BEFORE THE STATE BOARD OF EQUALIZATION

FOR THE STATE OF WYOMING

IN THE MATTER OF THE APPEAL OF )

MOUNTAIN CEMENT COMPANY FROM )

A DECISION OF THE ALBANY COUNTY ) Docket No. 2004-136

BOARD OF EQUALIZATION - 2004 )

PROPERTY VALUATION )

___________________________________________________________________________________________________________________________

DECISION AND ORDER

___________________________________________________________________________________________________________________________

APPEARANCES

Lawrence J. Wolfe, Holland & Hart LLP, for Mountain Cement Company (Petitioner or Mountain Cement).

James P. Schermetzler, Deputy Albany County and Prosecuting Attorney, for Deborah J. Smith, Albany County Assessor (Assessor).

DIGEST

Petitioner appealed a decision of the Albany County Board of Equalization (County Board) affirming the Albany County Assessor’s corrected 2004 valuation of the real property and improvements of Mountain Cement Company, whose plant is located near Laramie, Wyoming. The Assessor valued Petitioner’s property, for tax purposes, at $38,858,920. Petitioner asks the State Board to remand this case to the County Board with a directive that Petitioner’s property and improvements be assessed at $18,040,111. The State Board of Equalization (State Board), comprised of Alan B. Minier, Chairman, Thomas R. Satterfield, Vice Chairman and Thomas D. Roberts, Board Member, considered the hearing record and decision of the County Board, briefs filed pursuant to a Briefing Order (Locally Assessed Property) dated December 16, 2004, and oral arguments heard on April 7, 2005.

The State Board remands this case to the County Board with respect the following issues: the Assessor’s use of trending; the Assessor’s use of a 30% residual value for personal property; three duplicate assets; and pollution control equipment.

The State Board affirms the decision of the County Board with respect to the following issues: four assets in modified use; Petitioner’s claims of functional and economic obsolescence; Petitioner’s claims of costs related to assets not in service; and three assets not listed on a 1985 fixed asset listing of a predecessor company.

PROCEEDINGS BEFORE THE COUNTY BOARD

The County Board conducted a hearing on July 21, 2004, with Hearing Officer James Wolfe presiding, and took the matter under advisement. On September 17, 2004, the County Board entered an Order finding for the Assessor. The Order relied heavily on the presumed validity of the Assessor’s valuation, and incorporated by reference the Assessor’s proposed Findings of Fact.

JURISDICTION

The State Board is required to “hear appeals from county boards of equalization.” Wyo. Stat. Ann. § 39-11-102.1(c). A timely appeal from the County Board decision was filed with the State Board. Rules, Wyoming State Board of Equalization, Chapter 3, §2.

STANDARD OF REVIEW

When the State Board hears appeals from a county board, it acts as an intermediate level of appellate review. Laramie County Board of Equalization v. Wyoming State Board of Equalization, 915 P.2d 1184, 1188 (Wyo. 1996); Union Pacific Railroad Company v. Wyoming State Board of Equalization, 802 P.2d 856, 859 (Wyo. 1990). In its appellate capacity, the State Board treats the county board as the finder of fact. Id. In contrast, the State Board acts as the finder of fact when it hears contested cases on appeal from final decisions of the Wyoming Department of Revenue. Wyo. Stat. Ann. § 39-11-102.1(c). This sharp distinction in roles is reflected in the State Board Rules governing the two different types of proceedings. Compare Rules, Wyoming State Board of Equalization, Chapter 2 and Rules, Wyoming State Board of Equalization, Chapter 3. Statutory language first adopted in 1995, when the Board of Equalization and the Department of Revenue were reorganized into separate entities, does not express the distinction between the State Board’s appellate and de novo capacities with the same clarity as our long-standing Rules. 1995 Wyo. Sess. Laws, Chapter 209, § 1; Wyo. Stat. Ann. § 39-1-304(a).

By rule, the State Board’s standards for review of a county board’s decision are nearly identical to the Wyoming Administrative Procedure Act standards a district court must apply to hold unlawful and set aside agency action, findings of fact, and conclusions of law. Wyo. Stat. Ann. § 16-3-114(c)(ii); Rules, Wyoming State Board of Equalization, Chapter 3. However, unlike a district court, the Board will not rule on claims that a county board has acted “[c]ontrary to constitutional right, power, privilege or immunity.” Wyo. Stat. Ann. § 16-3-114(c)(ii)(B). The State Board’s review is limited to a determination of whether the county board action is:

(a) Arbitrary, capricious, an abuse of discretion or otherwise not in accordance with law;

(b) In excess of statutory jurisdiction, authority or limitations or lacking statutory right;

(d) Unsupported by substantial evidence.

Rules, Wyoming State Board of Equalization, Chapter 3, § 9.

Since the State Board Rules are patterned on the judicial review provision of the Wyoming Administrative Procedures Act, we look to precedent under Wyo. Stat. Ann. § 16-3-114(c) for guidance. For example, we must apply this substantial evidence standard:

Our task is to examine the entire record to determine if substantial evidence exists to support the [county board’s] findings. We will not substitute our judgment for that of the [county board] if [its] decision is supported by substantial evidence. Substantial evidence is relevant evidence which a reasonable mind might accept in support of the agency’s conclusions.

Clark v. State ex rel. Wyoming Workers’ Safety and Compensation Division, 934 P.2d 1269, 1272 (Wyo. 1997).

Petitioner in this case claims that the County Board failed to adequately articulate the grounds for its decision. The County Board’s determination must “reflect the reasons why one expert’s view [of the facts] was chosen over the other expert’s view [of the facts].” Mountain Fuel Supply Co. v. Public Service Commission of Wyoming, 662 P.2d 878, 888 (Wyo. 1983). We must determine whether the record is sufficient to permit us “to follow the [County Board’s] reasoning from the evidentiary facts on record to its eventual legal conclusions.” Jackson v. State ex rel. Wyoming Workers’ Compensation Division, 786 P.2d 874, 878 (Wyo. 1990). The State Board’s analysis must address whether the County Board’s decision reflects the ways in which the testimony of the Assessor’s expert accords with acceptable criteria, and the ways in which the testimony of Petitioner’s expert does not. Mountain Fuel Supply, 662 P.2d, at 887-888. “When an agency does not make adequate findings of basic fact, we do not have a rational basis upon which to review its ultimate findings and conclusions. . . In cases where the findings do not adequately explain the rationale for the agency’s decision, we remand the matter to the agency so that it can make additional findings.” Scott v. McTiernan, 974 P.2d 966, 969-970 (Wyo. 1999).

ISSUES

Petitioner initially identified twelve defects in the County Board’s decision. [Petitioner’s Notice of Appeal, pp. 2-4]. Petitioner later condensed these defects to five claims:

1. The County Board entered a three page Order that adopted the proposed findings of fact of the Assessor and rejected all of Mountain Cement’s evidence. The County Board essentially made no conclusions of law. The County Board’s Order is contrary to law because it fails to make findings of basic and ultimate facts and fails to adequately explain the rationale for its decision.

2. The County Board’s Order affirming the Assessor’s inclusion of value for assets not in service and duplicate assets is unsupported by substantial evidence. The County Board Order affirming the Assessor’s denial of four pollution control exemptions is unsupported by substantial evidence and is arbitrary and capricious.

3. The assessment issued by the County Assessor and affirmed by the County Board is contrary to law. It violates the Department of Revenue’s rules by using a 30% residual value instead of 25%, and by continuing to trend older assets while stopping depreciation.

4. The County Board Order is unsupported by substantial evidence and contrary to law because it fails to fully account for all forms of depreciation, including economic obsolescence.

5. The County Assessor’s valuation for Mountain Cement’s plant located in Albany County, Wyoming violates the Wyoming Constitution, particularly Art. 15 § 11 and the standards in Basin Electric Power Co-op. v Dept. of Revenue, 970 P.2d 841 (Wyo. 1998).

[Opening Brief of Petitioner, p. 1].

The Assessor presents a single issue for review:

Whether the 2004 value of the Petitioner’s property established by the Assessor and affirmed by the County Board of Equalization is (a) arbitrary, capricious, and 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; (d) unsupported by substantial evidence.

[Response Brief of Respondent Albany County Assessor, p. 5]. The Assessor correctly identifies the principal standard of review, without reference to Petitioner’s specific issues.

In the context of this case, we view Petitioner’s first issue as an aspect of the pertinent standard of review, rather than a separate issue.

We will consider eight specific subjects in light of the pertinent standards of review: the Assessor’s use of trending; the Assessor’s use of a 30% residual value for personal property; three duplicate assets; pollution control equipment; four assets in modified use; Petitioner’s claims of functional and economic obsolescence; Petitioner’s claims of costs related to assets not in service; and three assets not listed on a 1985 fixed asset listing of a predecessor company. Petitioner’s constitutional claim is entirely dependent upon the eight specific complaints. [Opening Brief, pp. 31-32].

FACTS PRESENTED TO THE COUNTY BOARD

1. Petitioner, Mountain Cement Company, owns and operates a cement plant located along U.S. Highway 287, 5 Sand Creek Road, south of Laramie, in Albany County, Wyoming. [Petitioner Exhibit 1, p. 200]. The record includes extensive descriptions and depictions of the property. [Petitioner Exhibit 16; Assessor Exhibits 10, 11; Transcript, pp. 23-61 (The transcript begins at page 579 of the County Board record. The parties have cited to the pages of the transcript, rather than the pages of the record. To avoid confusion, we also cite the transcript as pages of the transcript rather than pages of the record)].

2. A hearing on the appeal was held by the County Board of Equalization on July 21, 2004. [Transcript, pp. 1-330].

3. The Albany County Assessor, Deborah J. Smith, hired Thomas Y. Pickett & Company (Pickett) to assist her in appraising the Mountain Cement property. [Assessor Exhibit 12; Transcript, p. 223]. Robert Lehn was the Pickett appraiser who evaluated Mountain Cement for 2004. [Transcript, p. 223]. Lehn has an extensive personal background in industrial appraisal, and has evaluated the Mountain Cement property most years since 1986. [Transcript, pp. 223-224; Assessor Exhibit 9]. As a firm, Pickett also has extensive background in industrial appraisal, and provides appraisal services to a majority of the counties in Wyoming. [Transcript, pp. 222-223].

4. As part of a settlement of the 2003 Mountain Cement assessed valuation, Lehn sent Rodney Cummickel, vice president for tax of Mountain Cement’s parent company, certain proprietary Pickett files related to the firm’s asset list for the property. [Petitioner Exhibit 2; Transcript, p. 296]. Lehn transmitted these files on September 11, 2003. [Petitioner Exhibit 2].

5. On September 17, 2003, Lehn arranged for a site inspection on October 14, 2003. [Assessor Exhibit 15]. Cummickel subsequently prepared an agenda for the meeting. [Assessor Exhibit 16]. At the meeting and related site inspection, the Assessor was represented by herself, Lehn, and Grant Showacre of her office. [Assessor Exhibit 17]. Mountain Cement was represented by Cummickel, Leigh Anne Marchant, Mountain Cement vice president of finance, and Michael Seaton, Mountain Cement’s purchasing manager of seventeen years. [Assessor Exhibits 10, 17; Transcript, pp. 21, 302]. Cummickel’s agenda items anticipated most of the issues now on appeal. [Assessor Exhibit 18, at record page 72].

6. Cummickel memorialized the results of the meeting by a letter to the Assessor dated the same day. His letter referenced the extensive documentation that Mountain Cement had prepared in support of its exceptions to the anticipated 2004 valuation. [Assessor Exhibits 18, 19; Petitioner Exhibits 3,4].

7. By a letter to the Assessor of November 21, 2003, Cummickel asked that the preliminary Pickett property listing for 2004 be furnished in December. [Assessor Exhibit 20]. Lehn obliged on December 8, 2003, by sending Cummickel his firm’s preliminary 2004 appraisal. [Assessor Exhibit 21]. In doing so, Lehn stressed that the preliminary run was a “one time only extraordinary effort.” [Assessor Exhibit 21].

8. On December 15, 2003, Lehn sent Marchant a standard annual request for information to update his firm’s records in anticipation of the 2004 appraisal cycle. [Assessor Exhibit 22]. Marchant replied to the Assessor on February 13, 2004. [Assessor Exhibit 23]. Among other things, Marchant transmitted pollution control exemption applications. [Assessor Exhibit 23]. She also reminded the Assessor of claims for functional and economic obsolescence that had originally been presented on October 14, 2003. [Assessor Exhibit 23]. She claimed obsolescence of $5,215,000 related to excessive fuel consumption and $5,336,000 related to excessive quarry transportation costs. [Assessor Exhibit 23].

9. Lehn then prepared his appraisal report. [Assessor Exhibit 29; Transcript, p. 230]. He considered all three basic approaches to value to provide his advice to the Assessor. [Transcript, p. 231]. However, the principal focus of his valuation was a trended original cost calculation. He started with an existing historical physical asset list, updated periodically, and an original installation cost for each asset. [Transcript, p. 231]. The cost was trended using a derivation of the Marshall & Swift methodology and Marshall & Swift indicators for the cement industry. [Transcript, pp. 231-232]. Lehn’s calculations included established methods to account for service life and depreciation. [Transcript, pp. 232-233].

10. On April 5, 2004, Lehn sent Marchant a copy of the proposed 2004 valuation by telefax, and sought Mountain Cement’s comments. [Assessor Exhibit 24]. On April 19, 2004, Lehn reiterated his request for comments because he needed to release the appraisal to the Assessor right away. [Assessor Exhibit 26].

11. On April 23, 2004, Lehn sent the Assessor his list of recommended pollution control exemptions for Mountain Cement, including a detailed report listing the affected assets. [Assessor Exhibit 30]. Lehn recommended a one hundred percent pollution control exemption on twelve items, and no exemption on four items. [Assessor Exhibit 30].

12. Marchant did not respond to Lehn’s proposed valuation of April 5 until April 26, when she telefaxed Showacre, rather than Lehn, further suggested deletions. [Assessor Exhibit 27]. She followed these comments with a second telefax on April 28, this time to the Assessor and Showacre, reminding the Assessor of the February 13 letter and three additional items that Marchant had discussed with Showacre. [Assessor Exhibit 28].

13. The County Assessor sent out the 2004 Assessment Notice on May 18, 2004, with a market value for the Mountain Cement Plant of $39,154,920. [Assessor Exhibit 31]. Mountain Cement filed a timely appeal. [Assessor Exhibit 32; Petitioner Exhibit 1].

14. On June 28, 2004, the Assessor advised Cummickel that she had agreed to remove certain items that were duplications or no longer on premises, with a total value of $296,000. With these reductions, the 2004 valuation was $38,858,920. [Assessor Exhibit 33].

15. We will consider additional facts presented to the County Board in the context of the specific issues of law presented in the case.

DISCUSSION OF APPLICABLE LAW AND PETITIONER’S ISSUES

The Assessor’s valuation is presumed valid, accurate, and correct

16. Article 15, Section 11 of the Wyoming Constitution requires all property to be uniformly valued at its full value as defined by the legislature, in three classes, and requires the legislature to “prescribe such regulations as shall secure a just valuation of all property, real and personal.” Article 15, Section 11, is subject to settled judicial interpretation:

Early on, Justice Blume recognized a truth inherent in the area of property valuation: “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.” Bunten v. Rock Springs Grazing Ass’n, 29 Wyo. 461, 475, 215 P. 244, 248 (1923). Accordingly, this court has consistently interpreted Wyo. Const. art. 15, § 11 to require “only a rational method [of appraisal], equally applied to all property which results in essential fairness.”

Basin Electric Power Coop. v. Dept. of Revenue, 970 P.2d 841, 857 (Wyo. 1998) quoting: Holly Sugar Corp. v. State Board of Equalization, 839 P.2d 959, 964 (Wyo. 1992).

17. Broken into its component parts, the constitutional 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 Corp., 970 P.2d at 852. Similarly, the party challenging sufficiency of evidence has the burden of demonstrating an agency’s decision is not supported by substantial evidence. Laramie County Board of Equalization v. Wyoming State Board of Equalization, 915 P.2d 1184, 1188 (Wyo. 1996).

18. The Department has promulgated rules prescribing the methods for valuing property. The acceptable methods include a cost approach. Rules, Wyoming Department of Revenue, Chapter 9, § 6 (a), (b), (c), and (d).

19. 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 107, 113 (Wyo. 1987). A mere difference of opinion as to value is not sufficient to overcome the presumption. J. Ray McDermott & Co. v. Hudson, 370 P.2d 364, 370 (Wyo. 1962).

Valuation based on information from taxpayer

20. Wyoming Statute Annotated Section 39-13-103(b)(v) states in pertinent part: “...the county assessor or deputy assessor as provided by W.S. 39-13-102(a) shall obtain from each property owner or person having control of the taxable property in the assessment district for which they were appointed, a full, complete and detailed statement of the amount of the taxable property owned by or subject to the control of the property owner. If a property owner fails to provide a listing of personal property owned by him or under his control by March 1, unless an extension is granted from the assessor in writing, the assessor shall issue an assessment from the best information available. . ..”

The County Board’s findings and conclusions

21. As its first issue, Mountain Cement attacks the adequacy of the County Board’s Findings of Fact and Conclusions of Law. The focus of this complaint, based on Scott v. McTiernan, 974 P.2d 966, 696-970 (Wyo. 1968), is that the County Board’s findings and conclusions do not adequately explain the rationale for the County’s Board’s decision. The County Board’s principal finding of fact was to adopt all of the Findings of Fact proposed by the Assessor. The County Board’s principal conclusions of law were:

4. The Assessor utilized a cost approach to value the Mountain Cement Company property pursuant to the Rules of the Department and the value determined is therefore presumed valid, accurate and correct unless the Petitioner can rebut that presumption with sufficient credible evidence.

5. The Protestor has not offered sufficient credible evidence, in the opinion of the Board, to overcome the presumption that the method used in determining market value by the Assessor was appropriate as applied in this case.

6. The County Assessor’s method of determining the value of the Protestor’s property was done following the procedures required by the law and the Constitution of the State of Wyoming; was neither arbitrary, capricious, nor inconsistent with the law; and was supported by substantial evidence.

[County Board Conclusions of Law, Nos. 4-6, at record pp. 947-948].

22. We disagree that the County Board’s findings and conclusions are inadequate in their entirety. We do, however, agree that remand is warranted with respect to some of Mountain Cement’s issues because some of the County Board’s findings and conclusions are inadequate, as more specifically set forth below.

The Assessor’s Use of Trending

23. Both parties presented expert testimony which relied on a trended original cost method. The Assessor’s expert, Mr. Lehn, testified that he stops depreciating at 30% residual value, but continues trending to account for the cost of money and inflation, which causes even fully depreciated assets to increase in value. [Transcript, p. 233; Response Brief, pp. 21-22]. Mountain Cement argues this method is mathematically wrong, and contrary to Department of Revenue Rules. [Opening Brief, pp. 9-10]. The County Board adopted no specific Findings or Conclusions on the point.

24. The parties agree that the following Rule applies:

(v) For purposes of this section, the following definitions apply:

* * *

(H) “Trended original cost method” means the procedure for estimating replacement cost of property by trending its original or historical cost with a factor from an appropriate construction cost index. Subsequent additions and replacements less deductions or removals must be considered. The method is used to appraise property for which comparable cost data are not available. For personal property, acquisition or original costs shall be trended to reflect current replacement costs by application of a cost trend factor developed annually by the Ad Valorem Tax Division. The result is replacement cost new, or rcn. Trending or acquisition of original costs shall cease when the residual value has been reached except when refurbishing or maintenance changes the effective age.

Rules, Wyoming Department of Revenue, Chapter 9, § 6(b)(v)(H)(emphasis supplied).

25. “Administrative rules and regulations adopted pursuant to statutory authority have the force and effect of law.” State ex. rel. Wyoming Department of Revenue v. UPRC, 67 P.3d 1176, 1184, 2003 WY 54, ¶18. Mr. Lehn was apparently under the impression that the Rules are merely “guidelines for assessors.” [Transcript, p. 270]. He is mistaken. He likewise was under the impression that the Department of Revenue could approve violations of its Rules. [Transcript, p. 232]. He is again mistaken. State ex. rel. Wyoming Department of Revenue v. UPRC, 67 P.3d 1176, 1184, 2003 WY 54, ¶18.

26. The record shows that Mr. Lehn’s practice of continued trending rested entirely on his judgment that continued trending is necessary to address the effects of inflation. The Assessor cannot rely on the presumption favoring her judgment to overcome a specific standard established by regulation, because the judgment of an appraiser cannot supplant a rule of law. In the Matter of the Thunder Basin Coal Company Black Thunder Mine, Docket No. 2002-161, 2003 WL 23164226 (Wyo. St. Bd. Eq. 2003), ¶110.

27. The Department’s Rules govern use of the cost approach to determine value, and govern the use of the trended original cost method. Even if there is merit to Mr. Lehn’s argument, the Rules specifically provide that trending must cease when residual value has been reached. If a distortion in value results, the solution is to change the Rules, not to ignore them.

28. The County Board’s decision on trending is contrary to law. We remand the case to the County Board to direct the Assessor to recalculate her values in a manner consistent with the requirements of Chapter 9, Section 6(b)(v)(H), of the Department’s Rules.

The 30% Residual Value

29. The respective experts for Mountain Cement and the Assessor both testified to the residual value floor used for the depreciation component of the trended original costs calculations. The County Board approved Mr. Lehn’s use of a residual value of 30% for Mountain Cement’s personal property. The Assessor’ Proposed Findings of Fact, adopted by the County Board, include the following finding addressed to this subject:

11) Mr. Lehn’s appraisal utilized a 30% floor in calculating depreciation. He did so based upon data collected by his company that demonstrated that equipment of the general type holds its value in that amount and that data supports the use of that floor. The 30% floor is used uniformly with appraisals of industrial property in Albany County. {Trans. 258-261}

30. The parties acknowledge a pertinent regulation that binds the Assessor:

(b) The Cost Approach. The cost approach is a method of estimating value by summing the land value, where applicable, with the depreciated value of improvements. The approach may also be 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 than its comparable replacement. The approach requires:

* * *

(iv) Depreciation in the case of real and personal property. For personal property:

* * *

(D) 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 added)

Rules, Wyoming Department of Revenue, Chapter 9, § 6(b)(iv)(D).

31. Mr. Lehn suggested that the 25% residual value prescribed by regulation is merely a guideline. [Transcript, p. 257]. He is mistaken. Mr. Lehn also testified that he had discussed the subject with the Department of Revenue [Transcript, p. 259], a matter of uncertain implication but ultimately of no interest, because the Department is bound by its own Rules. State ex. rel. Wyoming Department of Revenue v. UPRC, 67 P.3d 1176, 1184, 2003 WY 54, ¶18. The Department is, of course, free to provide further guidance consistent with its Rules, but the Assessor called no Department witness to address this subject, and offered no documentation of the Department’s support for Lehn’s position.

32. The County Board’s Conclusions of Law do not specifically state how the County Board took the Rule into account. The Assessor’s Proposed Conclusions of Law included the following:

24) The Assessor’s appraiser used a 30% floor in calculating depreciation but did so based upon a bank of data justifying deviation from the 25% residual value established by the Rules of the Department of Revenue.

33. From our review of the County Board’s decision and the record, it appears that the County Board may have applied the presumption in favor of the Assessor based on Mr. Lehn’s testimony that his firm had collected sufficient market information to indicate a residual value other than 25%. We are therefore faced with a different situation than the outright violation of specific standard found in a regulation. Here, the County Board may have concluded that the presumption properly applied to the exception to the 25% standard. In other words, the County Board may have decided in favor of the Assessor on the premise that the presumption applies to Mr. Lehn’s rather vague claim to reliance on information available to his firm.

34. The County Board may have committed an error if it did so. In view of the standard established by regulation, the taxpayer met its burden to overcome the presumption in favor of the Assessor’s judgment. The Assessor then had to establish by a preponderance of the evidence that a deviation is justified. When a taxpayer proposes to deviate from the 25% residual value, it bears a similar burden. If both parties fail to carry that burden, the residual value must be the 25% established by the Rule. We do not concern ourselves further about the taxpayer’s case, since the County Board found for the Assessor. By our decision in this case, we do not endorse the view of taxpayer’s expert by default.

35. Based on the record before us, we cannot tell whether the County Board relied on the presumption, or found the Assessor had carried her burden to demonstrate a 30% residual was justified. The distinction would not make any practical difference if Mr. Lehn’s testimony had been sufficiently comprehensive to satisfy us that the Assessor had carried her burden in any event. We were not satisfied that this was so.

36. Mr. Lehn acknowledged that the 25% residual may not be applicable for certain types of property [Transcript, p. 257], and that Mountain Cement’s plant “is a special facility . . . it’s the only one in Wyoming we do.” [Transcript, p. 259]. Mr. Lehn’s justification for 30% is by inference from a database for industrial properties maintained by his firm. [Transcript, p. 259]. Nothing in the record described this database in detail, or how the existence of the database justified Mr. Lehn’s application of 30% to a property he conceded to be unique in Wyoming.

37. At the same time, the subject of the Pickett data base may have been raised frequently over the years, and in the perception of the County Board based upon the conduct of the parties at the hearing, was not seriously in dispute. We cannot tell from the County Board’s Order, or by reasonable inference from the County Board’s adoption of the Assessor’s proposed findings, whether the County Board had a sound reason for concluding that the 30% residual was justified.

38. We remand this issue to the County Board to conduct a rehearing pursuant to the correct standard of proof and persuasion, and for findings and conclusions consistent with that standard. By this remand, we do not mean in any way to prejudge the result of the rehearing.

Duplicate Assets

39. Some time after March 1, 2004, but in advance the County Board hearing, Mountain Cement discovered three additional “duplicate assets.” We understand Mountain Cement to mean that each of the three assets had been mistakenly listed and valued twice. The Assessor has refused to delete these items, arguing that under Wyo. Stat. Ann. § 39-13-103(b)(v) the taxpayer was obligated to identify and report all such items by March 1. The Board endorsed the Assessor’s view of a taxpayer’s obligations in a prior decision involving the same taxpayer, Mountain Cement Company, Docket 2003-11, 2003 WL 22506484 (October 29, 2003).

40. Mountain Cement argues this result is contrary to the principle that the county may only levy taxes on taxable property that exists as of January 1. Wyo. Stat. Ann. § 39-13-103(b)(i), (v), (vi). Mountain Cement argues the Assessor has conceded the duplicate assets represent property that did not exist. From the record, we cannot tell whether the County Board agreed that the Assessor made such a concession.

41. One of the policy purposes served by the March 1 deadline for listing property is to prevent the taxpayer from filing claims for elimination of personal property at a time so late that the Assessor may be unable to investigate the validity of the claim, given the finite resources available to her office. Where there is no dispute that the property in question does not exist, the policy is not a matter of concern.

42. We conclude the County Board must remove non-existent property, even after the March 1 deadline, if (1) the taxpayer has filed a timely appeal, and (2) the taxpayer and Assessor agree that such property has been incorrectly included on the property rolls. Unlike the State Board, the County Board has a responsibility to address the error of non-existent property, in addition to its responsibility to hear taxpayer complaints:

(c) The board of county commissioners of each county constitutes the county board of equalization . . .. The county board of equalization shall:

* * *

(iii) Correct any assessment or valuation contained in and complete the assessment roll;

(iv) Hear and determine any complaint of any person relative to any property assessment or value as returned by the county assessor subject to W.S. 39-13-109(b)(i) [pertaining to taxpayer appeals]....

Wyo. Stat. Ann. § 39-13-102(c). By statute, the County Board’s authorities and responsibilities are broader than those of the State Board when the State Board sits as a finder a fact. The State Board is generally limited to deciding the dispute between a petitioner and the Department of Revenue. Amoco Production Company v. Wyoming State Board of Equalization, 12 P.3d 668, 674 (Wyo. 2000).

43. We accordingly remand this matter to the County Board to determine whether the Raw Mill Classifier, Cement Loading Protection, and Portable Steam Cleaner assets are incontestably duplicate entries of taxable property for which the Assessor has correctly accounted in the first instance. If the County Board concludes that the Mountain Cement and the Assessor agree that the entries in question are duplicates, the County Board must correct the assessment roll by eliminating these items. If not, then the issue may be addressed through Mountain Cement’s listing of assets for the following tax year.

Pollution Control Equipment

44. Property used for pollution control is exempt from property taxation “to the extent provided by W. S. 35-11-1103.” Wyo. Stat. Ann. § 39-11-105(a)(xx). The exemption applies to facilities “designed, installed and utilized primarily for the elimination of” pollution. Wyo. Stat. Ann. § 35-11-1103. The exemption is subject to an allocation of value where the property performs other beneficial purposes. Wyo. Stat. Ann. § 35-11-1103. The assessor must not include as exempt any portion of the facilities which have value as a specific source of marketable byproducts. Wyo. Stat. Ann. § 35-11-1103.

45. Pollution control exemptions are governed by a specific chapter of the Department of Revenue’s Rules. Rules, Wyoming Department of Revenue, Chapter 16. A taxpayer must apply for the exemption on or before February 15, about two weeks before submitting its annual listing of personal property to the assessor:

(a) Annually, on or before February 15^th of each year, all locally-assessed property owners or agents requesting ad valorem tax exemption for pollution and fire control property shall file with the County Assessor the required application forms. If a substantially complete application is not postmarked by the February 15^th deadline, it will be denied in its entirety as untimely. [Emphasis supplied].

Rules, Wyoming Department of Revenue, Chapter 16, § 4(a). Compare Wyo. Stat. Ann. § 39-13-103(b)(v)(requiring a listing of all personal property by March 1, subject to extension based on a timely request). The Department’s Rules also provide for a simplified annual pollution control exemption application in four of every five years, under certain conditions. Rules, Wyoming Department of Revenue, Chapter 16, § 4(c).

46. Our understanding of this issue rests on the arguments of the parties. The County Board did not make any specific Findings of Fact concerning the pollution control exemption. [County Board Order]. While the County Board adopted the Assessor’s proposed Findings of Fact, the Assessor’s proposed Findings of Fact referred only to the amount of pollution control exemption allowed. [Assessor’s Proposed Findings of Fact, ¶ 5].

47. Mountain Cement complains that it was not allowed any exemption on four pollution control assets. [Opening Brief, p. 26; Assessor Exhibit 30]. In prior years, Mountain Cement was allowed a 4.52% exemption on two of these assets, and an 80.15% exemption on the other two. [Opening Brief, pp. 6-7]. The two higher exemptions were associated with a 165' X 400' Storage Building, and erection of the same building. [Opening Brief, pp. 6-7]. The lower exemptions were associated with Clinker Storage Building Doors and erection of an unspecified Storage Building. [Opening Brief, pp. 6-7].

48. The Assessor replies that Mountain Cement failed to fully and accurately complete the required forms. [Response Brief, pp. 18-20]. Specifically, the Assessor stated that in the four instances in which the exemption was disallowed, Mountain Cement answered three questions in the following way:

12. Description of pollutants and/or contaminants marketed or recycled each year for the past five years (tons per yr, bbl per yr, etc):

None

13. Annual volume of pollutants and/or contaminants marketed or recycled reach year for the past five years (tons per yr, bbl per yr, etc):

None

14. Unit value of pollutants and how value was determined ($ per ton, $ per bbl, etc.):

None

[Response Brief, p. 19; Petitioner Exhibit 5].

49. When Lehn reviewed Mountain Cement’s applications, he noted that in previous years, Mountain Cement had listed values for such pollutants as clinker dust. [Transcript, p. 256]. He considered the “none” answer to be a “blank.” [Transcript, p. 256] He advised the Assessor that the forms had been improperly completed, and that the entire exemption should therefore be denied. [Transcript, p. 256]. This was a mistake. “None” is not the same thing as a blank. Each of the applications was “substantially complete,” as required by the Department’s Rules. If this was the reason for the County Board’s decision, the County Board was in error.

50. The Assessor’s objection is not to the adequacy of the form, but to its apparent conflict with values reported in prior years. Lehn assumed that if a full exemption were not warranted in prior years, it could not be warranted in the year at hand – a logical assumption, but an assumption which is not supported by the record. Cummickel testified that there was no recycling, and we are unable to tell whether the County Board did not find him credible on this point. If the County Board found Cummickel credible and with adequate personal knowledge of the pertinent status of Mountain Cement’s recycling, but acted on the basis of Lehn’s view about completion of the forms, then its decision cannot be sustained.

51. The apparent purpose of questions 12 through 14 is to provide the Assessor with information so that she may assure that no portion of the facilities which have value as a specific source of marketable byproducts are exempted. Wyo. Stat. Ann. § 35-11-1103. If there were indeed no marketable byproducts, as Mountain Cement’s applications represent, then Mountain Cement may still be entitled to its exemption. The fact that an exemption of only 4.52% was previously allowed on two of the four assets suggests that those two assets primarily served other beneficial purposes. The correct result may not be entirely a function of the answers to questions 12 through 14.

52. We remand this issue to the County Board for more detailed findings of fact and conclusions of law, and rehearing insofar as the County Board deems necessary.

Assets in Modified Use

53. Mountain Cement identified four assets that were either not in use, or used for a much more limited purpose than the purpose for which they were originally designed. These include:

Old Packhouse – A four story building originally used for bagging operations that ceased more than twenty years ago. [Opening Brief, pp. 3-4]. It is now used for storage, and to support the operation of a bag house. [Opening Brief, p. 4]. On behalf of the Assessor, Lehn prepared a trended cost based on the property’s previous use, reduced by a factor to reflect the change in the present use of the asset. [Opening Brief, pp. 3-4; Response Brief, p. 16]. Mountain Cement’s expert testified to an alternative value based on comparable storage costs. [Opening Brief, p. 4]. Mountain Cement nonetheless concedes that dust collection is a vital part of the total operation. [Transcript, p. 71].

Old Monolith Raw Mill – The raw mill was a component of a process not used since Mountain Cement acquired the plant in 1985. [Opening Brief, pp. 4-5]. The Assessor again valued the asset based on its previous use, reduced by a factor to reflect the change in the present use of the asset. [Opening Brief, p. 5; Response Brief, p. 16]. Mountain Cement’s witnesses testified that the building has no value, and would cost more to remove than it is worth in scrap. [Opening Brief, p. 5].

Electronic Precipitator, Kiln #1 – The electronic precipitation equipment in this building has been removed, so that it now performs a limited precipitation function within the structure. [Opening Brief, p. 5]. The Assessor again valued the asset based on its previous use, reduced by a factor to reflect the change in the present use of the asset. [Opening Brief, p. 5; Response Brief, p. 16]. Mountain Cement’s witness contended that the building shell represents no more than 5% of the value of the precipitator. [Opening Brief, p. 5].

P&H Crane – This crane was not in service after December, 2002. [Opening Brief, p. 5]. The Assessor again valued the asset based on its previous use, reduced by a factor to reflect the change in the present use of the asset. [Opening Brief, p. 5; Response Brief, pp. 16-17]. Mountain Cement contends that the crane has no value. [Opening Brief, p. 6].

54. The Assessor correctly points out that the Department’s guidelines for valuing personal property specifically address the problem of property taken out of service or with changed use:

Equipment that has been taken out of service/use but is still on 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), Department of Revenue Ad Valorem Tax Division, Section 1, p. 36. Lehn considered service limitations by additional factors he applied. However, Lehn confirmed that as long as property is physically on the site the property it is assigned a value, usually after consultation with the taxpayer to reach a mutually agreeable discount. [Transcript, pp. 233-234].

55. In the end, this issue boils down to a difference of opinion between Mountain Cement and the Assessor. The County Board could correctly find that the presumption favored the Assessor, and that Mountain Cement did not carry its burden to demonstrate that an alternative value was correct. Supra, ¶ 19. We affirm the County Board’s decision on this issue.

Functional and Economic Obsolescence

56. Mountain Cement’s plant dates back to 1927. [Transcript, pp. 27-29, 74]. The plant was purchased by Syntex [sic] Construction Products from Monolith in 1986. [Transcript, p. 318 (the date of purchase is identified as 1985 elsewhere in the record].

57. The number 2 kiln was erected before the 1986 sale, but subsequently modified. [Transcript, pp. 37, 74]. The plant’s raw mill was erected after the sale. [Transcript, pp. 37-38]. The number 1 kiln was put into service in 1966, but not used after the 1986 purchase until it was overhauled in 1996. [Transcript, p. 51]. Mountain Cement accomplished the overhaul of the number 1 kiln by cutting up, transporting, and reassembling used kilns from an old plant in Salt Lake City. [Transcript, p. 74].

58. The Department’s Rules specifically address functional and economic obsolescence as a type of depreciation:

(D) “Depreciation” means a loss of utility and hence value from any cause. Depreciation may take the form of physical depreciation, functional obsolescence, or economic obsolescence.

* * *

(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. The methods to measure economic obsolescence may include, but are not limited to:

(1.) Capitalization of the income or rent loss attributable to the negative influence;

(2.) Comparison of sales of similar properties which are subject to the negative influence with others which are not.

(3.) Identification of factors specifically analogous to the property, i.e. Investments, capacities, and/or industry relationships.

Rules, Wyoming Department of Revenue, Chapter 9, § 6(b)(v)(D). We note that neither party has argued its position by reference to these definitions. [Opening Brief, pp. 10-14, 29-30; Response Brief, pp. 22-24; Reply Brief, pp. 4-5].

59. Mountain Cement presented four witnesses to support its obsolescence claims. John Wittmayer, senior corporate engineer with Mountain Cement’s parent company, testified the Laramie plant compared unfavorably with modern cement plants, and described specific difficulties with the plant’s fuel consumption, quarry location, and layout. [Transcript, pp. 652-673]. Robert Roy, an independent expert, testified the Mountain Cement plant is at a disadvantage to its competition due to distance from its market, its relatively small size, and distance from its raw material sources. [Opening Brief, p. 11; Petitioner Exhibits 12, 13]. Marchant testified that Mountain Cement operates in a competitive price environment and has to offer price discounts in order to maintain market share. [Opening Brief, p. 11]. At the same time, she testified that the plant generally operates at capacity:

We haven’t ever had a problem selling the amount of cement that we can make. We’ve always pretty much been sold out cementwise. But our cement milling capacity doesn’t meet our clinker production capacity. And it’s cyclical, where sales of cement drop off in the wintertime, in the wintertime we fill up all our terminals, we fill up all the rail cars, we fill up our silos. And when they’re full and there’s no sales, you have to shut down production in the finish mill.

The clinker is – continues to be produced all year round with the exception of downtimes . . .. [Transcript, pp. 305-306].

60. The fourth witness, Dennis Nielsen, provided the core of Mountain Cement’s position through his calculated values for obsolescence [Opening Brief, pp. 12-14; Petitioner Exhibit 11 (July 6, 2004)] in three areas:

Excess Fuel Costs – Neilsen compared the fuel consumption of the Mountain Cement facility and a “modern plant,” then calculated the value of average fuel costs, adjusted for federal income taxes, and calculated a present worth value of 10% for 10 years. The claimed penalty was $7,239,800. [Opening Brief, p. 12].

Excess Quarry Transportation Costs – Neilsen calculated excess costs over a three year period (1) for road paving, repair, and maintenance, and (2) for material transportation, adjusted for federal income taxes, and calculated a present worth value of 10% for 10 years. The claimed penalty was $4,390,489. [Opening Brief, p. 13].

Excess Capital Costs – Neilsen calculated a cost disadvantage based on comparison to the capacity of a “modern plant,” then applied his calculated penalty to selected features of the plant by eliminating mobile machinery and equipment, personal property, inventory and construction work in progress from the amounts to which the penalty was applied. The claimed penalty was $3,039,718. [Opening Brief, pp. 13-14; Petitioner Exhibit 19].

61. These three items amount to nearly 38% of the Assessor’s total value. Supra, ¶ 14. Neilsen made no effort to demonstrate that this result was reasonable. In response to a question from Commissioner Gabriel about the appropriate value of the plant, he testified that he had not been hired to do an appraisal. [Transcript, p. 218].

62. Under the letter of the Department’s Rules, the County Board could properly have found that Mountain Cement had not carried its burden of demonstrating the loss in value associated with functional obsolescence. Neilsen essentially argued a comparison with an ideal – a modern plant, or a plant with different access to its raw materials. Yet Mountain Cement had never invested capital in such an ideal facility or location. Mountain Cement did not demonstrate that its plant was ever functionally adequate. Without such a demonstration, Mountain Cement could not go on to show such that the plant had subsequently become inadequate or less appealing as design standards, mechanical systems, and construction materials changed over time. For example, when Mountain upgraded the plant in 1996, it did so with surplus existing material from Salt Lake City, not with new equipment conforming to current standards. The County Board could readily have found that, without a comparison based on accurate reflection of the functional aspects of the plant as acquired and periodically modified, Mountain Cement failed to demonstrate functional obsolescence.

63. Similarly, the County Board could properly have found that Mountain Cement had not carried its burden of demonstrating economic obsolescence. Neilsen presented no evidence that met either of the first two economic obsolescence tests, i.e., (1) capitalization of the income or rent loss attributable to the negative influence, or (2) comparison of sales of similar properties which are subject to the negative influence with others which are not. [Transcript, pp. 194-195].

64. Neilsen instead argued economic obsolescence based on his identification of specific features of the property. However, as we have already said, he did so without ever establishing a baseline grounded in the functional adequacy of the plant and its components. Perhaps as important, the County Board could have rejected Neilsen’s argument because the features of the plant he selected for analysis did not necessarily add up to a complete picture. For example, the plant may always have been profitable and competitive because Mountain Cement was, from the time of the purchase in 1986, willing to accept relatively high operating costs as a trade-off against a deep discount in capital investment achieved by acquiring a used, and perhaps even outmoded, facility.

65. Further, the County Board knew that there was no claim the plant was unprofitable. Marchant testified that Mountain Cement’s net income in 2003 was $14,000,000 [Transcript, p. 312], despite the competitive market environment. The record includes income statements for 1998 through 2002. [Assessor Exhibit 18, at record pages 84-89].

66. Lehn confirmed the plant’s profitability. He relied on information provided in support of the pollution control exemption. [Transcript, p. 240]. Compared with the preceding year, he confirmed that revenues had decreased and expenses had risen, so that cash flow narrowed. [Transcript, p. 241]. However, doing calculations with an 11.6% discount rate, the lowest value Lehn reached for the plant was $43.5 million [Transcript, p. 241], or an amount in excess of the Assessor’s taxable value. He calculated a plant value in excess of $100 million for the same plant in the preceding year. [Transcript, p. 241].

67. Based on Mountain Cement’s general representations regarding obsolescence, Lehn assigned an overall 5% reduction in value that appears in a column of his calculations labeled “eco.” [Response Brief, p. 22]. This factor was in addition to individual factors assigned to specific pieces of equipment that reflected reduced use or service. [Response Brief, p. 23].

68. As with the issue of assets no longer in use or their original service, this issue amounts to a difference of opinion between Mountain Cement and the Assessor. The County Board could correctly find the presumption favored the Assessor, and Mountain Cement did not carry its burden to demonstrate that an alternative value was correct. Supra, ¶ 19. We affirm the County Board’s decision on this issue.

Costs Related to Assets Not in Service

69. Mountain Cement timely identified a group of engineering, construction management and equipment installation costs that have in-service dates of 1987 and 1988. [Opening Brief, p. 14]. Based on these dates, Mountain Cement argues that some portion of these costs unavoidably relate to equipment long since removed or replaced, even though Mountain Cement cannot tie the costs to specific pieces of equipment, and has no record to establish why these costs were incurred. [Opening Brief, p. 14; Response Brief, pp. 24-25]. Nielsen and Cummickel argued that these costs should normally be removed when the assets with which they were associated are removed, and argued for a 50% “tempering” of the taxable value of these assets. [Opening Brief, p. 14; Response Brief, p. 25; Transcript, p. 287].

70. Neither the County Board’s Order nor the Assessor’s proposed Findings of Fact specifically mentioned this issue.

71. We conclude that this issue amounts to a difference of opinion between Mountain Cement and the Assessor. The County Board could correctly find the presumption favored the Assessor, and Mountain Cement did not carry its burden to demonstrate that an alternative value was correct. Supra, ¶ 19. We affirm the County Board’s decision on this issue.

Assets not included on the June 1985 Monolith Asset Listing

72. On or about September 11, 2003, Lehn provided Cummickel information indicating Pickett had used a Monolith Portland Cement fixed asset listing dated June 30, 1985, to account for assets purchased by Mountain Cement. [Assessor Exhibit 10, at record p. 90; Transcript, p. 288; Petitioner Exhibit 2]. Cummickel compared the Pickett 2003 Appraisal Report with the fixed asset listing of June 30, 1985. [Assessor Exhibit 10, at record p. 90; Transcript, p. 288]. He found three items in the 2003 Appraisal Report that did not appear on the fixed asset listing. [Assessor Exhibit 10, at record p. 90; Transcript, p. 288].

73. Cummickel then testified that “there’s potential for them not being physically present when we acquired [the cement plant], [so] they shouldn’t be on the appraisal.” [Transcript, p. 289]. Mountain Cement now argues that, “[t]he records of Pickett are significant for establishing the property that should be included on the current property list of the Assessor,” [Opening Brief, p. 15], and that the assets should be eliminated. No Mountain Cement witness testified that the assets do not exist. The Assessor points out that it is not uncommon for property to be discovered long after it is in service. [Response Brief, p. 26]. No witness testified, or even appeared to be competent to testify, that the Monolith Portland Cement 1985 fixed asset listing was complete and correct.

74. The County Board could correctly find that the presumption favored the Assessor, and that Mountain Cement did not carry its burden to demonstrate that the three assets in question should no longer be listed. Supra, ¶ 19. We affirm the County Board’s decision on this issue.

Constitutional Claim Based on Rational Method of Valuation

75. Petitioner’s claim under Article 15, Section 11 of the Wyoming Constitution rests entirely on the claims it makes with respect to the foregoing individual issues. By our disposition of the individual claims, we dispose of this claim, and find for the Assessor.

ORDER

IT IS THEREFORE HEREBY ORDERED that the Albany County Board of Equalization Order denying Petitioner’s protest and affirming the 2004 assessment of Petitioner’s property located along U. S. Highway 287 south of Laramie in Albany County, Wyoming is remanded to the County Board for proceedings consistent with this decision, with respect the following issues: the Assessor’s use of trending; the Assessor’s use of a 30% residual value for personal property; three duplicate assets; and pollution control equipment.

The State Board otherwise affirms the decision of the County Board with respect to the following issues: four assets in modified use; Petitioner’s claims of functional and economic obsolescence; Petitioner’s claims of costs related to assets not in service; and three assets not listed on a 1985 fixed asset listing of a predecessor company.

Pursuant to Wyo. Stat. Ann. § 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 at the appropriate district court by filing a petition for review within 30 days of the date of this decision.

Dated this _______ day of July, 2005.

STATE BOARD OF EQUALIZATION

_____________________________________

Alan B. Minier, Chairman

_____________________________________

Thomas R. Satterfield, Vice-Chairman

_____________________________________

Thomas D. Roberts, Board Member

ATTEST:

________________________________

Wendy J. Soto, Executive Secretary