Summary
holding that aircraft hangars built by private persons on public land were not exempt from taxes
Summary of this case from Parma Heights v. WilkinsOpinion
Nos. 36978 and 36980
Decided January 24, 1962.
Taxation — Public property — Conditions essential to exemption — Property of municipally owned airport — Leased to private persons — Element of ownership passes — Identity as public property lost — Not exempt.
1. For property to be exempt from taxation under Section 5709.08, Revised Code, the following three conditions are essential, (1) the property must be public property, (2) the use thereof must be for a public purpose, and (3) the property must be used exclusively for a public purpose.
2. Where property of a municipally owned airport is leased for long periods by the municipality to private persons to serve their own purposes, an element of ownership passes to the lessees, and such property thereby loses its identity as public property used exclusively for a public purpose and is not exempt from taxation.
APPEALS from the Board of Tax Appeals.
These two appeals are pursuant to Section 5717.04, Revised Code. One is by the Auditor of Cuyahoga County (case No. 36978) and the other by the city of Cleveland (case No. 36980), hereinafter called the city, and are from a decision of the Board of Tax Appeals determining the taxable status for the year 1959 of certain real property in the Cleveland and Brookpark taxing districts of Cuyahoga County.
On December 31, 1959, the city filed its application with the board to have exempted from taxation eight aircraft hangars at the Cleveland Hopkins Airport, now located in the city, which were constructed pursuant to separate lease agreements between the city and eight entities, namely, Executive Hangars, Incorporated, Cleveland Hangars, Incorporated, The Standard Oil Company of Ohio, Republic Steel Corporation, Thompson Ramo Wooldridge, Incorporated, The M.A. Hanna Company, United Airlines, Incorporated, and American Airlines, Incorporated.
The leases stipulate that, for relatively small annual rental fees for the land, the named business enterprises will build, at their own expense, on land owned by the city, aircraft hangars for the use of the lessees, such leases to extend over periods of from 25 to 40 years.
As to the six entities first named above, each lease provides that title to all hangar improvements constructed or installed on the hangar-base premises and becoming a part of the real estate shall pass to the city as the same are affixed to the land, whereas, with respect to the last two entities named, each lease provides, as interpreted by the board in connection with a related instrument, that alterations or additions which become a part of the real estate shall become the property of the city only upon the expiration of the leasehold estate.
As to the six entities first named, it was determined by the board that title to the hangars constructed by them was vested in the city on January 1, 1959, and that such hangars should be placed upon the Cuyahoga County tax exempt list for the tax year 1959, and that, as to the two entities last named, title to the hangars constructed by them was not vested in the city on January 1, 1959, and that such hangars were not entitled to exemption from taxation; and the board rendered its decision accordingly. In reaching its conclusions the board noted Section 5709.08, Revised Code, and applied the principles it conceived to have been enunciated in the case of City of Toledo v. Jenkins et al., Board of Tax Appeals, 143 Ohio St. 141, 54 N.E.2d 656, to the effect that hangars erected on a municipally owned airport, even though privately used, are embraced within the general public purpose for which the airport was established, and found that the property it accorded an exempt status for the tax year 1959 was publicly owned and was devoted to a public purpose during the tax year 1959.
Mr. John T. Corrigan, prosecuting attorney, Mr. George W. Leddon and Mr. Joseph A. Zingales, for John J. Carney, Auditor of Cuyahoga County.
Mr. Ralph S. Locher, director of law, Mr. Joseph H. Crowley and Mr. Anthony V. Leanza, for city of Cleveland.
Were the board's determinations unreasonable or unlawful?
Section 5709.08, Revised Code, enacted pursuant to the authorization contained in Section 2, Article XII of the Constitution of Ohio, recites in part:
"* * * public property used exclusively for a public purpose, shall be exempt from taxation."
Such section was interpreted in the case of Board of Park Commissioners of City of Troy v. Board of Tax Appeals, 160 Ohio St. 451, 453, 116 N.E.2d 725, 727, in the following language:
"In order to obtain exemption from taxation, under Section 5351, General Code [Section 5709.08, Revised Code], there are three prerequisites: (1) The property must be public property, (2) the use thereof must be for a public purpose, and (3) the property must be used exclusively for a public purpose."
The word, "exclusively," is significant and may not be ignored in a situation where exemption from taxation is claimed.
A generally recognized principle is that one who is in the possession and control of property and is occupying, managing and operating the same as lessee is often to be treated as the owner thereof. Baltimore Ohio Rd. Co. v. Walker, 45 Ohio St. 577, 16 N.E. 475; Iroquois Co. v. Meyer, 80 Ohio St. 676, 89 N.E. 90; Cooper v. Roose, 151 Ohio St. 316, 85 N.E.2d 545; and 73 Corpus Juris Secundum, 184, Property, Section 13. Or, as stated more specifically in relation to the instant cases, "where a public body owns real property and leases it to a private corporation at a fixed rental and other emoluments, the elements of ownership are partly vested in the lessor and partly in the lessee. That part of the ownership vested in the private corporation by its lease thereafter ceases to be public property. The use which the lessee in this case makes of such property * * * is not a use by the applicant [lessor] but by the private corporation." Board of Park Commissioners of City of Troy v. Board of Tax Appeals, supra, near the close of the opinion.
So, in the cases at bar, the hangars were constructed by the lessees at their expense, under long-term leases from the city, are under their management and control, and are largely, if not exclusively, devoted to the private purposes of the lessees in connection with their businesses.
The situation differs from that which obtained in the case of City of Toledo v. Jenkins et al., Board of Tax Appeals, 143 Ohio St. 141, 54 N.E.2d 656. There, the Toledo Municipal Airport was wholly owned and operated by the city, resulting in a public use, and it was held that the realty necessary and incidental to the conduct of the airport as a public enterprise, even though revenue was derived from some of it, did not lose its identity as an integral part of the airport operation and was exempt from taxation. Compare Carney, Aud., v. Ohio Turnpike Commission, 167 Ohio St. 273, 147 N.E.2d 857.
For a recent decision of this court citing and discussing a number of cases dealing with the exemption or nonexemption of real property from taxation, attention is directed to the case of City of Cleveland v. Carney, Aud., 172 Ohio St. 189, 174 N.E.2d 254.
In our opinion, none of the property involved herein is "public property used exclusively for a public purpose" within the meaning and intent of the statutory language quoted, and, therefore, none of such property is entitled to be exempted from taxation. Hence that part of the decision of the Board of Tax Appeals involved in cause No. 36978 is reversed and that part involved in cause No. 36980 is affirmed.
Decision reversed in part and affirmed in part.
GRIFFITH, TAFT, MATTHIAS, BELL and O'NEILL, JJ., concur.
HERBERT, J., not participating.
ZIMMERMAN, J., sitting in the place and stead of WEYGANDT, C.J.
GRIFFITH, J., of the Seventh Appellate District, sitting by designation in the place and stead of ZIMMERMAN, J.