First N. Corp. v. Olmsted Falls Bd. of Zoning Appeals

[Cite as First N. Corp. v. Olmsted Falls Bd. of Zoning Appeals, 2013-Ohio-5580.]

[Vacated opinion. Please see 2014-Ohio-487.]

Court of Appeals of Ohio
EIGHTH APPELLATE DISTRICT
COUNTY OF CUYAHOGA

JOURNAL ENTRY AND OPINION
No. 99681

FIRST NORTH CORPORATION, ET AL.

PLAINTIFFS-APPELLANTS

vs.

BOARD OF ZONING APPEALS
OLMSTED FALLS, OHIO, ET AL.
DEFENDANTS-APPELLEES

JUDGMENT:
REVERSED

Administrative Appeal from the
Cuyahoga County Court of Common Pleas
Case Nos. CV-627542 and CV-627672

BEFORE: Stewart, A.J., S. Gallagher, J., and E.A. Gallagher, J.

RELEASED AND JOURNALIZED: December 19, 2013
ATTORNEYS FOR APPELLANTS

Sheldon Berns
Benjamin J. Ockner
Gary F. Werner
Berns, Ockner & Greenberger, L.L.C.
3733 Park East Drive, Suite 200
Beachwood, OH 44122

ATTORNEYS FOR APPELLEES

Paul T. Murphy
Paul T. Murphy Co., L.P.A.
5843 Mayfield Road
Mayfield Hts., OH 44124

James A. Climer
John D. Pinzone
Frank H. Scialdone
Mazanec, Raskin & Ryder Co., L.P.A.
100 Franklin’s Row
34305 Solon Road
Cleveland, OH 44139
MELODY J. STEWART, A.J.:

{¶1} Olmsted Industrial Park1 (“OIP”) owns 54 acres of unimproved land in the

city of Olmsted Falls. The land is zoned for light industrial use. OIP claims the land is

unsuitable for that purpose, and when a developer proposed using the land for

senior-targeted cluster housing, OIP asked the city of Olmsted Falls to rezone the land or

grant it a variance. The city denied both requests. As OIP pursued its administrative

remedies in the court of common pleas, it filed a declaratory judgment action seeking to

have the zoning classification declared unconstitutional as applied to the property. It also

asked the court to commence proceedings to appropriate the property and pay just

compensation because the deprivation of economically viable use of the property, as

currently zoned, constituted a regulatory taking per se. The court upheld the

administrative decisions and, following a trial on the substantive constitutional issues,

ruled that OIP failed to show beyond fair debate that the present zoning classification

constituted a categorical taking of the property.

{¶2} We conclude that the court erred by affirming the city’s refusal to grant a

variance. OIP presented unrebutted evidence to show that the present zoning

classification worked an unnecessary hardship because the property was unmarketable as

light industrial space due to a poor regional economy, issues with the size and location of

the property, and competition from other light industrial sites (including one funded by

First North Corporation, the named plaintiff, “is the development entity associated with OIP”
1

and both companies are owned and operated by the same principal. Appellant’s brief at fn. 1. The
parties collectively refer to these entities as “OIP,” so we do as well.
the city). The city offered no evidence of its own, insisting that it could deny a variance

in order to diversify its tax base even though it conceded that the undeveloped property

was generating no tax revenue and had not done so in the 13 years that OIP owned the

property. In essence, the city’s position, and one that the court accepted, was that OIP

could be forced to wait indefinitely on the chance that economic conditions might change

in the future and create a demand for light industrial use. This was an arbitrary and

unreasonable position that amounted to an abuse of discretion.

I

A

{¶3} R.C. 2506.04 states:

The court may find that the order, adjudication, or decision is
unconstitutional, illegal, arbitrary, capricious, unreasonable, or unsupported
by the preponderance of substantial, reliable, and probative evidence on the
whole record. Consistent with its findings, the court may affirm, reverse,
vacate, or modify the order, adjudication, or decision, or remand the cause
to the officer or body appealed from with instructions to enter an order,
adjudication, or decision consistent with the findings or opinion of the
court.

{¶4} The Ohio Supreme Court has given the following characterization of the type

of review to be given by the court of common pleas in an administrative appeal:

Although a hearing before the Court of Common Pleas pursuant to R.C.
2506.01 is not de novo, it often in fact resembles a de novo proceeding.
R.C. 2506.03 specifically provides that an appeal pursuant to R.C. 2506.01
“shall proceed as in the trial of a civil action,” and makes liberal provision
for the introduction of new or additional evidence. R.C. 2506.04 requires
the court to examine the “substantial, reliable and probative evidence on the
whole record,” which in turn necessitates both factual and legal
determinations.
(Emphasis sic.) Cincinnati Bell, Inc. v. Glendale, 42 Ohio St.2d 368, 370, 328 N.E.2d

808 (1975).

{¶5} The power to review and hear additional evidence necessarily means that the

court of common pleas “must weigh the evidence in the record.” Dudukovich v. Lorain

Metro. Hous. Auth., 58 Ohio St.2d 202, 207, 389 N.E.2d 1113 (1979). But the court of

common pleas cannot simply substitute its judgment for that of the administrative agency.

The standard of review set forth in R.C. 2506.04 is limited to determining whether there

is a “preponderance” of evidence to support the administrative decision, so the court of

common pleas must affirm if a preponderance of reliable, probative, and substantial

evidence exists. Id.; Smith v. Granville Twp. Bd. of Trustees, 81 Ohio St.3d 608, 612,

693 N.E.2d 219 (1998).

B

{¶6} When a court of appeals reviews a common pleas appellate decision in an

administrative appeal, its standard of review is far more circumscribed. In an R.C.

Chapter 2506 administrative appeal from a common pleas court decision in a zoning case,

we can review the judgment of a lower court only on questions of law — we do not have

the same extensive power to weigh the preponderance of substantial, reliable, and

probative evidence as is granted to the lower courts. Henley v. Youngstown Bd. of

Zoning Appeals, 90 Ohio St.3d 142, 147, 735 N.E.2d 433 (2000). However, “within the

ambit of ‘questions of law’ for appellate court review would be abuse of discretion by the

common pleas court.” Kisil v. Sandusky, 12 Ohio St.3d 30, 34, 465 N.E.2d 848 (1984),

fn. 4.
 II

{¶7} The city’s zoning code defines a “variance” as a “modification of the literal

provisions of this Planning and Zoning Code where such modification will not be

contrary to the public interest.” Olmsted Falls Codified Ordinances 1204.03(b)(129).

Under the city’s ordinances, its board of zoning appeals has the authority to authorize a

variance when “strict and literal interpretation and enforcement” of the zoning code

would yield “results inconsistent with the general purpose of this Code.” Olmsted Falls

Codified Ordinances 1206.05(b)(2).

{¶8} In general terms, a use variance is an application for a deviation from the

permitted uses in a zoning district. The city zoning code allows the board of zoning

appeals to grant a use variance if it determines that (1) the variance will result in no

substantial detriment to any surrounding property, (2) the intent and purpose of the zoning

code is not impaired, and (3) the applicant shows either: (a) unnecessary hardship or (b)

exceptional circumstances. Olmsted Falls Codified Ordinances 1032.08(c).

“Unnecessary hardship” exists when the “literal interpretation” of the zoning code would

result in “unnecessary hardships peculiar to the property involved and not based on

conditions created by the owner[.]” Olmsted Falls Codified Ordinances

1032.08(c)(1)(a). In addition, the ordinance makes it clear that “limiting of possibilities

of economic advantage do not constitute unnecessary hardship.” “Exceptional

circumstances” exists when zoning code restrictions apply to the property in question

“that do not apply generally to other properties or classes of uses in the same zoning

district.” Olmsted Falls Codified Ordinances 1032.08(c)(1)(b).
 III

A

{¶9} The land in question is located within an I-2 light industrial district. That

zoning restriction has been in place for more than 130 years, however, the property has

never been used for industrial purposes (it was apparently farmland until the 1930s and

went fallow). The I-2 industrial district provides for industrial and manufacturing uses

“which may utilize products, materials, and/or processes that create smoke, noise, odor,

dust, fumes, glare, or other objectionable characteristics, but the impacts of which are

controlled in compliance with permitted uses, performance standards, and setback and

screening requirements.” Olmsted Falls Codified Ordinances 1258.01(b). In essence,

the I-2 light industrial use zone prohibits manufacturing utilizing raw goods and is limited

to the “processing, assembling or packaging of goods, conducted within wholly enclosed

buildings.” Olmsted Falls Codified Ordinances 1258.03. Other permitted uses include

offices of professional occupations, research laboratories, nonmanufacturing business

conducted in wholly enclosed buildings, storage and distribution, wireless communication

towers or facilities, and household services like laundry or dry-cleaning. Id. Expressly

excluded as an I-2 use are “dwellings of any kind[.]” Olmsted Falls Codified Ordinances

1258.04(a).

B

{¶10} OIP purchased the unimproved land in 2000 from Dairypak Corporation.

The site is a mostly rectangular lot, with residential housing on the north perimeter and

train tracks on the south perimeter. An electrical substation and electrical transmission
towers intersect the far southwest corner of the land. Dairypak Corporation maintains a

packaging plant on the southeast corner of the property. There is access to the property

by only two roads: Fitch Road on the west; Mapleway Drive on the east. Both roads

carry only two-lanes of traffic with no left-turn lanes. Residential housing exists on the

other side of each road.

{¶11} In its application for a variance, OIP made the following argument relative

to the property’s location making it unsuitable for development as light industrial:

The features of the Property that underlie its unsuitability for [light
industrial] uses include without limitation its location, remoteness from
interstate access, and proximity to transportation alternatives (i.e., rail) that
are outmoded, given that the Property’s permitted light industrial uses
would be more suited to truck access. But even the truck access limitations
of its permitted light industrial use clash with the surrounding residential
environment. The transportation infrastructure surrounding the Property is
by its nature suited to the area’s abundant residential users, not for
significant truck traffic incident to light industry. Moreover, the Property’s
remoteness from similar industrial users and districts disconnects it from
area where such suitable infrastructure might be available. These
exceptional circumstances uniquely affect the Property in ways not
generally applicable to other industrially zoned property.

(Emphasis sic.)

{¶12} OIP also argued that external economic factors had softened the need for the

type of “flex” industrial space contemplated by the zoning. “Flex” industrial space can,

consistent with uses permitted under the I-2 zoning classification, be used to house

several different types of traditional business structures, from office space to warehouses

to light industrial. At the time OIP purchased the land, the vacancy rate for industrial

flex space in the greater Cleveland area was 12 percent, but at the time of the variance

application, the vacancy rate stood at 21 percent.
 {¶13} The high vacancy rate for flex industrial space was brought about for two

reasons: lack of demand and an influx of industrial flex space to the region. The

commercial real estate experts collectively testified that the demand for new, light

industrial flex space in the greater Cleveland metropolitan area was functionally

nonexistent. In addition to the lack of demand, area plant closures had resulted in a

repurposing of existing factories into industrial flex space. These newly-repurposed

spaces were priced significantly cheaper than any space that OIP might construct. For

example, one expert noted that a closed auto factory in Lorain, Ohio, had been bought by

a developer. The expert believed the converted factory would charge $1.50 per square

foot in rent for what he called a “feature rich facility.” Were OIP to build on a

speculative basis (meaning without any commitment from prospective tenants), its cost in

new construction would require it to charge as much as $5 per square foot in rent for

similar space. The experts agreed that industrial flex space was exceptionally

price-sensitive, with only slight differences in rent being the determining factor for many

businesses. And the higher price that OIP would have to charge would be in a market in

which the lack of demand and surplus inventory had caused the price charged per square

foot to fall in the last five years.

{¶14} A real estate appraiser was more blunt in his assessment of the viability of

the site for light industrial flex space: “The conclusion is flatly that this is not an

industrial development location. The reason that it is not is that there is no way that you

can get a reasonable investment back, a reasonable rate of return, from this property

because it starts out with so many debilitating factors.”
 {¶15} The experts said that the lot was too small to contemplate development of a

light industrial park. One expert said the property lacked the kind of visibility needed to

“get some synergy, if you will, as far as industrial development.” Another expert said:

“54 acres is too small to make a dent in anything. And nobody is going to look at that

property for [light industrial] use.”

{¶16} The property also suffered from poor access to roads and highways, making

it incompatible with the needs of industrial users. The property is served only by

two-lane roads that run through residential areas. The size of truck utilized by light

industrial companies is too big for the type of roads running through residential areas.

This problem is exacerbated because neither road contains a left-turn only lane.

{¶17} Location was another issue — the property bordered on residential areas and

lacked direct access to interstate highways and other commercial amenities. The OIP

property had been unused for more than 70 years and local residents who presumably

enjoyed the quiet, nonuse of the property over that period voiced significant opposition to

the planned industrial park.

{¶18} Apart from resident concern over increased traffic was the problem of

getting to the site. All of the experts agreed that the property lacked immediate access to

interstate highways. The property had been zoned for light industrial at a time when its

direct access to a rail line was considered a positive and the interstate highway system had

not been fully developed. However, in the present day, light industrial users rely on

trucking, not rail. One expert noted that where light industrial expansion had recently

occurred in other locales, that expansion had been driven by direct highway access. He
said that, barring direct highway access at the OIP property, “you’re going to have trucks

coming * * * back and forth, and it is just not practical.”

{¶19} In addition to the lack of highway access was the property’s isolation from

similar business activities that could act as “other industrial demand generators” to drive

additional development. In other words, the property lacked proximity to

retail-commercial activities, restaurants, amenities, and services that would naturally

support an expansion of industrial use.

{¶20} OIP also showed that the property faced competition from the city’s own

Joint Economic Development District (“JEDD”) with Olmsted Township. According to

the JEDD’s marketing materials, the site (to be known as “Stearns Crossing Business

Park”) consists of more than 250 acres of land within Olmsted Township with

“immediate access to major highways.” The JEDD sits just 1.35 miles west of the OIP

site, and is located along the same rail line that borders the OIP property. The JEDD has

the inherent competitive advantage of being developed by governmental entities that can

improve off-site infrastructures with government funding. One expert said that larger

properties like the JEDD have “a shot at getting * * * public funding and having users in

there that have special uses.”

{¶21} Viewing all of these factors together, the experts unanimously concluded

that the site was simply unsuitable for light industrial development. A real estate broker

who spent two years unsuccessfully marketing the property for OIP concluded that

[t]he potential for development of the subject Olmsted site is so distant as to
be undefinable; therefore we might guess that it would take at least 25-30
years to reach full development, even assuming that the Greater Cleveland
Market were to become robust soon (which it is not and likely will not).
(Emphasis sic.)

{¶22} The broker concluded that without commitments from prospective tenants,

“it would be a serious mistake” for OIP to build industrial flex space on a speculative

basis.

{¶23} Another real estate broker said that if OIP came to him and asked him to

market the property for industrial use, “I would not market it and I would not waste my

time trying to market this as an industrial use. It’s just not there and won’t be there.” A

city planner for a number of area communities echoed the concerns of OIP’s experts and

gave his opinion that “regardless of the market, I don’t believe that this property will ever

be developed for industrial use.”

C

{¶24} The city’s objections to the rezoning were based on its desire to pursue a

long-term strategy to diversify its tax receipts away from the current 92 percent

residential. The OIP site constituted more than 50 percent of the city’s

industrially-zoned land (the JEDD is located in Olmsted Township). The city feared that

granting a variance would negatively impact the city’s desire to have a more balanced tax

base.

{¶25} In addition to diversifying its tax base, the city feared that additional

residential expansion would increase the financial burden on its school system at a time

when the residents had defeated three consecutive school levies. City officials also

expressed the concern that senior residents who did not have children who used the

school system would be disinclined to vote for school levies. The superintendent of the
Olmsted Falls School District testified that he was “hard pressed to believe that a

residential development for senior citizens in Olmsted Falls is any more marketable than

an industrial park” and that a 192-unit development could produce an additional 200

students for the school system.

D

{¶26} The city council upheld the board of zoning appeals, finding that the

property was suitable for light industrial use given that Dairypak, the entity that sold the

property to OIP, had been using adjacent property for that very purpose for more than 50

years. The city council also expressed its concern that granting a variance would upset

the city’s goal of expanding its industrial tax base to counter its heavy reliance on

residential taxes. The city council was unsympathetic to OIP’s claim that the shape of

the property was ill-suited to industrial development, claiming that OIP knew the shape of

the property when it purchased it and that the city did not have “the onus * * * to save

[OIP] from a bad investment.” The city council rejected OIP’s assertion that the

economic downturn meant that there was no demand for the type of industrial use

required by the present zoning — it believed (as of May 2007) that the economy “has

begun to rebound to turning positive” and that in any event OIP “made a hasty purchase”

and “failed to investigate the business cycle” and that the city “should not rezone the

property against the concepts of our Master Plan just because there is a kink in the

business cycle.” Finally, the city council found that its commitment to a joint economic

development district lying outside its borders did take away from its commitment to

pursue other light industrial development within the city.
 {¶27} The court affirmed the city’s decision, finding the order “is not

unconstitutional, illegal, arbitrary, capricious, unreasonable or unsupported by a

preponderance of substantial, reliable and probative evidence on the whole record.”

IV

{¶28} OIP argues that the court abused its discretion by upholding the city’s

refusal to grant it a use variance from the I-2 light industrial zoning classification. OIP

sought the variance on grounds that strict enforcement of the zoning code would result in

an unnecessary hardship peculiar to the property. That hardship, claimed OIP, was that

external economic factors dried up demand for light industrial facilities. And that lack of

demand, coupled with intrinsic issues relating to the size of the lot and poor access to

public highways, meant that there would be no demand for light industrial facilities for

the foreseeable future.

A

{¶29} There is no question that OIP presented uncontradicted evidence in support

of the use variance. However, the city’s position in the court of common pleas was that

it “does not have the burden to prove anything, and in fact in most variance proceedings

the municipality presents no evidence with regard to any question of fact. Consequently,

the lack of evidence presented by the City has nothing to do with whether or not [OIP]

carried [its] burden.” R. 17, Brief of appellee City of Olmsted Falls, at 8.

{¶30} The city’s argument is correct only insofar as it states the basic premise that

a decision by a board of zoning appeals is presumed correct and the party contesting the

board’s decision has the burden of showing why it was wrong. Consol. Mgt., Inc. v.
Cleveland, 6 Ohio St.3d 238, 240, 452 N.E.2d 1287 (1983). But the standard of review

applied by the court of common pleas is to weigh the evidence to determine whether the

board’s decision is supported by a preponderance of reliable, probative, and substantial

evidence. Dudukovich, 58 Ohio St.2d at 207. The party seeking a variance has the

initial burden of offering evidence, but once that burden has been met, the opposing party

cannot demur — it must come forward with its own evidence. And it requires no citation

to say that the absence of any factual issue turns a matter into a question of law that we

review de novo.

{¶31} Our recitation of the facts should make it clear that OIP carried its burden of

presenting evidence that an unnecessary hardship would result if the city denied it

application for a use variance. It offered significant evidence to show not only that the

property could not be developed consistent with the I-2 light industrial zoning

classification, but that it would not be viable for that purpose in the future. The market

for light industrial use had evaporated given the poor economic climate and the

availability of other cheaper, more accessible sites, including the city’s own attempt to

market industrial flex space with its nearby JEDD.

B

{¶32} The city offered nothing to contest OIP’s evidence and, in fact, agrees that

the present business climate precludes light industrial development. Its primary reason

for denying the use variance was twofold. First, it appeared to argue a form of caveat

emptor, stating its belief that OIP made a bad business decision in purchasing land that it

knew was zoned for light industrial use and that decision “does not put the onus on the
city to save the owner from a bad investment.” Second, it argued that its desire to

balance its overwhelming residential tax base with a commercial base was paramount to

any short-term hardship that OIP might suffer in a cyclical economy.

1

{¶33} Although the city’s zoning code states that an “unnecessary hardship” does

not exist when the reasons for requesting the variance are based on conditions created by

the owner, there was no evidence that OIP caused its own hardship. At the time it

purchased the land in 2000, vacancy rates for industrial flex space were low and the

experts agreed that OIP could viably construct for that purpose. However, by the end of

2001, an economic downturn occurred that caused a lowering of rents. As businesses

closed or moved out of state, those facilities came on the market for lease. Preexisting

facilities had the advantage of being able to offer lower rents (they cost less to build);

new facilities of a kind contemplated by OIP were handicapped by construction costs that

forced them to charge more rent to be competitive. So OIP’s new facility could not hope

to compete against existing facilities, particularly when those existing facilities were more

accessible to highways. The economic conditions were intervening, external factors not

caused by OIP.

2

{¶34} The city desired to balance its tax revenue because its current tax base was

more than 90 percent residential. It characterized current economic conditions as “a kink

in the business cycle” that OIP should wait out. The court found this rationale

persuasive, stating:
 If the Property were rezoned and OIP’s residential development came to
fruition and economic times change, then there would be no way to revert
the property to industrial, and the City’s tax base will remain heavily
imbalanced with no room for recovery. If the City is correct and the
economy begins to improve, and should a business choose to build on that
property then the City and the community will benefit from additional
income and real property taxes.

{¶35} The court relied on a number of implied “ifs” to support its conclusion, but

“ifs” are not facts. The city offered no evidence of any kind to show the future viability

of the land as industrial. Instead, it relied on conclusions such as “real estate

development is cyclical, and one type of development is not always the most profitable at

a certain point in time.” See Appellee’s brief at 13. In fact, the court appeared to accept

the city’s assertion that an improving economy would permit light industrial development

without regard for the uncontradicted expert testimony that the land would never be

developed as light industrial, regardless of whether business conditions improved.

{¶36} We agree that temporary economic downturns do not justify knee-jerk

zoning changes. On the other hand, the city’s position would require a landowner to wait

indefinitely before showing that economic conditions have created an unnecessary

hardship. This conclusion is supported by the city’s argument that one of OIP’s experts

said that he held onto land in the city of Strongsville for 25 years before developing it, so

it would be reasonable to expect OIP to do the same.

{¶37} OIP purchased the land in 2000 and spent four years unsuccessfully

marketing it for light industrial development. At present, conditions have not improved

to the point where there is any demand for light industrial facilities within the city.

Indeed, those same conditions have meant that the city has yet to turn the first shovel on
its own JEDD — a joint venture that predated OIP’s purchase of the property — even

though the experts agreed that the JEDD was a superior industrial development

opportunity because of its size, location, and public funding. While it is true that the

land was privately owned for many years, it is equally true that the company that owned

the land did nothing with it for more than 40 years. From the point of view of a private

investor, idle land is nonproductive, so it stands to reason that it was not developed

because of lack of demand. That lack of demand continues to this day. To accept the

city’s argument would condemn the land to lie fallow in perpetuity, or until the city tires

of collecting no revenue from the land.

{¶38} At this juncture, it is useful to ask why the city would be content to forsake

residential development and prospect of tax revenue to let the land lie unused and

generate no tax revenue. The city’s primary answer — diversification of tax revenue —

provides only a part of the answer. With more than 90 percent of the city zoned for

residential use, those residents require significant services from the city. The cost of

providing those services has, by all accounts, led to high taxes in Olmsted Falls. The city

believes that industrial users are far less of a burden on city services than residential

users, so it wishes to encourage industrial development. In this case, retaining land for

light industrial use that generates no income would be more valuable to the city than

using the land for residential housing that would require potentially more services than

the land would generate in tax revenue. For example, the school superintendent testified

that the city school system was stretched beyond physical capacity, with some students

being taught in modular classrooms. The city residents had rejected three straight school
levies and the school superintendent feared that new housing could bring as many as 200

more children into the district.

{¶39} The superintendent testified outside of his field of competency. He gave

his opinion that “I’m hard pressed to believe that a residential development for senior

citizens in Olmsted Falls is any more marketable than an industrial park.” Unlike OIP’s

experts who had extensive credentials in urban planning and commercial real estate, the

superintendent offered no reason for the board to give any credence to his opinion on the

potential marketability of senior-focused housing.

{¶40} What is more, the superintendent’s statement about an influx of new

students was premised on his assumption that OIP’s development would not be

age-restricted. OIP told the board of zoning appeals and city council that senior-focused

housing would necessarily target “empty nester” homeowners. In fact, OIP raised the

possibility that the proposed development could legally be limited to residents of a

preestablished age in order to minimize the school district’s exposure to more students.

See Housing for Older Persons Act, 42 U.S.C. 3601 et seq. (allowing communities to

market themselves as “55+”or “age-restricted” provided that 80 percent of the occupied

units are occupied by at least one person who is 55 years of age or older). Admittedly,

OIP’s witnesses conceded that even if restricted to seniors, its planned residential housing

could bring in up to 15 additional students. But that number is significantly lower than

the 200 postulated by the superintendent.

{¶41} In any event, OIP offered evidence to assuage the city’s concerns about

diversifying its tax base, noting that recent changes in Ohio’s tax structure had made
reliance on a light industrial base less appealing as a source of tax revenue for

municipalities. A public policy analyst said that in ten years the percentage of tax

revenue generated by business properties had fallen from 31 percent to less than 12

percent. For that reason, the public policy analyst said, “these industrial office pieces

that we were telling people to hold aside and save to balance out their long-term

sustainability don’t do that anymore.” Her testimony was based on her conclusion that

“you can build a whole boatload of business today in your community and not get nearly

the tax base balance that we all thought we were going to get in 1994.”

{¶42} OIP also offered an opinion by an urban planner — the same urban planner

that assisted the city in drawing up its master plan — challenging the continued

classification of the property as light industrial. He noted that the city designated the

property light industrial because it had been the practice to do so with land adjacent to

railroad tracks. The planner noted that the practice was changing, and “the more

marketable industrial sites are increasingly located convenient to freeway interchanges or

along major highways.” The planner recognized the city’s desire to diversify its tax base

away from residential, but noted that the city’s master plan acknowledged that

“alternative housing (other than a standard single-family home and lot) could result in tax

revenues that exceed service costs.”

{¶43} The city assails the planner’s opinion, noting that he helped write the 1997

zoning code to comply with the master plan that sanctioned the continued use of the land

as light industrial. It argues that as a paid expert for OIP, the planner’s opinion carries

no credibility. The planner’s opinion, however, was consistent with other experts who
testified that the market for light industrial space had become extremely competitive and

that the location of the property put OIP at a huge disadvantage for developing it. So to

the extent the planner’s position had changed in 15 years, that change reflected the new

realities facing light industrial development.

V

{¶44} OIP more than carried its burden of offering evidence showing that the

present I-2 light industrial zoning classification worked an unnecessary hardship on it

because changing economic conditions, inherent site limitations, and competition from

other sources made light industrial development unviable. In response, the city offered

no evidence of any kind because it erroneously insists that it need not offer anything.

That position is patently wrong — once OIP met its burden of showing that the present

zoning works an unnecessary hardship on it, the burden shifted to the city to show

otherwise. To accept the city’s argument that it had no obligation to offer evidence to

rebut a landowner’s evidence in support of a variance would mean that no opposed

variances should ever be granted.

{¶45} The city agrees that presently, the land cannot viably be developed as zoned,

but maintains that its interest in diversifying its tax base is sufficient reason to deny the

variance. The city’s argument appears to be premised on an outdated sense of the kind

of revenue it could generate. What is more, diversification as a long-term goal is simply

unrealistic because the land as presently zoned is not generating any tax revenue nor does

there appear to be any possibility that it will at some point in the future. OIP spent four

futile years trying to market the property and now 13 years have passed with no
development opportunity in sight. In fact, the city’s own joint venture industrial park,

conceived before OIP purchased its property, has yet to be constructed, even though both

parties agreed that the city’s joint venture was a superior opportunity. While the

economy does operate in cycles, the city offered no evidence to counter the expert

opinion that the current bad economy is not just a product of a cycle, but an economic

reality endemic to the entire region.

{¶46} With no evidence in dispute, we find as a matter of law that the court erred

by affirming the city’s refusal to grant OIP’s request for a use variance based on

unnecessary hardship. The city’s decision to deny the use variance in the face of

unrebutted evidence of unnecessary hardship was arbitrary and its insistence that the land

lay fallow indefinitely was unreasonable. The first assignment of error is sustained.

OIP’s remaining assignments of error are moot. See App.R. 12(A)(1)(c).

{¶47} Judgment reversed.

It is ordered that appellants recover of appellees their costs herein taxed.

The court finds there were reasonable grounds for this appeal.

It is ordered that a special mandate issue out of this court directing the Cuyahoga

County Court of Common Pleas to carry this judgment into execution.

A certified copy of this entry shall constitute the mandate pursuant to Rule 27 of

the Rules of Appellate Procedure.

MELODY J. STEWART, ADMINISTRATIVE JUDGE

SEAN C. GALLAGHER, J., and
EILEEN A. GALLAGHER, J., CONCUR