R.C. 5717.03(G) Limits the BTA’s Sua Sponte Issue-Spotting and Confirms “Direction or Control” Survives Third-Party Parking Management Under R.C. 5709.121(A)(2)

Case: RiverSouth Auth. v. Harris, Slip Opinion No. 2026-Ohio-2396 (Supreme Court of Ohio, June 26, 2026)

I. Introduction

RiverSouth Auth. v. Harris is a real-property-tax-exemption dispute over a roughly 600-space public parking garage on the Scioto Peninsula near COSI in Columbus. RiverSouth Authority (“RiverSouth”), a “new community authority” and “body corporate and politic” under R.C. 349.05, owned the garage improvements and leased them to the City of Columbus under a long-term financing-and-lease structure. The City, in turn, contracted with a private nonprofit (Capitol South Community Urban Redevelopment Corporation, “Capitol South”) to manage the garage, and Capitol South hired a private for-profit operator (LAZ Parking Midwest, L.L.C., “LAZ”) to run day-to-day operations.

The central legal question was whether the garage qualifies as “public property used exclusively for a public purpose” under R.C. 5709.08(A)(1), as informed by R.C. 5709.121(A)(2)’s “direction or control” framework for political-subdivision property made available for public purposes “and not with the view to profit.”

Procedurally, the case also raised a significant administrative-law constraint: when the Board of Tax Appeals (“BTA”) believes an unraised issue is “important,” it may not decide the case on that ground without following R.C. 5717.03(G)’s remand procedure.

II. Summary of the Opinion

The Supreme Court of Ohio vacated the BTA’s decision and remanded to the tax commissioner to issue the exemption order and calculate RiverSouth’s refund. The Court held:

  • The BTA acted unlawfully by affirming the tax commissioner on a new, sua sponte issue (Capitol South’s involvement) without using the remand mechanism in R.C. 5717.03(G).
  • On the merits, the City retained “direction or control” under R.C. 5709.121(A)(2) even though it hired a nonprofit manager (and the manager hired a for-profit operator). Contractual controls—rate constraints, budget oversight, fiduciary handling of receipts, audit rights, operational standards, and approval thresholds—preserved municipal direction and control.

Separate writing: Brunner, J., concurred in part and dissented in part, and would have remanded to the tax commissioner to conduct remaining analysis under R.C. 5709.121(A)(2) rather than directing issuance of the exemption.

III. Analysis

A. Precedents Cited

1. Cincinnati v. Testa, 2015-Ohio-1775

This was the opinion’s controlling substantive precedent. In Cincinnati v. Testa, the Court interpreted R.C. 5709.121(A)(2) and articulated a three-element framework: the property must be (1) under the direction or control of the political subdivision, (2) used in furtherance of or incidental to its public purposes, and (3) made available “not with the view to profit.” The tax commissioner there argued that contracting with a for-profit manager/operator of city golf courses defeated exemption; the Court rejected that position because the City retained key controls (including rate-setting, marketing approval, hours of operation, and frequent inspections).

In RiverSouth, the BTA attempted to distinguish Cincinnati by treating Capitol South’s managerial authority as displacing City control. The Supreme Court treated Cincinnati as establishing that third-party management is compatible with “direction or control” when the political subdivision retains meaningful governance levers. Importantly, the Court clarified that Cincinnati did not make “daily inspections” a necessary condition; it was merely evidence of control in that record.

2. First Baptist Church of Milford, Inc. v. Wilkins, 2006-Ohio-4966

The Court cited First Baptist Church of Milford, Inc. v. Wilkins for the proposition that R.C. 5709.121 “does not itself grant an exemption” but instead defines circumstances in which property “may be considered as used exclusively” for exempt purposes. This matters because it frames R.C. 5709.121(A)(2) as an interpretive aid for applying the exemption in R.C. 5709.08(A)(1), not a standalone entitlement.

3. N. Royalton City School Dist. Bd. of Edn. v. Cuyahoga Cty. Bd. of Revision, 2011-Ohio-3092

The Court used N. Royalton City School Dist. Bd. of Edn. v. Cuyahoga Cty. Bd. of Revision to define “ground lease.” While not outcome-determinative, it situates the property interests: the City leased land to RiverSouth; RiverSouth owned the improvements for the lease term; and the City held “sole and exclusive” use and occupancy of the garage under the related leases. This property-interest architecture is typical in public finance and reinforces why “control” must be assessed functionally through contractual governance, not merely by who turns the keys daily.

4. Adams v. Harris, 2024-Ohio-4640; Rover Pipeline, L.L.C. v. Harris, 2025-Ohio-2806

These cases supplied the standard of review: BTA decisions are reviewed for whether they are “reasonable and lawful,” with de novo review for legal questions and more deferential review for credibility and evidentiary weighing. In RiverSouth, the dispositive issues were legal (procedural compliance with R.C. 5717.03(G) and application of “direction or control” to undisputed contracts), keeping review largely de novo in practice.

5. Stingray Pressure Pumping, L.L.C. v. Harris, 2023-Ohio-2598

The Court reiterated Stingray Pressure Pumping, L.L.C. v. Harris to confirm its modern approach to tax-statute interpretation: courts should apply a “fair reading” of what the legislature enacted, and the Court expressly noted it has disavowed the older maxim that tax-exemption statutes must be strictly construed against the taxpayer. This interpretive posture supports a realistic, contract-sensitive analysis of municipal “direction or control,” rather than a formalistic presumption that private involvement necessarily contaminates public-purpose use.

B. Legal Reasoning

1. The procedural holding: the BTA may not decide on an unraised issue without R.C. 5717.03(G) remand

The tax commissioner denied exemption largely because the for-profit operator (LAZ) was involved, reasoning that this arrangement fell outside R.C. 5709.121 and caused the property to “los[e] its identity as public property used exclusively for a public purpose.” On appeal, RiverSouth challenged that rationale. The BTA agreed LAZ’s involvement did not defeat the exemption—but then affirmed anyway by shifting focus to Capitol South’s involvement, even though that theory was not presented as the basis of denial and was not developed through adversarial briefing.

The Supreme Court held this was unlawful because R.C. 5717.03(G) provides the mechanism for exactly this scenario: if the BTA finds unraised issues “important,” it “may remand” for an administrative determination and issuance of a new determination. The Court treated the statute as a constraint on the BTA’s ability to affirm on a new ground without giving the taxpayer a procedurally proper path to respond and without securing an updated administrative determination.

Although RiverSouth framed the problem in waiver and due process terms (Propositions of Law Nos. 1 and 2), the Court anchored its resolution in statutory procedure: the BTA “overstepped” by not complying with R.C. 5717.03(G).

2. The substantive holding: hiring a manager/operator does not negate municipal “direction or control” where contractual governance is robust

Applying Cincinnati v. Testa and reviewing de novo, the Court examined the City–Capitol South management agreement clause-by-clause. It concluded that the City retained “direction or control” because:

  • Operations/maintenance controls: Capitol South’s duties had to be performed to ensure the City met its lease obligations, and City approval was required for emergency repair and operating expenses above thresholds.
  • Availability and rate constraints: Capitol South had to make the garage “reasonably available” to the public, and parking rates were constrained by the City’s financing requirements.
  • Receipts as fiduciary funds: Deposits had to be in a bank “reasonably acceptable” to the City; the account was in Capitol South’s name “as a fiduciary of the city”; receipts could be used only for defined purposes (including distributions to the City).
  • Budgetary oversight: Annual budgets were submitted to City finance officials; Capitol South had to discuss concerns and report material variances; LAZ’s five-year budget had to be submitted to the City.
  • Audit and records rights: The City had inspection/copying rights, audit rights, GAAP requirements, and annual reporting requirements.

The Court also undercut the argument that the City’s control dissipated because LAZ handled operations: the LAZ agreement itself acknowledged the premises were “controlled by the City of Columbus” and required LAZ to follow Capitol South directives—directives that, in turn, were tethered to the City’s retained controls.

Having found the “direction or control” element satisfied, the Court did not separately analyze the other Cincinnati elements (public-purpose nexus and “not with the view to profit”) in detail; it instead remanded with instructions to issue the exemption order and calculate the refund. Justice Brunner would have sent the matter back for “remaining analysis under R.C. 5709.121(A)(2),” signaling a narrower remedial approach.

C. Impact

  • Administrative discipline for the BTA: The decision strengthens R.C. 5717.03(G) as a procedural guardrail. When the BTA identifies a potentially dispositive issue not raised by the parties, it must use the statutory remand pathway rather than decide the case on a new rationale without the procedural protections that remand supplies.
  • Public-private governance structures preserved: Municipalities and public authorities frequently deliver public services (parking, recreation, facilities management) through layered contracts. RiverSouth confirms that “direction or control” can be retained through contractual governance (approval rights, fiduciary handling of revenues, budget/audit oversight, operational standards), even when day-to-day tasks are outsourced to nonprofit managers and for-profit operators.
  • Evidence of control is not limited to inspections: By clarifying that daily inspections are not required, the Court lowers the risk that exemptions hinge on a single operational fact and instead directs attention to the totality of contractual and practical controls.
  • Tax commissioner denial rationales face closer scrutiny: The Court rejected the notion that involvement of a for-profit operator is inherently “not contemplated” by R.C. 5709.121(A)(2). Future exemption disputes will likely turn on whether the political subdivision retained meaningful levers of control and whether the arrangement is “not with the view to profit,” rather than on the mere presence of private contractors.

IV. Complex Concepts Simplified

  • “Public property used exclusively for a public purpose” (R.C. 5709.08(A)(1)): Property can be tax-exempt if it is public property and its use is exclusively for public purposes. “Exclusively” does not necessarily mean no private entity is involved; it means the use, in substance, serves a public purpose under the statutory framework.
  • R.C. 5709.121(A)(2) as a “use” test: R.C. 5709.121 does not itself create the exemption; it explains when property is treated as used “exclusively” for public purposes. Division (A)(2) focuses on whether the property is made available under the subdivision’s “direction or control,” in furtherance of public purposes, and “not with the view to profit.”
  • “Direction or control”: This is not the same as performing every operational task. A city can retain control through contract terms—approval rights, budget oversight, rate constraints, audit access, fiduciary treatment of funds—even if a manager or operator handles daily operations.
  • R.C. 5717.03(G) remand procedure: If the BTA thinks an issue not raised by the parties matters, it can remand to the tax commissioner to make an administrative determination and issue a new determination. The BTA should not decide a case on a brand-new theory without using that statutory tool.

V. Conclusion

RiverSouth Auth. v. Harris delivers two practical rules. First, the BTA cannot affirm a denial of exemption on a new, sua sponte issue without using R.C. 5717.03(G)’s remand mechanism. Second, outsourcing day-to-day management and operations of public property does not, by itself, strip a political subdivision of “direction or control” under R.C. 5709.121(A)(2) when the contracts preserve meaningful municipal governance (financial controls, rate/budget oversight, audit rights, and operational standards). In an era of public-private service delivery, the decision signals that exemption eligibility turns on functional control and statutory purpose—not simply on whether private entities touch the operations.