CLEVELAND v. BD. OF T. A.

No. 31802.

153 Ohio St. 97 (1950)

CITY OF CLEVELAND, APPELLANT, v. BOARD OF TAX APPEALS ET AL., APPELLEES.

Supreme Court of Ohio.

Decided March 1, 1950.


Attorney(s) appearing for the Case

Mr. Lee C. Howley, director of law, Mr. Robert M. Morgan, Mr. Joseph F. Smith and Mr. Ernest J. Halambeck, for appellant.

Mr. Herbert S. Duffy, attorney general, and Mr. W. II. Annat, for appellee Board of Tax Appeals.


MATTHIAS, J.

Was the decision of the board, in denying, in part, the city's application for exemption of these parcels and in dismissing the city's complaint against the restoration of the parcels to the tax duplicate, unreasonable or unlawful?

As stated by the city, this case as presented to this court primarily concerns the power of the General Assembly under Section 2 of Article XII of the Constitution to authorize the exemption from taxation of these parcels of real estate.

We should be reminded at the outset that the principle is well established that taxation is the rule and exemption is the exception. There is no presumption favorable to the exemption of property from taxation. An exemption from taxation must be clearly and expressly stated in the statute and must be such only as is authorized by the Constitution. 38 Ohio Jurisprudence, 852, Section 114; Wilson, Aud., v. Licking Aerie, 104 Ohio St. 137, 135 N. E., 545; Cullitan, Pros. Atty., v. Cunningham Sanitarium, 134 Ohio St. 99, 16 N.E.2d 205; Crown Hill Cemetery Assn. v. Evatt, Tax Commr., 143 Ohio St. 399, 55 N.E.2d 660.

As will be disclosed, the city of Cleveland has been receiving income in the form of rentals from each of these premises; and the right to exemption herein claimed is based upon the provisions of Sections 5351 and 5356, General Code.

Section 5351 provides as follows:

"Real or personal property belonging exclusively to the state or United States, and public property used for a public purpose, shall be exempt from taxation. Real and personal property, when devoted to public use and not held for pecuniary profit, owned by any adjoining state or any political subdivision or agency of such adjoining state (which would be exempt from taxation if owned by the state of Ohio or a political subdivision or agency thereof), shall be exempt from taxation providing that such adjoining state exempts from taxation real and personal property devoted to public use and not held for pecuniary profit, owned by the state of Ohio or any political subdivision or agency thereof (which would be exempt from taxation if owned by the adjoining state or political subdivision or agency thereof). This exemption from taxation shall not apply to such real and personal property until the current and delinquent taxes thereon have been paid." (Emphasis ours.)

Section 5356 (108 Ohio Laws, pt. 2, 1285), prior to the amendment effective October 6, 1949, read as follows:

"Market houses, public squares, or other public grounds of a city, village or township, houses or halls used exclusively for public purposes or erected by taxation for such purposes, notwithstanding that parts thereof may be lawfully leased, and property belonging to park districts, created pursuant to the provisions of Section 2976-1 et seq. of the General Code, shall be exempt from taxation." (Emphasis ours.)

Both of these sections were enacted under authority granted by Section 2 of Article XII of the Constitution which provides:

"* * * without limiting the general power, subject to the provisions of Article I of this Constitution, to determine the subjects and methods of taxation or exemptions therefrom, general laws may be passed to exempt * * * public property used exclusively for any public purpose * * *."

It is to be noted that the question presented involves only a claimed exemption of public property. Unless limited by the provisions of Section 2 of Article XII of the Constitution, the exemptions sought herein are granted by the specific provisions of Section 5356, General Code (108 Ohio Laws, pt. 2, 1285), wherein the General Assembly provided that "* * * public grounds of a city, * * * houses or halls used exclusively for public purposes or erected by taxation for such purposes, notwithstanding that parts thereof may be lawfully leased, * * * shall be exempt from taxation."

It would be profitable to examine the history of the amendment of Section 2, Article XII of the state Constitution, in November 1929, effective January 1, 1931, and the objectives sought to be attained by such amendment.

It should be noted that the language of the section was entirely changed. The following language was entirely deleted, "Laws shall be passed, taxing by uniform rule, all moneys, credits, investments in bonds, stocks, joint stock companies, or otherwise, and also all real and personal property according to its true value in money." As changed it read, "No property, taxed according to value, shall be taxed in excess of one and one-half percent [changed to one per cent in 1933] of its true value in money for all state and local purposes * * *," and "land and improvements thereon shall be taxed by uniform rule according to value."

The obvious result of such change is to fix a limitation upon the levy of taxes upon real property by the state or local government. This entirely new provision definitely limited the power of the General Assembly to make an additional levy of taxes upon real estate without a vote of the people. There was likewise removed the requirement of the taxation of personal property by uniform rule which previously existed. There was also deleted the following language, "but burying grounds, public school houses, houses used exclusively for public worship, institutions used exclusively for charitable purposes, public property used exclusively for any public purpose, and personal property, to an amount not exceeding in value five hundred dollars for each individual may, by general law, be exempted from taxation." Instead thereof the following was added, "and without limiting the general power, subject to the provisions of Article I of this Constitution, to determine the subjects and methods of taxation or exemptions therefrom, general laws may be passed to exempt burying grounds, public school houses, houses used exclusively for public worship, institutions used exclusively for charitable purposes, and public property used exclusively for any public purpose * * *."

It has been urged that this amendment of Section 2, Article XII, has conferred upon the General Assembly the same power to determine exemptions of real property from taxation as it has conferred to determine exemption of personal property from taxation; that is, subject only to the limitation of Article I of the Constitution and that nothing stated in the Constitution will justify any inference of intention to limit the meaning and effect of the words used.

The purpose of the amendment, and the reasons for, and the history of its adoption, are pertinent in determining the meaning of the language used, for when the language is obscure or of doubtful meaning the court may, with propriety, recur to the history of the time when it was passed, to the attending circumstances at the time of adoption, to the cause, occasion or necessity therefor, to the imperfections to be removed or the mischief sought to be avoided and the remedy intended to be afforded. 37 Ohio Jurisprudence, 668, Section 368.

This court may take judicial notice of the fact that when the amendment was adopted, in 1929, taxes levied upon real estate had become a great burden to the home owners of this state, which condition resulted, at least partially, from failure to secure the desired results from the taxation of personal property, much of which then remained in concealment. The General Assembly, in 1925, had submitted an amendment to Section 2, Article XII, which retained the uniform rule of taxation on "all real estate and improvements thereon and all tangible personal property" and provided that "all moneys, credits, bonds, stocks and all other intangible property, shall be taxed as provided by law." That proposal was defeated at the election held in November 1925. It is to be noted that that proposal did not attempt any change in the classes of property which might be exempted by law from taxation. In 1929, when the present amendment was adopted (except for the change made in 1933 previously noted) the joint resolution of the General Assembly for the first time in the history of the state thereby submitted a proposal which would limit the rate of taxes for which a levy could be made without a vote of the electors of the taxing district, for all state and local purposes to one and one-half per cent of the true value of the property. In the 1929 proposal the remainder of the classes of property which might be exempted by law was unchanged. That amendment was adopted and became effective January 1, 1931.

It is to be noted that when that proposal was submitted to the electors the General Assembly stated the change to be made in question form as follows: "Shall Article XII, Section 2 of the Constitution of the state of Ohio be amended and Article XII, Section 3 of the Constitution of the state of Ohio be repealed so as to provide for a more flexible system of taxation for the state and to protect property against excessive taxation according to value."

A consideration of the history of such amendment leads to the inescapable conclusion that the electors, by the proposed change, sought the accomplishment of two objectives: First, the reduction of the burden of real estate taxes theretofore borne by home owners, and, second, a classification of personal property and the determination of "the subjects and methods of taxation or exemption therefrom," so that the owners of personal property would bear their proper proportion of the cost of state and local government.

It is now urged that in adopting the amendment the people had a third purpose, that being to delegate to the General Assembly full power to exempt real estate from taxation, as it may from time to time decide. If that had been desired there was a very easy way that it could have been done. The deletion of all the language relative to "burying grounds, public school houses, houses used exclusively for public worship, institutions used exclusively for charitable purposes, and public property used exclusively for any public purpose" would have very readily accomplished that purpose. Even deletion of the word "exclusively" would have evidenced some purpose to increase the list of properties authorized to be exempted from taxation.

The first case decided by this court, in which was involved the power of the General Assembly to grant exemption under the amendment effective January 1, 1931, was State, ex rel. Struble, v. Davis et al., Tax Comm., 132 Ohio St. 555, 9 N.E.2d 684, decided June 30, 1937.

The first case decided by this court after such amendment became effective wherein it was declared that the right to exemption from taxation must be found in Section 2, Article XII of the Constitution, was the case of Cullitan, Pros. Atty., v. Cunningham Sanitarium, 134 Ohio St. 99, 16 N.E.2d 205, decided July 6, 1938. For a period of twelve years, during which many constitutional amendments have been submitted to the electors, some of which were adopted, such rule of construction has remained unchallenged except by those who have sought to secure exemption from taxation.

The language now found in Section 2 of Article XII of the Constitution, authorizing the exemption of "public property used exclusively for any public purpose," has remained unchanged since the adoption of the Constitution in 1851. The original section provided in part that "public property used exclusively for any public purpose, and personal property, to an amount exceeding in value two hundred dollars, for each individual may, by general laws, be exempted from taxation."

Since the adoption of the Constitution in 1851, many cases have been decided by this court in which the question was presented as to what constituted public property used exclusively for any public purpose, of which the following are illustrative: City of Cincinnati v. Lewis, Aud., 66 Ohio St. 49, 63 N. E., 588; Columbus Metropolitan Housing Authority v. Thatcher, Aud., 140 Ohio St. 38, 42 N.E.2d 437; Dayton Metropolitan Housing Authority v. Evatt, Tax Commr., 143 Ohio St. 10, 53 N.E.2d 896; City of Toledo v. Jenkins et al., Board of Tax Appeals, 143 Ohio St. 141, 54 N.E.2d 656; Federal Public Housing Authority v. Guckenberger, Aud., 143 Ohio St. 251, 55 N.E.2d 265; Youngstown Metropolitan Housing Authority v. Evatt, Tax Commr., 143 Ohio St. 268, 55 N.E.2d 122; Zangerle, Aud., v. City of Cleveland, Division of Municipal Transportation, 145 Ohio St. 347, 61 N.E.2d 720; Division of Conservation and Natural Resources of Ohio v. Board of Tax Appeals, 149 Ohio St. 33, 77 N.E.2d 242.

That the authority of the General Assembly to exempt public property from taxation is limited by the provisions of Section 2 of Article XII of the Constitution is established by the following cases:

Youngstown Metropolitan Housing Authority v. Evatt, Tax Commr., supra, paragraph one of the syllabus of which reads as follows:

"Section 2, Article XII of the Constitution of Ohio is a limitation upon the legislative power to enact laws exempting property from taxation; therefore the General Assembly, in the enactment of general laws for such purpose, may not exceed the limitations provided in the Constitution."

Federal Public Housing Authority v. Guckenberger, Aud., supra, paragraph one of the syllabus of which reads as follows:

"Under the provisions of Section 5351, General Code, and Section 2 of Article XII of the Constitution of Ohio relating to the exemption of public property used for a public purpose, such public use must be exclusive. (Paragraph two of the syllabus in the case of Pfeiffer v. Jenkins, 141 Ohio St. 66, approved and followed.)"

The phrase "public property used for any public purpose" does not necessarily mean used for a public benefit; that some public purpose may be served is not sufficient to constitute an exclusive public use. This court held in Dayton Metropolitan Housing Authority v. Evatt, Tax Commr., supra, that "a use of property to be public must be an exclusive use by the public, open to all the people on a basis of equality to such extent as the capacity of the property admits, or by some public or quasi-public agency on behalf of the public, and not simply a use which may incidentally or indirectly promote the public interest or general prosperity of the state and its people."

Likewise, where property is owned by a municipality but devoted to a use which is entirely proprietary in its nature, or leased to private individuals, it is no longer public property devoted exclusively to a public purpose and may not be exempted.

In the case of Zangerle, And., v. City of Cleveland, Division of Municipal Transportation, supra, this court held:

"The General Assembly has constitutional authority to exempt from taxation municipally owned real property used in the performance of a public or governmental function; but lacks constitutional authority to exempt from taxation municipally owned real property used in carrying on a private or proprietary function primarily for profit."

A similar but more recent pronouncement by this court is in the case of Division of Conservation and Natural Resources of Ohio v. Board of Tax Appeals, supra. The syllabus of that case reads:

"Real property owned by the state and rented by it to a private citizen, who uses it exclusively for private purposes, is not exempt from taxation under Section 5351, General Code."

See, also, City of Shaker Heights v. Zangerle, Aud., 148 Ohio St. 361, 74 N.E.2d 318.

Tested by these well established rules, was the decision of the Board of Tax Appeals in this case proper?

All the evidence submitted in this case was produced by the applicant, and the exhibits therein consisted of statements showing the amount of income derived from the operation of the stadium and parking lots and contracts between the city and the lessees of portions of this property.

The record shows that parking lot No. 3 and parking lot No. 4, although both are publicly owned, are leased to the Lederer Terminal Warehouse Company under a five-year lease at a total rental of $28,500; that those lots are privately used as a place in which to park new automobiles when unloaded from lake carriers; and that such lots are closed to public use. The Board of Tax Appeals correctly held that such use was not exclusively for a public purpose.

The facts in regard to the other parking lots are set forth in the entry of the Board of Tax Appeals as follows:

"The situation respecting parking lots No. 1 and No. 2 is somewhat different. Both are open to the public for parking purposes for about 265 days of the year, but are let—whether it be called a lease or concession —to two private individuals whenever the stadium is occupied for the day, which, we are told, is about 100 days a year, for 88 and 89% of the take or rental charge to patrons at not greater than 35 cents. During the year 1948 the city of Cleveland's share was $47,958.34. These agreements run for three years. During those 100 days of 1948 they were only open to the public upon payment of a parking charge just as a privately owned parking lot would be. They were rented for a profit almost one-third of the year."

It is difficult to see how the situation in regard to these lots differs materially from that involved in parking lots Nos. 3 and 4. For a substantial part of the year in question, the lots were under the control of private individuals who were collecting rentals thereon and paying to the city a portion thereof as compensation for the use of these publicly owned premises. A substantial income was realized by the city and we agree with the conclusion of the Board of Tax Appeals that such premises were not used "exclusively for any public purpose."

The most important question presented in this appeal involves the municipal stadium of the city of Cleveland. The operative facts in regard thereto are set forth in the entry of the Board of Tax Appeals in the following language:

"In 1932 the city caused the stadium to be built at a cost of around $2,500,000. It has twice been rehabilitated. The original cost and the two repair jobs were financed by the issuance and sale of general revenue bonds as distinguished from mortgage revenue bonds. Prior to the year 1948 the stadium was operated at an an annual loss of $50,000 to $100,000. The purpose to be accomplished by possession of such a structure was and is, as testified by the stadium commissioner, to provide a place for amusement for its residents and visitors; to bring new business into the city; and, thirdly, to produce a money income. These three purposes are so related as to require the drawing of large numbers of people to Cleveland from considerable distances. Hence, it was contemplated that guests of the city from near and far were to be entertained and amused and to largely contribute towards its maintenance. Thanks to champion baseball and football teams, suecess was realized in 1948. Here follow a number of figures for the year 1948: Total days and nights operated, 100; sixty of which were by the Cleveland Indians, eight by the Cleveland Browns. The remaining 32 were local athletic contests, civic projects, amateur contests, religious gatherings and the like. Only one use of the stadium was had without an admission charge, that being the annual Fourth of July celebration. The letting of the stadium for a day is based upon a sliding scale depending on the character of the user. It ranges from $300 to $1,200, usually taken from the day's concession receipts. By concessions is meant articles of food and drink and the like sold to patrons. The total attendance for the year was 3,694,517. The gross income derived by the city and paid into its general fund was $571,000. The total rentals was $225,284; food concessions, $292,760; and, according to the profit and loss statement made by its stadium commissioner, it earned a net profit of $129,339.45. The Cleveland Baseball Club's share of rentals paid amounted to $166,759.42. The Cleveland Browns' management paid in rental a proportionate amount for its eight appearances in the stadium, to wit, $41,540.57."

An examination of the exhibit filed by the city of Cleveland, entitled "Cleveland Stadium Operating Statement, Years 1947-1948," shows a gross profit for the year 1947 of $83,821.55, and for the year 1948 of $105,753.34. The statement shows further that, after deducting depreciation and interest on the stadium debt, net losses were incurred in the year 1947 in the sum of $42,347.23, and in the year 1948 in the sum of $14,710.44.

The Board of Tax Appeals from a consideration of that exhibit concluded, as follows:

"If depreciation and debt interest are properly includible, then it becomes apparent that patrons (resident and nonresident) are expected to contribute towards cost of construction as well as for the amusement they enjoy. It also evidences a practice pursued by private industry conducted for profit usually not followed in management of public property. The mere fact of applicant's claim for its inclusion in an operating statement indicates a purpose to destroy all suggestion of the stadium's profitable operation in 1948."

It is evident from the testimony and exhibits that the Cleveland stadium did make a substantial profit over its actual operating expenses. It is contended, however, by the city of Cleveland that, because of the recreational purpose for which the stadium is sometimes used and because it is often used by some organizations at greatly reduced rentals, its operation is in a governmental capacity and is not a proprietary activity and that it is none the less a public facility even though in the administration thereof an effort is made to have those who use it pay something toward its upkeep. Such theory would require that the determination of the question of exemption await the calculation of profit or loss at the end of each year. Reliance is placed on the cases of College Preparatory School for Girls v. Evatt, Tax Commr., 144 Ohio St. 408, 59 N.E.2d 142, and O'Brien, Treas., v. Physicians Hospital Association, 96 Ohio St. 1, 116 N. E., 975, L. R. A. 1917F, 741. However, the facts involved in those cases render them inapplicable here.

Summarizing: When a city undertakes an enterprise which is proprietary in its nature, and thereby enters into competition with similar enterprises privately operated, its real estate used in such enterprise is not exempt from taxation. Zangerle, Aud., v. City of Cleveland, supra, and City of Shaker Heights v. Zangerle, Aud., supra.

In the exercise of a municipal function, the fact that revenue is incidentally derived from public property does not in and of itself alter the public character of the use. City of Toledo v. Jenkins, supra. However, the General Assembly is without authority to convert a proprietary operation into a public use; and in the construction of Sections 5351 and 5356, General Code, the limitations of Section 2 of Article XII of the Constitution must be superimposed upon the statutory provisions granting exemption. Statutory exemptions may not go beyond the limitations prescribed by the Constitution. As stated in 2 Cooley on Taxation (4 Ed.), 1382, Section 661, "generally, where the constitution enumerates the property which is or may be exempted, it is held that the legislature has no power to exempt other property than that enumerated. The lack of power to exempt may result from the express wording of the constitutional provision or be implied on the theory that the enumeration is intended to be exclusive." (Emphasis supplied.)

It is urged also that language appearing in the case of State, ex rel. Struble, v. Davis et al., Tax Comm., supra, has abrogated this limitation. Paragraphs one and two of the syllabus of that case are as follows:

"1. Section 2 of Article XII of the state Constitution requires only lands and improvements thereon to be taxed by uniform rule according to value. By reason of the removal of previous constitutional limitations and restrictions, the power of the General Assembly to determine the subjects and methods of taxation and exemption of personal property therefrom is limited only by Article I of the Constitution of the state.

"2. In the matter of classification of property for taxation purposes, broad power is conferred upon the Legislature. Its action in that regard will not be set aside by the courts unless the classification attempted results in such discrimination against members of the same class as to deny them the equal protection of the law."

As has been said in previous decisions of this court, the Struble case related only to the classification of personal property for taxation, as authorized by the amendment of Section 2 of Article XII of the Constitution, effective January 1, 1931. It clearly cannot apply here since we are construing a provision which has remained unchanged since the enactment of the 1851 Constitution and which has been interpreted repeatedly both before and since the 1931 amendment. See Zangerle, Aud., v. Republic Steel Corp., 144 Ohio St. 529, 60 N.E.2d 170, and Zangerle, And., v. City of Cleveland, supra.

The Board of Appeals found:

"The character and operation of the stadium is clearly not a governmental function, but a proprietary one.

"* * * At the time of construction and in 1948 operation at a profit was contemplated, intended and actually accomplished at the expense, not only of its citizens, but of thousands upon thousands of visitors. An annual gross income of $571,000 and a net of $149,000 upon an investment of $2,850,000 displays better than a 5% earning for 1948, which is not bad when compared with private business earnings.

"Can it be that the $292,760 income from concessions is merely incidental to operation? This is quite a sizeable amount earned in 100 days operation. It was not for amusement and entertainment that stadium patrons paid nearly $3,000 a day plus the profit which fell to concessionaires. It was even more lucrative to the city than the rentals obtained. Food and drinks did not afford amusement to patrons. Its sale did not promote or forward the stadium's purpose. It was not necessary, as was the sale of gasoline, oil and aeronautical supplies as in the Toledo Airport case. It was more than incidental income. It was a profit anticipated and secured in competition with private business. It represented better than half of its 1948 gross income. It entered this field clearly for a profit."

Demands for exemption from taxation are increasing and efforts to extend the limitation upon exemption are more and more persistent. The report of the Board of Tax Appeals for the year 1949 discloses that of the 1,124 cases filed with that board during that year, 994 were cases in which exemption from taxation on real estate was sought, and that of the 1,188 cases decided by that board in 1949, 1,022 involved claims for exemption from taxation. These figures, of course, do not include the numerous tax exemptions granted annually without renewed applications therefor.

Construing Section 2, Article XII as amended, giving due consideration to the obvious purposes of the change made by the amendment, effective January 1, 1931, we hold that there no definite intention is manifested to grant to the General Assembly unlimited power to exempt any and all property from taxation; that the retention of the enumerated list of exemptions authorized to be granted by the General Assembly precludes the granting of any further exemptions, and that under the well established rule set forth in Section 20, Article I of the Constitution, that "enumeration of rights shall not be construed to impair or deny others retained by the people; and all powers, not herein delegated, remain with the people," the right to determine what institution or property may be exempted remains with the people. If it be desired to further relax the limitations upon exemptions of property from taxation it should be done in the appropriate manner.

It should ever be borne in mind that tax revenues are essential to the maintenance of governmental functions, and that revenues lost by reason of exemption of property from taxation must be provided by increased taxes upon nonexempt property.

It seems clear that there was ample evidence before the Board of Tax Appeals to support its finding and decision. That decision is neither unreasonable nor unlawful, and is, therefore, in all particulars affirmed.

Decision affirmed.

WEYGANDT, C.J., HART and TURNER, JJ., concur.

ZIMMERMAN, J., concurs in paragraph one of the syllabus but dissents from the judgment.

STEWART and TAFT, JJ., dissent.

ZIMMERMAN, J., dissenting. Although I concur in paragraph one of the syllabus and agree with certain of the observations and comments embodied in the majority opinion, I dissent from the judgment, particularly from that part thereof which holds that the Municipal Stadium of the City of Cleveland is properly taxable. Such dissent is based largely on the reasoning contained in my dissenting opinion in Zangerle, Aud., v. City of Cleveland, Division of Municipal Transportation, 145 Ohio St. 347, at 361, 61 N.E.2d 720 at 726.

The Municipal Stadium is publicly owned property, publicly used, and the fact that revenue is derived from its use at different times does not alter that fact.

TAFT, J., dissenting. Apparently the decision and opinion of the majority recognize that, if the words "public property used for a public purpose," as found in Section 5351, General Code, were given their ordinary meaning, the tax exemptions sought in this case should be granted. There can be no other explanation of the requirement, found in four of the six paragraphs of the syllabus and emphasized throughout the opinion, that the property involved must be used "exclusively" for public purposes in order to be exempted from taxation. The word "exclusively" does not appear in Section 5351, one of the statutes under which tax exemption is sought.

This raises the question as to what power the General Assembly now has to exempt property from taxation.

In 1929, the people of Ohio adopted an amendment to Section 2 of Article XII of their Constitution. In State, ex rel. Struble, v. Davis et al., Tax Comm., 132 Ohio St. 555, 9 N.E.2d 684, it was held by this court (paragraph one of the syllabus) that, by reason of this amendment, "the power of the General Assembly to determine the subjects and methods of taxation and exemption of personal property therefrom is limited only by Article I [the Bill of Rights] of the Constitution of the state."

The Davis case has been frequently cited with approval and followed by this court.

The language of the amendment, relied upon by this court as effecting this change in the power of the General Assembly, reads:

"* * * and without limiting the general power, subject to the provisions of Article I of this Constitution, to determine the subjects and methods of taxation or exemptions therefrom * * *." (Emphasis added.)

By the amendment, the foregoing language was inserted immediately before language which, in substance, was previously found in this section and which reads:

"* * * general laws may be passed to exempt burying grounds, public school houses, houses used exclusively for public worship, institutions used exclusively for charitable purposes, and public property used exclusively for any public purpose, but all such laws shall be subject to alteration or repeal * * *."

In giving the new language of this section, relied upon in reaching the decision in the Davis case, its ordinary meaning, it is apparent that the "exemptions" referred to are those resulting from "taxation." No other reasonable meaning can be given to the word "therefrom." It would be clearly unreasonable to say that "exemptions therefrom" meant exemptions from the subjects of taxation or from the methods of taxation or from both such subjects and methods. The words "exemptions therefrom" must mean exemptions from taxation. There is nothing to indicate that such words mean only exemptions from taxation of personal property.

In some instances, where it has been suggested that the General Assembly does not have the same power and authority in determining exemptions from taxation of real property as it does in determining exemptions from taxation of personal property, reference has been made to some of the previous words of the amended section which read:

"Land and improvements thereon shall be taxed by uniform rule according to value."

The significance of this reference has usually not been suggested. The sentence quoted does deal with a subject of taxation (land and improvements thereon) and a method of taxation (by uniform rule according to value), but says nothing about permitting or prohibiting exemptions from taxation.

A careful reading of the syllabus and the opinion by Matthias, J., in State, ex rel. Struble, v. Davis, supra, indicates that this was the understanding of the court when that case was decided. It recognizes that, with regard to the subject of real property, the method of taxation was prescribed, but nothing is said as to the power to exempt real property from taxation. This was proper because that question was not before the court.

The absence of the word "all" before the words "land and improvements thereon" in the amended Section 2 of Article XII is significant. The lastquoted sentence from the amended section replaced language which required that laws be passed "taxing by a uniform rule * * * all real and personal property according to its true value in money." The presence of this word "all" in the section, as adopted in 1851, was given by this court as the reason why the General Assembly had no power to provide for exemptions from taxation not specifically authorized by the words of Section 2 of Article XII prior to the amendment adopted in 1929. Exchange Bank of Columbus v. Hines, Treas., 3 Ohio St. 1; City of Zanesville v. Richards, Aud., 5 Ohio St. 589, 592; Baker v. City of Cincinnati, 11 Ohio St. 534, 540; Fields v. Commrs. of Highland County, 36 Ohio St. 476, 481; Shotwell v. Moore, 45 Ohio St. 632, 645, 16 N. E., 470; Lee, Treas., v. Sturges, 46 Ohio St. 153, 159, 19 N. E., 560, 2 L. R. A., 556; Carlisle v. Hetherington, 47 Ohio St. 235, 249, 24 N. E., 488; Treasurer v. Bank, 47 Ohio St. 503, 518, 25 N. E., 697, 10 L. R. A., 196; Ashley v. Ryan, 49 Ohio St. 504, 524, 31 N. E., 721; Probasco, Exr., v. Raine, Aud., 50 Ohio St. 378, 391, 34 N. E., 536; State, ex rel., v. Ferris, 53 Ohio St. 314, 332, 41 N. E., 579, 30 L. R. A., 218.

It may be argued that the words, "general laws may be passed to exempt burying grounds, public school houses, houses used exclusively for public worship, institutions used exclusively for charitable purposes, and public property used exclusively for any public purpose," justify implying an intention to limit the "general power" of the General Assembly to determine exemptions from taxation of real property. The obvious fallacy of this argument is that the sentence in which these words are found clearly and expressly states that these words are not to limit that general power.

In support of this argument, it may be pointed out that burying grounds, public school houses and houses used for public worship are real estate. It must be admitted, however, that institutions may not necessarily be real property and it is obvious that public property is not confined to real property. If these words are to limit the general power, then, since they are not all applicable only to real property but may be applicable to personal property, that would require a decision that the General Assembly does not have the general power to determine exemptions from taxation of personal property.

It has been stated that the primary purpose of the 1929 amendment was to permit the General Assembly to classify personal property for taxation. It does not follow that there may have been no other purpose or that the words used did not accomplish some other purpose.

In this instance, the constitutional amendment was submitted to the people for consideration by joint resolution of the General Assembly. There were, therefore, no debates of a constitutional convention or any "arguments and explanations" for or against its adoption (Section 1g, Article II of the Constitution). The joint resolution, submitting the proposed amendment to the electors for approval or rejection, contains nothing which might be helpful on this problem, except that the form of ballot prescribed stated the purpose of the proposed amendment to be "to provide for a more flexible system of taxation for the state and to protect property against excessive taxation according to value." Certainly, removal of all limitations on the power of the General Assembly, with respect to exemptions from taxation, would tend to provide for a more flexible system of taxation.

In the majority opinion, it is stated that, by reason of Section 20 of Article I of the Constitution, the right to determine exemptions remains with the people. This disregards the fact that, by Section 1 of Article II of the Constitution, the people delegated the "legislative power of the state" to the General Assembly. As recognized in State, ex rel. Struble, v. Davis, supra, at page 558, this legislative power included the power to determine what institutions or property should be exempted from taxation. The question is not whether Section 2 of Article XII of the Constitution delegates power to the General Assembly to determine tax exemptions but rather whether anything therein can be construed as a limitation upon such power otherwise delegated by the people to the General Assembly by Section 1 of Article II of the Constitution.

In arguing that the General Assembly does not have the same power in determining exemptions from taxation of real property as it does in determining exemptions from taxation of personal property, the majority contends that that conclusion is "established" by previous cases decided by this court. However, none of the decisions in the cases referred to justify or support that contention.

In Ursuline Academy of Cleveland v. Board of Tax Appeals, 141 Ohio St. 563, 49 N.E.2d 674, it was held unnecessary to decide the question because the General Assembly had not acted, as in State, ex rel. Struble, v. Davis, supra, after this amendment to the Constitution had been adopted in 1929 (see paragraphs three, four and five of the syllabus and the opinion, pages 570 and 571). The court held that, in the absence of such legislative action, the statute involved should be given the construction which had been given to it by this court in order to sustain its validity under the constitutional provisions in force prior to 1929.

However, Section 5351, General Code, involved in the instant case, was substantially amended effective in September 1943.*

Most of the cases referred to by the majority, like the Ursuline Academy case, involved claims for tax examption under statutes enacted prior to adoption of the amendment of Section 2 of Article XII of the Constitution in 1929. See City of Toledo v. Jenkins et al., Board of Tax Appeals, 143 Ohio St. 141, 54 N.E.2d 656; Federal Public Housing Authority v. Guckenberger, Aud., 143 Ohio St. 251, 55 N.E.2d 265; Youngstown Metropolitan Housing Authority v. Evatt, Tax Commr., 143 Ohio St. 268, 55 N.E.2d 122; Pfeiffer et al., Trustees, v. Jenkins et al., Board of Tax Appeals, 141 Ohio St. 66, 46 N.E.2d 767; Dayton Metropolitan Housing Authority v. Evatt, Tax Commr., 143 Ohio St. 10, 53 N.E.2d 896; Columbus Metropolitan Housing Authority v. Thatcher, Aud., 140 Ohio St. 38, 42 N.E.2d 437; Cullitan, Pros. Atty., v. Cunningham Sanitarium, 134 Ohio St. 99, 16 N.E.2d 205.

In Zangerle, Aud., v. City of Cleveland, Division of Municipal Transportation, 145 Ohio St. 347, 61 N.E.2d 720, the holding of the court was that the use of the property was not for a "public purpose" and, therefore, not within the terms of the exemption statute (page 359). In no other way could the court have reached the conclusion which it did that the personal property was taxable. It was certainly not necessary to consider whether the Constitution authorized exemptions of real property other than those specifically provided for by statute, especially when that statute had been enacted prior to 1929.

In Division of Conservation and Natural Resources v. Board of Tax Appeals, 149 Ohio St. 33, 77 N.E.2d 242 the syllabus reads in full:

"Real property owned by the state and rented by it to a private citizen, who uses it exclusively for private purposes, is not exempt from taxation under Section 5351, General Code." (Emphasis added.)

Obviously, exemption was not justified under the words of the statute because this was not property either "belonging exclusively to the state" (see Iroquois Co. v. Meyer, 80 Ohio St. 676, 89 N. E., 90; Baltimore & Ohio Rd. Co. v. Walker, 45 Ohio St. 577, 16 N. E., 475; Cooper v. Roose, 151 Ohio St. 316, 85 N.E.2d 545) or "public property used for a public purpose."

The opinion in City of Shaker Heights v. Zangerle, Aud., 148 Ohio St. 361, 74 N.E.2d 318, does not discuss this question. It merely applies the decision in Zangerle, Aud., v. City of Cleveland, supra, to substantially the same facts involved in the latter case. In New Orphans' Asylum of Colored Children of Cincinnati v. Board of Tax Appeals, 150 Ohio St. 219, 80 N.E.2d 761, not cited in the majority opinion but sometimes urged as having decided this question, the tax exemption sought was granted.

Hospital Service Assn. of Toledo v. Evatt, Tax Commr., 144 Ohio St. 179, 57 N.E.2d 928, does apparently decide that the General Assembly does not have the same power to exempt real property from taxation as it does to exempt personal property. No reason is given why the words which the people used require such a result.

The only reason there given for the conclusion that the General Assembly had no general power to determine exemptions from taxation of real property (opinion page 183) would require a holding that the General Assembly did not have such power to determine exemptions from taxation of personal property. However, in State, ex rel. Struble, v. Davis, supra, 559, 560, that reason had been considered and rejected. As stated in the opinion in that case by Matthias, J., at page 560:

"As amended, the Constitution itself now provides that the enumeration of certain classes of property which may be exempted does not take away or limit authority of the Legislature to make other exemptions."

Hospital Service Assn. v. Evatt, Tax Commr., supra, not referred to in the majority opinion, has been judicially noticed by this court only once, when it was distinguished.

While, under the rule of stare decisis, any decision of this court is entitled to great respect, that rule should not be invoked to sustain a decision which appears to be clearly wrong, except where such decision has become a rule of property or the overruling of such decision would otherwise cause hardship or inconvenience to those who have relied on the decision. See State v. Sinks, 42 Ohio St. 345, 357; City of Youngstown v. Fishel, 89 Ohio St. 247, 251 et seq., 104 N. E., 141; State, ex rel. Guilbert, Aud., v. Yates, Aud., 66 Ohio St. 546, 548, 64 N. E., 570.

As stated by Davis, J., in the opinion in the Guilbert case:

"No amount of wrong adjudication can justify a practical abrogation of the Constitution. We may well pause and consider carefully when we find our views to be in conflict with those entertained by our predecessors; but if it be found that the conflict is honestly irreconcilable, there is but one course to take, and that is to follows our own convictions."

Furthermore, in Board of Education of City School Dist. of City of Cincinnati v. Board of Tax Appeals, 149 Ohio St. 564, 80 N.E.2d 156, this court necessarily held that the General Assembly has the same power to exempt real property from taxation as it does to exempt personal property from taxation.

To hold that the General Assembly does not have the same power to exempt real property, as this court has held that it does to exempt personal property from taxation, it is necessary to decide that, when the people recognized "the general power" of the General Assembly subject to the Bill of Rights in Article I "to determine the subjects and methods of taxation or exemptions therefrom," the people intended the words "of personal property" or "of property other than real property" to appear after the word "taxation." The people did not use those additional words. Nothing which the people did say will justify any reasonable inference that they intended to so limit the words which they used.

If the words of the Constitution are to be changed, that should be done by the people and not by judicial construction. An invasion of the rights and powers of the people in the making of their Constitution, under the guise of judicial interpretation, necessarily impairs and undermines public confidence in the administration of justice.

On this question my conclusions are:

1. Under the amendment of Article XII, Section 2 of the Constitution, adopted in 1929, the General Assembly has the same power to determine exemptions from taxation of real property as it does to determine exemptions from taxation of personal property.

2. That power is limited only by the provisions of Article I of the Constitution.

The next question to be considered is whether Section 5351, General Code, as amended to take effect in September 1943 and now in force, requires a different conclusion than that reached by a majority of this court in Zangerle, Aud., v. City of Cleveland, supra, with regard to exemption from taxation of public property used for a public purpose where the public purpose is such as to be characterized as a proprietary one.

The writer of this opinionhas never been able to understand why public purposes of a proprietary nature are not still public purposes. Even in 1851, they were so regarded (see Cincinnati, W. & Z. Rd. Co. v. Commrs. of Clinton County, 1 Ohio St. 77, 94 to 96, and Giesey v. Cincinnati, W. & Z. Rd. Co., 4 Ohio St. 308, 323 to 325); and, as pointed out by Zimmerman, J., in his dissenting opinion in Zangerle, Aud., v. City of Cleveland, supra, the words "public purpose" in Section 2, Article XII, had been previously held by this court to include public purposes of a proprietary nature. There is no language in the Constitution of Ohio which might be interpreted as requiring a limitation of the words "public purpose' in Section 2, Article XII to those of a governmental as distinguished from a proprietary nature.

In State, ex rel. Williams, v. Glander, Tax Commr., 148 Ohio St. 188, 201, 74 N.E.2d 82, the following was quoted with approval in the majority opinion by Turner, J., from 51 American Jurisprudence, 550, Section 557:

"When public property is involved, exemption is the rule and taxation the exception. Public property is presumed to be exempt from the operation of general property tax laws. Tax statutes are construed not to embrace property of the government or its instrumentalities unless the legislative intention to include such property is pliantly and clearly expressed."

The basis for such conclusions is the recognition of the absurdity of government levying taxes against itself to pay taxes to itself. Taxation of publicly owned property would obviously involve the levy of other taxes to pay any levy of taxes on such public property. Thus, the exemption of publicly owned property from taxation, unlike other tax exemptions, does not, in effect, usually involve any additional burden on other taxpayers.

Section 5351, General Code, as now in force, clearly discloses the intention of the General Assembly not to limit the words "public purpose" to those of a governmental nature. This section is quoted in full in the majority opinion and will not be repeated here.

The first sentence states broadly that "public property used for a public purpose, shall be exempt from taxation." The second sentence deals only with the exemption of property owned by an adjoining state or one of its subdivisions or agencies. It significantly provides for exemptions of such property only "when devoted to public use and not held for pecuniary profit." It would necessarily seem to follow that the General Assembly intended to exempt other public property, such as involved in this case, if used for a public purpose, even if it was held for pecuniary profit. Thus, the General Assembly has provided for the abrogation of the rule of law announced and applied in Zangerle, And., v. City of Cleveland, supra.

The next question to be considered is which, if any, of the parcels of real property involved in the instant case were "used for a public purpose." It is conceded that all were public property.

I agree with the majority that parking lots 3 and 4 were not so used and were not, therefore, exempted from taxation.

I believe that the decision of this court in City of Cleveland v. Ruple. 130 Ohio St. 465, 200 N. E., 507, requires the conclusion that parking lots numbered 1 and 2 were used for public purposes. The 35-cent charge for parking was a reasonable one. The dollar amount from the 11 or 12 per cent, allowed to those who operated these lots on the 100 days a year when they were not available to the public for parking without charge, amounted to no more than reasonable compensation for the responsibility involved. It follows that these lots were exempted from taxation under the provisions of Section 5351, General Code.

If an "exclusive" use for public purposes were necessary for tax exemption, I would be inclined to agree that the stadium was not exempted. However, it seems to me that it would be most unreasonable to determine, on the facts presented to the Board of Tax Appeals, that the stadium was not "used for a public purpose" within the meaning of Section 5351, General Code.

In State v. City of Columbia, 115 S.C. 108, 104 S. E., 337, it is said in the court's opinion by Hydrick, J.:

"The city hall of Columbia * * * contains also what is known as the City Opera House, or Columbia Theater. The city council has always leased the theater to private persons, who have procured theatrical, musical, and other entertainments, to which the public have been admitted on payment of reasonable charges. The city council has always exercised the right of supervision, so as to prevent any exhibition or performance against good morals, and also the right to use the auditorium for public gatherings of a religious, charitable, educational, industrial, social or political nature; and it has been so used on many such occasions without charge, except the actual cost of opening, heating, and lighting it. The record of the city council shows that the theater was built in the city hall, because private capital could not be induced to build one; and, from the foundation of the city, there has been no other place in the city where such public entertainments could be given, or such public gatherings be held.

"* * *

"The state does not and cannot well contend that the city hall has not been used exclusively for public purposes. Good theatrical and musical performances educate, enlighten, and afford pleasurable entertainment to the people which makes them better citizens. The authorities generally agree that the providing of public parks and playgrounds is a public purpose for which public funds may be expended.

"* * *

"We see no reason to differentiate the providing of a place where public entertainments may be given and public gatherings be held for the benefit of adults, who are only `children of a larger growth.' The question was incidentally involved and decided in Jones v. Camden, 44 S.C. 319, 23 S. E., 141, 51 Am. St. Rep., 819, where it was held that the fact that the `town hall' contains a store and an `operate house,' from the rentals of which some revenue was derived, did not deprive the building of its character as a public building, erected and used for municipal purposes. We have no difficulty, therefore, in reaching the conclusion that the city hall has been `used exclusively for public purposes * * *."

In Green v. Garrett (Md.) 63 A.2d 326, it is said in the court's opinion by Marbury, C. J.:

"The appellant's first contention is that the Department of Recreation and Parks has no power or authority to enter into an agreement with the baseball company, giving the latter the privilege of using the stadium for professional baseball.

"* * *

"The Baltimore Stadium was constructed as a sports center to be used for all purposes for which such a building could be used. It has been, since its construction, the scene of many athletic events. * * * In its very earliest days it was used for professional football games, and it is now being used during the football season by the Baltimore professional football team. Many of the great college football teams of the country have played there. It is obvious that it was never intended that the athletic and recreational facilities which the department is allowed to conduct there, should be those only in which residents of the city were physically engaged. Recreation is a broad term, and it would be an unnatural use of it to say that it does not apply to watching a football or baseball game, but only applied to engaging in one. From the onlooker's point of view, a game conducted by professionals is often more interesting than one played by amateurs. The very purpose of a stadium is to afford facilities for spectators. The players need only the ground to play upon.

"* * *

"Watching games of baseball, and particularly a game of professional baseball, is to many people in this country the greatest possible recreation with respect to athletic activity. We think the department has ample power to recognize this, to provide such recreation, and to enter into a long term lease if it and the board of estimates think it advisable, and for the interest of the city and of its people to do so * * *. In our opinion, the wording of the chapter gives the department a wide discretion to determine what are athletic and recreational facilities, and it has ample power to include professional baseball as part of the facilities at this location. This is a use for the benefit of the public, and comes within the scope of the charter provision."

In Martin v. City of Asbury Park, 114 N. J. Law, 298, 176 A., 172, it is said in the court's opinion by Wells, J.:

"The land levied upon has been leased by the defendant to one Edward T. Mitchell for the purpose of maintaining thereon a bathing establishment previously erected by the defendant city. The injuries for which the judgment was given were sustained by Mrs. Martin while a patron of this bathing establishment.

"* * *

"* * * there is authority, both statute and case, that property held by a municipal corporation for private and proprietary purposes can be taken in execution upon a judgment entered against such corporation.

"* * *

"The pertinent question, therefore, is as to the status of the land taken under the levy here contested.

"* * *

"The unique position of our seashore resorts enables them to extend certain benefits of the ocean and beach to persons who come from many sections of this and other states. It may well be said that the functions of a municipality so situated include the supervision and development of these special advantages. With such a view, the Legislature specifically provided that the public lands purchased under the authority of the above act should be so improved and developed that the funds necessary to the purchase should eventually be contributed by the public so benefited; but a condition was imposed, that the income thus derived from the public must be applied to the maintenance of these public lands from which the benefit is derived. The conclusion is inevitable that the plan of purchase, leasing, providing of bathing pavilions, etc., are all various units of the one `public purpose.'"

In Myer v. City of Cleveland, 35 Ohio App. 20, 171 N. E., 606 (motion to certify overruled, xiviii), which held that the Cleveland stadium was a public building which could be constructed and maintained by the city, it is said in the court's opinion (page 27) by Williams, J., later a member of this court:

"Whether it can be used for professional baseball we are not compelled to determine at this time, but public auditoriums and public assembly places owned by municipalities have commonly been let for a consideration for lawful purposes, and where buildings of that character are owned by the city there can certainly be no objection to the city deriving revenue therefrom."

This court has recognized that public property may be used for a public purpose even though part of its use may be for private purposes. Thus, in Little Miami Elevator Co. v. City of Cincinnati, 30 Ohio St. 629, paragraph three of the syllabus reads:

"The right to surplus water and to lease the same for private uses, is an incident of the public use of the canal for purposes of navigation. The canals of the state were authorized, constructed, and maintained for public purposes, and not to afford water power, to be leased or sold, for private use. The latter use is subordinate, and the right to the same may be terminated whenever the state, in the exercise of its discretion, abandons or relinquishes the public use."

In Pontiac Improvement Co. v. Board of Commrs. of Cleveland Metropolitan Park Dist., 104 Ohio St. 447, 465, 135 N. E., 635, 23 A. L. R., 866, it is stated in the court's opinion by Johnson, J.:

"No one would contend that it is not proper to expend public money in the acquisition, care and adornment of public parks. They contribute to the mental as well as to the physical improvement of the people, and their aesthetic value in large commercial and industrial centers is very great."

In a large city the opportunities for open-air athletics are limited and yet the need therefor is greater than in less congested communities. That need is of the same nature as the need that results in a city providing public parks for its citizens. In this country, baseball and football are national pastimes and a great source of public relaxation and entertainment. No one will question the extent of the public interest in the activities of the Cleveland professional baseball and football teams.

The construction and operation of modern open-air stadiums have not been developments of private enterprise. They originated in the athletic needs of schools and colleges and have been undertaken generally as municipal functions throughout the country. Even if the development and operation of such an enterprise were left to private initiative, it would require so much governmental policing and regulation that such policing and regulation alone might represent the largest part of its operation. To best answer public needs, such an enterprise should be as near the center of the city as possible. Crowds running up to 85,000 cannot be safely handled in the center of a large city except by public authority. Order must be maintained inside and outside the building. These traffic and police problems and the public evils that might arise from sale of intoxicating liquors and from gambling, if the enterprise were not conducted as a public enterprise, are important factors which justify the conduct of such enterprise at all times under governmental supervision.

In my opinion, therefore, the stadium was "used for a public purpose" within the meaning of Section 5351, General Code, and the decision of the Board of Tax Appeals to the contrary was both unreasonable and unlawful.

The majority opinion states that demands for exemptions from taxation are increasing. The instant case is a good example of the reason for that increase. No one ever seriously considered the possibility that the stadium was not exempt from taxation until recent decisions by this court raised doubts about rights to exemptions which had been generally recognized for decades. The necessity of demanding these exemptions does not stem from efforts to extend any limitation upon exemptions that were recognized before those decisions.

STEWART, J., concurs in the foregoing dissenting opinion.

FootNotes


* It may be noted that the provisions of Section 5356, General Code (108 Ohio Laws, pt. 2, 1285), were enacted prior to 1929.

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