86-0263 - Centrally Assessed






Petitioner, )





PROPERTY TAX DIVISION, : Appeal No. 86 0263



Respondent. )



An Informal Hearing was held on December 11, XXXXX. XXXXX, Hearing Officer, heard the matter for the Utah State Tax Commission. XXXXX, Manager, Ad Valorem Tax, represented Petitioner. XXXXX represented the Respondent. At issue is the XXXXX assessment of Petitioner's XXXXX located in XXXXX County, Utah. XXXXX testified that the XXXXX was purchased in XXXXX, that production commenced in XXXXX, but that the quality of the reserves was never what it was represented to be. XXXXX said that the BTU content was inadequate and that the sulphur was too high for the coal to be used in XXXXX, the coal's intended market. The XXXXX was closed in XXXXX, and put up for sale although security was maintained at the mine until the summer of XXXXX when the portal was closed. XXXXX indicated that Petitioner does not dispute Respondent's real property assessment but feels that obsolescence was not properly applied to improvements and personal property. Petitioner pointed to the attempted sale of the mine, the reclamation work, and the physical depreciation of the equipment as evidence of obsolescence.

XXXXX testified that when the Petitioner put the mine up for sale in XXXXX, it asked for several million dollars. However, there were no buyers. Subsequently, Petitioner tried to sell the mine to XXXXX, a sister company that was not interested in buying the mine, and in XXXXX tried to give the mine to XXXXX. XXXXX would not take the mine free, because it knew that Petitioner had operated the mine as efficiently as possible and that the mine was simply uneconomical.

XXXXX testified that Petitioner filed a reclamation plan with the state and posted an $$$$$ bond in XXXXX. The cost of reclamation will total about $$$$$ which is more than the value the state assigned the property. Because the reclamation plan had been filed and the bond had been posted prior to the lien date of January 1, XXXXX, the obsolescence factor should be higher than the factor applied by the state.

XXXXX also testified that the equipment had remained idle since XXXXX (the equipment was sold in XXXXX, after the lien date) and had remained in the exact place on the premises that it was on when the mine was closed. XXXXX testified that most of the equipment was purchased used and that used equipment depreciates faster than equipment purchased new. XXXXX indicated that there had been a good deal of physical deterioration of the property.

XXXXX recommended on behalf of the Petitioner that the valuation that Petitioner assigned the personal property in its XXXXX return be allowed to stand. XXXXX said that he applied a 50% obsolescence factor to the personal property based on a suggestion that XXXXX had verbally made to Petitioner. XXXXX suggested that a $0 value be applied to the masonry part of the office building, and that no more than $$$$$ per square foot be assigned to the metal part of the building. He indicated that the building will be allowed to remain on the property and will probably be used to shelter cattle. XXXXX did not specifically mention other improvements in the hearing so it is assumed he wished the values he assigned the other improvements in the XXXXX return to stand. XXXXX recommended that no change be made to Respondent's assessment on the land.

XXXXX presented a memorandum outlining Respondent's position, which is to retain the value Respondent assigned Petitioner's property in the XXXXX assessment. As support for this position, XXXXX indicated that fair market value of the property must be the fair market value as of the lien date, January 1, XXXXX. XXXXX indicated that reclamation had not begun on the lien date, but that if actual reclamation work on the land had begun by that date, the work would affect the value of the property. XXXXX said that the Tax Commission staff was aware at the time of the XXXXX assessment that the portal would be closed and the property would be reclaimed in XXXXX. It is Respondent's view that reclamation should not affect the valuation of the property until actual physical work has begun because although a plan has been filed and a bond posted, the mine may subsequently be reopened.

XXXXX asserted that methods of valuation should be uniform throughout the state. He said that most coal mines throughout the state are in a similar situation. Almost all of the Utah coal mines have shut down either permanently or temporarily in the last four or five years. Some of the coal mines have been reclaimed. XXXXX indicated that Respondent is aware of the current problems in the coal industry.

XXXXX testified that Respondent allowed a 25% obsolescence factor on the improvements and a 35% obsolescence factor on the equipment. Obsolescence was based on the XXXXX study of sales of equipment of Utah coal mines. XXXXX recognizes that the study is old but asserted that he has seen no better data on which to rely. He testified that Respondent does not use a straight-line physical depreciation schedule. Instead, Respondent uses a guide similar to the NADA guide for used cars. The guide supplies a value for used equipment based on normal wear and tear. The obsolescence factor reflects shutdown and further depreciation.

XXXXX strongly objected to the use of the XXXXX equipment sale study as a base of determining obsolescence because it is too old. He also objected to XXXXX's comparison of the XXXXX to XXXXX in XXXXX, asserting that no two mines are alike.


The Commission finds that although Petitioner presented ample evidence in support of applying an economic obsolescence and physical depreciation factor, it did not sustain its burden of proving its obsolescence factor was more rationally based than Respondent's. Petitioner's obsolescence factor was based on the verbal opinion of someone in a related company. However, Respondent's obsolescence factors were based on a study, albeit an old, and possibly an outdated, study. Without more concrete evidence supporting its position, however, Petitioner's request for relief must be denied.


Based on the foregoing, it is the decision and order of the Utah State Tax Commission that Respondent's assessment be sustained.

DATED this 21 day of January, 1987.


R. H. Hansen Roger O. Tew

Chairman Commissioner

Joe B. Pacheco G. Blaine Davis

Commissioner Commissioner