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IN THE COURT OF COMMON PLEAS

ASHTABULA COUNTY, OHIO

BRUCE A.VANCE

t26W. fefferson Street

]efferson, Ohio 44047
And
G. FREDERICK PIERCE.RUHLAND
4352 Fox Rd.

Kingsville, Ohio 44048

And

losEPH K. BLYSTONE TRUST

foseph K. Blystone, Trustee
Blystone Farms
8677 Oregon Road
Canal Winchester, Ohio

Plaintiffs, Individually And On Behalf 0f

All Others Similarly Situated

v,

THE STATE OF OHIO

JOHN R. KASICH, GOVERNOR

77 S. High Street
Suite 30
Columbus, 0hio 43215

CASE NO.

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7.A15CV0363

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JUDGE

CTASS

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And

ACTION COMPLAINT
[Civ.R.23; Ohio Const. Art. II, Sec. 36;
0.R.C.5713.30 et seq; Ohio Admin. Code
57 03-25 -33.; Compensatory Damages,
Declaratory And Injunctive Relief)

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JOSEPH W. TESTA, COMMISSIONER

OHIO DEPARTMENT OF
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STATE 0F
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TAXATION
OHrO
30 E.Broad Street
22ND Floor
Columbus, OH 432L5

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Defendants

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INTRODUCTORY STATEMENT

1) This is a class action on behalf

of the more than 100,000 owners of Ohio

lands devoted to agricultural production, including crop farmers, greenhouse

owners, hay, fruit, vegetable, egg, poultry, fish, livestock and timber producers, to
recover more than one billion dollars of property taxes illegally collected from them
by Defendants' failure to calculate Current Agricultural Use Valuation ("CAUV")
taxes in accordance with the Ohio CAUV law. Commencing in 2005 and increasingly

during the Kasich Administration, CAUV taxes have doubled, tripled and
quadrupled, threatening the future of agriculture, 0hio largest industry.

2)

The Ohio Constitution provides that all lands throughout the State shall

be valued for
197 4,

property tax purposes at "true value" aka market value. But, since

Article II, Section 36 has included the following language:

"Notwithstanding the provisions of Section 2 of Article XII, laws may
be passed to provide that land devoted exclusively to agricultural use
be valued for real property tax purposes at the current value such
land has for such agricultural use." [emphasis added)

3) Following

that Amendment, which was the result of a popular vote, the

Legislature enacted the laws creating the system of Current Agricultural Use

Valuation ["CAUV") which has made agriculture Ohio's largest and most important
industry.

4)

Simply put, it is the public policy of Ohio, as well as the law, that

agricultural lands may only be valued based on their value fo.r agriculture use, not
for high rise apartments, shopping malls, office parks, golf courses, residential
developments, and the like.

5)

The Ohio Department of Taxation ["ODT") has been entrusted with

the critical task of conducting an annual investigation into the productivity of the
many types of agriculture in Ohio, and the calculation of the value of Ohio real

property which is in the Current Agricultural Use Valuation ("CAUV").

6l

For many years, at least as far back as 2005, the ODT has failed and

refused to follow the Legislative and Regulatory mandates prescribing how CAUV
values are to be calculated, As a result, hundreds of thousands of owners of CAUV
lands have overpaid property taxes And, in recent years, taxes on CAUV lands have
doubled and even tripled, threatening the viability of agriculture, 0hio's largest

industry, and threatening the destruction and removal of hundreds of thousands of

acres of wooded timberlands. Ohio agriculture

will suffer permanent and

irreparable harm if the ODT continues to violate the law.

This Ohio Civil Rule 23 Class Action Complaint seeks:
D

The formation and certification of a Class of Plaintiffs, consisting of

all owners of land in the State of Ohio, who, during any period of

time since the enactment of the current version of Ohio

Administrative Code Section 5703-25-33 in 2003 through the
present, have owned or do own land(s) in Ohio whose property
was valued for property tax purposes under the Current

Agricultural Use Valuation [hereinafter "CAUV") laws, rules and

regulations.
ID

An award of all property tax monies illegally overpaid or collected

from CAUV property owners due to the misconduct of the Ohio

Department of Taxation, plus further damages for interest on

and/or loss of use of such monies,

rrr)

a Declaratory |udgment that the Ohio Department of Taxation's

calculation and formulation of CAUV land values violates the

relevant statutory and regulatory mandates prescribed by the
Legislature,

M)

an Order, including Preliminary and Permanent Injunctive Relief,

enjoining and prohibiting the Department of Taxation from any

further violations of the statutory and regulatory mandates of the

CAUV system.

THE LAW OF CURRENT AGRICULTURAL USE VALUATION

7)

By Constitutional Amendment and Legislative enactment,land in

CAUV is valued for

property tax purposes by

a set of laws,

rules and regulations

which do not apply to any other property in the State. Agricultural lands are those
lands:

"devoted exclusively to commercial animal or poultry husbandry, aquaculture,

algaculture meaning the farming of algae, apiculture, the production for a
commercial purpose of timber, field crops, tobacco, fruits, vegetables, nursery
stock, ornamental trees, sod, or flowers, or the growth of timber for a
noncommercial purpose, if the land on which the timber is grown is contiguous
to or part of a parcel of land under common ownership that is otherwise
devoted exclusively to agricultural use."

O.R.C. Section 57 1,3.30 (A) [1) [a).1

B)

0DT has been assigned the task of conducting a thorough, efficient,

timely and practical investigation of all annual agricultural production throughout

Ohio, in order to make CAUV valuations.

9)

Annually, the ODT calculates CAUV land values, and then distributes

its CAUV Land Tables to all 88 County Auditors.

10)

An owner of CAUV land must file an annual application with the local

County Auditor to be included in the CAUV program. o.R.C. 571,3.37. The Auditor
must then view the property to see if it is still in CAUV use, and if so, must apply the
annual CAUV Land Tables supplied by the ODT:

l Also included in the definition are adjacent lands devoted to various methods of
bioenergy production; all owners of CAUV land under O.R.C. Section 5713.30 are
included in the proposed class.

"lf the auditor determines, which determination shall be made as of the

first Monday of June, annually, that the land is land devoted exclusively to
agricultural use he shall appraise it for real property tax purposes in
accordance with rules adopted by the commissioner for the valuation of
land devoted exclusively to agricultural use and such appraised value
shall be the value used by the auditor in determining the taxable value
of such land for the current tax year under section 57L3.03 of the Revised
Code and as shown on the general tax list compiled under section 319.28 of
the Revised Code." (lbidJ. (emphasis added)

11)

All countyAuditors, as a matter of law, must use the oDT-supplied

CAUV Land Tables when assessing local

property taxes:

"(B) The auditor shall assess all the real estate situated in the county at its
taxable value in accordance with sections 57L3.03,5773.37, and 5715.01
of the Revised Code andwith the rules and methods applicable to the
auditor's county adopted, prescribed, and promulgated by the tax
commissioner"
O.R.C. Section

5713.01[B).

THE ODT'S CATCUTATIONS OF CAUV VALUES ARE IN VIOLATION OF

PUBTIC POTICY AND THE LAW

tZ)

The Legislature mandates that the 0DT annually conduct thorough

investigations, research, and data analysis, and perform numerous calculations, to

determine CAUV values for the lands of hundreds of thousands of CAUV
landowners. This investigation must include not just "cropping patterns," but all
land uses, from the most productive and lucrative fflat, good soil, market crops),
and the least frocky, steep land barely suitable for timber or grazing sheep and
goats), and all types of agriculture. Not just corn, soybeans and wheat but also:

"commercial animal or poultry husbandry, aquaculture, algaculture meaning

the farming of algae, apiculture, the production for a commercial purpose of
timber, field crops, tobacco, fruits, vegetables, nursery stock, ornamental
trees, sod, or flowers, or the growth of timber "

13)

Instead, the oDT has failed to do its homework ignored

nearly every

mandate and rule, taken shortcuts, carefully selected minimal

data, imposed illegal

minimum property values, and performed calculations with

view to falsely

inflating CAUV Iand values, thus illegally increasing property tax collections
by
billions of dollars.

L4)

A CAUV landowner has no Administrative remedy available, through

which they can dispute the CAUV value formulated by the ODT. Unlike
the usual
and ordinary Board of Revision disputes, over "fair market value,,,
or perhaps a

religious, charitable, educational, or other exemption from property

tax, a GAUV

landowner cannot dispute the Table of Values prepared and distributed

by 0DT.
The Local Boards of Revisions will not hear such a dispute. He or she
can only
dispute the Auditor's determination that the land is no longer in agricultural
use, or
the number of acres in CAUV, or the type of soil,. No hearing before
the Board of
Tax Appeals is available, as the ODT's annual issuance of the
CAUV Land Tables is

not an appealable "Final Determination" by the Tax Commissioner

with respect to
any particular GAUV parcel. Nor could the Board of rax Appeals
handle over

100,000 CAIIV appeals every six months, when property tax bills are
distributed.

Plaintiffs and hundreds of other farmers have spent months and years
of efforts to
remedy and stop the illegal overtaxation described here, all in vain.
In Ashtabula
County, aftet'over 700 farmers gathered to protest the hike in CAUV
taxes, a CAUV
Task Force was created. The Task Force joined forces across the
State with like

minded grorrps, and lobbied ODT, the Governor, the ohio Farm Bureau,
held

meetings, made calls, wrote letters (even to the GovernorJ, and attended meetings

in columbus, putting in thousands of hours of time in: all to no effect.

15)

The State of Ohio directly benefits from illegally fixing higher property

taxes in the rural and semi-rural areas of Ohio where CAUV lands are located. 2 The

more money rural and semi-rural counties, cities, villages, townships, park

districts, school districts, etc., obtain as a result of the increasing land values in the
CAUV tables promulgated by the ODT, the less money the State of Ohio needs to

send out to support those same bodies.

Governor's Kasich's office recently announced that, due to increases in CAUV

taxes, his Administration was allocatingT4o/o of new state money for suburban and

major urban districts, and almost none for rural districts. Rural pupils receive
17 .4o/o

less per pupil than other districts.

THE MANDATORY METHOD OF CALCULATING CAUV VALUES

16)

Ohio Administrative Code Section5T03-25-33, contains the mandates

the ODT must comply with each year in order to properly calculate CAUV land
values. Section 5703-25-33 was last revised in 2003. This action seeks

compensation for the illegal collection of higher property taxes caused by ODT's

failure to calculate taxes as required.

17)

In simplest terms, CAUV property values are determined by dividing

"net income" per acre by the "capitalization rate":

For example, cuyahoga county only has about lr7 cAUv parcels, but wood
County, with the best soil in the state, has over 9642 CATJV parcels.
2

NET AGRICULTURAL INCOME PER ACRE

PROPERTYVALUE/ACRE

(CAPITALIZATION RATE FOR AGRICULTUREJ

18)

Here is a highly simplified example: a farm produces 150 bushels of

corn per acre, sells it for $4.50 per bushel, and has $3.15 per bushel in costs. Net
Income is $201.75 per acre, rounded to $202. $202 will be the numerator in the
equation. With a capitalization rate of

60/o,

the denominator will be

60/o,

or 0.06.

$202 income divided by 0.06 = $3,366.00. This calculation produces a per acre
value of $3,366.00.

19J

Under the mandated Ohio CAUV formula:

Property taxes will rise if:

Z0)

Net Income increases,_andf or

the Capitalization Rate or Average Property Tax Rate decreases.

Using the example above, if the Capitalization Rate decreases one

percentage point, from

60/o

to

5o/o

(0.05), the value per acre increases to $4,040, an

increase of 20o/o. An artificially low Capitalization Rate, and downward changes in

the rate, can cause enormous increases in GAUV property taxes. Similarly,

overinflated or artificially high Net Income figures will increase property taxes.

21)
taxes

Conversely, it logically follows that, under the CAUV formula, property

will drop if:

22)

Net income decreases, andf or

The Capitalization Rate or Average Property Tax Rate increases.

Again, using the same example, if there is a one percentage point

increase in the capitalization Rate, the per acre value drops from $3,366 to

$2,885.71 ($202/.07), a L4.30/o drop. A two percentage point increase in the

capitalization Rate will drop the per acre value even further, to $z,szl
($202/0.08). Using a 1,Oo/o Capitalization Rate, the rate mandated in Texas, yields

per acre price of $2,020.00, 40% lower than with a 60/o rate.

23)

The oDT annually publishes its explanation of the inputs,

assumptions, data, methods and calculations it employed in determining the CAUV

value for that tax year. Reviewing these explanations reveals that ODT has been

violating Ohio law for years, with the net effect that CAUV landowners have
overpaid property taxes by billions of dollars. The 0DT's own publications state that
the average CAUV tax collections from Tax Year 2005 to Tax Year 2013 have
increas ed 37 4o/o,

from

1,8

7,459,9

S0

/year to $6,803,97

6,SZO f y

ear.

THE ODT MISCALCULATION OF CAUV VALUES

24)

The preamble to 5709-25-33 states:

"[CAUV land valuel sHALL BE GALCUIATED and prepared by the

capitalization of the typical net income before real property and income taxes
from agricultural products assuming typical management, cropping AND
land use patterns and yields for a given type of soil, AS pRovIDED IN THIS
RULE." (emphasis added)

A. All Income

25)

Figures Are Derived From Cropland OnIy

The ODT's first of many violations of the law applicable to calculating

CAUV values is its

failure to determine net income and capitalization rates from

"cropping and land use patterns." To determine net income, and capitalization
rates, it has only used cropping patterns from corn, soybeans and wheat, and none
of the many other agricultural products or land uses: not pasture, hay,livestock

10

grazing, fish farming, beekeeping, poultry or pork, orchards, vegetable production,

timber, etc. Corn and soybeans rose dramatically in many years between 2004 to
20L2, then dropp ed 40o/o. Soybeans also rose, then dropped. But fertilizer, fuel and

other expenses also increased. CAUV collections for Z0I4-20!7 are staged to
increase significantly over 2013.

26)

All CAUV prices in 0hio are driven by the economic conditions of

farming corn, beans and wheat. All other means and methods of agricultural
production, all other "land uses" are ignored in violation of the IAUV law and
regulations.
57

03-25-33 further states:

"(B) The use of the income approach to develop annual "Current Agricultural
Use Value of Land Table Or Tables" that are accurate, reliable and practical
requires that careful attention be given to the many principles and
techniques involved. It is essgntial that th.e typical or potential net income be
basq4 on the land capability under normal pr typical management practices,
yields, cropping or land use patterns,-prices, costs and conditions in the area.
(emphasis added)

28)

As detailed above, and below, ODT has violated this mandate by, inter

alia, failing to:

a. develop

annual CAUV Land Tables that are accurate, reliable and practical

b.pay careful attention to the many principles and techniques involved

c.

account for conditions in local areas in calculating CAUV values, and

d. base net income on land capability under normal or

practices.

1.1

typical management

29)

ODT has ignored productivity levels of all types of agriculture other

than corn, beans and wheat, by assuming the productivity of all land is to be
assessed as

it compares to land with the very best soil, devoted to growing corn,

soybeans and wheat. Livestock, pasture land and timberland are but a few of the

many very important, but overlooked, "local conditions" and "land use patterns."
Hay has been excluded since 20L0.
B. Illegal Taxation of Land

capability classes v, vI, vII, and vIII

30)

In fact, all Ohio CAUV land is divided into B "land capability classes,"
four of which are only considered suitable for pasture or woodlands; and NOT for
crops:

"(F) Land capability classes: consideration sHALL be given to the LAND

CAPABITITY class of a soil as determined by the soil conservation service based on
the soil's suitability to grow vafious crops and potential hazards considering slope,
drainage, erosion and other factors. (emphasis added)
The major land capability classes are as follows:

(1) Land adapted for crops:

Class I No special hazards, very good land from every standpoint.
class II Some hazards which require good conservation practices.
Class III Several intensive hazards which require intensive conservation practices.

class IV very severe hazards, needs very careful handling and management.

(2) Land for permanent vegetation only:

Class V Very frequent flooding or permanently wet.
Class VI Moderate hazards to be overcome for pasture use.
Class VII Severe limitations for grazing or forestry, very steep.
Class

VIII Not suited for cultivation, pasture or forests. Wildlife and recreation is the

best use.
**c*****

t2

"A higher percentage of row crops will be grown on the better soils with land
capability class ratings such as I or IL Land in land capability class V through VIII
shall be considered as devoted entirely to either pasture or woodland."

31)

The oDT does not attempt to calculate the net income, costs, or

capitalization rate of the four Land Capability Classes which are not suitable to grow
crops. This language from (K)t4) and [5) of 5705-25-33 demonstrates that the net

return per acre from crop production on Land Capability Classes V, VI, VII and VIII,
which are by definition unsuitable fof crop produclion, should be zero, and the taxes
zerol

"The typical land capability class is estimated for each soil management group
based on information from the soil conservation service and the cropping pattern
assigned from paragraph (G) of this rule. This multiplied by the net return per acre
gives the contribution from the crop to the rotation acre."

(5) The total of the net return from each crop in the rotation is the total net
return to be capitalized into land value."

32)

No crop production capability = no taxability. All taxes collected on

Land Capability Classes V-UII were illegally collected.

33)

The requirement that income be based on B Land Capability Classes

has been ignored by ODT in favor of a highly complicated 3,500+ soil class system,

not authorized in Section 5703-25-33. The refusal to use "land capability classes" as
required arguably means that every formulation of crop income since the
abandonment of the B Land Capability Classes has been illegat.

C.

ODT Miscalculations of Net Income and Other Inputs

Subpart [B) of Section 5703-25-33 also includes the following mandates:

13

"To avoid erratic fluctuations of value due to spot economic, market or

climatic conditions, five year moving averages of price costs, cropping patterns
and othqr factors SHALL be used where practical" femphasis added)
34) 0DT has violated this mandate. For crop prices and production costs

(fertilizer, insurance, fuel, etc), ODT uses a7 year period and tosses out the high and
low numbers. This improper methodology completely ignored the massive spikes in
production cost inputs in 2012 and 2013.ODT also uses this 7 year method when
determining bank interest rates as part of its capitalization rate calculations.

35)

ODT also does not use a 5 year moving average for crop yields. They

use a L0 year moving average, then compare

this 10 year average to 1984 yields,

which is both inaccurate and impractical. Section 5703-25-33 mandates 5 year

moving averages and practical methods.

36)

ODT does not consider the 5 year running average of a number of

"other factors" that obviously are required, including land clearing, tiling and
drainage costs necessary to convert land from timber production to croplands.
D. ODT'S Failure to Properly Investigate Crop Net Income

37)

By using 7 years of data, ODT ignores the following express mandate

for crop prices:

"(H) Crop prices: Five year moving weighted average crop prices for the
major field crops are to be calculated by totaling the productiort and value of
each crop, as reported by the statistical reporting service or other reliable
source, for the five years preceding the year in which the table is issued and
calculating the average price per unit after consideration of price differentials in
various parts of the state." (emphasis addedJ

38)

In determining crop income, ODT is required to determine

ru

management costs:

"(I) Management: A percentage to be determined annually shall be deducted

from the five year moving weighted average crop prices to provide for typical
management costs incurred by the land owner." femphasis added)

39)

0DT makes no attempt to make

yearly determination of an

appropriate management deduction, as required. Every year, oDT simply deducts

5% without investigation, calculation or explanation. Failing to determine real

world management costs causes net income, and thus property taxes, to increase.

40)

Since 2009,ODT has also taken Risk out of the CAUV calculation,

without authority, thereby grossly reducing the Capitalization Rate they use. Risk up
to 5.5% was formerly recognized by 0DT. Omitting Risk increased CAUV taxes by
millions, if not billions of dollars. The Risk of agricultural operations is calculated by
objective, actuarial standards for farm insurance. That actual risk would add as
much as lLo/o to the Capitalization Rate, and lower CAUV taxes by billions of dollars.
By contrast, the State of Ohio recognizes a risk rate in the oil and gas industry; the
Oil and Gas industry embeddedaL3o/o "Risk" factor in their formula per 5713.051

(A)(17).

E.

Violations of CAUV Law Re:Woodlands/Timberlands

41)

Any CAUV land that is devoted to timber production faka woodlandJ

is taxed at the value that land would have as cropland, minus the cost of clearing

(cutting down, removing and stumping out trees to convert the land to cropland).
Since the mid-1970's, the ODT has only allowed $500 per acre clearing costs. A

15

a high value [Land

wooded CAUV parcel located on rich, flat soil would be taxed at

with only a $500 yearly

Capability Class I), e.g., $4,000 per acre, year after year'
to $3'500' 0DT increased
credit for clearing, which reduces the taxable value slightly
year 2015 forward.
the clearing credit to $1,000 per acre from tax

42)

ODT',s

failure to increase the clearing credit for nearly 40 years

on accurate, reliable' and

violates the mandates that it calculate CAUV based
and that "the effect of
practical information, that it use 5 year moving averages,

relationships must constantly be

changes in agricultural technology and economic
revaluated."

43)

for woodland
The ODT',s failure to increase the land clearing credit

was put on notice

and timberland in CAUV has been knowing and intentional..ODT

Forestry Association and

years ago that surveys conducted by members of the Ohio
clearing costs have risen to, on
other owners of 0hio timberland demonstrate that

violation of the requirement that

average, well over $3,000 per acre. This is a clear
in Ohio and elsewhere:
0DT consider input and data from "reliable sources"

,.D)InformationSHALLbeobtainedfromsuchagenci-.:1'Co'operative
State University; Ohio
Extension Service, cott"g. of Agriculture, The ohio
Resources
Agricultural Research And Development centerj-National
National Agricultural
conservation Services, U.S.D.A.; Forest Service, u.s'D'A' ;
Ohio; Department 0f
Of
Statistical Service, U.S.D.A.; Department Of Agriculture
reliable sources'"
Natural Resources Of Ohio, Federal Land Bank and other

44)

lands in the timber

A tiling and drainage credit is also applicable to

convert the land to crop farming'

designation, if the soil type requires these costs to
these credits even as
Like the land clearing credit, oDT has refused to increase
prices for each have risen over the decades'

L6

45)

By failing to increase the clearing, tiling and drainage credits for

woodland/timberland owners, the ODT has caused the illegal collection of tens of
millions of dollars in property taxes.

46)

Within the CAUV laws, there is no provision for any minimum land

value for purposes of taxation. [the

1,97

4 Amendment to the Article II, Section 3 6 of

the Ohio Constitution even allowed woodlands to be completely exempt from

taxation). All land is to be valued based on its net income from agricultural
production. And all land is divided into 8 Land Capability Classes, Class VIII of which
is by definition unsuitable as cropland, pastureland or even timber production.

47)

The third and final Chart appended to 5703-25-33 is a table to convert

land values between and amongst the B Land Capability Classes. The land value for a
Class

VIII property is to be 3% of the value for a Class I cropland. If the Class

cropland has a CAUV value of $4,770 an acre fthe highest value for 2015), the Class

VIII pastureland would only have a value of $143.10 f acre, far below the $35O/acre
minimum set by ODT (and below the $230 minimum for woodlandJ. In fact, since
Class

VIII land by definition is unsuitable for agricultural production, even pasture

or woodland, it has no agricultural value and cannot be taxed under the CAUV
system.

48)

Regardless of the express mandates of the CAUV law, which bases all

tax on agricultural lands on their agricultural productivity, the 0DT has arbitrarily
imposed minimums per acre for both croplands and woodlands. For woodlands, the

minimum value was raised from $50 in the 1970's, to $100 and now to $230. For

1.7

croplands, no matter how poor or unproductive, there was a $50 per acre minimum

in the 1,970's; there is now a $350 minimum.

49)

0DT's imposition of these minimums is without basis in enacted law,

violates the law, and has caused the illegal overcollection of hundreds of millions of

dollars in property taxes from CAUV landowners.

F. DEI,IBERATELY USING A LOW CAPITALIZATION RATE

50)

ODT

has failed to follow the mandates required to calculate an

"accurate, reliable and practical" Capitalization Rate for agricultural use, and

thereby has caused the overpayment of billions of dollars in property taxes by CAUV
landowners. An annual investigation of the 5 year moving averages of four critical
factors is required. The determination begins with a mandated investigation of loans
taken out by CAUV landowners over a 5 year period:

"(M)(1) For the purpose of estimating the capitalization rate to be used in

determining the base value of agricultural land the use of the mortgage-equity
method is prescribed. In making the rate determination the five year running
averase of each of the followine items will be used:
(a) Typical term of years, per cent of mortgage and return on farm mortgages
other sources." [emphasis added)

as reported by federal land bank and

51)

ODT makes no attempt to conduct any investigation

running average of

the typical terms of years

the typical percent of mortgage (LTV) and
the return on farm mortgages [interest rate)

1B

into the five year

52)

ODT also does not investigate "other sources," i.e, any lending source

other than Farm Credit Services ("FCS" fka the Federal Land Bank), e.g. small rural
banks, major lenders, private mortgages, credit unions, etc.

53)

Until the 2015 tax year, they simply used the standard 15 yr

FCS

mortgage for cropland, with a 600/o LTV. Because FCS is backed by the Federal
Government, non-FCS lenders are typically at higher rates. And FCS will charge a

higher rate for land devoted to timber as compared to cropland, even up to

commercial/investor rates.

54)

By using a lower percentage borrowed, a Federally subsidized interest

rate, and a shorter term of years, this component of the Capitalization Rate has

illegally been kept lower, causing the illegal overpayment of property taxes from
CAUV Iandowners.

55)

Under the required "Mortgage Equity Method" of determining

capitalization rates, the second factor ODT must investigate is the "required yield"
or "return on investors equity," i.e., the yield that a prudent and reasonable investor
would expect when investing in a farming operation, with all the risks of drought,
flooding, wind and hail damage, pest and predator damage, disease, crop price

fluctuations, and other disastrous consequences. Sectio n 57 03-25-3 3 states:

(b) Return on investors equity - This shall be extracted from market

data." (emphasis added)

56)

ODT makes no effort to investigate, extract, or "constantly revaluate"

any market data, or any "accurate, reliable and practical" measure of investors'

79

equity in agricultural production ("agricultural production" includes not just

cropland, but dairy, poultry,livestock, orchards, wineries, woodland, etc."). They

just use the Prime Rate +2% published in the Wall Street |ournal.

57)

Prime +

2o/o

is the yield from extremely safe investments, e.g. what the

market pays investors in blue chip corporate bonds, or the market pays banks
lending money for home equity loans where the borrowers have high credit scores,
there is collateral (the roof over the borrower's head), Federal backing, and
insurance.

"Prime + Zo/o" violates the Regulation, which goes on to state:

"[the final capitalization rate] should represent the rate of return a prudent
investor would expect on an average or typical Ohio farm.considering only
agricultural factors." (emphasis added)

58)

The next component of the capitalization rate is the movement in

farmland prices, without speculation [for housing developments, oil and gas drilling
rights, etc.):

(c) Depreciation or appreciation expected in property [agricultural land) over

the next five years. The moving average of the preceding five years of percentage
increases or decreases in U.S.D.A. farm real estate index for Ohio for March of each
year over the previous year shall be considered as the estimate of this term. In the
consideration of the weight to be given to this item the effect of speculation
should be removed so that the appreciation that accrues in land values over a
five-year period from improvement in agricultural technology and practices
only is reflected. (emphasis added)

59)

ODT simply completely ignores this mandated investigation as well.

Every year they simply state: " A5o/o appreciation over a period of 5 years is added

20

to address the increase in farmland values due to the demand for additional land in
an increasingly efficient operation."

60)

ODT does not consult the USDA farm real estate index for Qhio in

March. They do not attempt to remove appreciation due to "speculation" by

development pressure, or oil and gas mania, etc.

6L)

After determining the capitalization rate under the Mortgage Equity

Method, the ODT is to then add the average statewide average of all real property
taxes on all types of real property in the State:

(MXz) "To the capitalization rate adjusted for land only shall be added the
effective real property tax rate. This is to be determined by multiplying the five year
average state tax rate as shown in department of taxation records by thirty-five
per cent and expressed as a percentage. This rate shall be further reduced to reflect
the average effect of the reductions required by section 319.301 of the Revised Code.
The total of the two rates is the agricultural land capitalization rate. This
should represent the rate of return a prudent investor would expect on an
average or typical Ohio farm considering only agricultural factors. [emphasis
added)

62)

In direct violation of the law, the ODT only averages the state tax rate

for agricultural land. All the high property tax districts are excluded: large cities,
wealthy enclaves, upper class and middle class suburbs, etc. As a result, the tax rate
added to the capitalization rate for land, which becomes the final, critical number

the denominator- in the CAUV formula, is deliberately lower. Like 0DT's other

violations, described elsewhere, this violation directly causes CAUV taxes to be

higher all over the State.

63J

Every small reduction in this final cap rate causes taxes to increase

dramatically, almost exponentially. Like 0DT's other violations of the CAUV tax laws,

21

this misconduct has caused CAUV taxpayers to overpay hundreds of millions if not

billions of dollars in property taxes.

G.

Failing To Calculate Capitalization Rates For Each Land Capability Class

64)

ODT also ignores the last set of mandates of 5703-25-33:

'(M)(3) Since capitalization rates will vary with the land capability class
due to the difference of risk and operating costs market studies shall be
designed to determine such differential in rates.
(a) The per acre value of each soil category will be determined by dividing the
net return per acre by the appropriate rate. Values in classes I through IV shall be
the values for cropland. If land in these classes is used for other purposes such as
forestry or pasture the cost of converting from present use to crop use shall be
deducted. Values in classes V through VII shall be the value for pasture and
woodland." (emphasis added)

65J

The Ohio Legislature recognized that each Land Capability Class will

have a different capitalization rate, and ordered the ODT to conduct market studies

to determine the various rates, so that the CAUV value of each soil category [aka
Land Capability Class) can be determined by the "appropriate" capitalization rate for

that class. A Class I crop farm and a Class VII pasture operation, or timber lands, etc.

will have widely varying capitalization rates. The riskier the investment, the higher
the yield expected by an investor to make it worth the investment. Crop farms in
Class I

will have

lower capitalization rate than Class VII woodlands. A higher

capitalization rate results in lower taxes.

66)

The 0DT has not conducted market studies to determine

capitalization rates for all Land Capability Classes. As a result, owners of lands in
Land Capability Classes other than high value croplands have overpaid property
taxes.

22

67)

As a direct and proximate result of the ODT's violations, misconduct,

acts and omissions, CAUV landowners throughout Ohio have overpaid billions of

dollars in property taxes. CAUV taxes have quadrupled statewide. In many Ohio
Counties, CAUV Iandowners are paying taxes at rates well in excess of 70o/o of fair

market value. In all Ohio Counties, CAUV values have risen to the point where the
underlying public policy of support for agricultural production, and the CAUV laws,
have been undermined to the point of imperiling the future of agriculture

production.

68)

And, inflated and illegal CAUV values remain the appraisal value for 3

years, the length of county appraisal cycles. Farmers are taking out personal loans

just to pay the new taxes; others are shutting down livestock or other operations;
others are being forced to sell to developers and other non-agricultural uses; others
are under pressure to cut down forests to pay taxes and go into crop farming. The
0DT's conduct is negatively affecting the economic and environmental landscape of
Ohio.

IURISDICTION AND VENUE

69)

Each of the named Plaintiffs is the titled owner of CAUV lands in Ohio,

since at least 2003.

70)

The majority of the named Plaintiffs reside in, and own affected

CAUV lands in Ashtabula County. They have paid CAUV taxes to the Ashtabula

County Treasurer during each year since 2003.

7L)

Pursuant to Civ. R. 3, venue properly lies in this County, where

23

"the defendant conducted activity that gave rise" to the Plaintiffs' claims and
where "all or part of the claim[s] for relief arose'"

TZ)

The Courts of Common Pleas have direct jurisdiction of actions for the

illegal collection of taxes, pursuant to O.R.C. 2723.0L, et seq., and for Declaratory
fudgment under O.R.C. 272L.

Z3)

The Courts of Common Pleas have direct jurisdiction of the Plaintiffs'

claims in equity seeking restitution of specific funds wrongfully paid pursuant to an

unlawful provision or program, funds collected or held by the State' Santos v' Ohio
Bufgau gf Workers' Compensation, 101 0hio St.3d 74' A Court may properly
exercise jurisdiction over this matter as provided in 0.R.C. Section 2743.03
T

4)

tAlt2)

The claims of the Class also include claims for which there is no

administrative remedy. Such claims include their claims for violation of the Ohio
Constitution, a Declaration of the public policy of Ohio, a Declaration invalidating
certain actions of the Defendant ODT, class certification, injunctive reliel and other
remedies, over which no Board of Revision, the Board of Tax Appeals, or any other
forum, has jurisdiction to rule, declare, decree, order or enact. The ODT's

determination and formulation of the CAUV Land Tables may not be appealed under
O.R.C.

Section 57 L5.t9.

7S)

The individual Plaintiffs and the Class as a whole cannot obtain full

and final relief in any forum other than a Court of Common Pleas.

THE PARTIES

T6)

Plaintiff and Class Representative Bruce Vance owns over 148 acres of

CAUV lands in Ashtabula County, devoted to crop production, vegetable

24

production

and timber. His CAUV taxes have incre ased 420/o since last year, and 7940/o since
20L1..

77)

Plaintiff and Class Representative

G.

Frederick ("Fred") Pierce-

Ruhland is the owner of 177 acres of CAUV timber lands in Ashtabula County. His
CAUVtaxes have increased33.To/o since lastyear, and 533o/o since 2009.

7B)

Plaintiff |oseph K. ("|oe") Blystone is a resident of Franklin County,

and is the Trustee of the |oseph K. Blystone Trust, which owns two tracts of

farmland totaling 75.6 acres. on which he grows crops, and raises and slaughters
livestock and poultry. Mr. Blystone recently opened a retail shop on his land, selling
these and other farm products. The CAUV taxes on his lands have incre ased

24Oo/o

since last year. For many years, Mr. Blystone owned these parcels with his wife,

until he took ownership as Trustee of his Trust in 2008, after her death.

79)

Plaintiff Bruce Achor owns 337 acres in Clinton County, and L39 more

in Highland County, on which he raises sheep, and grows corn, soybeans, wheat and
hay. His CAUV taxes have doubled in the last six months.

'80) Defendants are the State of Ohio, by and through its Governor, f ohn R.
Kasich, and the Ohio Department of Taxation, by and through its Commissioner,

Ioseph W. Testa.

25

CLASS ACTION ALLEGATIONS

B1)

The Plaintiffs and Members of the Class are all owners of CAUV lands

in 0hio, who have since 2005 paid property taxes on their CAUV lands based on the
property values in the annual CAUV Land Tables, As such, each individual Plaintiff,
and all members of the Class, have been directly, typically and commonly damaged
by the misconduct, acts, omissions and violations of law, by the Defendant Ohio

Department of Taxation, as aforedescribed.

82)

Plaintiffs bring this action pursuant to Rules 23(A) and 23[BJ of the

Ohio Rules of Civil Procedure.

83)

This is a class action filed on behalf of the Class, defined as all owners

of CAUV lands in Ohio, who have since 2005 paid property taxes on their CAUV
lands based on the property values in the annual CAUV Land Tables.

84)

The Class satisfies the requirements of Rule 23[A) and 23(B) of the

Ohio Rules of Civil Procedure, including numerosity, typicality, commonality,

superiority and adequacy.

B5)

The members of the Class are so numerous that joinder of all

members would be impracticable. In Tax Year 2013, there were over 406,000
CAUV parcels. However, the names and addresses of, the CAUV parcels owned by,

and taxed assessed paid, by each Member of the Class are all matters of public

record. Per O.R.C. Section 5773.33, each County Auditor shall maintain, on forms
prescribed by the Tax Commissioner, an "Agricultural Land Tax List," listing:
a.

the owner and parcel information

Z6

b. the

"true" or fair market value if the land were not in the CAUV

program
c.

the taxes actually levied each year (the CAUV amount)

d. the taxes which

would have been levied had the CAUV values

not been applied

e.

the difference between the CAUV and fair market value taxes,

i.e., the tax savings.

B6J

Upon and information and belief, there are over 100,000 Members of

the Class. (Most owners of the 406,000 CAUV parcels own several parcels). Notice
can be provided to the Class by a combination of published notice and first-class

mail, using techniques and a form of notice similar to those customarily used in class
actions. Notice can be provided to Class Members by the 0DT, by inclusion in the
County Auditors' property tax bills.

87)

There are questions of law or fact common to the class. Plaintiffs'

claims are typical of the claims of the other Class members, all of which result from
the same breaches of Ohio Public Policy, Ohio Revised Code, and Ohio

Administrative Code, occurring during the same time period,

88)

The common questions of law and fact exist as to all Class members

and over any questions affecting solely individual Class members. Among the
questions of law and fact common to the Class are:

a.

Did the Defendant violate Ohio Public Policy Law Rules and
Regulations in the formulation of CAUV Land Tables from 2005

onward?

.,1

b.

Did the Defendant fail to comply with Ohio Administrative Code 5703-

25-33 in the formulation of CAUV Land Tables from 2005 onward?

c.

Did the Defendant act in excess of the express authority and powers

granted to the Defendant under the Ohio Revised Code?

89)

The Claims and defenses of the representative parties are typical of

the claims or defenses of the class.

90)

The representative Plaintiffs will fairly and adequately represent and

protect the interests of the Class members. Plaintiffs have retained competent
counsel experienced in class action litigation to further ensure such protection and

to prosecute this action vigorously. The named Plaintiffs do not have any interests
antagonistic to, or in conflict with, the Class.

91)

This matter is best prosecuted as a Class Action. The prosecution of

separate actions by or against individual members of the class would create a risk
of:

a.

Inconsistent or varying adjudications with respect to individual

members of the class which would establish incompatible

standards of conduct for the ODT. Were f udges in separate actions

to rule differently on all, any one, or any combination of the
numerous issues presented by this Complaint, the 0DT would find

itself complying with the 0rders of one Court at the risk of being
held in contempt by another. The ODT cannot comply with CAUV
laws one way in one County, another way in 23 more, and a third
way in the other 64.

2B

b. Adjudications with respect to individual members of the class,

which would as a practical matter be dispositive of the interests of
the other members not parties to the adjudications, or
substantially impair or impede their ability to protect their
interests;

92)

Through its illegal CAUV Land Tables formulations, the ODT has acted

on grounds generally applicable to the class, thereby making appropriate final

injunctive relief or corresponding declaratory relief with respect to the class as a

whole. The questions of law or fact common to the members of the class described
predominate over any questions affecting only individual members. A Class Action
is superior to other available methods for the fair and efficient adjudication of the

claims and controversy at issue here. There is no other litigation concerning the

controversy already commenced by or against members of the class.

93)

No special difficulties are likely to be encountered in the management

of this Action. The members of the proposed Class are all readily identifiable from

public records, which demonstrate, to the penny, of the amount of the CAUV
property taxes paid by the Plaintiffs and Members of the Class. Such records are
maintained by ODT. The County Auditors and Treasurers communicate with Class
Members on a regular basis. The ODT can provide Notice and pay any damages

directly through such communications.

94)

A class action is superior to any other available methods for the fair

and efficient adjudication of this controversy. 0n the whole, the damages suffered by

individual Class members are relatively small, relative to the expense and burden of

29

individual litigation, making it virtually impossible for the Class members to seek
redress for the wrongful conduct alleged. Plaintiffs know of no difficulty that will be
encountered in the management of this litigation that would preclude its
maintenance as a class action.

COUNT I

(Violation of Ohio CAUV Law, Rules and Regulations)

95)

Plaintiffs reincorporate as if fully rewritten herein each and every

allegation of this Complaint, and further state that the Defendant oDT has, as
aforedescribed, violated both the public policy underlying the 197 4 Amendment to

Article II, Section 36 of the Ohio Constitution, and the language and purpose of the
Ohio GAUV Laws, Rules and Regulations set forth at, inter alia, o.R.c. Sections

57t3.01,5713.30,57L3.31, and Ohio Administrative Code Section 5703-25-33, by

conducting a deliberate program of formulating CAUV Land Tables in violation of
such Laws, Rules and Regulations.

96)

As a direct and proximate result of such violations, the Plaintiffs and

Members of the Class have overpaid their CAUV property taxes based on values
forced upon them in the CAUV Land Tables, values which were excessive, inflated
and illegal. Such overpayments in the aggregate total in the billions'of dollars.
Statewide, in excess of $20,000,000,000.00 in CAUV based property taxes was
collected in Tax Years Z0L0-20L3.

97)

Plaintiffs and the Members of the Class bring this action in equity,

seeking restitution of the amount of specific funds wrongfully paid and collected

30

pursuant to ODT's unlawful provisions in the CAUV Land Tables, and in the Annual
Explanations of such Tables, and the unlawful CAUV program being carried out from
2005 forward. The Defendant effectively possesses these funds, by virtue of being
able to keep in the State Treasury the exact amount of excess and illegal CAUV tax

funds overpaid to local governments, which would otherwise be paid out in State

support.

WHEREFORE, Plaintiffs pray for judgment against the Defendant, for full, fair
and just compensation for themselves, and the members of the Class, for all
damages directly and proximately flowing from the Defendant ODT's aforedescribed

violations of the Ohio Constitution, the Ohio Revised Code, and the Ohio

Administrative Code. Such damages include, but are not limited to:

a.

For tax years 2005 forward, all taxes in excess of the amount due and
payable had 0DT not violated the Ohio Constitution, Ohio Revised
Code and Ohio Administrative Code, and interest on, and damages for

the loss of use of such funds.

b.

All financial harm reasonably foreseeable by Defendant at the time it

carried out its adverse provisions and programs.

c.

Injunctive relief, enjoining and prohibiting any further violations of

law by the Defendant.

31

COUNT

II

(Violation of O.R.C. 2723.0L, et seq.)

9B)

Plaintiffs reincorporate as if fully rewritten herein, all the preceding

allegations of this Complaint, and further state that the collection of CAUV taxes

under the provisions and programs, including CAUV Land Tables, was illegal.

99)

Plaintiff therefore seeks recovery of all such taxes, and injunctive

relief from all further such taxes en futuro, pursuant to O.R.C. Sections 2723.0t, et
seq.

WHEREFORE, Plaintiffs pray for judgment against the Defendant, for full, fair
and just compensation for themselves, and the members of the Class, for all
damages directly and proximately flowing from the Defendant ODT's aforedescribed

violations of the Ohio Constitution, the Ohio Revised Code, and the Ohio

Administrative Code. Such damages include, but are not limited to:

a.

For tax years 2005 forward, all taxes in excess of the amount due and
payable had ODT not violated the Ohio Constitution, 0hio Revised
Code and Ohio Administrative Code, and interest on, and damages for

the loss of use of such funds.

b. All financial harm reasonably

foreseeable by Defendant at the time

carried out its adverse provisions and programs.

c.

Attorney's fees, and all costs and expenses of litigation.

d. All such further

relief at law, or in equity, that is fair, just and

equitable.

32

it

Injunctive relief, enjoining and prohibiting any further violations of

CAUV Laws, Rules and Regulations by the Defendant.

COUNT

III

(Unjust Enrichment)

100)

Plaintiffs reincorporate as if fully rewritten herein each and every

allegation of this Complaint, and further state that the Defendant ODT has, as
aforedescribed,unjustly enriched the Treasury of the State of Ohio by violating the
public policy underlying the 197 4 Amendment to Article II, Section 36 of the Ohio
Constitution, and the language and purpose of the Ohio CAUV Laws, Rules and
Regulations set forth at, inter alia, O.R.c. sections 57L3.07,5]L3.30,5713.31, and
Ohio Administrative Code Section5703-25-33, by conducting a deliberate program
of formulating CAUV Land Tables in violation of such Laws, Rules and Regulations.

101)

By its aforedescribed misconduct, Defendant ODT has procured the

State the benefit of billions of dollars of overpayments of CAUV taxes to local

governments, as a result of which the State can reduce its support to local
governments in CAUV areas, including school districts, dollar for dollar. The ODT
and State have full and actual knowledge of this benefiq indeed it is was and is their

intent and plan to increase and inflate CAUV tax levels to enrich the State Treasury.
And their plan has worked; the State has received billions of dollars in benefits.
Retention of these billions of dollars accumulated by the State as the intended and

deliberately calculated result of violating the 0hio Constitution, and the language
and purpose of the Ohio CAUV Laws, Rules and Regulations set forth at, inter alia,

33

o.R.c. Sections 571,3.01,,571,3.30, s7L3.31, and Ohio Administrative code Section

5703-25-33, would be unjust.

1,02)

Plaintiffs and the Members of the Class bring this action in equity,

seeking restitution of all funds by which the State of Ohio has been unjustly enriched
by 0DT's unlawful conduct. The Defendant effectively possesses these funds, by

virtue of being able to accumulate in the State Treasury the amount of excess and
illegal CAUV tax funds overpaid to local governments, which would otherwise be
paid out in State support.

WHEREFORE, Plaintiffs pray for judgment against the Defendant, for full, fair
and just compensation for themselves, and the members of the Class, including the

return all benefits unjustly received by the State of 0hio due to Defendant gDT's
aforedescribed violations of the Ohio Constitution, the Ohio Revised Code, and the

0hio Administrative code. Such damages include, but are not limited to:

For tax years 2005 forward, all taxes in excess of the amount
due and payable had ODT not violated the Ohio Constitution,
Ohio Revised Code and Ohio Administrative Code, and interest
on, and damages for the loss of use of such funds
b.

All financial harm reasonably foreseeable by Defendant at the

time it carried out its adverse provisions and programs.

c.

Attorney's fees, and all costs and expenses of litigation.

34

d'

All such further relief at law, or in equity, that is fair, just and
equitable.

e.

Injunctive relief, enjoining and prohibiting any further

violations of law by the Defendant.

COUNT IV

fDeclaratory judgment

103)

0.R.C. Sections ZTZI.OI, et seq.)

Plaintiffs reincorporate as if fully rewritten herein, all the preceding

Complaint, and further state that each Individual Plaintiff, and member of the
Class,
is a person whose rights, status or other legal relations are affected by the
CAUV

related, set forth above, and who, pursuant to o.R.c. Section 27zl.o3,may
have

determined for them the question of the construction and validity of such

constitutional Provisions, Statutes, Rures and Regulations by this court.

WHEREFORE, pursuant

to 0.R.C. Section 27Z1.O2,the Individual plaintiffs for

themselves, and on behalf of the entire Class, pray for a Declaration from this
Court

that the aforedescribed failures of the oDT to abide by the Laws, Rules &
Regulations governing the calculation of the CAUV Land Tables.

IURY DEMAND

plaintiff hereby demands

of

trial by a jury composed of the maximum number

jurors allowed by law, on all issues so triable.

35

RespectfullY submitted,

rsvrN r.

[0037479)
Firm
The Roberts Law
T622Columbia Road,
Olmsted Falls, Ohio 44138
t4401 793'62ss
Fax: [440) 793'6256
ktr@kevinrobertslaw' com
Attorney for Ptaintiffs & the Class
ROBERTS, ESQ.

BENIAMIN CALKINS, ESQ. (0016009)

The Calkins Law Firm
100 North Main Street
Suite 235
Chagrin Falls, 0hio 44AZZ
Co'iounset for Plaintiffs & the Class

36