BEFORE THE STATE BOARD OF EQUALIZATION
FOR THE STATE OF WYOMING
IN THE MATTER OF THE APPEAL OF )
THUNDER BASIN, BLACK THUNDER )
AND COAL CREEK MINES FROM A )
DECISION OF THE CAMPBELL COUNTY ) Docket No. 2001-208
BOARD OF EQUALIZATION - 2001 )
PROPERTY VALUATION )
FINDINGS OF FACT,
CONCLUSION OF LAW,
DECISION AND ORDER
APPEARANCES
Lawrence J. Wolfe, P.C., Holland & Hart, LLC, for Thunder Basin Coal Company, and Black Thunder and Coal Creek Mines (Petitioner).
Charlene Lynde, Deputy County Attorney, Campbell County, for Jerry R. Shatzer, Campbell County Assessor (Assessor).
DIGEST
This matter was considered by the State Board of Equalization (State Board), Edmund J. Schmidt, Chairman, Roberta A. Coates, Vice-Chairman, and Sylvia Lee Hackl, Member, on written information and oral argument, pursuant to a Briefing Order dated February 21, 2002. This matter arises from a decision of the Campbell County Board of Equalization (County Board), concerning the 2001 valuation of personal property owned by Thunder Basin Coal Company (Petitioner) at its Black Thunder and Coal Creek Mines. The issue is:
Was the County Board’s decision on the valuation of Petitioner’s property supported by substantial evidence, according to procedures required by law, and neither arbitrary, capricious, nor inconsistent with law?
For the reasons set forth below, the State Board affirms the decision of the County Board, and the 2001 valuation of personal property by the Campbell County Assessor.
JURISDICTION
The State Board is mandated to “hear appeals from county boards of equalization . . . upon application of any interested person adversely affected” and to hold hearings after due notice pursuant to the Wyoming Administrative Procedure Act and prescribed rules and regulations. Wyo. Stat. § 39-11-102.1(c). An appeal from a county board of equalization decision must be filed with the State Board within thirty (30) days from entry of the county board decision. Rules, State Board of Equalization, Chapter 3, Section 2(a). Petitioner timely filed this appeal.
DISCUSSION
Petitioner appeals from an order of the Campbell County Board of Equalization affirming the assessed value of Petitioner’s property as determined by the Campbell County Assessor for 2001. Petitioner challenged the valuations set by the Assessor for Petitioner’s machinery and equipment at its Black Thunder Mine (“BTM”) and Coal Creek Mine (“CCM”). The Assessor valued the personal property at BTM at $231,558,310 and the personal property at CCM at $23,861,300. Petitioner’s appraiser valued the personal property at BTM at $168,788,000 and at CCM at $12,459,000. The County Board affirmed the Assessor’s valuations. On appeal, Petitioner alleges that the County Board’s decision is arbitrary and capricious, contrary to law, and unsupported by substantial evidence. Petitioner contends that the County Board’s order should be reversed for five reasons:
(1) The order adopted the Assessor’s appraisal, which failed to account for all forms of depreciation – physical depreciation, functional and economic obsolescence – in determining the valuations for both BTM and CCM.
(2) The Assessor’s appraisal failed to fully account for all physical depreciation and functional obsolescence because it reset the economic lives of all the property to June 1, 1998, the date of the sale from ARCO to Arch Minerals, Inc. This had the effect of treating all property as if it were new on that date, thereby eliminating years of depreciation that accrued from the time the equipment was actually acquired. The Assessor’s appraisal extended the economic life of some of the equipment and facilities beyond the time such equipment would be in use and beyond the life of the mine.
(3) The order violated the Department of Revenue’s Rules by substantially increasing the valuation of property between 2000 and 2001.
(4) The order affirmed the Assessor’s appraisal which did not account for any functional depreciation or economic obsolescence for BTM. Because the appraiser considered the June 1, 1998, sale to have established fair market value for the property,
no functional or economic obsolescence was allowed, despite the fact that the appraisal occurred over two years after the sale.
(5) The Assessor’s appraisal lacked any cross-checking to actual sales values.
The Assessor responds with three issues:
(1) Whether the 2001 value of Petitioner’s property established by the Assessor and affirmed by the County Board is (a) arbitrary, capricious, an abuse of discretion or otherwise not in accordance with law; (b) in excess of statutory jurisdiction or authority; (c) without observance of procedures required by law; or (d) unsupported by substantial evidence.
(2) Whether Petitioner is entitled to its preferred method of valuation, when there is substantial evidence in the record to support the findings by the County Board that the Assessor used a rational appraisal method, equally applied to all property, which resulted in essential fairness in valuing Petitioner’s property for 2001.
(3) Whether the Assessor violated statutorily imposed duties by using the best information available in 2001.
FINDINGS OF FACT
General Information
1. Thunder Basin Coal Company owns and operates BTM near Wright, Wyoming, and CCM near Gillette. Thunder Basin was purchased by Arch Coal, Incorporated, on June 1, 1998. [Trans. pp. 32-33; Exhibit 3, TB00027]. 1
2. For the 1999 and 2000 tax years, the Campbell County Assessor retained Thos. Y. Pickett & Company, Inc. (Pickett) to assist in appraising the mines. Because Petitioner had not yet finalized its reallocation information (the process of allocating the total sales price to individual assets), the appraiser used information reflecting the actual acquisition
date of equipment by the original mine owner in determining current value. [Trans. pp. 175-176; Exhibit 9, TB00017].
3. Based upon the appraisals conducted by Pickett, which in 2000 included a “settled amount” agreed upon between Pickett and the Ernst & Young, Incorporated, appraisers retained by Petitioner, the Assessor valued the two mines for tax year 2000 as follows:
Mine Market Value Assessed Value Estimated Tax
BTM $238,331,920 $27,408,171 $1,650,054
CCM $ 26,042,110 $ 2,994,843 $ 180,298
[R.A. 2000
Assessment Schedules, BTM and CCM; Trans. pp. 164, 177; Exhibit 6, TB00268].
4. Black Thunder Mine produced 60.1 million tons of coal in 2000, at an average price of $5.02 per ton. The production reserves under lease at the mine are estimated at one (1) billion tons and the estimated remaining life of the facility at current production rates is 16 years. [Trans. pp. 34-37].
5. Coal Creek Mine produced 4.2 million tons of coal in 2000, at an average price of $3.64 per ton. The mine was closed in the spring of 2000. [Trans. pp. 38-39]. BTM and CCM (when open) sold coal through long-term contracts and on the spot market. [Trans. pp. 42-43, 46, 50-51; Exhibit 3, TB00195; Exhibit 6, TB00228].
6. For the 2001 tax year, the Campbell County Assessor again retained Pickett to conduct industrial appraisals in Campbell County. Pickett has done industrial appraisals in Campbell County since the mid-1980's, and performs approximately 20 complex mining appraisals each year throughout Wyoming and the Powder River Basin. [Trans. pp. 154, 190]. Pickett applied the same appraisal principles when appraising BTM and CCM, and used the same method for all coal mines appraised in Campbell County and the State of Wyoming in 2001. [Trans. pp. 185, 190].
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1 Documents contained in the original County Board record will be referred to as "R.A." (Record on Appeal) and by document name, since the pages in that record are not numbered. References to the transcript of the hearing will be to "Trans." and the appropriate page number. The joint exhibits will be referred to by exhibit number (1 through 9), followed by the sequentially numbered page - TB (for "Thunder Basin") 0001, for example.
7. The Pickett appraisals used information provided by Petitioner pursuant to requests made by Pickett on behalf of the Campbell County Assessor’s office. [Trans. pp. 155-156, 170, 176-177; Exhibit 3, TB00023-00080; Exhibit 6, TB00212-233]. In Pickett’s opinion, the 2001 fair market value was $247,576,990 for BTM, and $24,630,557 for CCM [Exhibit 3, TB 00123; Exhibit 6, TB00268].
8. The 2001 Assessment Schedules issued by the Assessor for the two mines established the following values: 2
Mine Fair Market Value Assessed Value Estimated Tax
BTM $231,558,310 $26,629,206 $1,602,386
CCM $ 23,861,300 $ 2,744,049 $ 165,120
[R.A. 2001 Assessment Schedules, BTM and CCM].
9. Petitioner timely appealed the assessments to the County Board of Equalization, which held a hearing on June 20, 2001. In order to allow sufficient time for the parties to prepare Proposed Findings of Fact and Conclusions of Law, and for the County Board to issue its decision, Petitioner waived the statutory August deadline for the issuance of the County Board’s order. [R.A. Letter from Holland & Hart agreeing to waive deadline, dated 7/16/01; Trans. pp. 218-219; Exhibit 1, TB00019; Exhibit 4, TB00207; see also Wyo. Stat. 39-13-102(c)(v)]. The County Board issued its Findings of Fact and Conclusions of Law on November 20, 2001. [R.A. Board of Equalization’s Findings of Fact and Conclusions of Law]. Petitioner filed its Notice of Appeal with the State Board on December 18, 2001.
The Thos. Y. Pickett Appraisal
10. Danny Hendrix, an appraiser with the Thos. Y. Pickett & Co., Inc., conducted the appraisals of BTM and CCM. He used the same method in appraising these mines as he did for all of the mass appraisals he performed for mines throughout the county and state. [Trans. pp. 154-155, 185].
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2 Petitioner cites the values determined by the Assessor for BTM and CCM as $247 million and $24.6 million, respectively. [Brief of Petitioner, pp. 1, 12 ¶29, cf p. 5, ¶8]. This is incorrect. The numbers to which Petitioner refers appear on the summary page of the Ernst & Young appraisal [Exhibit 7, TB00288], which report in turn refers not to the actual assessments by the Assessor, but instead to the values estimated by the Pickett appraisals. The record is silent as to why the actual valuations determined by the Assessor differ from, and are in fact less than, those estimated by the Pickett appraiser.
11. Mr. Hendrix began the appraisal process by requesting information from Petitioner about both mines. [Exhibit 3, TB00023-00025; Exhibit 6, TB00212-00214]. Two critical pieces of information requested were “an asset list, indicating description, including make, model, type, size, and age” and “depreciation schedules” for all machinery and equipment. [Exhibit 3, TB00024; Exhibit 6, TB00213]. Mr. Hendrix asked that the information be provided by February 15, 2001.
12. Sometime after February 26, 2001, Mr. Robert Branham, property tax manager for Petitioner, sent to Mr. Hendrix the fixed asset schedules. In a cover memo, Mr. Branham noted that the schedules showed Petitioner’s “[c]urrent book costs [as] taken from an appraisal by Price Waterhouse Coopers LLP at the time of acquisition in June, 1998.” [Exhibit 3, TB00053].
13. During the appraisal process, Mr. Hendrix met with Christine Wiard, Petitioner’s business manager. Mr. Hendrix again requested an updated depreciation schedule because of the amount of time which had passed since the sale, and the need for current information upon which to base the appraisals. [Trans. pp. 31, 173, 176]. However, Mr. Hendrix did not receive a depreciation schedule until June, 2001, when he saw a copy of the appraisal prepared by Ernst & Young at the Petitioner’s request, in response to the Assessor’s assessment schedules. [Trans. pp. 156, 170; Exhibit 7, TB00284].
14. Based upon the information provided by Petitioner, Mr. Hendrix appraised the personal property at the mines using the cost approach. Mr. Hendrix testified that this approach is a generally accepted appraisal method. [Trans. p. 184].
15. Mr. Hendrix considered the amount allocated to each asset, as reflected by Petitioner’s own fixed asset schedules, to be the acquisition cost. Mr. Hendrix further assumed that the assets were purchased at fair market value. This assumption accounted for depreciation of assets as of the date of the sale, because the buyer is presumed to have paid only what each asset was worth - its fair market value. [Trans. pp. 158, 161, 168]. Mr. Hendrix testified, “[T]he equipment sold for what it would bring at the market on that particular day . . . Arch Coal went out and paid a price they thought was fair . . . And then they have to turn around - and this is common procedure - you have to turn around and allocate that price to all of the assets . . ..” [Trans. p. 180].
16. The method employed by Mr. Hendrix did not assume the equipment was new as of the June 1998 acquisition date. The assumption was simply that the value - as allocated by Petitioner’s own appraisal from Price Waterhouse Coopers - was a fair market value. [Trans. p. 168]. As a further component of the appraisal, Mr. Hendrix used standard economic lives for equipment based on information obtained from the Marshall Swift Valuation Service. [Trans. pp. 158-168, 185, 190].
17. Finally, Mr. Hendrix calculated the 2001 value of each asset by applying a depreciation factor. [Trans. pp. 159, 178]. That the Assessor also accounted for depreciation is reflected by the decrease in the total valuation of each mine from the 2000 to the 2001 assessments:
Year Mine Market Value Assessed Value Est. Taxes
2000 BTM $238,331,920 $27,408,171 $1,650,054
2001 BTM $231,558,310 $26,629,206 $1,602,386
(2.84% decrease)
2000 CCM $ 26,042,110 $ 2,994,843 $ 180,298
2001 CCM $ 23,861,300 $ 2,744,049 $ 165,120
(8.37% decrease)
The Ernst & Young Appraisal
18. Thunder Basin Coal Company employed John C. Coates, manager of Ernst & Young, LLP, of Prairie Village, Kansas, to prepare an appraisal for Petitioner’s appeal of the 2001 BTM and CCM assessments. Mr. Coates’ experience with mine appraisals was gained through his work as an industrial property appraiser for the Montana Department of Revenue from 1982 to 1984, during which time he participated in appraisals of 5 mines. [Trans. pp. 63-66; Exhibit 7].
19. Mr. Coates’ appraisal was completed May 31, 2001, with an effective date of January 1, 2001. [Trans. p. 66].
20. Mr. Coates opined that the market value of the personal property at BTM was $168,788,000 and the market value of the personal property at CCM was $12,459,000 - respectively, 27.1% and 47.7% less than the valuations established by the Assessor. [Trans. pp. 67-69; Exhibit 7, pp. TB00286-00288].
21. Mr. Coates also used the cost approach in appraising Petitioner’s property. However, in determining the value of the personal property, Mr. Coates began with the actual acquisition costs, or historical costs, incurred by Petitioner’s predecessor in title, and then calculated all accrued depreciation to determine each asset’s current value. [Trans. pp. 69, 78-81, 87-92, 146; Exhibit 7, TB00146-00147]. The methodology employed by Mr. Coates did not take into account the value allocated to each asset by Petitioner after the purchase of the mines, nor any maintenance which had the effect of re-building or re-conditioning the equipment.
22. Petitioner’s witness, Mr. Coates, and the Assessor’s appraiser, Mr. Hendrix, had differing opinions as to the starting point for calculating the value of the personal property: Petitioner’s witness contended that the actual acquisition cost incurred by the original owner should be the value, whereas the Assessor’s appraiser began with the cost allocated to each piece of property by Petitioner’s appraiser (Price Waterhouse Coopers),
at the time of the acquisition by Arch Coal. However, both appraisers used the same appraisal method (the cost approach), and the same depreciation schedules (5 percent per year for buildings, 4 percent per year for machinery and equipment). [Trans. pp. 98, 125-127,149-150, 159, 178].
23. Petitioner’s witness testified at length about basic appraisal terms and principles, and about the approach he employed in appraising the property; his testimony encompasses over 88 pages in the record. However, his critique of the methods used by the Assessor’s appraiser constitutes less than 3 pages in length, and focuses almost exclusively on Pickett’s use of 1998 as the acquisition date for two dozers. [Trans. pp. 109-112]. Mr. Coates also acknowledged that the accounting for external obsolescence constituted the only substantial difference between the appraisals. [Trans. pp. 98, 147].
24. Any Discussion above or Conclusion of Law below which includes a finding of fact may also be considered a Finding of Fact and, therefore, is incorporated herein by this reference.
CONCLUSIONS OF LAW
25. The notice of appeal was timely filed and the State Board has jurisdiction to determine this matter.
26. We note at the outset that the County Board’s decision was not issued in accordance with the requirement, set forth in the Wyoming Statutes, that a county board of equalization “shall . . . [d]ecide all protests heard and provide the protestant with a written decision no later than the first Monday in August.” Wyo. Stat. §39-13-102(c)(v)(emphasis supplied). This deadline is directly related to the County Board’s duty to “levy the requisite taxes for the year” by that same day, see Wyo. Stat. §39-13-107(b)(i)(A), and to set the mill levies by the first Tuesday in August, Wyo. Stat. §39-13-102(g), which cannot be accomplished properly unless all tax protests have been decided.
Since this defect is not jurisdictional in nature, the State Board will not reverse the County Board on this basis. However, we strongly caution the County Board to complete its hearings in accordance with the statutory requirements. The statutes set forth dates by which the County Board must complete its duties; as such, parties to an appeal may not “waive” these deadlines.
27. The State Board’s inquiry is limited to whether the County Board’s decision affirming the Assessor’s 2001 valuations of Petitioner’s property is: (a) arbitrary, capricious and abuse of discretion or otherwise not in accordance with law; (b) in excess of statutory jurisdiction or authority; (c) without observance of procedures required by law; or (d) unsupported by substantial evidence. Rules, Wyoming State Board of Equalization, Chapter 3, § 9.
28. Petitioner sets forth five contentions in urging reversal of the County Board’s decision. [Petitioner’s Opening Brief, pp. 2-3]. Before addressing these specific contentions, we will set forth a brief review of the basic principles and procedures of taxation relevant to this matter.
29. Article 15, Section 11 of the Wyoming Constitution requires that all property “be uniformly assessed for taxation, and the legislature shall prescribe such regulations as shall secure a just valuation for taxation of all property, real and personal." The legislature, in turn, has required the Department of Revenue (Department) to “prescribe by rule and regulation the appraisal methods and systems for determining fair market value using generally accepted appraisal standards.” Wyo. Stat. § 39-13-103(b)(ii).
30. The Wyoming Supreme Court has consistently held that Article 15, Section 11 of the Wyoming Constitution requires “only a rational method [of appraisal], equally applied to all property, which results in essential fairness.” Teton Valley Ranch v. State Board of Equalization, 735 P.2d 107, 115 (Wyo. 1987)(Urbigkit, J., concurring), quoted with approval in Holly Sugar v. State Board of Equalization, 839 P.2d 959, 963 (Wyo. 1992), and Pacificorp, Inc., v. Department of Revenue, 2001 WY 84, ¶11, 31 P.3d 64, ¶11 (Wyo. 2001). Broken into its component parts, this standard requires (1) a rational method; (2) equally applied to all property; and (3) essential fairness. It is the burden of one challenging an assessment to prove by a preponderance of the evidence that at least one of these elements has not been fulfilled. Basin Electric Power Coop. v. Department of Revenue, 970 P.2d 841, 852 (Wyo. 1998).
31. The legislature has mandated that all taxable property be valued annually at fair market value. Wyo. Stat. §39-13-103(b)(ii). Fair market value is defined as:
[T]he amount in cash, or terms reasonably equivalent to cash, a well informed buyer is justified in paying for a property and a well informed seller is justified in accepting, assuming neither party to the transaction is acting under undue compulsion, and assuming the property has been offered in the open market for a reasonable time . . ..
Wyo. Stat. § 39-11-101(a)(vi).
32. The Department has promulgated rules prescribing the methods for valuing property. The acceptable methods include a sales comparison approach, a cost approach, and an income or capitalized earnings approach. Rules, Department of Revenue, Ch. 9, § 6 (a), (b), (c). The Department has further noted that, “[f]or personal property, the valuation methodology selected shall reflect the trade level at which personal property is found, and shall account for factors influencing the value in place including utility, usefulness to the owner or the actual income produced.” Rules, Department of Revenue, Ch. 9, §6.
33. The county assessor is the official responsible for assessment of personal property. Wyo. Stat. §18-3-204(a). “All taxable property shall be annually listed, valued and assessed for taxation in the county in which located and in the name of the owner of the property on January 1 . . ..” Wyo. Stat. §39-13-103(b)(i)(A). An assessor’s valuation is presumed valid, accurate, and correct. This presumption survives until overturned by credible evidence. Teton Valley Ranch v. State Board of Equalization, 735 P.2d at 113. The presumption is especially valid where the Assessor has valued the property in accordance with the Department’s Rules and Regulations. Rules, Department of Revenue, Chapter 9, § 6(b), (d).
34. The burden is on the petitioner to present sufficient credible evidence to overcome the presumption in favor of the assessor’s valuation. Colorado Interstate Gas Co. v. Wyoming Department of Revenue, 20 P.3d 528, 521 (Wyo. 2001), citing Teton Valley Ranch v. State Board of Equalization, 735 P.2d at 113. The Wyoming Supreme Court has long held that a mere difference of opinion is insufficient to sustain a challenge to a valuation decision. In Bunten v. Rock Springs Grazing Association, 29 Wyo. 461, 215 P. 244, 248 (1923), Justice Blume wrote:
There is no such thing as absolute value. A stone cannot be other than a stone, but one man may give a different valuation to a piece of land than another . . . It its ultimate analysis, therefore, we have here, presumptively, an honest difference of opinion, and in such case, unless the allegations in the amended petition negative this state of facts, the general rule above stated applies, and the judgment of the board, honestly exercised, must, under the decisions of all the courts, prevail.
Ten years later, the Court discussed the burden upon the taxpayer to produce sufficient evidence to demonstrate error in a valuation decision:
The fact that, in the opinion of a number of good citizens of Crook County, the value of the lands in that county is lower than that fixed by the board . . . does not show that the state board of equalization acted fraudulently, arbitrarily, or with intentional disregard of the rights of the taxpayers of Crook County. It shows merely that these men differ in their opinion from that held by the members of the state board of equalization.
State ex rel. Greenwood v. Pearson, 46 Wyo. 307, 26 P.2d 641, 642 (1933).
More recently, the Court has emphasized that taxpayers’ disagreement with the way in which a valuation method was employed “is not sufficient to meet the companies’ burden of demonstrating that the Board acted fraudulently, arbitrarily, capriciously, or in abuse of its discretion. It simply demonstrates that there was a difference of opinion from that held by the members of the Board.” Hillard v. Big Horn Coal Co., 549 P.2d 293, 300 (Wyo. 1976), citing State ex rel. Greenwood v. Pearson, supra; see also Amax Coal Co. v. Wyoming State Board of Equalization, 819 P.2d 834, 838 (Wyo. 1991).
35. However, if a taxpayer introduces sufficient evidence to overcome the presumption, the burden shifts to the assessor to indicate how the property was valued. The county board must then evaluate all of the evidence, bearing in mind that its conclusions must be supported by substantial evidence. Basin Electric Power Coop. v. Department of Revenue, 970 P.2d at 851.
36. “‘Substantial evidence’ is a term of art, best described as relevant evidence that a reasonable mind can accept as adequate to support an agency’s conclusion.” Sidwell v. State Worker’s Compensation Div., 977 P.2d 60, 63 (Wyo. 1999). While substantial evidence may be less than the weight of the evidence, it cannot be clearly contrary to the overwhelming weight of the evidence. The Wyoming Supreme Court has held that “an agency’s action is arbitrary and capricious and must be reversed if any essential finding is not supported by substantial evidence.” Amax Coal West, Inc. v. State. Board of Equalization, 896 P.2d 1329, 1335 (Wyo. 1995), citing Majority of Working Interest Owners in Buck Draw Field Area v. Wyoming Oil and Gas Conservation Commission, 721 P.2d 1070, 1079 (Wyo. 1986) and Amax Coal v. State Board of Equalization, 819 P.2d 825, 831 (Wyo. 1991).
37. In this case, the Assessor utilized the cost approach to value Petitioner’s property. Thus, his valuations are presumed valid, accurate and correct. The burden is on Petitioner to rebut the presumption with sufficient credible evidence.
38. The cost approach is used “to establish value for personal property through the process of cost estimation. The cost approach relies on the principle of substitution in which an informed buyer will not pay more for a property than its comparable replacement.” Rules, Ch. 9, §6(b).
39. The Rules also acknowledge the role of appreciation and depreciation in the cost approach. Depreciation “means a loss of utility and hence value from any cause.” Rules, Department of Revenue, Ch. 9, §4(d). The Department has defined three forms of depreciation: physical depreciation, functional obsolescence, or economic (or external) obsolescence.
(I)“Physical Depreciation” means the physical deterioration as evidenced by wear and tear, decay or depletion of the property.
(ii)“Functional Obsolescence” means the impairment of functional capacity or efficiency, which reflects a loss in value brought about by such factors as defects, deficiencies, or super adequacies, which affect the property item itself or its relation with other items comprising a larger property.
(iii)“Economic obsolescence” means impairment of desirability or useful life arising from factors external to the property, such as economic forces or environmental changes which affect supply-demand relationships in the market.
Rules, Department of Revenue, Ch. 9, §4(d).
40. Three of Petitioner’s five arguments allege that the Assessor failed to properly account for all forms of depreciation in valuing the mines’ personal property for 2001. Another argument alleges that the assessments violated the Department’s rules by increasing the value of property between 2000 and 2001. The final argument contends that the Assessor erred in not cross-checking his values to actual sales prices. [Petitioner’s Opening Brief, pp. 2-3]. None of these arguments is supported by the facts in the record, or by applicable law.
The Assessor’s appraiser properly accounted for depreciation in appraising the mines
41. As noted above, ¶39, the Department’s Rules define three forms of depreciation: physical depreciation, functional obsolescence, and economic obsolescence. The record is clear that Pickett did account for physical depreciation in the mines’ appraisals, a fact which Petitioner admits. [Trans. pp. 158, 161-167, 178, 180-188; Brief of Petitioner, p. 12, ¶29].
The record is also clear that functional and economic obsolescence were accounted for through Pickett’s use of the 1998 allocated costs as Petitioner’s acquisition cost, and by the assumption that the assets were purchased at fair market value. Mr. Hendrix testified that this assumption accounted for functional and economic obsolescence because the buyer is presumed to have paid only what each asset was worth - its fair market value. Mr. Hendrix testified, “[T]he equipment sold for what it would bring at the market on that particular day . . . Arch Coal went out and paid a price they thought was fair.” [Trans. pp. 158, 161, 168, 180]. The testimony also reflects that Mr. Hendrix did account for changes to the asset list made by Petitioner, further accounting for functional and economic obsolescence. [Trans. pp. 161, 167; Ex. 6, TB00150, 00234, 00243-00244].
42. Related to Petitioner’s argument about depreciation is its contention that the Assessor “re-set” the economic lives of the equipment at 1998, that the Assessor assumed
the equipment was new as of that date, and, as a result, the equipment was erroneously presumed to have economic lives extending beyond the life of BTM. [Brief of Petitioner, p. 16, ¶43, pp. 23-24, ¶59]. Again, Petitioner’s argument fails.
The record is clear that the Assessor did not assume the assets were new, only that they were purchased, in 1998, at a fair market price. [Trans. p. 168]. Furthermore, the Assessor did not “re-set” the economic lives of the equipment: the Assessor used “standard lives” for the property - and for all coal mines, as required for mass appraisal. [Trans. pp. 159, 185, 191]. The “life” of an asset determines what percentage of depreciation applies each year based on guidelines provided by the Department of Revenue. State of Wyoming Personal Property Valuation Manual (2002), DOR Ad Valorem Tax Division, “Forward” [see also Exhibit 3, TB00168]. The “economic life” of an asset is defined as “[t]he period of time over which an asset’s operation is economically feasible. The economic life may or may not be equivalent to physical life of the asset.” Personal Property Valuation Manual, Section 1, p. 46.
Finally, Petitioner cites no authority for the proposition that personal property has no value beyond the life of the entity of which it is a part. Much of the property assessed by the Assessor was equipment or mobile machinery - property which could be used in another location should a mine cease production or be closed, and thus which retains an economic value even if idled. [Trans. pp. 174-175]. Petitioner’s own appraiser in effect admits as much, by assigning a value - albeit one below the residual value established by the Department’s Rules - to the equipment at CCM, which closed in 2000.
The Assessor’s appraiser valued the personal property in accordance with Department guidelines. The guideline for valuing used personal property notes:
Valuing used personal property requires that the Assessor make a decision about the remaining economic life of the equipment. The purchase of used equipment that has not reached the end of its economic life would be valued normally. In other words you would use the purchase price (if accurate) and then trend the property and depreciate it.
When the equipment has been reconditioned to extend its remaining economic life the equipment should be treated as a new item and valued at the new estimated cost. The cost should include all costs incurred to recondition the equipment plus the value of the item at the time of the reconditioning.
Equipment that has been taken out of service/use but is still on the premises must also be valued. However the Assessor may want to consider additional functional and/or economic obsolescence.
State of Wyoming Personal Property Valuation Manual (2002), DOR Ad Valorem Tax Division, Section 1, p. 36 (emphasis supplied).
At this juncture, it should be noted that the approach utilized by Petitioner’s appraiser resulted in residual values for all types of personal property well below the level established by the Department’s Rules. Chapter 9, Section 6(b)(iv)(D) states:
Depreciation shall continue to be applied until the residual value is reached. The residual value shall be considered to be 25% for all personal property, unless the property tax appraiser has collected sufficient market information to indicate a different residual value. (Emphasis supplied.)
Furthermore, the Department’s guidelines for valuing used personal property provide that “[i]f the equipment has reached its residual value, the acquisition cost should be treated as a RCNLD value and frozen at that value, RCN trending and depreciation would not be applied . . .” State of Wyoming Personal Property Valuation Manual (2002), DOR Ad Valorem Tax Division, Section 1, p. 36.
The residual values determined by Petitioner’s appraiser were all below the 25% set by the Department, and in all but one case, substantially less than that amount:
Mobile machinery and equipment 11%
Machinery and equipment 14%
Site improvements 14%
Vehicles 15%
Buildings 17%
Personal property 24%
[Trans. 116-119; Exhibit 6, TB00352].
While a recalculation of the valuations is beyond the scope of this Board’s authority, it is clear that, had Petitioner’s appraiser adhered to the Department’s residual value rule, his valuations would have been higher, and the subsequent difference between the parties’ valuations would have been much less.
The 2001 assessments did not “substantially increase the value of property” over the 2000 valuations
43. During the County Board hearing, and in briefing and argument before the State Board, Petitioner expended much effort in arguing that Pickett’s use of the 1998 allocation amounts “appreciated” the value of the property between the 2000 and 2001 appraisals. [Trans. pp. 109-110, 210; Brief of Petitioner, p. 19, ¶¶ 50-52]. Petitioner focused its arguments on the valuation of two dozers, reflected on one page of Pickett’s lengthy appraisal. [Exhibit 3, TB00146].
The record reflects two key points that refute Petitioner’s allegation. The first is that the Assessor’s actual valuation of the total amount of personal property at each mine decreased between 2000 and 2001, as would be expected with property subject to depreciation:
Year Mine Market Value Assessed Value Est. Taxes
2000 BTM $238,331,920 $27,408,171 $1,650,054
2001 BTM $231,558,310 $26,629,206 $1,602,386
(2.84% decrease)
2000 CCM $ 26,042,110 $ 2,994,843 $ 180,298
2001 CCM $ 23,861,300 $ 2,744,049 $ 165,120
(8.37% decrease)
The second is that, based upon Petitioner’s own asset allocation list, the value of most items decreased. [See e.g. Exhibit 3, TB00146; Exhibit 6, TB00352]. While it is true that the value assigned to a few individual items increased, Petitioner’s attempt to balance its entire argument on the valuation of two dozers falls far short of demonstrating error in the Assessor’s valuation.
Cross-checking to actual sales prices is not a required component of the cost approach to valuation
44. Finally, Petitioner contends the Assessor’s appraisal was arbitrary and capricious because it failed to cross-check values with actual sales prices. Petitioner’s appraiser testified he cross-checked prices of some equipment to develop depreciation tables. [Trans. pp. 79-90; Exhibit 7, TB00298, 00318-00324.] However, Petitioner failed to produce any evidence that cross-checking prices with Wyoming Machinery Company, or any other seller of mining equipment, is an appropriate component of mass appraisal. Petitioner also fails to cite any case law, statute or regulation stating that an assessor’s decision to not cross-check sales prices of individual pieces of equipment is erroneous. Finally, it should be noted that the cross-checking done by Petitioner’s appraiser was part of the process which led to residual values below those permitted by Department rule, discussed above.
CONCLUSION
45. The task before the State Board is not “to determine which of various appraisal methods is best”; rather, we are simply to “determine whether substantial evidence exists to support usage of the [chosen] method of appraisal.” Basin Electric Power Coop. v. Department of Revenue, 970 P.2d at 851, quoting Amoco Production Company v. State Board of Equalization, 899 P.2d 855, 858 (Wyo. 1995) and Holly Sugar Corp. v. State Board of Equalization, 839 P.2d at 963. For the reasons stated above, we conclude that substantial evidence does exist to support the Assessor’s valuation and the County Board’s decision affirming that valuation.
46. Petitioner failed to carry its burden of demonstrating error in the Assessor’s 2001 valuations of BTM and CCM. At most, Petitioner demonstrated a difference of opinion between the Assessor’s valuation, and the determination of its own expert. To quote the Wyoming Supreme Court in Amax Coal Co. v. Wyoming State Board of Equalization, 819 P.2d at 838:
[Petitioner] proposes a valuation method which is different from that used by [the Assessor], but it is unable to demonstrate that the method used by the [Assessor] violated the applicable review standards. The evidence offered by [Petitioner] demonstrated a difference of opinion, as in Hillard, and, of course, [Petitioner’s] model would have the effect of reducing their tax assessments.
See also Chicago, B. & Q. R. Co. v. Bruch, 400 P.2d 494, 500 (Wyo. 1965) (“The entire record . . . is devoid of any evidence showing arbitrary, capricious, despotic or implied fraudulent action on the part of the board or any of its members. Nor has it been shown that an excessive valuation has been placed upon the appellant’s properties. In fact, there seems to have been a material reduction below previous valuations of appellant’s properties . . ..”).
A mere difference of opinion as to value is not sufficient to overcome the presumption in favor of an assessor’s valuation. Basin Electric Power Coop. v. Department of Revenue, 970 P.2d at 851; Teton Valley Ranch v. State Board of Equalization, 735 P.2d 107 (Wyo. 1987); J. Ray McDermott & Company v. Hudson, 370 P.2d 364, 370 (Wyo. 1962).
47. Petitioner argues that this is “more than a mere difference of opinion [and] reflects fundamentally different choices about compliance with Wyoming law.” [Brief of Petitioner, p. 25, ¶61]. However, the evidence does not demonstrate any manner in which the Assessor did not comply with Wyoming law in valuing Petitioner’s mines. This case is remarkably similar to Teton Valley Ranch v. State Board of Equalization, 735 P.2d at 113, in which several “widely divergent assessments of the value of the property” were before the board, as was “evidence of the methods used and factors considered” by the appraisers. As in that case, here Petitioner offered evidence of its appraiser’s perceived “superior expertise, experience, and technique,” but offered “no evidence that the county assessor failed to assess the property in a manner consistent with the directives of the state board.” The result in this case should be the same as in Teton Valley Ranch - affirmance of the Assessor’s valuation.
48. Finally, Petitioner failed to demonstrate any violation of the constitutional mandate that its properties be uniformly assessed. The testimony was that the same method was used to value the personal property for all mines in Campbell County. The Constitution requires “only a rational method [of appraisal], equally applied to all property, which results in essential fairness.” Teton Valley Ranch v. State Board of Equalization, 735 P.2d at 115 (Urbigkit, J., concurring). The evidence in this case demonstrates that “all similarly situated taxpayers [were treated] uniformly and equally.” Thunder Basin Coal Company v. Wyoming State Board of Equalization, 896 P.2d 1336, 1340 (Wyo. 1995).
49. The County Board’s decision on the valuation of Petitioner’s property was supported by substantial evidence, according to procedures required by law, and neither arbitrary, capricious, nor inconsistent with law.
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ORDER
IT IS THEREFORE HEREBY ORDERED:
The decision of the County Board affirming the Assessor’s valuation of Petitioner’s property shall be and the same is, hereby affirmed.
Pursuant to Wyo. Stat. § 16-3-114 and Rule 12, Wyoming Rules of Appellate Procedure, any person aggrieved or adversely affected in fact by this decision may seek judicial review in the appropriate district court by filing a petition for review within 30 days of the date of this decision.
DATED this 23rd day of December, 2002.
STATE BOARD OF EQUALIZATION
Edmund J. Schmidt, Chairman
Roberta A. Coates, Vice-Chairman
Sylvia Lee Hackl, Member
ATTEST:
Wendy Soto, Executive Secretary