The Hamilton County auditor’s $14 million appraisal of a Cincinnati Coca-Cola bottling plant will stand despite the owner’s contention that the property is worth only about $8.55 million, the Ohio Supreme Court ruled today.

A unanimous Supreme Court affirmed the Ohio Board of Tax Appeals (BTA), which rejected a challenge from Johnston Coca-Cola Bottling Company Inc. to reduce its property tax value for 2011, a year in which Hamilton County reappraised and revalued property. The per curiam decision noted that the Cincinnati Board of Education opposed attempts by Johnston Coca-Cola to reduce the value of the nearly 35-acre parcel.

Company, County Had Varied Appraisals
The property houses a 426,000-square-foot bottling and distribution facility with about 38,000 square feet of office space. The county auditor initially valued the property at $13.5 million, and Johnston Coca-Cola appealed to the Hamilton County Board of Revision.

At the board of revision, Johnston presented an appraisal valuing the property at $6.8 million based on the income generated by similar leased properties in the area as well as the sales prices of similar commercial properties. The auditor provided testimony from in-house certified appraiser Douglas Thoreson, who challenged the findings of the company’s expert, and the board voted to retain the $13.5 million value.

Johnston appealed to BTA, which heard the testimony of a second appraiser hired by the company. The expert used “sales comparison” and “income” approaches to evaluate the property. He introduced sales of six manufacturing buildings throughout Ohio that sold between 2010 and 2013, considered leases of comparable property, and valued the Coca-Cola plant at $8.55 million.

Thoreson prepared a new appraisal for the BTA, and unlike the company’s appraiser, he focused his research on comparable sales of facilities in the Cincinnati and Dayton areas that occurred between 2010 and 2012. After considering leases of eight other properties, he concluded the Coca-Cola property had a value of $14 million. The BTA concluded that Thoreson’s conclusions were “better supported and more consistent with the market.”

Johnston appealed the BTA decision to the Ohio Supreme Court, which is required to hear these types of BTA appeals.

Company Questions Constitutionality of County’s Work
Johnston argued that the BTA improperly considered the present use of the building in valuing the property. The company maintained the Ohio Constitution requires all property be taxed uniformly and that real estate is to be valued by its “exchange value,” which is what a buyer would pay for the property on the open market.

The Court’s opinion stated that its 1972 State ex rel. Park Invest. Co. v. Bd. of Tax Appeals decision did find that valuing a property based on its present use generally violates the state constitution. However, it clarified that present use can be considered as a factor when “exchange value” is determined using other accepted methods of valuation. The Court found that Thoreson used acceptable methods of valuation by analyzing comparable sales and other data to determine the facility’s value.

County Employee Was Biased, Company Claimed
Johnston also argued the BTA should not have accepted Thoreson’s report because, as a county employee, he is “inherently biased” because he receives a salary from the county. The opinion stated that R.C. 4763.12 provides that a party can retain or employ a certified appraiser to act as a “disinterested third party in rendering an unbiased valuation.”

It also noted that the company provided no proof that Thoreson’s employment status made him biased, and pointed out that the company’s own appraisers were paid for their service, but nothing in the record suggests they were biased because they were paid for their professional services.

“Coca-Cola has not shown that the BTA abused its discretion in assigning credibility and weight to Thoreson’s testimony and report,” the opinion stated. “And although Coca-Cola cross-examined Thoreson regarding his status within the auditor’s office, it elicited no evidence showing that he was incapable of honoring the professional standards applicable to certified appraisers.”

2014-1820, Johnston Coca-Cola Bottling Co., Inc. v. Hamilton Cty. Bd. of Revision, Slip Opinion No. 2017-Ohio-870.

Listen to oral argument audio of this case.

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