Wyoming Administrative Code › Agency 011 - Revenue Dept › Sub-Agency 0006 - Property Tax › Chapter 7 - PROPERTY TAX VALUATION METHODOLOGY AND ASSESSMENT (DEPARTMENT ASSESSMENTS) › Section 7-7 - Capitalization Rate Development

Current through July 13, 2024
(a) The
				capitalization rate is any rate used to convert an income stream into a present
				worth of future benefits. The rate reflects the relationship between one year's
				income or an annual average of several years' income and the corresponding
				value. The Department shall annually calculate capitalization rates based upon
				the band of investment method as defined by these rules for all Department
				assessed industries. The primary components of the rate shall include capital
				structure (book, market and/or regulatory) as determined for the industry
				and/or company being appraised (if industry data is not available or
				applicable) and cost of capital (debt, preferred, and equity) as developed in
				appropriate money markets.
(i)
				Band-of-investment shall mean the method based on the concept that the
				capitalization rate is equal to the weighted average cost of the debt and
				equity portions of the capital investment. Proper development and application
				of the band-of-investment requires obtaining and analyzing data by industry
				type for:
(A) The percent of debt and equity
				which makes up the capital structure as determined from published financial
				sources (Mergent Bond Record, regulatory reports or other recognized financial
				materials available to the Department). The determination shall be done by
				industry type and subgrouping (if sufficient data is available for review) by
				corporate bond rating or other means if bond ratings are not
				available.
(B) Debt rate estimates
				used in the band-of-investment method shall reflect the average current cost of
				yield to maturity of outstanding issues of debt financing for the year ending
				closest to the lien date of appraisal. The rates shall be taken from published
				financial sources (Mergent Bond Record, Standard and Poor's Record, Public
				Utility Financing Tracker and/or other recognized financial materials available
				to the Department). The determination shall be done by industry type and
				sub-grouping (if sufficient data is available for review) by corporate bond
				rating or other means if bond ratings are not available.
(C) Preferred rate estimates used in the
				band-of-investment method shall reflect the average current cost of market
				yield of outstanding issues of preferred stock financing for the year ending
				closest to the lien date of appraisal. The rates shall be taken from published
				financial sources (Mergent Bond Record, Standard and Poor's Record, Public
				Utility Financing Tracker and/or other recognized financial materials available
				to the Department). The determination shall be done by industry type and
				sub-grouping (if sufficient data is available for review) by corporate bond
				rating or other means if bond ratings are not available.
(D) The current cost of equity shall be based
				on data from the capital markets of public utility industries. Equity rates
				shall reflect the representative cost of equity financing for a given industry
				and sub-grouping (if sufficient data is available for review) by corporate bond
				rating or other means if bond ratings are not available as of the lien date of
				appraisal. The current cost of equity will be developed by accepted models in
				the appraisal and financial communities. These models shall include, but are
				not limited to, equity risk premium (ERP), capital asset pricing model (CAPM),
				and the discounted cash flow model (DCF). The sources of required data shall be
				taken from published financial sources, i.e. (Value Line, Morningstar, Inc.
				Ibbotson-"Stocks, Bonds, Bills and Inflation", Wall Street Journal, regulatory
				filings, Federal Reserve Bulletin, Public Utility Financing Tracker and/or
				other recognized financial materials available to the Department).