2016 VT 100
By Elizabeth Kruska
Here’s what you’re going to like about this summary: its summary nature. This is a very long, thorough, and well-written opinion and is very detailed on valuations and expert findings. It is really accessible and understandable on complicated property valuation issues. I cannot do as good a job summarizing the finer details as the opinion has, so I’ve kept this brief and urge people to read the actual opinion for these details.
TransCanada (“Taxpayer”) owns a hydroelectric dam on the Connecticut River at or near Bellows Falls, which is situated in the Town of Rockingham. Before we go any further: this dam is partly in New Hampshire and partly in Vermont. I assume TransCanada has some set of issues relative to land use and tax and whatnot in New Hampshire with respect to this dam, but someone a few miles east of me can talk about that. Or not. Live free or die, you know?
Town of Rockingham (Town) valued the dam at $130,000,000, with $108,000,000 being taxable. Taxpayer thought this was too high and appealed to the appropriate local board, and then to the superior court in Windham County. The State intervened on behalf of the town, and there was a trial. I’m not immediately sure if this was a jury trial or if there even could be a jury trial. This strikes me as a situation best suited for a bench trial.
At trial, both sides presented experts relative to the valuation of the dam. The value of a dam is not the kind of thing that everybody knows. If there was testimony during a trial that it snowed on Christmas in Vermont, probably nobody would bat an eye, because that’s commonly understood as possible and doesn’t take someone with special training to explain it. Once parties start getting into complicated facts where conclusions have to be drawn, and where facts are beyond common understanding, there needs to be expert testimony.
Taxpayer took issue with the way the Town’s expert did his valuation. I’m not going to re-hash all the different moving parts, but the long and short of it is that there are lots of different moving parts in figuring out a value of a property like this. It’s not like a three-bedroom house on a one-acre lot—there are lots of those, and it’s not too hard to make comparisons to similar houses in the same or similar towns. With a dam, there are issues relative to capital improvements, licensing, usable life of the structure, power output, income, debt, and all sorts of other things. That, and there aren’t that many dams being bought and sold, so it’s not as if there’s a huge market for comparison.
Both experts presented different valuation methods and arrived at two different amounts. The Town’s expert crunched all his data and came up with $130,000,000. Taxpayer’s expert came up with $84,000,000. I’m no expert, but this is a pretty big difference, and is going to make a big difference in Taxpayer’s tax bill, since property tax is calculated based on the value of the property. The trial court didn’t give Taxpayer’s expert a lot of weight because the valuation was so low—in fact, lower than the value had been in prior years. Also, Taxpayer’s expert made a lot of assumptions that the trial court felt weren’t supported by the available information (again, there’s a lot to this opinion). The trial court credited the Town’s expert, and judged the value of the dam to be $130,000,000. Taxpayer appeals.
SCOV has a few things to look at. They ultimately affirm the judgment, but adjust the amount slightly, making the fair market value of the Bellows Falls dam around $127,000,000. Maybe “slightly” is the wrong word—what’s three-million dollars between friends? I kid. It’s a lot of money.
Taxpayer appeals based on the trial court’s use of the Town’s comparable sales computation and discounted-cash-flow analysis due to errors made with those computations. The Town responds by asking the court to affirm the findings.
In a tax case, where there’s an appeal from a board, the trial court reviews the findings de novo. The trial court’s job is to find the fair market value of the property, and then to equalize the value to comparable properties. SCOV reviews these trial court decisions with a fair amount of deference and will affirm if the findings are reasonably supported by the evidence. If a taxpayer believes he or she is over-assessed, it’s the taxpayer’s burden to prove otherwise.
First, SCOV looks at the cash-flow-analysis argument. The two experts arrived at very different conclusions. Again, because there is a lot here, the long-story-short is that the trial court relied on the Town’s expert because he was able to show his calculations and how he arrived at them in figuring out a fair-market-value amount. SCOV, on review, finds that the trial court made the correct conclusions based on the evidence presented, and upholds this part of the analysis.
Second, SCOV looks at the comparable-sales-valuation argument. SCOV will uphold an adjustment where the appraiser’s conclusion is rationally derived from the evidence. Taxpayer took issue with some of the comparable-sales data the Town’s expert used. However, SCOV finds that the record has enough evidence to support the adjustment. There’s got to be enough for the court to figure out how the expert arrived at his or her conclusion. Valuing property isn’t an exact science, so there’s got to be sufficient data and explanation about how the expert arrived at his or her conclusion. The Town’s expert gave lots of testimony about the facility itself and comparable facilities, and how all that information factored into his conclusion about how the value should be adjusted.
SCOV does do some adjusting to the fair market value, though. The trial court relied heavily on the Town’s expert. In the Town’s expert’s comparable sales valuation, he relied quite a bit on certain offers for comparable dams. SCOV felt this may have inflated the value a bit, since it dealt with offers, and not actual sales. The change was about three-million dollars, which is pretty substantial. The record actually allows SCOV to re-do the valuation rather than remand for further findings (which probably makes everyone glad), so they adjust the fair market value to about $127,000,000.