Ohio Supreme Court issues ruling on TIF's
By Peg Ritenour
The case, Sugarcreek Township v. City of Centerville, involves the interplay between a municipality's annexation of township property using an expedited type 2 process and tax increment financing. In this case, the City of Centerville (“Centerville”) entered into pre-annexation agreements with the owners of 268 acres along Interstate 675 located in Sugarcreek Township (“the Township”). Under these agreements a third-party developer would purchase the property for a multiuse development. As part of the agreements, the land was to be annexed to the City, and in return the City would create a TIF, or tax-increment financing plan. Under such financing, improvements to real property are exempted from taxation, and the funds that would have been applied toward taxes are instead applied toward public improvements that benefit the property within the area subject to the TIF.
Before the annexation was completed the Township filed suit seeking a ruling that Centerville couldn't establish the TIF because it would divert real estate taxes from the township in violation of Ohio law. The lower courts ruled in favor of the Township finding that under Ohio law the property remained subject to the township's real property taxes. The case was subsequently accepted by the Ohio Supreme Court. OAR and the BIA filed a brief in support of Centerville's efforts to have these decisions overturned due to concern about the negative impact this case would have on future developments that depend on such TIF's.
In a unanimous decision, the Supreme Court overturned the Court of Appeals decision , ruling in favor of Centerville and the position of OAR and the BIA. In doing so, the Ohio Supreme Court ruled that when township land has been annexed using the expedited process, even though by statute it remains “subject to” the township's real property taxes, Ohio law does not grant townships the unfettered ability to collect any and all taxes that may arise from the real property or improvements to the real property. Instead a municipality that has annexed the property may adopt a tax-increment financing plan that temporarily exempts improvements to the annexed property from city and township property taxes to support the annexed property's economic development.
This case is an important victory for development in Ohio and OAR was pleased to work with the Ohio Home Builders to achieve this outcome. To read the Supreme Court's decision in this case click here.
