BEFORE THE STATE TAX COMMISSION OF UTAH
v. ) ORDER OF APPROVAL
PROPERTY TAX DIVISION OF, : Appeal No. 86 0289
THE UTAH STATE TAX COMMISSION, )
STATEMENT OF CASE
The above-captioned matter involves an appeal to the Utah State Tax Commission from the assessment by the Property Tax Division of the Utah State Tax Commission on the subject property. XXXXX, (Petitioner) asserted that the subject property should have a lower taxable value as of the lien date, XXXXX.
1. The Petitioner, XXXXX, and the Respondent, Property Tax Division of the Utah State Tax Commission, agreed to the following facts:
(a) The XXXXX assessment of the Petitioner's property was $$$$$ which was the result of the application of the Utah allocation rate of .59% to a system value of $$$$$. The Utah allocation factor represented the Utah plant in service (at cost) divided by the system plant in service (at cost). The system value was the result of correlating the cost indicator of value ($$$$$), the income indicator of value ($$$$$), and the stock and debt indicator of value ($$$$$).
(b) Petitioner presented an independent appraisal by XXXXX which contained a system value of $$$$$, a Utah allocation rate of .4565%, and an estimated value of Utah property of $$$$$.
(c) The major difference in system value in Petitioner's appraisal and Respondent's appraisal was the recognition of obsolescence with respect to the cost indicator and stock and debt indicator of value in Petitioner's appraisal. Respondent has calculated Petitioner's return-on-net-plant to the Telecommunication industry's return-on-net-plant and has concluded that XXXXX's return was only 78.71% of the industry's. Obsolescence at 21.29% was therefore allowed with respect to the cost indicator only, because the ratio of return on plant is not appropriate for use with the market indicator such as the stock and debt indicator.
(d) Several adjustments were made in the XXXXX assessed value to arrive at a revised assessed value. First, the net book value of other property and equipment and Construction Work in Progress (CWIP) was added to the cost indicator. The revised assessment also incorporates corrections in estimated lease interest and effective income tax rates and adds an income indicator of CWIP to two of the income streams. The use of the Fixed Life Cash Flow Analysis was abandoned. No adjustment was made to the stock and debt indicator of value although it is likely some shareholder expectation of growth has contributed to the value. However, in order to properly extract the contribution owing to investor expectation, a study would have to be conducted to determine the amount of growth, and the results of such a study would be highly subjective and controversial.
2. The parties agree to the following:
(a) A revised Utah allocation rate of .46%, derived from dividing the Utah telephone plant in service (at cost) by the parent corporation's system investment, including other property and equipment and CWIP, (at cost), is proper.
(b) The revised XXXXX assessed value of $$$$$, which is the result of the application of the revised Utah allocation factor of .0046 to a system value of $$$$$, is proper.
(c) The revised system value, the result of correlating the revised cost indicator of $$$$$, the revised income indicator of $$$$$, and the original stock and debt indicator of $$$$$, is proper.
3. The parties therefore agree that Petitioner's appeal should be dismissed provided the above referenced adjustments are approved by the Commission.
XXXXX, XXXXX, XXXXX and XXXXX Counties had standing to object to the assessment of the subject property pursuant to Utah Code Ann. § 59-2-1013 (1953) but elected not to show cause.
Based on the foregoing, Utah State Tax Commission hereby finds the taxable value of the subject property as of XXXXX, to be $$$$$.
The Property Tax Division of the Utah State Tax Commission is hereby ordered to adjust its records in accordance with this Order of Approval.
DATED this 10 day of May, 1988.
BY ORDER OF THE STATE TAX COMMISSION OF UTAH.
R. H. Hansen Roger O. Tew
Joe B. Pacheco G. Blaine Davis