CINCINNATI - In March, 2011, Ohio Tax Commissioner Joseph Testa decided that the Duke Energy Convention Center no longer qualified for a property tax exemption because the city hired a for-profit company to operate it in 2006.
Now, he says it would be “fundamentally unfair” for Cincinnati Public Schools to force the city to pay taxes on the property.
It’s the latest in a twisting trail of skirmishes over the city-owned convention center, which lost its tax exemption status with Testa’s ruling 34 months ago only to regain it several months later after state lawmakers installed a specific exemption for the center into a state budget bill.
The school board sued to challenge the constitutionality of that last-minute amendment. Now that the case is before the Ohio Supreme Court, the city and the Tax Commissioner agree that the school board has no right to intervene, recent court filings indicate.
Lots of money is at risk. Filings show the city faces a tax bill of more than $12 million – including $7 million that would go to Cincinnati Public Schools - if the exemption is lost on convention center parcels dating back to 2006.
Perhaps more importantly, the case calls into question whether the city’s historic exemption for government-owned property is valid in an era where public-private partnerships abound. As WCPO recently reported , more than 40 percent of downtown Cincinnati is now owned by local governments.
On much of that land, private businesses operate with tax advantages over competitors. Parking lots, stadiums, apartment buildings, condos and office buildings all benefit from government exemptions, all of it justified under the premise that a “public purpose” is served by redevelopment of downtown land.
In 2009, Paul Macke, whose Hillview golf course competes against city-owned courses, challenged the “public purpose” of golf course ownership and won. Former Ohio Tax Commissioner Richard Levin ruled in December, 2010 that the city lost its exemption status when it hired a for-profit company to operate its courses.
Levin ruled that Billy Casper Golf “does not merely operate the golf course property on the city’s behalf, but rather toward its own ends and with its own interests at the fore.”
Testa adopted that same logic in 2011, when he declared that the city’s privatized convention center no longer serviced an exclusively “public purpose” because the city put a for-profit operator in charge of the public asset.
It’s an interesting question. Why does it serve a public purpose for Cincinnati to own a convention center?
Downtown hotels and restaurants certainly benefit when a big convention comes to town or a trade show attracts boat buyers, home and garden shoppers and Reds fans to the city’s center. But are those people coming because the city owns the building? Wouldn’t Redsfest do just as well at Great American Ball Park or even a privately-owned facility like Horseshoe Casino Cincinnati?
And, which serves the public interest better: Full hotel rooms or fully-funded schools?
We didn't have that kind of public debate in 2011 when city lobbyists convinced Republican legislators from Springboro and Anderson Township to slip language into the House version of a $55.8 billion budget bill. The amendment "exempts from property taxation a convention center and golf courses owned by the largest city in a county having a population greater than 750,000 but less than 850,000."
And we're not going to have that kind of debate at the Ohio Supreme Court, where attorneys are sparring over procedural instead of policy questions.
“This case boils down to a play by the Board of Education to obtain an unwarranted windfall,” said an Ohio Supreme Court merit brief, filed on Testa’s behalf Feb. 4 by Assistant Ohio Attorney General Daniel Fausey.
State and city attorneys argue the school board lost its chance to get involved in the case in 2006, when the city first applied for an exemption on one of the 17 real estate parcels that comprise the convention center property. At issue is the land on which WCPO once operated at the corner of Fifth and Central. It was acquired by the city in 2002 for the convention center’s expansion. Because the school board failed to challenge the exemption eight years ago, it has no standing to challenge the tax designation now, the city and state both argued in their Feb. 4 briefs.
“The BOE was five years too late,” said the city’s filing.
“The Board of Education seeks unlimited time in which to challenge a property owner's exemption application,” said Testa’s brief. “This result would be fundamentally unfair to property owners who, like the City of Cincinnati in this case, must spend considerable resources fighting the Board of Education’s untimely and unauthorized litigation.”
The school board sees the issue differently. In a December 15 filing, attorneys for the district argued lawmakers violated Ohio’s Constitution in three ways with their “backdoor legislative fix” for Cincinnati’s tax problem.
“CPS was not clairvoyant
and did not know in 2006 that the General Assembly at the behest of the city would enact legislation five years later granting a retroactive exemption,” said the school board’s filing. “This Court should invalidate the challenged provisions because they violate the ‘retroactive laws,’ ‘single-subject,’ and ‘uniformity’ provisions of the Ohio Constitution.”
Don't hold your breath waiting for a spirited public policy debate on the exemption issue.
As for the Ohio Supreme Court case, that is likely to be decided sometime in 2014.