Ohio Region Senior Citizens Housing Corp. v. Franklin County Board of Revision

Per Curiam.

Appellant, in its notice of appeal, urges that: (1) the BTA valuation contravened Canton Towers, Ltd. v. Stark Cty. Bd. of Revision (1983), 3 Ohio St.3d 4, 3 OBR 302, 444 N.E.2d 1027, and later supporting cases, (2) it was unreasonable for the BTA to reject the income approach to value of appellant’s appraiser, John R. Garvin (“Garvin”), and (3) it was unlawful for the BTA to reject Garvin’s use of stabilized expenses in his income approach.

At the BTA hearing, Garvin presented his appraisal report and testified at length. Garvin, relying on the cost approach and the income approach to value, estimated the true value of the complex, including furniture, fixtures and equipment, to be $610,000. The appraiser for the appellees (the auditor, the board of revision and the school board) used the income approach and the market approach, and estimated the true value of the complex at $1,100,000. Both appraisers considered all three standard approaches to value. Both agreed that the income approach was the most appropriate method of valuation and that the complex should be appraised as if unencumbered, since it was subsidized housing.

The BTA agreed that the income approach was appropriate, but criticized Garvin for his use of actual expenses rather than market expenses, and it criticized appellees’ appraiser for his failure to provide specific information concerning sales of comparable units. The BTA refused to accept the valuation of either appraiser, and determined that “considering the valid elements of each appraisal, i.e., the appellant’s comparables, including the appellant’s adjusted gross income figure, and the county appellees’ expenses figure and capitalization rate, the figure derived would be virtually the same as that which the county *491auditor determined * * Thus, the BTA found the value assessed by the auditor “accurately reflects] the fair market value of the subject property as of January 1, 1988.”

The BTA found the significant defect in Garvin’s income approach was his failure to use market expenses, as required by Canton Towers, Ltd., supra. We do not find that Garvin used the actual expenses only in appraising the subject property. The BTA erred. Its rejection of Garvin’s appraisal on this basis “is not the sort of weighing of evidence or determination of credibility to which we must defer.” SFZ Transp., Inc. v. Limbach (1993), 66 Ohio St.3d 602, 605, 613 N.E.2d 1037, 1040.

The record reflects that Garvin began with a review of the actual expenses, but that they were only a part of the basis for his appraisal. He identified the actual expenses of the complex for 1987, 1988 and 1989, and explained how those expenses had to be adjusted to stabilize expenses for the tax year in question by deducting real estate taxes and the costs of repairs, maintenance, utilities, and management fees, in addition to reserves for replacement. These adjusted expenses, according to Garvin, compared “very closely with other operating expense statements [he had] reviewed over the * * * years which apply to apartment projects.” He testified that the capitalization rate employed in his calculation of true value of the complex was “based on other observations in the market.” He also testified that personal property, consisting of furniture, fixtures and equipment valued at $27,700, was included in his true value estimate. Finally, on cross-examination, Garvin said that his “appraisal report is on the market economics of the project * * * and not the economics of subsidization.”

We agree with appellant that Canton Towers, Ltd., supra, requires the use of appropriate economic or market rents and expenses in determining the true value of subsidized apartments by the income approach to value. That is precisely what Garvin’s evidence showed. The BTA’s conclusion to the contrary is both unreasonable and unlawful. See, also, Villa Park Ltd. v. Clark Cty. Bd. of Revision (1994), 68 Ohio St.3d 215, 625 N.E.2d 613.

Additionally, we reiterate our holding in R.R.Z. Assoc. v. Cuyahoga Cty. Bd. of Revision (1988), 38 Ohio St.3d 198, 202, 527 N.E.2d 874, 878, that “Appellant had the duty to prove its right to a reduction in value.”

In this case, appellant complained of the true value determination of the county auditor and the board of revision, presented to the BTA the evidence of its appraisal witness, and sustained its burden of proving that the true value determination from which it appealed was excessive.

The decision of the BTA, affirming the decision of the board of revision, is unreasonable and unlawful and it is reversed. The BTA is instructed to find the *492trae value of the subject property, excluding furniture, fixtures and equipment, to be $582,300.

Decision reversed.

Moyer, C.J., A.W. Sweeney, Wright, Resnick, F.E. Sweeney and Pfeifer, JJ., concur. Douglas, J., dissents.