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OFFICE OF THE ATTORNEY GENERAL **OF rrxAs**  **Q- c.**  **m&w4 AH--**  **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

costswotid 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:Xrpointedout tkat t.",a Ccmn;?cbe

County. Z?ural Sleotrificatlon

Ad2~i~istratlon,

a oor~o7ation

Or~etized

un

## der thf2

zi. Z. k., isa, as 0: Zancury 1, 

## iaa, sanstr.3cZeda>proximatsly sixtpf3ur allea oi cmpleted pomr lines at a coat of about $490.00 Fez rzlle, far tke pspose **af** ?ir-lisi&k~ electricalgsnorable D. P. Parker, Page a ,A~.

_ energy to the rural seotlonsof ZastlaudCounty,not with en objeot ol profit but of servioe to the e:~icultural cozmnity. Zowever, it is sttited that the lm incomereturn is not due to the non-profitcharester 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 earsingpoplar, a condition

v.$ich ha's preventedprivate utilitiesfrm serving these rural areas.

Mont To resolve this oontrovertJy you ask the followingques8 ?&at shAd be the prlnoijles t&t, the Cm&- aloners* Court sh&ld adopt in a.vr1vin.a at fair snd just tsxation?w

_. Article 7174, of Ve&on~s AnnotatedCivil Statutes of Texas, 1925, as mended, sets 'upcertainrequirezests relating to the valuation of real and personalpropertyfor ad val0X.z tax purpOSeS. The article fin questionprovides,in part, as follows: Pooh separateparcel of real propertyshall be valued at its true end lull value in z~oney, exclud-, ing the value of mops grcru%3g gr uxigeethered

,thereon. /-- coin deterzzningthe tNe a3d full' valtie of'

real aad personal propertythe assessorskall not adopt a laver or differentstandardof 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*uchFroperty would sell at augtlon or a forced sale or in the aggregatewith all the propertyin his county;but he shall value eaoh~tractor lot by itself,az3. at sI*nh

am and pioe as he believes the sem to be fairlyrrorth in money at the ti=le suah assesszestis nade.

. . . *Personal.

property of every aeaariptlon shall bs r&ued at its true and full value in,~oney,~ Artiole 7149 of Vernon'sAnnotatedZevisedCivil Statutes of Texas, 1925, as mended, providesas 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 propertyto 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."
2

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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

9iarketvalue* or Vair market ~&lue* has been defined ea “the ezount OS Honey that a person deslrin3to sell, but hot bound to 00 so, oould,within a reasonable t&e procure for ouah : 

## property

frm a person who desiresand 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 propertiesof the COnencheCoruty Eleotric~

CooperativeAssmiation, looated~ .inZestlendCounty, either have no eotual *r;arket value,O d?re

to ‘the slz3le gurgose and multi-aounty nature of the propertyand 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 oriEioe1aost 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 reasonablecash value o.f the $operty on the market, or v&at it oan be bou&t ant sold for, is difficult if not tigosslbleof qgllcztlon ns the aole~factor of value. Consequently upon this a8suspAon, we turn to the deoisionsof **thh** and othsr jurisdictions

to det..

**rrdne** the aocegted w recognized nethods of valuing property for tex purposes in swh situations.

Intrinsiavsbue 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 redderedhis propertyat a feir market value. 96 fcLEphnsis

ours.) It h&s been noted that VAir nerket valuea is the basis required of the Assessorunder Artiole 7174. 1s this~~Qo.~cotfOa it my be golnted out t;lat Article 7211,Vernon’sA22otstedilevised Civil Statutes, .provides that “IS such propertyshellbe 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 L p,,

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. Eaorable Il.

P.~Perkar,Page 4

propartY." Therefore, it scelzs ttit the AssaSSOr, nay and'shoulddeterzine value ;g;t in instances where the propertyin

. 40 Tax. Jur. 149. %erd, as well as the a:cordingto intrinsic. quuestioxl

has no narket

~Bkethkror not the properties inmlved hers, dw to low or non-existantearnin.power, or to the nature of the properties and the use to whioh they are put, have or do not have a "fairmarket 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 literaltense of the'above quoted stat; utes, is-

II pure questionof faot which this Zepsrtnsnt is not oonpetentto pass upon,.andit 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 arrivingat in- .trinsio

value for tax purposee,~ zag. properlyand legally consider all pertinentfacts, eatixates, forecasts

and oirc*sastoroes

bro!l?ht to its attention or established and recotgizsd ea f~danontallp~ casentialand reasonablyrelated 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,'theoole discrstlonin the valuation clld tie equalization of ths valusa of propertyeubjeotto taxation. Their action is clothed tith the presuznption that it has been rightlynade on the baois of actual valueand courtswill deoline to disturb su* assessnantsunlsas sham to be arbitrary and grossly excessiveor based upon a funde~eotally wrong principalor retaod of deteminfug value. 40 3x. Jur. 156, Great Northern XailxayCompany 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;,

propertyfor taxation, then, with strong3r reasons, this 3spartnsnt o~lnotpkoperiy,in advance of the exercise 3f such discretion by the Equalization Zoard of 

## xaath4ac9mlty,outline end prescribe, by tie requestedopinion, any t3yLit.m,

fomula, ruls or rethod for the oontroland guidance of said Soara in ths aisahargeof 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.oreystaasaomotilyused by tax officiala

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- BonorableD. 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 averagemarket priae of ths outstandingstocke and bon5e of a corporation; Great Ziorthern-Xallnay Co. v. iieeks,

supra; (3) *tie capitallzation of net ope-stinginaoms ~.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

purposesby tax assessingofficialsand boardshas been, by ths courts, in the cited zaaee and others,approvedas beiq particularlyapplicable to railroadsand pub110 utiliti4s of variouskinds suoh as ferrye, bridgse, canals, toll roads,pipe lines and elsctrio powsr ana eerviae oompenles,euuh as the one involvedin the instant case. The wcapitel.ization-of net izlcoae rnethtiv may be rtated aa follows: "

.

When propertyhas a known and determinate value aeasrtaiced

by commera4 in it, as~.in many kinds or parsonal propsrtyaria in aertainclasses

. of real estate, them can be no difficulty in aeaertaining its val*ue for purposes of taxation. In manyce3es, however, ~24 asosssortae 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 conditionto pro&ace its maximum in0438, one very important416mentfor ascertaining its present value is tie net profitsaerlvedthcrefrom. In suah a ease the tax ie not leviedWon th4 earnin.zs

as ezch, but the earninEs are treated ae a guide to tie capitalvalus. Ths valus of the proparty is arrived at by oap$taliziag the net icoons therefra at the rate of returnprewiling in the sem seatim of the -country upon InvsstzIsnte o? a sl-silar

otiracter. In dsterainini; the net 11100~4 of any itsm of propertya3 E basis for valuation **for** the purpose of taxation,t5a average net income fm a umber of y4ars shouldbe ooneldersd,rather t;Fi;hs earnic.~s of a sin?JeySar standingalone. , however,the eaiiin~capaoity of th4 property a8 distinguished from the

.,-.

. .. z .Hmorable D. P, Farlser, Page 6 T--
aotual earnings that is the proper

siderationin 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 officialsin the valuationOS pub110 utlllty propeztlesover tii e other system or Sormlas above emmeiated, u&er statutesahost identical to those whloh 20vern here, the oourt, in the case of' Pemms TV.

Detroitb;

Cmada Turml Co., supra, saidr $

*The original, or rearoduotion; construction cost of tt,ia

t\;r;sa~ is so 6nOPnauS thst there Is absolutelyno aowrent relatttion between suoh cost and its earninE cnpaoity. Kor does such cost appear to have any possible bearingupon such eaiitig CsQacity. IS nature had aonzitruoted tbls tunnel in its preeent Soxz, it v+lU ba as valuableto 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** probableSuttie, taming power of the property;erd certainly presentand past earningsare proper and tigortant Sactors in $.idgi~g

whet eazzingsmy fairly be expeatodfn the -' SutumL -.
_. 'ThereforeIt ie t5.e couolusionOS the ooiirt that the tunnel i;roperty here involvedis OS auoh characteras to be usable for a singlepurposeonly; that it is devoted to the public serviceunder regulations and oetkxls oS operation, a6 to classify it as a aublio utility; also that the capitalization cl earn&s nethod shouldhare 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. eatlrelyupon dspreciatad Cost, ecd in iailicg to give imy cohsidertitioz or xrc2Tht

to the capitalization of net irso-& method, have adoptede fundazentally erro:.eozs

2ri:;ciple

or rathod of arrivingat 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,

1

. .a&~ i;

.Honorable

D. F. Parker, Page 7 EM-.

and the reaultlngassestmtnts are thereforeIllegal and void.

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We reiterate that the groper Somfila, nethod or prinodpie to aide the Eoard of Equalization OS Xaatiand CounQ~ in the perfoxzanceOS their statutoryduties 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 conditions8urromliIig t-he ;rro?ei-ties

ir: question end therefrm deterzxine vhi3ti 3i the three sethods,Sorml.aa or Prinoiplssaug;-Tested hereimbote, or my others, aiiigly or in. ambifiation,

will be best ada_s';ad to the peculiarfacts of this aase. in other words, this opinion shouldnot be understoodto hold that the wca~ltali-&tion oS net inoo~eaethod2+ is the anly. one applicableto 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 , grinaipleor.forzula, whether clistmssed .T-- herein'& not, arjpsais to the 3aard to better establishsuch "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 armveruyaw inqw, we

Tauzs very truly