Opinion ID: 2520803
Heading Depth: 1
Heading Rank: 1

Heading: bota's standard of review

Text: 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. In re Tax Appeal of Colorado Interstate Gas Co., 270 Kan. 303, 14 P.3d 1099 (2000). In a prior appeal of this same case, we reversed and remanded to BOTA based upon our conclusion that BOTA may have given the PVD deference and based upon our decision in Colorado Interstate Gas, we rejected the standard adopted by BOTA that a public utility must demonstrate that the PVD intentionally and grossly disregarded the standards prescribed by K.S.A. 79-5a04 in order to prevail. While BOTA did not articulate such a standard in this case, we held that it was not possible to conclude that BOTA disregarded the erroneous standard of review adopted in Colorado Interstate Gas. We, therefore, reversed and remanded to BOTA for further proceedings. After a review of the law in Kansas regarding the appropriate standard BOTA must use in its determination of value in a public utility's appeal from a PVD determination of value, we said in Colorado Interstate Gas: Based upon the expert testimony presented by the PVD before BOTA that the unit valuation method used need not represent the fair market value of CIG's property in Kansas, and considering that BOTA applied an incorrect standard of review for that evidence by giving deference to the PVD's determination of value, there is a real possibility that BOTA's final determination of value for the years in question was not based on fair market value as required by K.S.A. 79-5a04. 270 Kan. at 321. In the present appeal, ANR again challenges the standard of review applied by BOTA, claiming that BOTA paid lip service to the standard of review set forth in Colorado Interstate Gas but effectively applied a similarly erroneous standard by again giving deference to the valuation determined by the PVD. In support of its claim, ANR points to the following language in the BOTA decision: 38. The Taxpayer has the burden of proof to show by a preponderance of the evidence that the Director has not appropriately valued the Taxpayer's property pursuant to K.S.A. 79-5a04. Id. . . . . 41. The Board finds that PVD used appropriate methodologies and came to rational conclusions concerning depreciation and obsolescence in the cost approaches to value. . . . . 47. PVD's overall capitalization rate for tax years 1994 and 1995 are similar to the overall capitalization rates recommended by the Natural Gas Pipeline Property Tax Forum. Finally, PVD's capital structure determination is similar to the capital structure determination of the Natural Gas Pipeline Property Tax Forum. . . . . 53. The Board finds that the Taxpayer has not shown by a preponderance of the evidence that PVD's unit valuation of the Taxpayer's property is in error. After considering the standards prescribed by K.S.A. 79-5a04, the Board concludes that PVD's unit valuation of the Taxpayers property for tax year 1993 of $1,640,000,000, for 1994 of $1,590,000,000 and for tax year 1995 of $1,560,000,000 are appropriate estimates of the fair market value of the Taxpayer's property and should be sustained. ANR argues that the above language makes clear that BOTA once again gave deference to the PVD and required ANR to shoulder the burden of proving that the PVD erred. ANR notes that it should have no burden to show that the PVD erred or to negate the contentions of the PVD, but argues that its burden is limited to showing by a preponderance of evidence that its proposed values are correct. We agree that ANR's burden before BOTA was to establish by a preponderance of evidence that its proposed values are correct. We, however, disagree that BOTA actually deferred to the PVD in its decision on the unit value of ANR's property and the fair market value of its 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 ANR's value together with all supporting evidence in addition to ANR's determination of its value together with its supporting evidence. In order to prevail before BOTA, the burden fell upon ANR to establish by a preponderance of the evidence the accuracy of its valuation. BOTA recognized its role when it said that ANR has the burden of proof to show by a preponderance of the evidence that the [PVD] has not appropriately valued the Taxpayer's [ANR] property pursuant to K.S.A. 79-5a04. In other words, ANR's burden was to show that the PVD was wrong and the value ANR 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 supporting its valuation, ANR must necessarily attack and undermine the PVD's valuation. It is up to BOTA  by paying neither side deference  to determine which side presents the most compelling case. ANR argues that Paragraph 38, 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 ANR. In order for ANR to prove its valuation, it would be reasonably required to prove that the PVD valuation was incorrect. ANR also complains that evidence of BOTA deference is found in Paragraph 41, 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 that were rational and reached by appropriate methodologies. ANR argued that because the PVD's overall capitalization rates and capital structure determinations in Paragraph 47 above are similar to that recommended by the Natural Gas Pipeline Property Tax Forum (Property Tax Forum), BOTA deferred to the PVD. However, it must be noted that ANR was a member of the Property Tax Forum and a member of the subcommittee recommending overall capitalization rates for the years 1994 and 1995 as more fully discussed below. Far from indicating a deference to the PVD, it demonstrates that BOTA, like the PVD, considered the Property Tax Forum a valuable resource for determining overall capitalization rates, especially since the capitalization rates determined by a subcommittee of the Property Tax Forum were recommended to all members including ANR. In Paragraph 53, when BOTA said in its original order on remand that ANR has not showed by a preponderance of the evidence that the PVD's unit valuation of Taxpayer's property is in error, BOTA was also saying that the PVD had shown by a preponderance of evidence that its valuation was correct. Unlike the previous appeal, there is no indication that BOTA relied on an intentional and gross disregard standard of review or otherwise deferred to the PVD in determining the unit value of ANR's property. See Colorado Interstate Gas, 270 Kan. at 315. BOTA understood the mandate of this court in Colorado Interstate Gas and applied a correct standard of review as demonstrated in its order denying ANR's motion for reconsideration: 4. 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 the subject property. 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. 5. 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 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 $1,640,000,000, for 1994 is $1,590,000,000, and for 1955 is $1,560,000,000, which are the same as determined by the Director. Nevertheless, ANR 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, ANR 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. ANR 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 ANR'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 the unit value as well as the fair market value in Kansas was established. The assessment had been made by the PVD. Before BOTA, both the PVD and ANR presented their cases regarding the testimony of unit value as well as the fair market value of ANR's property in Kansas. BOTA decided this case based upon all the evidence without giving deference to the PVD. ANR had the burden to establish that its unit value was correct, thereby establishing that the determination by the PVD was invalid based upon the record as a whole. BOTA concluded that ANR failed to meet its burden, thus providing a basis for concluding based upon all evidence presented 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.