This case is one of many pending in the superior court or in the Board of Tax and Land Appeals in which a public utility has appealed the denial of a request for abatement of local property taxes. In many of these cases, the utility has relied upon the Department of Revenue Administration’s appraisal of its property under the statewide utility tax statute, RSA 83-F, to support its challenge to the municipality’s assessment.
The town in this case had assessed the property of the petitioner, New Hampshire Electric Cooperative (NHEC), in Gilmanton at values ranging from approximately $ 6.7 million to approximately $ 9.0 million for the tax years 2010 through 2012. The utility’s appraiser valued the property at approximately $ 2.8 million to approximately $2.9 million. The DRA’s appraiser assigned values very close to those claimed by the company, ranging from $2.5 million in 2010 to $3.0 million in 2012.
Over seven days of trial, the court heard expert testimony from consultants for the company and the town, as well as from DRA’s utility appraiser. In his decision, the judge reviewed in some detail the valuation methods used by the three experts. After a 30-page recitation of the approaches used in each appraisal and the results of those approaches, the judge determined “the appraisal conducted by [the town’s consultant] to be the most compelling evidence as to the value of the petitioner’s Gilmanton assets.”
The judge cited several reasons for siding with the town’s valuations. For one thing, the town’s consultant’s reports and testimony were “markedly detailed and thorough,” compared to those of the company and the state, and the town’s consultant was able to answer most of the criticism directed at his testimony, while the company’s expert failed to answer many of the criticisms of his opinions.
The court also criticized the company’s use of “mass accounting,” in which it based the value of its poles and wires on averages across the entire system. The company’s consultant used these average values “in lieu of assigning original costs to the assets within Gilmanton, in conducting his analysis. In contrast, [the town’s consultant] strove to identify each individual asset within the Gilmanton system.” The court found the latter approach preferable, “as it relies less on general averages in determining the value of assets and more on the individual assets themselves.”
Importantly, the court found the DRA appraiser’s reports and testimony to be “of little corroborative value to the petitioner.” The court noted that “in his responsibilities to the DRA, [the appraiser] is required to analyze a considerable amount of data in a relatively short period of time. (The DRA appraiser is responsible for appraising all utility property in the state in order to assess the statewide utility property tax—not for purposes of local property taxation.) As a result . . . , [his] reports [and] testimony . . . were understandably far less detailed than those of [the town’s and the company’s consultants].” Among other things, the DRA appraiser “was unable to provide explanations as to several of the calculations or other judgments central to his reports . . . , [including his reliance on] the calculations employed by the petitioner to determine the percentage of its total assets within Gilmanton.” The court also found fault with the DRA appraiser’s decision to use only the income and cost approaches to valuation, and to weigh the cost approach at 90 percent and the income approach at 10 percent, while both the town’s and the company’s experts also used the sales approach and gave each approach equal weight.
For these and other reasons, the court found the town’s expert to be more credible and denied the company’s request for relief, except to the extent that that the parties had already agreed to certain minor adjustments to the assessments.