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OFFICE OF THE ATTORNEY GENERAL OF rrxAs 

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AUSTIN 

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Honorable 3. P. Parker 

Co:nty kttornep 

Commohe County 

:Ccmanohe, Texas 

ale of the properties, if any sucl:. 

up03 constructl.on costs wotid be confishecauee of the 103 ear2.lz.g pwer 32 the prolngs aethod, chculd be given garmomt conslderetion,by ths Ward 

'in this tax v.aluatloa. 

It is'fzrt:Xr pointed out tkat t.",a Ccmn;?cbe County. 

Z?ural Sleotrificatlon Ad2~i~istratlon, a oor~o7ation Or~etized under thf2 zi. Z. k., isa, as 0: Zancury 1, iaa, sanstr.3cZed a>proximatsly sixtpf3ur allea oi cmpleted pomr lines at a coat of about $490.00 Fez rzlle, far tke pspose af ?ir-lisi&k~ electrical 
gsnorable D. P. Parker, Page a 

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energy to the rural seotlons of Zastlaud County, not with en objeot ol profit but of servioe to the e:~icultural cozmnity. Zowever, it is sttited that the lm income return is not due to the 

non-profit charester of the enterprise, but to the thinness of the 

territory served by it, o?d the relatively hi;yh tivestrrent ia fixed 

properties in oozparison v&th earsing poplar, a condition v.$ich ha's 

prevented private utilities frm serving these rural areas. 

Mont 

To resolve this oontrovertJy you ask the following ques8 

?&at shAd be the prlnoijles t&t, the Cm&- 

aloners* Court sh&ld adopt in a.vr1vin.a atfair snd 

just tsxation?w 

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Article 7174, of Ve&on~s Annotated Civil Statutes of 

Texas, 1925, as mended, sets 'up certain requirezests relating to 

the valuation of real and personal property for ad val0X.z tax purpOSeS. The article fin question provides, in part, as follows: 

Pooh separate parcel of real property shall be 

valued at its true end lull value in z~oney, exclud-, 

ing the value of mops grcru%3g gr uxigeethered ,thereon. 

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coin deterzzning the tNe a3d full' valtie of' real 

aad personal property the assessor skall not adopt a 

laver or different standard of value beaause the se.m 

is to serve as a bnsls of taxation, aor,shall,ho adopt 

as a criterion of vaUe the price f6r which s*uch Froperty would sell at augtlon or a forced sale or in the 

aggregate with all the property in his county; but he 

shall value eaoh~tract or lot by itself, az3. at sI*nh am 

and pioe as he believes the sem to be fairly rrorth in 

money at the ti=le suah assesszest is nade. . . . 

*Personal. property of every aeaariptlon shall bs 

r&ued at its true and full value in,~oney,~ 

Artiole 7149 of Vernon's Annotated Zevised Civil Statutes 

of Texas, 1925, as mended, provides as follcris8 

I The ten, ttrus eu?o full value'; w!ierever used 

shall be held to aoan the fair zzarket value, in cash, 

at the place where the property to Which the tern is 

appllod shall be at the tine of assessznt, belng the 

prioe which could be obtained therefor at private sale, 

833a not at roroad or auction s,ale." 

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The term 3arket YeI.& ,* “fair market value, * ~*caah 

market value, * *fair cash market value” end etrue and full val&e 

in money* have been held to be synonymous tern. 40 Tex. Jur. ‘. 

150. I 

9iarket value* or Vair market ~&lue* has been defined 

ea “the ezount OS Honey that a person deslrin3 to sell, but hot 

bound to 00 so, oould, within a reasonable t&e procure for ouah : 

property frm a person who desires and is able to buy, but is not 

bomd to purahase the property. It is the mount thet oould be 

obtained at grivate ~sale and not a ~foraed.or auotlon sale.“, 40 

Tex. Jur. 150. ,_ ” 

Under this-detinltlon end the fasts before us, we think 

it rzy’be assumed thet the properties of the COnenche Coruty 

Eleotric~ Cooperative Assmiation, looated~ .in Zestlend County, 

either have no eotual *r;arket value ,O d?re to ‘the slz3le gurgose 

and multi-aounty nature of the property and its conse~.ucnt war& 

oi a reedy narket as other realty and personalty, bosszonly bought 

and sold; or lf a mrket value z?ay be seid to exist, it Is so Us-,‘- 

proportionate to the oriEioe1 aost of the properties, less deprealation, or ths reproduction oost, iess.depreaietion; as to afford 

no reasonable and proper basis for Yaluation by the Soar& of ‘Equalizetion bf Zaatland County. : 

Thus we see &at the broad &id .dozina& crltsrlon pres-~ 

oribed b$ the Le~islatwa for the valuetiol? of prop&ty for tax 

purposes~ i. 0. ihe reasonable cash value o.f the $operty on the 

market, or v&at it oan be bou&t ant sold for, is difficult if not 

tigosslble of qgllcztlon ns the aole~factor of value. Consequently 

upon this a8suspAon, we turn to the deoisions of thh and othsr 

jurisdictions to det.. rrdne the aocegted w recognized nethods of 

valuing property for tex purposes in swh situations. 

Intrinsia vsbue Is not amtiosed in the statute t&t define0 the pcxvero of th6 Zossd Of yqueli~stioil ($2.) tit. 7206) 

but it is only stated that the Eoard shall “bause the assessor to 

bring before then at such meeting all assessment lists, etc. . . . 

to aae that every person has reddered his property at a feir market 

value. 96 fcLEphnsis ours. ) 

It h&s been noted that VAir nerket valuea is the basis 

required of the Assessor under Artiole 7174. 1s this~~Qo.~cotfOa 

it my be golnted out t;lat Article 7211, Vernon’s A22otsted ilevised 

Civil Statutes, .provides that “IS such property shell be found to 

hare nb market value by such officer (t5.e wsessor), then at such 

•~ aa r&d ofClc,er shJ3 deem the ret+ 01 intrizsio value of the 

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Eaorable Il. P.~Perkar, Page 4 

propartY." Therefore, it scelzs ttit the 

AssaSSOr, nay and'should deterzine value 

;g;t in instances where the property in 

. 40 Tax. Jur. 149. 

%erd, as well as the 

a:cording to intrinsic. 

quuestioxl has no narket 

~Bkethkr or not the properties inmlved hers, dw to 

low or non-existant earnin. power, or to the nature of the properties and the use to whioh they are put, have or do not have 

a "fair market value," 80 a5 to enable th3 3oard of Equalization 

to daternine, the "true and fi~ll valuetin ploney" of the progsrty 

on the basis of the price which auah property would brFr.3 at sri- 

.vate sale, pursuant to the literal tense of the'above quoted stat; 

utes, is- II pure question of faot which this Zepsrtnsnt is not 

oonpetent to pass upon,.and it is not, by this opinion, understood to be so doing. ZIowev6r, easuain,q,froiil the facts stated, 

t&i absence of an established market value for these properties 

which wodld rspresent the:s *true andfull value" thereof, it is 

our opinion that the Board of Zqualization, in arriving at in- 

.trinsio value for tax purposee,~ zag. properly and legally consider 

all pertinent facts, eatixates, forecasts and oirc*sastoroes bro!l?ht 

to its attention or established and recotgizsd ea f~danontallp~ 

casential and reasonably related to,the.question of v&116, either 

_eer the principles of Joxmon law~or a&non aenee. The Lewis- ~I' 

r‘,lature h5s vested in Poarda of Zquallzation, as,oonstit*&ed by 

statutes, 'the oole discrstlon in the valuation clld tie equalization of ths valusa of property eubjeot to taxation. Their action 

is clothed tith the presuznption that it has been rightly nade on 

the baois of actual valueand courts will deoline to disturb su* 

assessnants unlsas sham to be arbitrary and grossly excessive or 

based upon a funde~eotally wrong principal or retaod of deteminfug value. 40 3x. Jur. 156, Great Northern Xailxay Company v. 

Ueeka, 297 'J.S. 195; 80 L. Ed. 932. ,:.. ,I. 

Certainly if the oouvts are loath to dist?rrb the diearetion of Boardsof Zqtalizatloa in disahargin~ their s'titutory 

duties of 'assessing and vaiuin;, property for taxation, then, with 

strong3r reasons, this 3spartnsnt o~lnot pkoperiy, in advance of 

the exercise 3f such discretion by the Equalization Zoard of xaath4a c9mlty, outline end prescribe, by tie requested opinion, 

any t3yLit.m, fomula, ruls or rethod for the oontrol and guidance 

of said Soara in ths aisaharge of its duties. %or can said Soard 

.tbe oonpelled to aubzit to exanizetion as to the operation of their 

ninda in arriving at tis *true and full valus" of the property 

before then. 

Cn the other hand, we thlnk'ws nag pkpsrly point out 

som of tds fornulas.or eystaas aomotily used by tax officiala _, 

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Bonorable D. P. Parkar, Page 5 

in valuing property for'taxation and axzovea by the aourts, 

where market value is non-existent. Some of these are: (1) original cost cr re?roduation cost, less a rsaemable annual depreoiation; (2) "the etmk and bo;ld nethod," or the average market 

priae of ths outstanding stocke and bon5e of a corporation; 

Great Ziorthern-Xallnay Co. v. iieeks, supra; (3) *tie capitallzation of net ope-sting inaoms ~.ethod;~ 26 H.C.L. 367, 368; Grsat 

Northern Railway Co. v. Zeeke, eupra; Parsoae, st al v. Detroit 

k Canada Tunnel Co., et al, 15 Fed. 2upp. 926, aff. City of Ds- 

.,troit Y. Detroit E; Canada Tunn& Co.! 92 Fed. (2)' 33. 

. 

The laet formula or msthod for.acourately determining 

the *true and full value" of property Per taxation purposes by 

tax assessing officials and boards has been, by ths courts, in 

the cited zaaee and others, approved as beiq particularly applicable to railroads and pub110 utiliti4s of various kinds suoh as 

ferrye, bridgse, canals, toll roads, pipe lines and elsctrio 

powsr ana eerviae oompenles, euuh as the one involved in the instant case. The wcapitel.ization-of net izlcoae rnethtiv may be 

rtated aa follows: 

" 

When property has a known and determinate . 

value aeasrtaiced by commera4 in it, as~.in many 

kinds or parsonal propsrty aria in aertain classes 

. of real estate, them can be no difficulty in aeaertaining its val*ue for purposes of taxation. 

In many ce3es, however, ~24 asosssor tae no s;ich 

eatisfaatory guide, and muet value the property 

by other z14acs. In euah cases, if the property 

is devoted to the uee for %%ich lt ~143 desiiyned, 

and is in a condition to pro&ace its maximum in0438, one very important 416ment for ascertaining 

its present value is tie net profits aerlved thcrefrom. In suah a ease the tax ie not levied Won 

th4 earnin.zs as ezch, but the earninEs are treated 

ae a guide to tie capital valus. Ths valus of the 

proparty is arrived at by oap$taliziag the net 

icoons therefra at the rate of return prewiling 

in the sem seatim of the -country upon InvsstzIsnte 

o? a sl-silar otiracter. In dsterainini; the net 

11100~4 of any itsm of property a3 E basis for 

valuation for the purpose of taxation, t5a average 

net income fm a umber of y4ars should be ooneldersd, rather t;Fi;hs earnic.~s of a sin?Je ySar 

standing alone. , however, the eaiiin~ capaoity of th4 property a8 distinguished from the 

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.Hmorable D. P, Farlser, Page 6 

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aotual earnings that is the proper 

sideration in fixing a.8 valuatLon 

' taxation. . . .* .26 B.C.L. 367. 

slanent for oon- OS prop3rty for 

In ugholdirtg the wcapitallzation of net earnings~ prinoiple for the ga:danoe OS tax officials in the valuation OS pub110 utlllty propeztles over tii eother system or Sormlas above 

emmeiated, u&er statutes ahost identical to those whloh 20vern 

here, the oourt, in the case of' Pemms TV. Detroit b; Cmada Turml Co., supra, saidr $ 

*The original, or rearoduotion; construction 

cost of tt,ia t\;r;sa~ is so 6nOPnauS thst there Is 

absolutely no aowrent relatttion between suoh cost 

and its earninE cnpaoity. Kor does such cost appear to have any possible bearing upon such eaiitig 

CsQacity. IS nature had aonzitruoted tbls tunnel 

in its preeent Soxz, it v+lU ba as valuable to its 

owner a8 it nav is. It would'be as val&ble to the 

owner or a prospective purohaaer, re&ardless OS its 

original cost. ItS OOSt dOeS E&t &XX]-S ClteF hItO 

the questions as to what price a purchaser would pay 

.03-a selier 7sould take. The basis So? a sale price 'I 

wuld be the present, ar.d probable Suttie, taming 

power of the property; erd certainly present and 

past earnings are proper and tigortant Sactors in 

$.idgi~g whet eazzings my fairly be expeatod fn the -' 

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'Therefore It ie t5.e couolusion OS the ooiirt 

that the tunnel i;roperty here involved is OS auoh 

character as to be usable for a single purpose only; 

that it is devoted to the public service under regulations and oetkxls oS operation, a6 to classify 

it as a aublio utility; also that the capitalization 

cl earn&s nethod should hare been~given, controlling 

consideration ed eSSec t bytho assassin:< ol'floers 

in.arrivizIg at the true cash value of the >ropsrty, 

witbin ths ntanlng and oooF)e,o? tke ap::licable Xioh- 

&.n statutes; that the taxing authorities, in basing 

their valmtions for the tame years in qus.stLon. 

eatlrely upon dspreciatad Cost, ecd in iailicg to 

give imy cohsidertitioz or xrc2Tht to the capitalization of net irso-& method, have adopted e fundazentally erro:.eozs 2ri:;ciple or rathod of arriving at the 

true cash value 31 t;le Eroperty in ques:log, in violation OS tLej duci p,mcess clsute of th6 EwXeenth 

Amendmnt to the Constitution OS the i?nlted ktatss, 

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.Honorable D. F. Parker, Page 7 

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and the reaultlng assestmtnts are therefore Illegal 

and void. . . ." 

We reiterate that the groper Somfila, nethod or prinodpie to aide the Eoard of Equalization OS Xaatiand CounQ~ in the 

perfoxzance OS their statutory duties OS dete,-ini=% the *true 

and full value" of the properties oI +the CozamheCoucty 2lectrio 

COOpiQtiVe Assoolatl3n, is not 3ure to dooide, bat rests squarely ar.d solely within tha sound disoretloo of tile sa:d Bomd.~ It 

is their province to hem the avideme azd weigh the Saots, ciramstmioes and conditions 8urromliIig t-he ;rro?ei-ties ir: question 

end therefrm deterzxine vhi3ti 3i the three sethods, Sorml.aa or 

Prinoiplss aug;-Tested hereimbote, or my others, aiiigly or in. 

ambifiation, will be best ada_s';ad to the peculiar facts of this 

aase. in other words, this opinion should not be understood to 

hold that the wca~ltali-&tion oS net inoo~e aethod2+ is the anly. 

one applicable to the faots of this case, to be exoluslvely and 

xeiy Sollmed by the Dcard. UC are mrely pointtiog out that 

6uOh mtiiod ~a_y: be lawfully considered by the Eoardj if ,it ap?ears~ 

iron the facts adduced before then thatmch nethod is beat calauleted to arrive at the *true and full value" 0S the Froperty. 

But, if soy otbr xzethod , grinaiple or.forzula, whether clistmssed 

.T-- herein'& not, arjpsais to the 3aard to better establish such "true 

and full value," then said Eoard is et llberVJ,to follow such 

method, subjeot, OS oourse, to revieelr by the courts in the &amer 

-herein discussed. .: , : 

are 

Trawtlng the foregoing Sully armveru yaw inqw, we 

Tauzs very truly