A recent ruling on greenhouses by the Ohio Board of Tax Appeals in favor of a Lorain County operation could have substantial impact on schools, businesses and homeowners, not to mention repercussions across the entire state, including in Medina County.
In July, the Board of Tax Appeals ruled in favor of Green Circle Growers’ appeal of local tax assessment, reducing the amount of property tax the company owed for tax years 2015 and 2016. The taxable value of the property went from about $40 million to a little more than $10 million.
The ruling was whether greenhouses are actually structures and buildings or fixtures and personal property.
The Lorain County Auditor’s Office contends they’re buildings and should be taxed, but the Board of Tax Appeals ruled otherwise. Lorain County Auditor Craig Snodgrass said the county plans to take the issue to the Supreme Court.
“It’s an awful decision, and we’re going to do whatever we can to defend the position that it is real estate,” Snodgrass said.
The county has filed an appeal with the 9th District Court of Appeals and also petitioned the Supreme Court to consider the matter. The county commissioners voted Wednesday to hire a law firm in Columbus to help handle the pending litigation.
Medina County Auditor Mike Kovack said the ruling would have less of an impact in Medina County as Lorain County has larger operations.
He said he believes two properties — Blooming Acres on State Road in Wadsworth and Boyert’s Greenhouse and Farm on Wooster Pike in Medina — could be properties that fall under this ruling. His office is aware of the ruling and interpretation, but he has not read it, he said Thursday.
“There was some discussion on it in Columbus earlier this month,” he said. “It’s the stance of the county auditors of Ohio that they are taxable as real property.”
Snodgrass said the ruling has caught the eye of auditors across the entire state. He said he’s had discussions with auditors from several counties on the matter since the July ruling was rendered.
“This will impact 88 counties,” he said. “This decision could have further-reaching effects than just greenhouses if it’s allowed to stand.
“What’s the difference between this and a house being picked up from its foundation and moved? I’ve seen more houses in this county moved than greenhouses. That’s where this argument just doesn’t hold up.”
The issue comes down to changes in state law.
State lawmakers passed legislation that gradually phased the personal property tax out, according to Lorain County Assistant County Prosecutor Gerald Innes. Personal property tax included things like big equipment at manufacturing companies, Innes said.
“Green Circle came in and appealed their real estate taxes, which considered the greenhouses as they’ve always been considered — as buildings,” Innes said. “They made the argument that they actually can be taken apart and moved, even though they haven’t moved them for years. The Board of Tax Appeals bought it.”
Green Circle Growers sent a statement to The Chronicle-Telegram about the issue. The Chronicle is the sister publication of The Gazette.
“Green Circle Growers’ appeal was based on a 1992 statute passed by the Ohio General Assembly that changed the definition of real property,” the statement said. “The statute also established a new category, ‘business fixtures,’ that are not subject to real estate taxes. The (Board of Tax Appeals) agreed that the greenhouses meet the definition of ‘business fixtures’ that benefit the business but not the land; that is, because the greenhouses are temporary and moveable, they do not increase the value of the land. By contrast, permanent buildings on the property, including the office building and warehouse, are taxed as real property.”
Snodgrass said greenhouses aren’t fixtures, though. He said they have “footers, foundations and concrete.” Some of the greenhouses have been in the same spot for 40 years, Snodgrass said.
“This is a structure and a building with metal beams, bolts and concrete; they’re not going anywhere,” he said.
The Board of Tax Appeals addressed that issue in the ruling:
“We recognize that many of the greenhouses have been attached to the ground and have remained in place for significant length of time with no immediate plans for relocation,” the ruling said. “This does not speak to the permanence of their construction, but rather to the permanence of their attachment to the real property, which is a defining characteristic of a fixture.
“… Additionally, the contention that the greenhouses are permanent because the concrete beneath them is permanent, is flawed. Although the concrete is incorporated into the real property due to its permanent construction, that does not transform the item to which it is attached, such as a grain bin or an amusement park ride and its shelter, which retains its character as tangible personal property, albeit permanently affixed to the land.”
Green Circle Growers said it has moved and sold some of the greenhouses.
“The (Board of Tax Appeals) ruled in the company’s favor, acknowledging that the greenhouses are temporary, mobile fabrications that can be unbolted, taken down without damage to the units, sold, transported and reassembled,” the company’s statement said. “In fact, the company has done exactly that in the past. To be subject to real estate taxes, the greenhouses would have to be permanently attached to the land.”
Snodgrass said losing that much taxable value in the area could have a huge impact, especially on the Firelands school district.
“You’re looking at taking $30 million of value out of that district, which doesn’t have a huge base to begin with,” he said. “That means the rates would go up. What that will do is shift that tax burden onto the other businesses and the homeowners. It can be devastating. It’s about fairness. It’s about everybody paying their fair share.”
The ruling also could mean Green Circle Growers could receive a tax refund for the taxes it paid during the time in question. Snodgrass estimated it could be as much as $1.75 million in a tax refund, with nearly $1 million coming from Firelands Schools.
Firelands Schools Superintendent Mike Von Gunten said the district is optimistic that the appeal will rule in its favor, but there is still concern.
“We’re looking forward to the appeal, but ultimately if that’s what’s owed, then we’ll adjust accordingly,” Von Gunten said. “That’s a significant number. Our total operating budget is $20 million, so when you’re talking of extracting $1 million from it, that’s a substantial impact to the district.”