393 Mass. 511 | Mass. | 1984
The central issue on this appeal is the proper formula to be applied in valuing taxable personal property owned by Boston Edison Company (Edison) in Watertown for the fiscal years 1976, 1977, and 1978. The Appellate Tax Board (board), on remand from this court, Boston Edison Co. v. Assessors of Watertown, 387 Mass. 298, 308 (1982) (Watertown I), determined to value Edison’s property by giving 97% weight to the property’s net book cost (or rate base value) and 3% to its depreciated reproduction cost (DRC).
Pursuant to the remand, the board reopened the case “for the introduction of further evidence by the parties, a) on the [DRC] methodology of valuation and more particularly pertaining to the basis for the rates of depreciation utilized by the experts; b) on the circumstances in this case that would induce a willing buyer to pay more than the rate base value of the personalty or the value placed on the property by the Board; [and] c) any other evidence which will assist the Board in determining fair market value of the property.”
On appeal, the assessors concede that there is substantial evidence for a finding based on either net book cost or DRC or some combination of the two. Their contention, here made for the first time,
The assessors rely on New York law for the proposition that special purpose property must be valued at DRC. The real property tax law of New York provides that a “special franchise” be assessed annually at its “full value.” N.Y. Real Prop. Tax Law §§ 600(1), 606(1) (McKinney 1984). “Full value” has been interpreted to mean DRC in the case of “special franchise” property: “It has consistently been held that the proper and accepted method for the valuation of a ‘specialty’ is reproduction cost new less depreciation, except in a case where, because of the newness of the property, actual construction cost may adequately and fairly reflect its value.” Consolidated Edison Co. of N.Y. v. State Bd. of Equalization & Assessment, 101 Misc. 2d 910, 913-914 (N.Y. Sup. Ct. 1979), modified on other grounds, 83 A.D.2d 355 (N.Y. App. Div. 1981), aff’d, 58 N.Y.2d 710 (1982).
The assessors next ask us to apply an “intrinsic value” formula to the Edison property on the authority of our decision in Mashpee Wampanoag Indian Tribal Council, Inc. v. Assessors of Mashpee, 379 Mass. 420 (1980). We find nothing in Assessors of Mashpee which affects our holdings in Watertown I or in Montaup Elec. Co. In Assessors of Mashpee, supra at 421, we held it “proper to determine fair cash value from the intrinsic value of the property” in circumstances in which land, subject to deed restrictions, was not saleable. We did not, however, abandon the requirement that the assessors strive to determine the fair cash value of the property. Watertown I, supra at 304.
The assessors further contend that (1) nothing in the record establishes the economic obsolescence of Edison’s business or of the Watertown property; (2) a willing purchaser might pay a premium over net book cost; and (3) the Department of Public Utilities (DPU) might allow a rate base greater than net book cost to a purchase.
On remand, Edison introduced evidence through several expert witnesses that DPU’s ceiling on the future stream of
We are left, in the end, with a record in which the assessors did not avail themselves of the opportunity to explain, “by reference to substantial evidence or to reasoned principle, why a buyer would want to pay more than Edison’s net book value, when by investing the same dollars elsewhere that buyer could obtain a better return.” Watertown I, supra at 304-305. The decision of the Appellate Tax Board is affirmed.
So ordered.
“The [DRC] approach involves, for each item of property, a determination of its value based on the current cost of reproducing it, reduced by physical, functional, and economic depreciation. The net book cost, or the rate base value, of property is its cost when first devoted to public use, reduced by accrued depreciation” (footnote omitted). Watertown I, supra at 300-301.
The board would “not admit further testimony on net book cost of [Edison’s] property.”
General Laws c. 58A, § 13, as amended through St. 1983, c. 72, § 2, reads in pertinent part: “The court shall not consider any issue of law which does not appear to have been raised in the proceedings before the board. ”
The assessors also direct us to the “famous case” of People ex rel. N.Y. Stock Exch. Bldg. Co. v. Cantor, 221 A.D. 193, 195 (1927), aff’d mem., 248 N.Y. 533 (1928), where the court valued the New York Stock Exchange building at its DRC, despite the company’s argument that the building did not “enhance the value of the land except ‘as a tear-down proposition.’” The New York court would not permit the property to escape taxation when “the market value would be difficult, if not impossible, to find.” Id. at 197. But even then, the relevant New York statute required that property be assessed “at the full value thereof,” id. at 196, as distinct from G. L. c. 59, § 38, which demands a determination of the “fair cash valuation” of the taxable property.
We noted previously the DPU’s “apparently longstanding position . . . that, if a regulated utility sells an asset to another regulated, public utility, the basis of that asset in the hands of the transferee remains the same as that of the transferor for rate-making purposes. Thus, if Edison were to sell any of its taxable personal property in Watertown to another public utility, that other utility would be allowed a return on the transferred property based on that property’s net book . . . value, and not on any higher purchase price it might have paid.” Watertown I, supra at 301.
For example, one of Edison’s expert witnesses testified that: “Economic depreciation is that part of the cost approach which reflects the realities of the marketplace. Now a utility property has its earnings restricted. And in any approach in the determination of market value, it’s important that I incorporate the realities of the marketplace. So if I ignored the fact that the utilities earnings are restricted by leaving the economic depreciation out of my cost approach, I would have simply determined the physical cost of the property and not what a willing buyer would pay for this property.”
Another of Edison’s witnesses testified as follows: “My opinion is that a well informed and willing buyer would have no reason, no economic and rational reason, to pay a premium above net book cost for the property in question. And having no reason, he would not do so.” The witness later added: “[I] have already dismissed before the possibility that the DPU would allow a return higher tiian the fair net book. So that possibility is out.”