Prepare for Increased Property Valuation Challenges

The COVID-19 pandemic has impacted our lives and businesses in ways we never envisioned.  The real estate market has certainly not been spared.  Office space, hotels, restaurants and retail establishments have been particularly hard hit.  Demand for office space is likely to decline given our adaptation to working at home.  As of July 30th, the American Hotel and Lodging Association reported that more than half of hotel rooms were empty across the country with many hotels being completely closed.1  Many of our favorite restaurants and retail establishments have also been forced to close during the pandemic.  All of this is likely to affect real estate values for years to come.    

Starting in January, property owners will have the option to file complaints with their county boards of revision seeking to lower the county auditor’s value assigned to their properties (and their tax bills).  We anticipate that many property owner’s will take advantage of this opportunity.  However, their complaints may be premature.  That is because real estate taxes are paid one year in arrears.  Thus, any complaint filed next year is for valuation during the 2020 tax year.  By law, boards of revision must establish value next year as of January 1, 2020.  As of that date, the COVID-19 pandemic had not greatly impacted our lives or the real estate market.  Nonetheless, many property owners will not realize this distinction and will file anyway.  

County boards of revision understand and appreciate this aspect of the law.  However, the individuals who sit on those boards, which sometimes include elected officials, are often empathetic toward property owners who face significant challenges with their commercial businesses or properties.  For that reason, it is not uncommon for boards of revision to grant relief even though they technically should not do so under law.  They are easily able to do so when property owners are unopposed.

Faced with similar issues during the great recession, the Ohio Board of Tax Appeals made it clear that general references to decreased real estate values will not be enough to sustain a reduction in property value.  In Price v. Summit County Board of Revision, 2012 WL 440783 (February 7, 2012), a property owner sought to reduce the value of his properties due to the recession and foreclosure crisis.  The BTA rejected his request because it “has consistently rejected the notion that real property values must necessarily rise or fall commensurate with some preconceived notion of ‘historical trending’ or inflationary/deflationary rates.”

To help ensure county boards of revision uphold the law, school districts are advised to strongly consider filing counter-complaints against requests for reduction that appear unwarranted.  Under R.C. 5715.19, boards of education are entitled to notice of all valuation complaints that seek to decrease the value of real property by $50,000 or more.  Boards of education have the option to file counter-complaints contesting those decrease requests within 30 days of receipt of that notification.

What this means for your district?

Decreases in value through the county board of revision process directly impact the tax revenue received by school districts.  Any decrease in valuation will result in a refund issued to the property owner.  Those refunds are directly taken from school funding via the county treasurer settlement statements. We anticipate that school districts will face many decrease complaints next year, some of which are sure to be unwarranted.  Ennis Britton attorneys can help school districts determine when it is appropriate to file counter-complaints to contest unwarranted decrease complaints to help maintain the tax valuation of the district.

1https://www.ahla.com/covid-19s-impact-hotel-industry

What’s inside the new door barricade device rules

The Ohio Board of Building Standards has finalized the door barricade device rules mandated by HB 64. Found in the Ohio Building Code, the rules address active shooter drills, emergency situations, and establishes conditions for the use of the temporary locking devices.  The rules are effective as of April 18, 2016.

Generally, the building code requires door handles to be accessible, meaning they should not require tight grasping, pinching or twisting of the wrist to operate. The new rules provide an exception to the building code for temporary locking devices. Doors also must require only one motion to unlatch a door, but an exception has been built into the code for barricade devices. The devices may not be permanently mounted to the door. Individual parts of the device, such as bolts, stops, brackets, pins, etc. that don’t prevent ingress or egress through the door may be mounted permanently. If they affect the fire rating of a rated fire door assembly, they may not be permanently mounted.

To use the devices in compliance with the new code, the school district must have:

1. Adopted and filed a school safety plan.

2. The barricade devices may be used only in an emergency or during active shooter drills.

3. Only a trained member of the school staff may use the devices for a finite period of time, as determined by the school administrative authority according to the school safety plan.

4. The district must provide training to school staff on the temporary locking device, keep records of the training, and provide those records to the fire official upon request.

5. The district must provide proof to the building official that the fire and police officials with jurisdiction over the school building have been notified about the placement of the temporary locking devices.

6. The building official will approve the devices upon compliance with all rules, and will note the same on the certificate of occupancy.

Operation of the barricade device may not require more than one operation to be removed after it has been engaged. Two operations are permitted to remove the device only if the building has an automatic sprinkler system throughout the building. The building code notes that the Americans with Disabilities Act may affect the use and operation of temporary locking devices like door barricades, but states that this potential issue is outside the scope of the rules.

There are different vendors selling barricade devices, and not all of them may be compliant with the rules as outlined above. For example, the placement of the device (low, medium, or high on the door) or devices that require more than one motion to remove once engaged may be problematic. Carefully consider the requirements before selecting barricade devices for your schools: we suggest working with your local fire officials. Consult counsel for specific questions.

Ohio Supreme Court Decides Important Tax Exemption Case

On December 30th, 2015, the Ohio Supreme Court unanimously declared that real property owned by a public school district board of education is tax exempt regardless of whether it is currently used for school purposes. Ennis Britton Shareholder Gary Stedronsky represented the Talawanda City School District Board of Education at all levels of appeal, including before the Supreme Court.

The case involved a provision in Ohio law that generally exempts real property owned by a public school district from property taxes, which is codified in Ohio Revised Code section 3313.44. In this case, the Talawanda City School District Board of Education (the “Board”) purchased 154 acres of land to build a new high school. A portion of this land was not needed for the high school and was leased by the Board to a farmer.

In January of 2010, the Board filed an application to exempt all 154 acres from real property taxes. The Tax Commissioner approved the exemption application for all but the portion of the land that was leased to the farmer. The Tax Commissioner concluded that the pecuniary benefit realized by the farmer disqualified the land from tax exemption because the property was not being used for school purposes.

The Board appealed the Tax Commissioner’s decision to the Ohio Board of Tax Appeals (“BTA”), which affirmed the Tax Commissioner’s decision. The Board further appealed to the Ohio Supreme Court.

The Supreme Court was tasked with deciding whether the BTA decision was supported by the language in Ohio Revised Code section 3313.44. The applicable version of section 3313.44 simply states: “Real or personal property owned by or leased to any board of education for a lease term of at least fifty years shall be exempt from taxation.” The Board argued that this statute requires that a board of education merely own real property in order for it to qualify for tax exemption. In other words, there is no requirement in the statute that the property must be used for school purposes in order for the tax exemption to apply.

The Ohio Supreme Court agreed with the Board’s argument and concluded that the property that was leased to the farmer was exempt from taxation regardless of the specific use of the property. The Supreme Court acknowledged that past interpretations by the Tax Commissioner may have correctly interpreted an implied use restriction in the prior version of the statute. However, the Court recognized that the General Assembly chose not to include such a restriction when the statute was amended in 2010 even though it had authority to do so. Therefore, the Court held that the statute does not include an implied use restriction and the Board’s property is entitled to tax exemption even though it was leased to a farmer.

The Court also dismissed the Tax Commissioner’s argument that the Board’s request for tax exemption must be denied on grounds that the Board overstepped its legislative authority by leasing the land to a farmer for a commercial purpose. The Court held that a Board of Education’s property is entitled to tax exemption as long as it meets the conditions of the exemption statute in Ohio Revised Code section 3313.44, which merely requires ownership.

Ultimately, the Supreme Court decision clarifies that a board of education is entitled to a property tax exemption for all real property owned by the board of education regardless of how the property is currently being used. This decision is very favorable to school districts and will be used in the future to support applications for tax exemptions.

Talawanda City School District Board of Edu. v. Testa, Tax Commissioner (Ohio 2015), Slip Opinion No. 2015-Ohio-5450.

Appeals Court Affirms Political Subdivision Immunity in Slip and Fall

Stetz v. Copley Fairlawn School Dist., 2015-Ohio-4358

The Ninth Appellate District Court of Appeals has reaffirmed political subdivision immunity for public school districts in a slip and fall case. The Copley Fairlawn School District was sued after a student slipped and fell. The student worked in the office during her study hall. During her office time, the student was directed by a vice principal to go and change the letters on a marquee. The student did so and reentered the building. Forty five minutes after re-entering the building, the student slipped as she began to descend a stair case. The student fell backwards and hit her head on concrete. The student did not recollect any water being present on the floor at the time of her fall.

The school moved for summary judgment on the basis that it was immune from suit under Ohio law. The trial court denied summary judgment, finding that there were genuine issues of fact in dispute for the jury to decide as to whether an exception to immunity applied.

There are five exceptions to political subdivision immunity provided by Revised Code Chapter 2744. If one of these exceptions applies, the school district is not protected by immunity. The exceptions for which political subdivisions (including school districts) are liable for injury, death, or loss to person or property are as follows:

1. The negligent operation of any motor vehicle by their employees when the employees are engaged within the scope of their employment and authority.

2. The negligent performance of acts by their employees with respect to proprietary functions of the political subdivisions.

3. Negligent failure to keep public roads in repair to remove obstructions from public roads.

4. Injury, death, or loss to person or property that is caused by the negligence of employees and that occurs within or on the grounds of, and is due to physical defects within or on the grounds of, buildings that are used in connection with the performance of a governmental function (e.g., a school building).

5. Civil liability is expressly imposed upon the political subdivision by a section of the Revised Code

The student here argued that the buildings and grounds exception (number 4 above) applied. However, the Court of Appeals found that the student had not set forth sufficient evidence that there was a defect in the building where she fell or that the school employees were negligent. Particularly here, the defect would have been that the staff permitted a wet substance to remain on the floor causing a safety hazard. The court found that there was not sufficient information to determine if the floor was even wet at the time she fell, let alone whether a hazard had negligently been permitted to remain. Accordingly the school district was entitled to immunity and the case was dismissed.

Districts should keep in mind that while they may be protected by the immunity grants of Chapter 2744, immunity is not automatic as there are exceptions to the rule.

 

HB 64 Budget Bill Items Now in Effect

As with most other provisions of the budget bill (Am. Sub. HB 64) some significant provisions impacting Ohio school districts go into effect on September 29, 2015, including the following:

  • The maximum amount of a scholarship awarded under the Autism or Jon Peterson scholarship programs increases to $27,000 (up from $20,000).
  • School districts must offer real property it intends to sell first to a “high performing community school,” then to other community and college preparatory boarding schools located in the district.
  • ODE, in conjunction with an Ohio educational service center association and an Ohio gifted children’s association, must complete and submit a feasibility study for establishment of sixteen regional community schools for gifted children.
  • The State Board must develop rules waiving any additional coursework requirements for renewal of an educator license for teachers who are consistently high performing.
  • The duration of a pupil activity permit for individuals holding a valid educator license is changed from three (3) years to the same number of years as the educator license.
  • The State Board of Education will develop a standards based framework for the evaluation of school counselors. Furthermore, all school districts must adopt a counselor evaluation policy by September 30, 2016, that conforms to the framework and will be implemented beginning in the 2016-2017 school year (will include annual evaluations with ratings of accomplished, skilled, developing, and ineffective just like OTES).
  • The alternative teacher evaluation framework is revised to decrease SGM to 35%, maintain the performance rating at 50%, and authorize school districts to determine the appropriate measure or combination of measures for the remaining 15%.
  • Exemplary community schools may now operate a preschool program for general education students.
  • School districts may enroll under interdistrict open enrollment policies an adjacent or other district student who is a preschool child with a disability. ODE will deduct $4,000 from the resident district and pay that same amount to the enrolling district.
  • School districts cannot appropriate monies to purchase an assessment developed by PARCC for use as the state elementary or secondary achievement assessments. Additionally testing for the 2015-2016 school year is reduced.
  • Safe harbor provisions in effect during the 2014-2015 school year for state report cards are extended by two years.
  • School districts may now enter into a contract with a health care provider for the provision of health care services for students.
  • The new requirements for issuance of diplomas to home school students and students from non-chartered nonpublic schools are now in effect.
    STEM schools can now enroll out-of-state students.
  • Schools may install security doors or barricades as part of an emergency management plan.
  • The filing date for financial disclosure statements with the Ohio Ethics Commission is May 15 (instead of April 15).