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Ohio Supreme Court rules Warrensville Heights School District must share Chagrin Highlands tax revenue with Beachwood schools

The court ruled that a 1997 tax-sharing agreement between the Beachwood City School District and the Warrensville Heights City School District is enforceable.

COLUMBUS, Ohio — A case that dates back over 25 years involving two Northeast Ohio school districts may finally have been settled. 

On Tuesday, the Ohio Supreme Court ruled by a 4-3 decision that a 1997 tax-sharing agreement between the Beachwood City School District and the Warrensville Heights City School District is enforceable, despite the fact that it was not approved by the Ohio State Board of Education.

The case goes back to the formation of the Chagrin Highlands development near the Harvard Road exit of Interstate 271 in 1990. At the time, the land used in that project belonged to Cleveland before it was annexed in a five-city collaborative deal designed to spur development and benefit everyone involved. Involved in the deal were Cleveland, Orange, Beachwood, Warrensville Heights, and the newly incorporated Highland Hills. 

The five cities worked out agreements to divvy up income taxes based on new city boundaries. But figuring out which school district received property taxes wasn’t so simple. 

Property taxes from the land that encompasses Chagrin Highlands was already set up to go to Warrensville Heights City Schools prior to the new city limits. Despite the city of Beachwood annexing 405 acres of the land, property taxes still belonged to Warrensville Heights' schools. 

Beachwood City Schools sought the state school board’s approval for the transfer of the land annexed by the city into the Beachwood City School District. Warrensville Heights schools objected.

The two districts engaged in a contentious debate about sharing the property tax revenue and utilized a mediator to reach a deal in 1997. The two sides agreed to start sharing tax revenues from the development once the property value exceeded $22 million. Once Chagrin Highlands exceeded the value, Warrensville Heights would receive 70% of the property tax revenues and Beachwood would receive 30%. 

The deal, which was signed by representatives from both districts, included a clause that would lead to joint education programs.  

But in a 2018 lawsuit filed against Warrensville Heights, Beachwood schools claimed the district was owed more than $5.5 million that Warrensville refused to release for tax years 2012 through 2017. Warrensville officials believed the 1997 agreement was invalid because it never got approval from the State Board of Education, which would have been a requirement. 

Chief Justice Maureen O’Connor wrote the opinion for the majority, explaining that Warrensville Heights claimed that the deal was invalid because the school districts did not follow the state law overseeing the transfer of school district territory and the division of funds once territory is moved. She says the negotiated deal did not require any actual transfer of territory, meaning the contract between Beachwood and Warrensville Heights is enforceable without board approval.

The Ohio Supreme Court has remanded the case to the Cuyahoga County Court of Common Pleas for further proceedings.

“This revenue sharing agreement was a win-win for both districts when it was approved by both in 1997,” said Beachwood City Schools Superintendent Robert Hardis in a statement. “It is critically important to Beachwood Schools’ finances that the 1997 agreement between the parties be honored.”

Warrensville Heights Superintendent Donald Jolly provided the following statement to 3News: "The Common Pleas Court must now determine remaining legal issues including the amount of Chagrin-Highland tax proceeds that must be diverted from the Warrensville Heights City Schools to the Beachwood City Schools and how the two school districts will begin sharing educational programs.”  

Jolly says the Warrensville Heights Board of Education will be meeting in the near future to discuss the Supreme Court’s decision and related litigation issues.

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