Opinion ID: 2618039
Heading Depth: 1
Heading Rank: 1

Heading: Assessment

Text: As shown by the testimony at the trial, the first thing the Board did with respect to both plaintiffs here was to take the information that each company had supplied in their reports and attempt to fix the full and true value of each company as an operating unit. This involves application of what is termed the unit rule of valuation. The theory of this rule is this: Where property is part of a continuous system which extends through many taxing districts, the proper way to find the true cash value of any part of this property requires that the system as a unit be evaluated. The rationale of this theory is that, where a system is involved, the sum of the value of the parts of the system does not truly represent the total value thereof, and therefore, in order to get a true reflection of the economic value, the system as a whole must be valued as a unit. In order to find the value of the Oil Basin Pipe Line Co. the Board averaged the stock and debt value and the cost of plant and equipment. The stock and debt value was found by adding the value of first mortgage bonds outstanding, the value of sinking fund debentures issued, and the value of Oil Basin's common stock at market value. First mortgage bonds which were due in one year were not included because the Board felt that they would not contribute to an accurate picture of the value of the company. Capitalization of net operating income was not computed in the average because the company had been in operation for only a short while and the Board felt that no proper annual estimate of income could be made. The cost of plant and equipment, as indicated by the report of Oil Basin to the Board, was averaged. This average of stock and debt value and cost of plant and equipment was $5,072,908. This, in the Board's mind, represented the true and full cash value of all the property of Oil Basin Pipe Line Company. In finding the unit value of Yellowstone Pipe Line's property, the Board followed a similar procedure. It averaged stock and debt value, 6 percent capitalization of estimated annual income, and the cost of plant and equipment. Stock and debt value was computed by adding the value of common stock at par, the value of serial notes, and by subtracting the sum of over $6 million which the Board felt represented an excessive cost of construction in the light of the fact that Yellowstone had been required to traverse unusually treacherous terrain. By averaging these three elements, the Board estimated the true and full cash value of all Yellowstone's property at $13,388,747.