Opinion ID: 2520907
Heading Depth: 2
Heading Rank: 1

Heading: bota standard of review

Text: CIG contends that BOTA paid only lip service to our mandate and again deferred to the PVD's judgment. Resolution of this issue necessarily requires consideration of what we said in Colorado Interstate Gas, regarding BOTA's standard of review. In our reversal of BOTA's prior decision, we concluded that BOTA erred by paying deference to the PVD. BOTA's appropriate standard of review is as follows: The law in Kansas is clear. It is the duty of BOTA, in reviewing a valuation by the PVD, to exercise its judgment anew based on the evidence presented to it at the hearing and without giving deference to the PVD's valuation. K.S.A. 1996 Supp. 74-2438. 270 Kan. at 318. We rejected the PVD's argument that BOTA exercised its judgment anew in light of the language used by BOTA that the taxpayer had a duty to show that the PVD had intentionally and grossly disregarded the standards in order to prevail. 270 Kan. at 318-19. In an attempt to demonstrate that BOTA again applied an incorrect standard of review, CIG points to language in the BOTA decision which stated that CIG failed to establish by a preponderance of the evidence that the PVD's unit valuation and apportionment to Kansas was in error. CIG points to the following language in the BOTA decision which it claims supports its contention that BOTA again yielded to the PVD's determination: 46. The Taxpayer has the burden of proof to show by a preponderance of the evidence that the Director has not appropriately valued and allocated the valuation as prescribed by K.S.A. 79-5a04. . . . . 49. The Board finds that PVD used appropriate methodologies and came to a rational conclusion in its determination of the appropriate capitalization rate for large gas transmission companies for the tax years in question. The Taxpayer has not provided sufficient evidence to show that PVD's rates are in error. Based on the foregoing, the Board finds that the appropriate capitalization rate for tax year 1993 was 11%, for tax year 1994 was 11% and for tax year 1995 was 11.5%. . . . . 56. While the Board does not agree with the Director that he is `required' to allocate public utility unit valuation to Kansas by use of original cost, the director may use original cost if it is a generally accepted appraisal procedure and it results in the taxpayer's property located in Kansas being valued at fair market value. As noted previously, K.S.A. 79-5a25 requires that the apportionment of the assessed valuation to the various taxing jurisdictions in Kansas is to be in proportion to original cost. K.S.A. 79-5a04 and 79-5a25, read in pari material, provide a two-step process to first allocate, and then apportion, unit valuation to Kansas. Testimony was that PVD for the years at issue herein did perform the two-step process. However, as contended by the Director in his brief on pages 14-15 and by Mr. Badenoch in his testimony, the process of allocation and apportionment need not be a two step process if each taxing jurisdiction's share of the whole can be directly determined, as it can in Kansas. The Board concludes that the Director's interpretation is reasonable, has a rational basis, and should be upheld. . . . . 68. The Board finds that the Taxpayer has not shown by a preponderance of the evidence that PVD's unit valuation and apportionment to Kansas is in error. After considering the standards prescribed by K.S.A. 79-5a04, the Board concludes that the correlated unit value of the Taxpayer's property for 1993 is $525,000,000, for 1994 is $465,000,000 and for 1995 is $430,000,000. The Board further concludes that the fair market value of the Taxpayer's property allocated to Kansas for 1993 is $50,820,480, for 1994 is $48,041,475, and for 1995 is $44,549,720. (Emphasis added.) CIG argued that the above language makes clear that BOTA once again gave deference to the PVD and required that CIG shoulder the burden of providing that the PVD erred. CIG noted that it should have no burden to show that the PVD erred or to negate the contentions of the PVD but argued that its burden is limited to showing by a preponderance of evidence that its proposed values are correct. We agree that CIG's burden before BOTA was to establish by a preponderance of evidence that its proposed values are correct. We, however, disagree that the above language in the BOTA decision provided a basis for concluding that BOTA gave deference to the PVD in its decision on the fair market value of CIG's property in Kansas. Following remand, the proceeding continued with an agreement by the parties to consider the matter based upon the existing record. At that point, the record contained the PVD's determinations as to CIG's value, together with all supporting evidence. CIG's value, together with its supporting evidence, was also before BOTA. In order to prevail before BOTA, the burden fell upon CIG to establish by a preponderance of the evidence the accuracy of its valuation. BOTA recognized its role when it said that CIG has the burden of proof to show by a preponderance of the evidence that the [PVD] has not appropriately valued and allocated the valuation as prescribed by K.S.A. 79-5a04. In other words, CIG's burden was to show that the PVD was wrong and the value it asserted was supported by substantial competent evidence. Thus, BOTA was giving no deference to the PVD except to say that when the PVD established evidence that its valuation was accurate, CIG must necessarily attack and undermine the PVD's valuation. It is up to BOTA which side presents the most compelling case. CIG argues that Paragraph 46, quoted above, shows how BOTA deferred to the PVD's judgment. Within this context, BOTA's statement that the taxpayer has the burden of proof to show by a preponderance of the evidence that the director has not appropriately valued and allocated the valuation, as prescribed by K.S.A. 79-5a04, is another way of saying that the burden lies with CIG. In order for CIG to prove its valuation, it would be required to prove that the PVD valuation was incorrect. CIG also complains that evidence of BOTA deference is found in Paragraph 49, where BOTA said that the PVD came to rational conclusions. However, BOTA also said in the same sentence that the PVD's methodologies were appropriate. Consistent with exercising judgment anew, it would be logical for BOTA to adopt conclusions reached by appropriate methodologies. BOTA determined anew that the original cost was the appropriate method to determine fair market value of CIG properties in Kansas. This method was advanced by the PVD and rejected by CIG, providing BOTA with a choice among the many methods set forth in K.S.A. 79-5a04. BOTA selected the most appropriate method, which was also the method used by the PVD CIG argued that BOTA erred by using language in Paragraph 56 when it said that the PVD's interpretation is reasonable, has a rational basis, and should be upheld. We do not believe BOTA's language indicates that it ignored its standard of review. BOTA is faced with a decision between two competing positions as to value. Key to its decision is the process used by each in ascertaining such value. The allocation process used by each party is key to its final decision. In determining that the PVD's interpretation is reasonable, BOTA has determined that the evidence as a whole supports the determination made by the PVD, not that deference must be given to the PVD. The language used by BOTA demonstrates to this court that BOTA understood the role it was required to play in its determination of value. In Paragraph 68, when BOTA said in its original order on remand that CIG has not showed by a preponderance of the evidence that the PVD's unit valuation and apportionment of value to Kansas is in error, it was also saying that the PVD had shown by a preponderance of evidence that its valuation was correct. In its brief on appeal, CIG failed to offer a complete quotation of Paragraph 68, which indicates BOTA's conclusions with respect to the unit value and the allocation of that value to Kansas. Unlike the previous appeal, there is no indication that BOTA relied on an intentional and gross disregard standard of review or deferred to the PVD in determining fair market value in Kansas. See Colorado Interstate Gas, 270 Kan. at 315. BOTA understood the mandate of this court in Colorado Interstate Gas. BOTA applied a correct standard of review as demonstrated in its order denying CIG's motion for reconsideration: 5. The Taxpayer asserts that the Board did not exercise its judgment anew, but instead, found that the Taxpayer did not meet its burden to show that the Director has not appropriately valued and allocated the valuation. The Taxpayer further argues that the Board's standard of review inherently gives deference to the Director's valuation in direct contravention of the Supreme Court's remand. The Board believes the Taxpayer has misinterpreted the Board's findings and conclusions. 6. The Board is well aware that the standard of review requires that the Board exercise its judgment anew based on the evidence presented and without giving deference to the Director's valuation. The Taxpayer's argument in these matters is basically that the Director has excessively valued and allocated the valuation of the Taxpayer's property. The Taxpayer must provide evidence to show that the Director's valuation is in error and the Director must provide evidence in support of his valuation. The Board must review the evidence provided and by applying the factors enumerated in K.S.A. 79-5a04 determine the appropriate valuation and allocation of the Taxpayer's property. In these matters, the Board gave no deference to the Director's valuations, but rather reviewed the evidence presented and concluded by the weight of the evidence that the appropriate unit valuation for 1993 is $525,000,000 (now corrected to $510,000,000), $465,000,000 for 1994 and $430,000,000 for 1995, which are the same as determined by the Director. The Board further concluded that the fair market value of the Taxpayer's property allocated to Kansas for 1993 is $50,820,480, for 1994 is $48,041,475, and for 1995 is $44,549,720, which are the same as determined by the Director. Nevertheless, CIG argues that a decision on whether BOTA applied the correct standard of review should be determined by considering the record as a whole, not by considering what BOTA said in its order denying reconsideration. Further, CIG argues that BOTA's order denying reconsideration does not negate the admissions of deference in BOTA's original order since BOTA's figures matched those of the PVD's despite the subjective nature of the judgment exercised by the PVD. The fact that BOTA's figures matched those of the PVD's provides little if any evidence that BOTA applied a deferential standard of review. CIG is right that this determination must be made from the record as a whole. If BOTA is to be believed, it gave no deference to the PVD in its determination of value. However, we must point out that initially it was the responsibility of the PVD to value CIG's property for ad valorem taxation in Kansas. It did so based upon the judgment of its experts and all of the factors which are now before this court. The proceeding before BOTA started with the PVD's determination of value and its contention before BOTA that fair market value in Kansas was established. The assessment had been made by the PVD. Before BOTA, the PVD presented its testimony and CIG presented its testimony and its determination of fair market value in Kansas. CIG had the burden to establish that the determination by the PVD was invalid based upon the record as a whole. Based upon all evidence presented, BOTA concluded that CIG failed to meet its burden, thus providing a basis for concluding that the valuation determined by the PVD was correct. Instead of giving deference to the PVD by adopting its valuation, BOTA determined that the record supported the determination made by the PVD. To say that BOTA adopted the PVD's values without any consideration of the evidence ignores the record as a whole as well as BOTA's expressed conclusion that its determination was made anew based upon all the evidence presented.