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

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Defendants )))))

INTRODUCTORY STATEMENT

1) This is a class action on behalf of the more than 100,000 owners of Ohiolands 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 property tax purposes at "true value" aka market value. But, since

197 4, Article II, Section 36 has included the following language:

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

3) Following that Amendment, which was the result of a popular vote, theLegislature 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, thatagricultural 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 withthe 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 andrefused 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.

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,

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,

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.

ID

rrr)

M)

THE LAW OF CURRENT AGRICULTURAL USE VALUATION

7) By Constitutional Amendment and Legislative enactment,land inCAUV 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 acommercial purpose of timber, field crops, tobacco, fruits, vegetables, nurserystock, ornamental trees, sod, or flowers, or the growth of timber for anoncommercial purpose, if the land on which the timber is grown is contiguousto or part of a parcel of land under common ownership that is otherwisedevoted 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 distributesits CAUV Land Tables to all 88 County Auditors.

10) An owner of CAUV land must file an annual application with the localCounty 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 ofbioenergy production; all owners of CAUV land under O.R.C. Section 5713.30 areincluded in the proposed class.

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

11) All countyAuditors, as a matter of law, must use the oDT-suppliedCAUV Land Tables when assessing local property taxes:

"(B) The auditor shall assess all the real estate situated in the county at itstaxable value in accordance with sections 57L3.03,5773.37, and 5715.01of the Revised Code andwith the rules and methods applicable to theauditor's county adopted, prescribed, and promulgated by the taxcommissioner"

O.R.C. Section 5713.01[B).

THE ODT'S CATCUTATIONS OF CAUV VALUES ARE IN VIOLATION OFPUBTIC POTICY AND THE LAW

tZ) The Legislature mandates that the 0DT annually conduct thoroughinvestigations, 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 allland 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 meaningthe farming of algae, apiculture, the production for a commercial purpose oftimber, field crops, tobacco, fruits, vegetables, nursery stock, ornamentaltrees, sod, or flowers, or the growth of timber "

13) Instead, the oDT has failed to do its homework ignored nearly everymandate and rule, taken shortcuts, carefully selected minimal data, imposed illegalminimum property values, and performed calculations with a view to falselyinflating CAUV Iand values, thus illegally increasing property tax collections bybillions of dollars.

L4) A CAUV landowner has no Administrative remedy available, throughwhich 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 areligious, charitable, educational, or other exemption from property tax, a GAUVlandowner 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 onlydispute the Auditor's determination that the land is no longer in agricultural use, orthe number of acres in CAUV, or the type of soil,. No hearing before the Board ofTax 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 toany particular GAUV parcel. Nor could the Board of rax Appeals handle over100,000 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 likeminded grorrps, and lobbied ODT, the Governor, the ohio Farm Bureau, held

meetings, made calls, wrote letters (even to the GovernorJ, and attended meetingsin columbus, putting in thousands of hours of time in: all to no effect.

15) The State of Ohio directly benefits from illegally fixing higher propertytaxes 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 receive17 .4o/o less per pupil than other districts.

THE MANDATORY METHOD OF CALCULATING CAUV VALUES

16) Ohio Administrative Code Section5T03-25-33, contains the mandatesthe 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":

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

NET AGRICULTURAL INCOME PER ACRE= PROPERTYVALUE/ACRE

(CAPITALIZATION RATE FOR AGRICULTUREJ

18) Here is a highly simplified example: a farm produces 150 bushels ofcorn 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 acrevalue of $3,366.00.

19J Under the mandated Ohio CAUV formula:Property taxes will rise if:

- Net Income increases,_andf or

- the Capitalization Rate or Average Property Tax Rate decreases.

Z0) Using the example above, if the Capitalization Rate decreases onepercentage point, from 60/o to 5o/o (0.05), the value per acre increases to $4,040, anincrease 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) Conversely, it logically follows that, under the CAUV formula, propertytaxes will drop if:

- Net income decreases, andf or

- The Capitalization Rate or Average Property Tax Rate increases.

22) Again, using the same example, if there is a one percentage pointincrease 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 thecapitalization 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 aper 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 g 1,8 1 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 thecapitalization of the typical net income before real property and income taxesfrom agricultural products assuming typical management, cropping ANDland use patterns and yields for a given type of soil, AS pRovIDED IN THISRULE." (emphasis added)

A. All Income Figures Are Derived From Cropland OnIy25) 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

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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 offarming 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 AgriculturalUse Value of Land Table Or Tables" that are accurate, reliable and practicalrequires that careful attention be given to the many principles andtechniques involved. It is essgntial that th.e typical or potential net income bebasq4 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, interalia, 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 typical management

practices.

1.1

29) ODT has ignored productivity levels of all types of agriculture otherthan 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 vIII30) 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 forcrops:

"(F) Land capability classes: consideration sHALL be given to the LANDCAPABITITY class of a soil as determined by the soil conservation service based onthe 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 thebest use.

**c*****

t2

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

31) The oDT does not attempt to calculate the net income, costs, orcapitalization 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 netreturn 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 groupbased on information from the soil conservation service and the cropping patternassigned from paragraph (G) of this rule. This multiplied by the net return per acregives 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 netreturn to be capitalized into land value."

32) No crop production capability = no taxability. All taxes collected onLand Capability Classes V-UII were illegally collected.

33) The requirement that income be based on B Land Capability Classeshas 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:

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"To avoid erratic fluctuations of value due to spot economic, market orclimatic conditions, five year moving averages of price costs, cropping patternsand 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 andlow 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. Theyuse 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 mandatefor crop prices:

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

38) In determining crop income, ODT is required to determine

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management costs:

"(I) Management: A percentage to be determined annually shall be deductedfrom the five year moving weighted average crop prices to provide for typicalmanagement costs incurred by the land owner." femphasis added)

39) 0DT makes no attempt to make a yearly determination of anappropriate 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 asmuch 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 woodlandJis 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

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wooded CAUV parcel located on rich, flat soil would be taxed at a high value [Land

Capability Class I), e.g., $4,000 per acre, year after year' with only a $500 yearly

credit for clearing, which reduces the taxable value slightly to $3'500' 0DT increased

the clearing credit to $1,000 per acre from tax year 2015 forward.

42) ODT',s failure to increase the clearing credit for nearly 40 yearsviolates the mandates that it calculate CAUV based on accurate, reliable' and

practical information, that it use 5 year moving averages, and that "the effect of

changes in agricultural technology and economic relationships must constantly be

revaluated."

43) The ODT',s failure to increase the land clearing credit for woodlandand timberland in CAUV has been knowing and intentional..ODT was put on notice

years ago that surveys conducted by members of the Ohio Forestry Association and

other owners of 0hio timberland demonstrate that clearing costs have risen to, on

average, well over $3,000 per acre. This is a clear violation of the requirement that

0DT consider input and data from "reliable sources" in Ohio and elsewhere:

,.D)InformationSHALLbeobtainedfromsuchagenci-.:1'Co'operativeExtension Service, cott"g. of Agriculture, The ohio State University; OhioAgricultural Research And Development centerj-National Resourcesconservation Services, U.S.D.A.; Forest Service, u.s'D'A' ; National AgriculturalStatistical Service, U.S.D.A.; Department Of Agriculture Of Ohio; Department 0fNatural Resources Of Ohio, Federal Land Bank and other reliable sources'"

44) A tiling and drainage credit is also applicable to lands in the timberdesignation, if the soil type requires these costs to convert the land to crop farming'

Like the land clearing credit, oDT has refused to increase these credits even as

prices for each have risen over the decades'

L6

45) By failing to increase the clearing, tiling and drainage credits forwoodland/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 landvalue for purposes of taxation. [the 1,97 4 Amendment to the Article II, Section 3 6 ofthe Ohio Constitution even allowed woodlands to be completely exempt from

taxation). All land is to be valued based on its net income from agriculturalproduction. 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 convertland 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 I

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

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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 indetermining the base value of agricultural land the use of the mortgage-equitymethod is prescribed. In making the rate determination the five year runningaverase of each of the followine items will be used:

(a) Typical term of years, per cent of mortgage and return on farm mortgagesas reported by federal land bank and other sources." [emphasis added)

51) ODT makes no attempt to conduct any investigation into the five yearrunning average of

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

1B

52) ODT also does not investigate "other sources," i.e, any lending sourceother 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 FCSmortgage 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 interestrate, 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 determiningcapitalization 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 marketdata." (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'

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equity in agricultural production ("agricultural production" includes not justcropland, but dairy, poultry,livestock, orchards, wineries, woodland, etc."). Theyjust 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 themarket 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, andinsurance.

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

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

58) The next component of the capitalization rate is the movement infarmland prices, without speculation [for housing developments, oil and gas drillingrights, etc.):

(c) Depreciation or appreciation expected in property [agricultural land) overthe next five years. The moving average of the preceding five years of percentageincreases or decreases in U.S.D.A. farm real estate index for Ohio for March of eachyear over the previous year shall be considered as the estimate of this term. In theconsideration of the weight to be given to this item the effect of speculationshould be removed so that the appreciation that accrues in land values over afive-year period from improvement in agricultural technology and practicesonly 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

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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 inMarch. 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 EquityMethod, 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 theeffective real property tax rate. This is to be determined by multiplying the five yearaverage state tax rate as shown in department of taxation records by thirty-fiveper cent and expressed as a percentage. This rate shall be further reduced to reflectthe 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. Thisshould represent the rate of return a prudent investor would expect on anaverage or typical Ohio farm considering only agricultural factors. [emphasisadded)

62) In direct violation of the law, the ODT only averages the state tax ratefor 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 increasedramatically, almost exponentially. Like 0DT's other violations of the CAUV tax laws,

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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 bedesigned to determine such differential in rates.

(a) The per acre value of each soil category will be determined by dividing thenet return per acre by the appropriate rate. Values in classes I through IV shall bethe values for cropland. If land in these classes is used for other purposes such asforestry or pasture the cost of converting from present use to crop use shall bededucted. Values in classes V through VII shall be the value for pasture andwoodland." (emphasis added)

65J The Ohio Legislature recognized that each Land Capability Class willhave 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 [akaLand 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 a lower capitalization rate than Class VII woodlands. A higher

capitalization rate results in lower taxes.

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.

66)

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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 3years, 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 affectedCAUV 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

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"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 theillegal 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 tAlt2)T 4) 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 fulland 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 ofCAUV lands in Ashtabula County, devoted to crop production, vegetable production

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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 offarmland 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 morein 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.

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CLASS ACTION ALLEGATIONS

B1) The Plaintiffs and Members of the Class are all owners of CAUV landsin 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 theOhio Rules of Civil Procedure.

83) This is a class action filed on behalf of the Class, defined as all ownersof 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 theOhio Rules of Civil Procedure, including numerosity, typicality, commonality,

superiority and adequacy.

B5) The members of the Class are so numerous that joinder of allmembers 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 ofthe Class. (Most owners of the 406,000 CAUV parcels own several parcels). Noticecan 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 membersand 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 ofthe claims or defenses of the class.

90) The representative Plaintiffs will fairly and adequately represent andprotect 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 ofseparate 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 actedon 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 managementof 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 fairand 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

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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 andMembers 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

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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 itcarried out its adverse provisions and programs.

c. Injunctive relief, enjoining and prohibiting any further violations of

law by the Defendant.

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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 injunctiverelief 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, fairand 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 itcarried 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 andequitable.

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Injunctive relief, enjoining and prohibiting any further violations ofCAUV Laws, Rules and Regulations by the Defendant.

COUNT III

(Unjust Enrichment)

100) Plaintiffs reincorporate as if fully rewritten herein each and everyallegation of this Complaint, and further state that the Defendant ODT has, as

aforedescribed,unjustly enriched the Treasury of the State of Ohio by violating thepublic 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, andOhio 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 theState 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,

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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 enrichedby 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, fairand just compensation for themselves, and the members of the Class, including thereturn 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

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.

b.

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d' All such further relief at law, or in equity, that is fair, just andequitable.

e. Injunctive relief, enjoining and prohibiting any furtherviolations of law by the Defendant.

COUNT IV

fDeclaratory judgment - 0.R.C. Sections ZTZI.OI, et seq.)103) 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 havedetermined 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 a trial by a jury composed of the maximum numberof jurors allowed by law, on all issues so triable.

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RespectfullY submitted,

IrsvrN r. ROBERTS, ESQ. [0037479)The Roberts Law FirmT622Columbia Road,Olmsted Falls, Ohio 44138t4401 793'62ssFax: [440) 793'6256ktr@kevinrobertslaw' comAttorney for Ptaintiffs & the Class

BENIAMIN CALKINS, ESQ. (0016009)The Calkins Law Firm100 North Main StreetSuite 235Chagrin Falls, 0hio 44AZZCo'iounset for Plaintiffs & the Class

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