Opinion ID: 1291283
Heading Depth: 3
Heading Rank: 2

Heading: Valuation Methodology

Text: ¶ 42 The Commission's amended final decision remanded the case to the parties with instructions to calculate yield capitalization value minus growth, to time-adjust the cost approach, and weigh each result 50% in the final appraisal. WilTel argues that this approach is imprecise and does not effectively exclude intangibles. ¶ 43 However, the Commission rejected the use of direct capitalization and the stock and debt method because of the tendency each has to impound intangibles at higher levels. Both yield capitalization and direct capitalization are commonly used, often in combination with cost and market evaluations, to estimate the market value of commercial property. See Salt Lake City Southern R.R., 987 P.2d at 598. In WilTel's case, the Commission employed the cost indicator from the Division's appraisal and adjusted it using a U.S. Department of Commerce inflation measure. The Commission then applied yield capitalization, which is a method used to convert future benefits into present value by discounting each future benefit at an appropriate yield rate. The Appraisal of Real Estate, supra ¶ 42, at 420 (emphasis omitted). ¶ 44 WilTel and the Counties disagree for different reasons with the assessment method that the Commission selected. However, before arriving at its present method, the Commission sought input from the parties. The Commission's decision on the motion for partial summary judgment directed WilTel and the Division to calculate and remove the value of intangibles. Following the decision on the motion, the Division submitted a WilTel system value of $1,375,000,000 with a Utah share of $37,249,110. WilTel calculated the system value at $817,000,000 with a Utah allocation value of $15,704,000, while the Counties requested a Utah assessed value of $66,286,894, based on a system value of $2,352,293,100. It was only after the parties proved the impracticality of determining and deducting the value of intangibles, category by category, that the Commission stepped in with the cost/yield capitalization method. ¶ 45 WilTel and the Counties complain that the Commission has selected a methodology that neither of them proposed. The Commission was not obligated to adopt either of the proposed methodologies. Article XIII, section 11 of the Utah Constitution provides: The State Tax Commission shall administer and supervise the tax laws of the State. Section 11 also gives the Commission powers of original assessment as provided by the legislature and power to equalize the assessment and valuation of property within the counties. State appraisers, acting under the general direction of the State Tax Commission or a Commissioner, have considerable discretion in determining which method should be utilized in assessing a particular property and the weight to be given to each indicator of value. Rio Algom, 681 P.2d at 189. ¶ 46 WilTel and the Counties also contend that the Commission's method was without an evidentiary basis. The Commission counters that it relied on the affidavit of Charles Peterson, the manager of the Division's utilities valuation section, to calculate WilTel's final assessed value. Mr. Peterson's affidavit, which was made under oath and circulated to the parties, details the Division's appraisal method and calculations. Neither WilTel nor the Counties objected to or rebutted Mr. Peterson's affidavit. We add that the substantial documentation of unitary tax appraisal practice contained in the record also bolsters the evidentiary basis for the Commission's methodology. ¶ 47 Moreover, neither WilTel nor the Counties have offered a workable alternative assessment methodology. WilTel argues for cost analysis alone, which ignores fair market value. The Counties erroneously subject intangibles to the privilege tax and undervalue tax-exempt intangibles. As we noted in Salt Lake City Southern Railroad, the unsupported assertion that a different methodology should have been used does not constitute a basis for reversal. 987 P.2d at 599. In that case, we upheld the Commission's determination that the Division's use of the income approach of appraisal was proper and that the resulting valuation did not unlawfully include the value of intangible property. Id. at 596. In the instant case, the Commission's equal weighting of time-adjusted cost and yield capitalization removed over $1,400,000,000 of intangible value from the original $2,500,000,000 fair market value established by the sale price. Therefore, we hold that the Commission's combination of the yield capitalization value with the cost assessment of the Division sufficiently captures the unitary value of the property while excluding intangibles.