a timely appeal.
II. ASSIGNMENTS OF ERROR
{¶ 17} Appellant assigns the following as trial court error:
[1.] The Board of Tax Appeals acted unreasonably and
unlawfully, and abused its discretion, when it failed to find that
Appellant's appraisal evidence constituted competent and
probative evidence of the market value of the subject property.
[2.] The Board of Tax Appeals acted unreasonably and
unlawfully, and abused its discretion, when it failed to find that
Appellant met its burden of proof, when the record contained
reliable and probative evidence to support Appellant's market
value of the subject property.
No. 17AP-692 7
[4.]5 The Board of Tax Appeals acted unreasonably and
unlawfully, and abused its discretion, by finding the BOE's
highest and best use analysis more appropriate than the
analysis proffered by McDonald's.
[5.] The Board of Tax Appeals acted unreasonably and
unlawfully, and abused its discretion, in considering the
present use of the subject property in determining its market
value.
[6.] The Board of Tax Appeals acted unreasonably and
unlawfully, and abused its discretion, in finding the
capitalization rate advanced by the BOE, rather than the rate
adopted by McDonald's appraiser, was more appropriate to use
in calculating the Subject Property's market value under the
income capitalization approach to value.
[7.] The Board of Tax Appeals acted unreasonably and
unlawfully, and abused its discretion, in continuing to
recognize Appellee Dublin City School Board of Education's
appraiser as an expert witness in view of the testimony and
evidence proffered at the BTA hearing.
III. STANDARD OF REVIEW
{¶ 18} Pursuant to R.C. 5717.04, an appellate court reviews a BTA decision to
determine whether it is "reasonable and lawful." R.C. 5717.04; NWD 300 Spring, L.L.C. v.
Franklin Cty. Bd. of Revision, 151 Ohio St. 3d 193, 2017-Ohio-7579, ¶ 13. "[I]f it is both, we
must affirm." Id.
{¶ 19} Appellate review of BTA decisions "is guided by the premise that '[t]he 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.' " (Other citation omitted.) Id.,
quoting EOP-BP Tower, L.L.C. v. Cuyahoga Cty. Bd. of Revision, 106 Ohio St. 3d 1, 2005-
Ohio-3096, ¶ 17. The BTA's factual findings are entitled to deference as long as they are
supported by reliable and probative evidence in the record. Bd. of Edn. of the Westerville
City Schools v. Franklin Cty Bd. of Revision, 146 Ohio St. 3d 412, 2016-Ohio-1506, ¶ 26.
{¶ 20} Furthermore, "[t]he standard for reviewing the BTA's determination of the
credibility of witnesses and the weight to be given their testimony is abuse of discretion."
5 Appellant's brief does not include a third assignment of error. We have retained the numbering in appellant's
brief for sake of clarity.
No. 17AP-692 8
NWD 300 Spring at ¶ 14. Thus, where the parties present competing appraisals, the BTA
is vested with wide discretion in determining credibility of the witnesses and weighing the
evidence before it. Bd. of Edn. of the Westerville City Schools at ¶ 21; NWD 300 Spring at
¶ 13. The BTA's decision finding one appraisal more probative than another appraisal and
adopting a land value in one appraisal over the land value in another appraisal is reviewed
for an abuse of discretion. Id. at ¶ 16. " 'Abuse of discretion connotes an unreasonable,
arbitrary, or unconscionable attitude.' " Olentangy Local Schools Bd. of Edn. v. Delaware
Cty. Bd. of Revision, 153 Ohio St. 3d 241, 2017-Ohio-8385, ¶ 7, quoting Renacci v. Testa,
Tax Commr., 148 Ohio St. 3d 470, 2016-Ohio-3394, ¶ 32.
{¶ 21} Although the BTA is responsible for determining factual issues, this court will
not hesitate to reverse a BTA decision that is based on an incorrect legal conclusion. Bd. of
Edn. of the Westerville City Schools at ¶ 21. Questions of law are reviewed de novo. Terraza
8, L.L.C. v. Franklin Cty. Bd. of Revision, 150 Ohio St. 3d 527, 2017-Ohio-4415, ¶ 7;
Columbus City Schools Bd. of Edn. v. Franklin Cty. Bd. of Revision, 151 Ohio St. 3d 12, 2017-
Ohio-2734, ¶ 13 (identifying the BTA's determination that expert did not appraise the
subject property in compliance with the legal standards set forth in earlier cases as a legal
issue reviewed de novo).
IV. LEGAL ANALYSIS
A. Recognition of Appraiser As An Expert (Seventh Assignment of
Error)
{¶ 22} For clarity of discussion, we will address appellant's assignments of error out
of order. Under the seventh assignment of error, appellant contends the BTA acted
unreasonably and unlawfully and abused its discretion in continuing to recognize Sprout
as an expert witness in view of the testimony and evidence offered at the BTA hearing. We
disagree.
{¶ 23} Appellant specifically argues the "BTA was unreasonable in dismissing [its]
lawful impeachment attempts of [Sprout] during cross-examination and in its post-hearing
briefs. * * * The BTA consolidated [appellant's concerns regarding Sprout's experience] and
categorized them as being without merit because * * * Sprout had been recognized as an
expert at the start of his testimony." (Appellant's Brief at 31.) In other words, according to
appellant, the BTA "is basically saying that, because * * * Sprout was recognized as an
No. 17AP-692 9
expert, [appellant] is not able to attempt to impeach his credibility." (Appellant's Brief at
31.)
{¶ 24} Appellant does not point to the record where the alleged improper actions by
the BTA occurred. "The burden of affirmatively demonstrating error on appeal rests with
the [appellant]." Miller v. Johnson & Angelo, 10th Dist. No. 01AP-1210, 2002-Ohio-3681,
¶ 2; see also App.R. 9 and 16(A)(7). Pursuant to App.R. 16(A)(7), "[t]he appellant shall
include in its brief, under the headings and in the order indicated, all the following: * * *
[a]n argument containing the contentions of the appellant with respect to each assignment
of error presented for review and the reasons in support of the contentions, with citations
to the authorities, statutes, and parts of the record on which appellant relies." (Emphasis
added.) "It is not the duty of this court to search the record for evidence to support an
appellant's argument as to alleged error." Abraham v. BP Exploration & Oil, Inc., 10th
Dist. No. 01AP-1061, 2002-Ohio-4392, ¶ 32.
{¶ 25} Furthermore, the BTA's qualification of an appraiser as an expert who may
render an opinion before the board is not equivalent to the BTA barring that expert from
cross-examination as to his credibility. Kettering City Schools Bd. of Edn. v. McDonald's
United States, LLC, 2d Dist. No. 27684, 2018-Ohio-2323, ¶ 108-16 ("Kettering BOE I").
Once qualified as an expert, " 'the probative value of an appraiser's testimony lies within
the competence of the BTA.' " BT Property LLC v. Franklin Cty. Bd. of Revision, 10th Dist.
No. 16AP-449, 2017-Ohio-2769, ¶ 29, quoting Meijer Stores L.P. v. Franklin Cty. Bd. of
Revision, 122 Ohio St. 3d 447, 2009-Ohio-3479, ¶ 20. Nothing in the BTA's initial
statement qualifying Sprout as an expert prohibited appellant from challenging Sprout's
credibility, and our review of the record shows appellant had ample opportunity to cross-
examine Sprout and impeach his credibility. To the extent appellant suggests the BTA
should have retracted its initial finding that Sprout is an expert based on its challenges to
Sprout's experience, the record does not support this argument. As such, appellant's
contentions are against the record.
{¶ 26} Considering all the above, appellant has not demonstrated that the BTA acted
unreasonably and unlawfully and abused its discretion in regard to Sprout as an expert
witness. As a result, appellant has not met its burden of affirmatively demonstrating error
on appeal in this regard.
No. 17AP-692 10
{¶ 27} Accordingly, we overrule appellant's seventh assignment of error.
B. Capitalization Rate (Sixth Assignment of Error)
{¶ 28} Under its sixth assignment of error, appellant contends the BTA acted
unreasonably and unlawfully and abused its discretion in finding the capitalization rate
advanced by the BOE, rather than the rate adopted by McDonald's appraiser, was more
appropriate to use in calculating the subject property's market value under the income
capitalization approach to value.
{¶ 29} Appellant cites to the following excerpt of the BTA's decision: "Weis's
capitalization rate raises concerns given that it was derived from properties that were
dissimilar from the subject property, i.e., general retail, instead of restaurant or fast-food
restaurant properties. As such, we cannot confirm that his capitalization rate appropriately
captures the market in which the subject property would operate." (BTA Decision and
Order at 4.) Appellant argues this analysis is "not only unreasonable and unlawful, but lazy
and factually inaccurate" because out of the 21 properties Weis used to produce an average
capitalization rate, 9 were restaurants, and Weis also considered cap rates reported in
several realtyrates.com surveys and performed a "band of investment analysis."
(Appellant's Brief at 26, 27.) Appellant faults Sprout's analysis for relying on 7 "leased-fee
sales" and his band of investment research as coming from "discussions with (unidentified)
local banks" which is unverifiable "hearsay" in contrast to Weis's tangible chart.
(Appellant's Brief at 28, 30.) According to appellant, compared to Sprout's analysis, Weis
provided an "unbiased and much more thorough" capitalization rate and yet the BTA
persisted in giving Sprout the benefit of the doubt over Weis and did not adequately explain
its reasoning. (Appellant's Brief at 29.)
{¶ 30} First, we disagree with appellant's claim regarding the BTA decision being
factually inaccurate. The BTA did not state that Weis used only non-restaurants. Rather,
the BTA expressed concern that Weis's capitalization rate was derived from non-
restaurants, which is true: non-restaurants did form a significant part of Weis's direct
comparison approach to formulating a capitalization rate. Therefore, this argument is
without merit.
{¶ 31} Second, appellant provides this court with no legal authority as to how
capitalization rates are utilized in tax appeal cases. As such, appellant has not
No. 17AP-692 11
demonstrated that the BTA acted unlawfully in finding the capitalization rate advanced by
Sprout to be more appropriate to use in calculating the subject property's market value
under the income capitalization approach to value. Miller; App.R. 9 and 16(A)(7).
{¶ 32} Third, the record contains reliable and probative evidence to support the
BTA's decision, and the BTA did not act arbitrarily, irrationally, or unconscionably in
finding Sprout's analysis more appropriate. Each appraiser agreed that at least some type
of restaurant comprised the highest and best use of the subject property. Twelve out of
twenty-one properties that Weis utilized to establish his capitalization rate were not
restaurants, while nearly all the properties utilized by Sprout to establish his capitalization
rate were fast food restaurants. Both appraisers consulted outside sources in their analysis:
Weis referenced an internet source data, while Sprout referenced a national publication and
local banks. Sprout testified as to the comparable strength of his approach in relation to
Weis's approach. On this record, we find the BTA did not act unreasonably and did not
abuse its discretion in regard to choosing Sprout's capitalization rate over Weis's
capitalization rate.
{¶ 33} Accordingly, we overrule appellant's sixth assignment of error.
C. Consideration of Present Use (Fifth Assignment of Error)
{¶ 34} Under its fifth assignment of error, appellant contends the BTA acted
unreasonably and unlawfully and abused its discretion in considering the present use of the
subject property in determining market value by applying the holding of Johnston Coca-
Cola to this case.
{¶ 35} The Supreme Court in Johnston Coca-Cola discussed present use as a means
of measuring value. The Johnston Coca-Cola court specified:
Article XII, Section 2 of the Ohio Constitution provides that
"[l]and and improvements thereon shall be taxed by uniform
rule according to value." This provision generally requires a
real-property valuation to ascertain "the exchange value" of
the property. (Emphasis sic.) Rite Aid of Ohio, Inc. v.
Washington Cty. Bd. of Revision, 146 Ohio St. 3d 173, 2016-
Ohio-371, 54 N.E.3d 1177, ¶ 24. Exchange value "is the
amount for which [a] property would sell on the open market
by a willing seller to a willing buyer * * *, i.e., the sales price."
State ex rel. Park Invest. Co. v. Bd. of Tax Appeals, 175 Ohio
St. 410, 412, 195 N.E.2d 908 (1964). This stands in contrast
to valuing property according to its present use. See Rite Aid
No. 17AP-692 12
at ¶ 24. Present-use valuation violates Article XII, Section 2
because that "method of evaluation excludes, among other
factors, location and speculative value which comprise market
value." State ex rel. Park Invest. Co. v. Bd. of Tax Appeals, 32
Ohio St. 2d 28, 33, 289 N.E.2d 579 (1972). Ordinarily,
therefore, a present-use method "cannot be made the basis for
valuation of real property for tax assessment purposes."
(Emphasis added.) Id.
Although present use generally cannot be the only measure of
value, in a proper case it may be considered in determining
true value for tax purposes. In Dinner Bell Meats, Inc. v.
Cuyahoga Cty. Bd. of Revision, 12 Ohio St. 3d 270, 12 Ohio B.
347, 466 N.E.2d 909 (1984), we held that Article XII, Section
2 "does not prohibit altogether any consideration of the
present use of a property." Id. at 271.
Id. at ¶ 13-14.
{¶ 36} Thus, the Johnston Coca-Cola court determined that since consideration of
present use is not per se improper, "[t]he more pertinent question is whether the BTA
considered the property's present-use value to the exclusion of other factors relevant to
exchange value." Id. at ¶ 15. The court rejected the property owner's argument that the
BTA decision was unreasonable and unlawful where the appraisal relied on by the BTA had
the stated purpose of determining the fair market value of the property, utilized the sales-
comparison and income approaches to do so, concluded the highest and best use of the
property as improved aligned with its current use as a large bottling plant, and referred to
the property's present use in the context of selecting comparable properties. The court
noted that "[a]lthough the BTA referred to the property's present use as a bottling facility,
it did so in the context of deciding which comparables identified by the appraisers were
'more analogous' " to the subject property. Id. at ¶ 16. Such a determination of which
comparable properties identified by competing appraisals were more analogous to the
subject property "fell within the BTA's discretion as fact-finder." Id. Furthermore,
although the parties had extensively briefed the "special-purpose" doctrine, "[b]ecause the
BTA did not adopt a present-use valuation," the Supreme Court found no need to decide
whether the property at issue was a special-purpose property. Id. at ¶ 17.
{¶ 37} In this case, appellant suggests that although an "enigma," the Supreme
Court in Johnston Coca-Cola meant "a proper case" to consider present use to only include
No. 17AP-692 13
"situations where factors exist that would otherwise result in the property under
consideration being undervalued for tax purposes." (Appellant's Reply at 4; Appellant's
Brief at 25.) To appellant, unlike Johnston Coca-Cola, this is not a proper case to consider
present use because "[n]either the Sprout Report nor the BTA decision identifies any special
circumstances with regards to this rather ordinary McDonald's restaurant [as opposed to
the large bottling plant at issue Johnston Coca-Cola] that would cause it to escape fair
taxation * * * as the 5,320 sf retail structure that it is at its core." (Appellant's Brief at 26.)
As a result, appellant asserts the BTA's application of Johnston Coca-Cola to this case was
unlawful. We disagree.
{¶ 38} First, appellant provides no legal authority in support of his view of what a
"proper case" constitutes under Johnston Coca-Cola. (Appellant's Brief at 25.) As such, he
has not met his "burden of affirmatively demonstrating error on appeal." Miller at ¶ 2; see
also App.R. 9 and 16(A)(7).
{¶ 39} Our own review of case law applying Johnston Coca-Cola cases undermine
appellant's position. Specifically, this same argument put forth by appellant has been
repeatedly rejected in real property tax appeals that are extremely similar to the instant
case.6 See, e.g., Kettering BOE I at ¶ 90-94 (overruling present-use argument because
appraisers do have the ability to consider the present use of a property when determining
highest and best use and noting appellant presented inconsistent positions on this topic);
Kettering City School Bd. of Edn. v. Montgomery Cty. Bd. of Revision, 2d Dist. No. 27683,
2018-Ohio-2325, ¶ 45 ("Kettering BOE II") (overruling present-use argument because
appraiser did not value property solely on its present use and therefore application of
Johnston Coca-Cola was not problematic, and noting Supreme Court's discussion of the
bottling plant features occurred in discussing the highest and best use in terms of the
comparable properties of that case and is not a basis to distinguish Johnston Coca-Cola
from the McDonald's case); W. Carrollton City Schools Bd. of Edn. v. Montgomery Cty.
Bd. of Revision, 2d Dist. No. 27679, 2018-Ohio-2322, ¶ 54-56 ("W. Carrollton BOE I")
(overruling present-use argument because, on this record, it agreed with the BTA that
Sprout did not value the subject property solely based on its present use as a McDonald's
6 In all four of the Second District Court of Appeals cases, which all involve real property improved by a
McDonald's restaurant, the appraisers, attorneys, and assignments of error are identical to the three cases
currently before this court.
No. 17AP-692 14
restaurant); W. Carrollton City Schools Bd. of Edn. v. Montgomery Cty. Bd. of Revision,
2d Dist. No. 27686, 2018-Ohio-2324, ¶ 54-56 ("W. Carrollton BOE II") (overruling present-
use argument because, on that record, it agreed with the BTA that Sprout did not value the
subject property solely based on its present use as a McDonald's restaurant).
{¶ 40} Moreover, we find no error regarding present use on the facts of this case.
Like in Johnston Coca-Cola, the appraisal relied on by the BTA here had the stated purpose
of determining the fair market value of the property, utilized the sales comparison and
income approaches to do so, concluded the highest and best use of the property as improved
aligned with its current use as a national fast food restaurant, and referred to the property's
present use in the context of selecting comparable properties. Sprout did not value the
subject property solely based on its present use as a McDonald's restaurant. Johnston
Coca-Cola at ¶ 13-14. Under Johnston Coca-Cola at ¶ 16, the determination of which
comparable properties identified by competing appraisals were more analogous to the
subject property fell within the BTA's discretion as factfinder. On this record, we find
appellant has not demonstrated the BTA acted unreasonably and unlawfully and abused its
discretion in considering the present use of the subject property in determining market
value in this manner.
{¶ 41} Accordingly, we overrule appellant's fifth assignment of error.
D. Highest and Best Use Determination (Fourth Assignment of Error)
{¶ 42} Under its fourth assignment of error, appellant contends the BTA acted
unreasonably and unlawfully and abused its discretion by finding Sprout's highest and best
use analysis more appropriate than the analysis proffered by Weis. In this assignment of
error, alongside the concept of highest and best use, appellant raises issues related to the
special-purpose doctrine and scope of comparable properties.
{¶ 43} "[H]ighest and best use" of a property is "[o]ne crucial element in
determining the value of property in the overall market." Rite Aid of Ohio, Inc. v.
Washington Cty. Bd. of Revision, 146 Ohio St. 3d 173, 2016-Ohio-371, ¶ 34. As defined in
Rite Aid:
Valuing a property at its highest and best use means identifying
the "reasonably probable and legal use of vacant land or an
improved property that is legally permissible, physically
possible, appropriately supported, financially feasible, and that
No. 17AP-692 15
results in the highest value." (Emphasis added.) Appraisal
Institute, The Appraisal of Real Estate 278 (13th Ed.2008).
Id. Thus, the appraiser's determination of highest and best use of a subject property
typically influences the appraiser's subsequent choice of comparable properties in
formulating an opinion of the market-exchange value of a property. Id. at ¶ 24-27, 34-35;
Johnston Coca-Cola at ¶ 8, 14-16.
{¶ 44} An appraiser's determination that the highest and best use of a property
coincides with its present use for the sake of identifying comparable properties is not the
equivalent of finding that the property is "special purpose." See Rite Aid at ¶ 33-42;
Johnston Coca-Cola at ¶ 8, 14-16. Rather, the special-purpose doctrine is an exception to
the general rule of valuing a property for purposes of taxation based on market exchange.
Rite Aid at ¶ 24, 29. Under the special-purpose doctrine, a property's use may form the
basis of the property's value if it is " 'special purpose' in nature," meaning that it was built
for a unique purpose, is in good condition, and is being used for that purpose—both
presently and for the foreseeable future. Id. at ¶ 29, citing Dinner Bell Meats, Inc. v.
Cuyahoga Cty. Bd. of Revision, 12 Ohio St. 3d 270 (1984). W. Carrollton City Schools Bd.
of Edn. v. Montgomery Cty. Bd. of Revision, 150 Ohio St. 3d 215, 2017-Ohio-4328, ¶ 17
(emphasis sic) ("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 superadequacies that make it unattractive in the general market for that
type of property.").
{¶ 45} The Rite Aid court provides a guide for identifying whether an appraisal is
considering the highest and best use of a property (as it relates to comparable properties in
formulation value based on market exchange) as opposed to the special purpose of the
improvements to the property. The highest and best use "will usually be expressed in terms
of the general type of use to be made of such property. [F]or example, a 'retail store' might
be the highest and best use, and since it is currently in that use, the appraisal report might
say: 'continued use as a retail store.' " (Emphasis sic.) Id. at ¶ 35. "By contrast, in the
special-purpose situation one would expect to see: 'continued use by the current occupant
in its ongoing business.' " (Emphasis added.) Id.
No. 17AP-692 16
{¶ 46} One year after its Rite Aid decision, the Supreme Court in Johnston Coca-
Cola again addressed considerations of present use, highest and best use, and the special-
purpose doctrine in the context of tax valuation. In that case, the auditor's appraisal
identified the highest and best use of the property as "continued use as a bottling plant and
distribution center" and selected comparable properties under the sales comparison and
income approaches based on that use. Johnston Coca-Cola at ¶ 8. The property owner
asserted the BTA's decision adopting the auditor's appraisal was unreasonable and
unlawful because it considered the present use of the property in determining value. The
Johnston Coca-Cola court rejected this argument because present use was not the only
measure of value used in the appraisal, and the BTA referred to present use in the context
of deciding which comparable properties were "more analogous" to the subject property—
a determination that "fell within the BTA's discretion as fact-finder." Id. at ¶ 16. Finally,
the Johnston Coca-Cola court noted that although the parties extensively discussed the
special-purpose doctrine in their briefs, "[b]ecause the BTA did not adopt a present-use
valuation, there is no need for an exception to the general rule—and thus no need for us to
decide whether the property at issue here is a special-purpose property." Id. at ¶ 17.
{¶ 47} In this case, appellant argues the BTA's highest and best use conclusion was
"extremely" too narrow, "essentially labels a generic 5,320 sf, rectangular building as a
'special purpose' property," and "effectively limits the Subject Property to a single user
(McDonald's)." (Appellant's Brief at 19, 20.) According to appellant, this contradicts the
Supreme Court's precedent defining a special purpose-property and ignores "nearly
identical" precedent in Rite Aid. (Appellant's Brief at 20.) Appellant additionally argues
the BTA contradicted its own decision as discussed in NWD 300 Spring, as it adopted an
appraisal that relied on a more generalized scope of comparable properties. We disagree.
{¶ 48} First, we disagree with appellant's contention the BTA decision effectively
limits the subject property to a McDonald's alone, therefore essentially labeling it a special-
purpose property. Both Sprout and Weis agreed the best use of the property was a
"[r]estaurant," with Sprout further opining that a "national fast food restaurant" would be
the highest and best use. (Weis Appraisal Report at 26; see also Tr. Vol. I at 17, 63; Sprout
Appraisal Report at 17; see also Tr. Vol. I at 153-54.) Nothing in the appraisal or BTA
decision limited the highest and best use to its existing current use as a McDonald's. Rite
No. 17AP-692 17
Aid at ¶ 35. Rather, the BTA referred to its present use in the context of deciding which
comparable properties were more analogous to the subject property, a determination that
fell within the BTA's discretion as factfinder. Johnston Coca-Cola at ¶ 16. As such, there is
no need for us to consider whether the property at issue in this case is a special-purpose
property. Id. at ¶ 17.
{¶ 49} Second, we disagree that Rite Aid demands reversal on the record of this case.
In Rite Aid, the property owner of a Rite Aid located in Marietta, Ohio that was not subject
to a lease appealed the BOR's retention of the auditor's value. At the BTA hearing, the
property owner presented an appraisal that compared the subject property to six general
retail sites located in the "general geographic area" of the subject property, although none
were in the same county as the subject property. Id. at ¶ 7, 9. Five of the six properties were
not sold subject to long-term leases. The appraiser for the property owner testified against
the applicability of the special-purpose doctrine.
{¶ 50} On the other hand, the county presented an appraisal that compared the
subject property to five "geographically distant" drugstores that, unlike the subject
property, were all encumbered by long-term leases; no adjustments were made to account
for these leases. Id. at ¶ 10. Counsel for the county characterized the appraisal as valuing
the property "as it actually existed on the tax date as a Rite Aid"—"[i]n other words, the
county posits a valuation in terms of continued use by Rite Aid even after a putative sale,
presumably with the drugstore continuing as lessee under a long-term lease." (Emphasis
sic.) Id. at ¶ 8. Considering the competing appraisals, the BTA noted that the county's
appraisal drew from "larger urban areas" of Ohio and adopted the property owner's
appraisal. Id. at ¶ 16.
{¶ 51} The county appealed, arguing the special-purpose property doctrine applied
as an exception to the general rule of determining value under market exchange, thereby
permitting comparison of the subject property to properties encumbered by long-term
leases without adjustments. The Rite Aid court disagreed, finding no evidentiary basis to
apply the special-purpose doctrine. Because the special-purpose doctrine was inapplicable
to the subject property, the general rule requiring adjustments to properties encumbered
by leases applied and yet was not reflected in the county's appraisal. Thus, the Rite Aid
court found the special-purpose doctrine did not supply a reason to reverse the BTA's
No. 17AP-692 18
decision to adopt the property owner's appraisal. Id. at ¶ 33-42; Lowe's Home Ctrs. v.
Washington Cty. Bd. of Revision, 145 Ohio St. 3d 375, 2016-Ohio-372, ¶ 13.
{¶ 52} This case is distinguishable from Rite Aid. Unlike the instant case, in Rite
Aid, the record indicated the county was attempting to value the subject property as
continuing to operate specifically as Rite Aid after a putative sale, and the county argued in
favor of treatment of the property as special purpose to support its selection and treatment
of comparable properties. The selection of comparable properties in Rite Aid was
problematic for several reasons distinct from their geographic distance from the subject
property: they were located in large urban areas and, more poignantly, were subject to long-
term leases which the appraiser did not adjust. Considering all the above, we disagree with
appellant's contention that Rite Aid is "nearly identical" to this case and the BTA's decision
errantly disregarded it. (Appellant's Brief at 20.) This conclusion is consistent with the
decisions of the Second District. See, e.g., Kettering BOE I at ¶ 78-89; Kettering BOE II at
¶ 43-44; W. Carrollton BOE I at ¶ 49-51; W. Carrollton BOE II at ¶ 49-51.
{¶ 53} Fourth, we disagree that the BTA contradicted its own decision at issue in the
NWD 300 Spring case. After Rite Aid and Johnston Coca-Cola, the Supreme Court in
NWD 300 Spring considered competing appraisals as to the value of a high-rise residential
condominium building constructed in downtown Columbus in the Arena District. Before
the BTA, the BOE presented the appraisal of Sprout, who based his opinion of value on a
sales comparison approach that relied on sales of downtown land parcels intended for
mixed-use development. Sprout "defended his choice of comparables by noting that in his
view, walkability to athletic and other events made the property at issue even more
desirable than the downtown properties that he had used as comparables." Id. at ¶ 7. The
property owners presented an appraisal from an expert who based her opinion of value on
a sales-comparison approach that used other land parcels sold for residential apartment
development as comparable properties. The BTA adopted the land value in Sprout's
appraisal. The Supreme Court affirmed, noting that Sprout's reference to the mixed-use
comparable properties comported with his highest and best use determination in the BOE's
appraisal and finding the property owner's objections did not amount to a claim of legal
error, and the BTA did not abuse its discretion by finding the BOE's appraisal to be more
probative.
No. 17AP-692 19
{¶ 54} In the instant case, Sprout's selection of comparable properties comported
with his determination of highest and best use of the particular subject property here. Tax
valuation cases are highly fact specific and contained to their own record—a manner of
valuing one property may lack relevance to another property. W. Carrollton BOE I at ¶ 47
("[E]ach case is factually different, that we do not have the record and evidence from the
[other] case, and that the BTA's rejection of the valuation provided by an appraiser in one
case does not automatically impugn that appraiser's qualifications or his opinion in another
case."); W. Carrollton BOE II at ¶ 53; Kettering BOE I at ¶ 72 (rejecting claim that Sprout
utilized inconsistent method in comparison to another case since "appraisers make
judgments based on the facts of each case, and those facts will differ"). Considering the
factual differences between the two cases, we find no merit to appellant's suggestion that
the BTA contradicted its own decision at issue in the NWD 300 Spring case.
{¶ 55} As in NWD 300 Spring at ¶ 17, we see "no legal basis for second-guessing the
BOE's appraiser's professional judgment, nor any reason why the BTA's reliance on it would
be unreasonable." Furthermore, on this record, the BTA did not abuse its discretion by
finding Sprout's highest and best use analysis more appropriate than the analysis proffered
by Weis.
{¶ 56} Accordingly, we overrule appellant's fourth assignment of error.
E. The Appraisals As Evidence to Support Market Value (First and
Second Assignments of Error)
{¶ 57} Under its first and second assignments of error, appellant contends the BTA
acted unreasonably and unlawfully and abused its discretion when it failed to find:
appellant's appraisal evidence constituted competent and probative evidence of the market
value of the subject property, and appellant met its burden of proof when the record
contained reliable and probative evidence to support appellant's market value of the subject
property. For the following reasons, we disagree.
{¶ 58} Appellant essentially argues the BTA erred in weighing Sprout's opinion over
Weis's opinion for a multitude of reasons. Appellant argues Weis uses a more appropriate
methodology with local comparable properties, Sprout's methodology is "flawed,"
"unsupported," and only appropriate if the subject property is "special purpose," and
Sprout did not testify to that effect. (Appellant's Brief at 10, 13.) Appellant submits that
Weis's appraisal was clearly laid out whereas Sprout's report failed to include any
No. 17AP-692 20
qualitative adjustments or market support for its conclusions. Appellant argues Sprout's
methodology and analysis produces inconsistent results as evidenced by the BTA choosing
Weis's appraisal over Sprout's appraisal in a separate Montgomery County case, Bd. of Edn.
of the Brookville Local Schools v. Franklin Cty. Bd. of Revision, BTA Case No. 2016-325,7
involving property including a tractor-trailer parking lot and the restaurant was slated for
demolition. Appellant also takes aim at the BTA decision itself, stating the BTA decision
had "[s]loppy reasoning" and lacked a "clear statement identifying the 'unique physical
nature of the subject property' " even though that was a "key factor" the BTA relied on in
choosing Sprout's highest and best use analysis. (Emphasis omitted.) (Appellant's Brief at
11, 12.)
{¶ 59} To the extent appellant raises arguments posed in his fourth, fifth, sixth, or
seventh assignments of error (such as consideration of present use, comparable properties,
and special-purpose property valuation), we have already addressed those contentions
earlier in this opinion and disagreed with appellant's positions. Furthermore, any
remaining contentions submitted to support this assignment of error, such as references to
the Brookville case, qualitative adjustments, and a sales breakpoint analysis, are wholly
unaccompanied by legal authority in violation of App.R. 16(A)(7). Our review of case law
reviewing these same arguments posed by appellant found no error. Kettering BOE I at
¶ 62-66, 70-72; Kettering BOE II at ¶ 40-42; W. Carrollton BOE I at ¶ 39-41, 46-47; W.
Carrollton BOE II at ¶ 39-41, 46-47. Considering all the above, appellant has not
demonstrated error on appeal in these matters. Miller; App.R. 16(A)(7).
{¶ 60} Moreover, we disagree with appellant's overarching challenge to the BTA
finding Sprout's appraisal to constitute the most credible, competent, and probative
evidence of value. In this case, the BTA's factual findings are supported by reliable and
probative evidence in the record in the form of Sprout's appraisal and testimony. Bd. of
Edn. of the Westerville City Schools at ¶ 26. The determination of Sprout's credibility and
the weight to be given his testimony is within the province of the BTA, and, although Weis
formulated a different opinion, the BTA is vested with "wide discretion" in evaluating
competing appraisals. NWD 300 Spring at ¶ 14. Bd. of Edn. of the Westerville City Schools
7 The Board of Education of the Brookville Local Schools did not appeal that decision. As provided elsewhere
in this opinion, in four other separate Montgomery County tax appeals, the BTA chose Sprout's appraisal over
Weis's appraisal, and the BTA decision was upheld by the Second District Court of Appeals.
No. 17AP-692 21
at ¶ 21; NWD 300 Spring at ¶ 13. Although appellant disagrees with the BTA's conclusion,
appraisers' differing professional judgments are not grounds to find the BTA abused its
discretion by adopting the land value found in one appraisal over the value found in another
appraisal. Id. at ¶ 16. Overall, we see no legal reason for second-guessing Sprout's
professional judgment nor any reason why BTA's reliance on it would be unreasonable. Id.
at ¶ 17.
{¶ 61} Considering all the above, we find the BTA decision "reasonable and lawful."
R.C. 5717.04; id. at ¶ 13. Therefore, we must affirm. Id.
{¶ 62} Accordingly, we overrule appellant's first and second assignments of error.
V. CONCLUSION
{¶ 63} Having overruled appellant's six assignments of error, we affirm the
judgment of the BTA.
Judgment affirmed.
BROWN, P.J., and KLATT, J., concur.
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