I have written before regarding the flaws in Ohio’s automatic ten year tax abatement for brownfield cleanups.  In my prior post, I discussed both timing issues and exclusion of new buildings/improvements from coverage under the tax abatement.

Over the years, as I have dealt with this law in practice for clients, another reality has come to light. Even if you do everything right in terms of timing, the law is really hard to take advantage of due to the bias against reducing property values in Ohio based on pre-existing contamination.

The Law

The applicable statutory provision is set forth in  Revised Code Section 5709.87 "Exempting increase in assessed value of realty cleaned of contamination." The key language is as follows:

(C)(1)(a) Upon receipt by the tax commissioner of a certification for property under division (B) of this section [i.e. a VAP Covenant-Not-to-Sue from Ohio EPA], the commissioner shall issue an order granting an exemption from real property taxation of the increase in the assessed value of land constituting property that is described in the certification, and of the increase in the assessed value of improvements, buildings, fixtures, and structures situated on that land at the time the order is issued as indicated on the current tax lists.

The way the law is supposed to work is as follows:

  1. Pre-cleanup, contaminated property has a reduced value due to costs to remediate and potential liability of the owner;
  2. Buyer expends the costs to take the property through the Ohio Voluntary Action Program (i.e. VAP- Ohio’s brownfield cleanup program);
  3. Ohio EPA confirms the property meets VAP cleanup standards by issuing a covenant-not-to-sue;
  4. Ohio EPA sends certification to Tax Commissioner that the property has been cleaned up under the VAP;
  5. Tax Commissioner issues a order granting an exemption from the increase in value of the property post VAP cleanup.  The exemption (i.e. "freeze") is good for ten years.

The Real World Issue with the Ten Year Freeze 

The law assumes that the land and buildings have a reduced value due to the presence of contamination.  Once clean, the law assumes the values of both the land and buildings will likely increase significantly.  As an incentive to address costly brownfield properties, the law attempts to provide the Buyer an exemption from additional taxes attributable to the increase in value due to the cleanup.

However, the reality is that the tax value of the majority of brownfield properties do not accurately reflect their true value in the market place.  This is due to the fact that local governments have no ability to account for the contamination when assigning a tax value to properties.  As a result, the taxes assessed to land and existing buildings on brownfields, in reality, presume both are free of contamination.

What good is a "freeze" in the value if it simply freezes an over inflated valuation of the property?

To overcome this situation, any owner attempting to take advantage of the 10 year brownfield tax abatement, must first, successfully challenge the current tax valuation of the land and existing buildings so as to properly account for the presence of contamination.  While the Board of Revision process under Revised Code Chapter 5715 is seen as the opportunity for a owner to make such a challenge, the history of Board of Tax Appeal decisions (i.e. the most common administrative appeal tribunal) demonstrate the difficulty in making such a challenge.

Board of Tax Appeals Case Law Regarding Valuation of Contaminated Property

Dollar for Dollar Deduction is Not Appropriate

The easiest way to allow an owner of contaminated property to determine its value is to take the current fair market value and deduct the cleanup costs.  This method allows for the variation in levels of contamination.  The higher the cleanup costs, the bigger deduction, which seems appropriate.

Using this method, in some cases, the value of a property may be zero because the cleanup costs are higher than the current market value.  However, this is reality in the market place.  I have negotiated a number of deals in which a property transferred for one dollar in recognition of the costs and liability associated with contamination.

While the dollar for dollar deduction is the simplest method for determining value of contaminated property, unfortunately this methodology has been rejected in Ohio.  Multiple cases have held that introduction of evidence regarding the cost of cleanup and a request to reduce the value by that cost is inappropriate in Ohio. Chem-Masters Corp. v. Geauga Cty. Bd. of Revision (Dec. 21, 1990) BTA Case No. 88-J-994, unreported; Society National Bank v. Carroll County Board of Revision, BTA Case No. 94-M-454 (April 19, 1996); Hufford v. Montgomery County Board of Revision, BTA Case No. 95-M-855 (May 2, 1997); McDonald Local School District Board of Education v. Trumbull County Board of Revision, Case No. 94-A-757 (1996).

The dollar for dollar deduction methodology has even been rejected when an appraiser has endorsed the methodology as the best means of determining value of the property.  In Vogelgesang v. CECOS International, Inc., 85 Ohio App. 3d 339 (1993), CECOS challenged the property tax valuation. At the hearing, CECOS provided an appraisal report in which the appraiser deducted current and future environmental cleanup costs from the valuation. The Court upheld the BTA’s decision to reject this approach. The Court said deduction of the cleanup costs may reflect the effect these costs had on the company’s profitability, “but it fails to demonstrate their effect on the facility’s property value…” Therefore, the Court case rejected the approach of simply deducting cleanup costs from a valuation even in the context of an appraisal report.

Other Options for Determining Current Tax Value of Contaminated Property

The Board of Tax Appeals seems to favor the introduction of an appraisal which considers the impact of the contamination on the value of the property. For example, in Company at 34 v. Lake Cty. Bd of Revision (Mar. 25, 1994), 92-T-763, the BTA held that evidence must be submitted on the “diminutive effect the contamination has upon the value of the property.”   It appears the BTA wants to hear testimony from a property valuation expert.  Testimony from a consultant or someone familiar with the property will more than likely not be sufficient.

Based on the case law, the appraiser must utilize a different method for determining value other than dollar for dollar reduction based on cleanup costs.  But what other method is viable?

For example, a review of comparable sales of contaminated properties may be very difficult.  Each property is different and levels of contamination can very widely.  How an appraiser accounts for these variables in performing a market analysis would appear to be very daunting.  


The law in Ohio supports reduction in value of property based upon the presence of contamination. However, in reviewing the case law surrounding valuing property with environmental contamination, none of the cases discussed above provide examples in which the BTA or a Court validated a specific approach to reducing value based on contamination.

Courts and the BTA appear to endorse the use of an appraiser in determining the fair market value of contaminated property.  However, it appears no appraisal methodology has been specifically endorsed in Ohio.  

This leaves owners of contaminated property with no clear path toward reducing current tax values to reflect existing contamination.  Without successfully reducing current values to reflect pre-existing contamination, owners and developers of brownfield properties face a real challenge in capturing the value intended by the State’s ten year tax abatement for cleanup of contaminated properties.

Due to the challenges facing redevelopment of brownfields, particularly in Ohio where such underutilized properties are abundant, incentives are critical to overcoming such impediments to redevelopment.  The ten year tax abatement was seen a major incentive, but in reality, it is has limited applicability and its difficult to fully take advantage of.

The ten year tax abatement in R.C. 5709.87 has been on the books for twenty years.  Perhaps its time to revisit the law to make it better conform to reality.