Court Opinion

ID: 9522403
Source: CourtListenerOpinion
Date Created: 2023-08-07 02:24:48.716335+00
Date Added: 2024-06-11T13:02:42.801925
License: Public Domain

JUSTICE SCOTT, concurring in part and dissenting in part: I concur with the results reached in the majority opinion except for its determination that the 15% depreciation factor should not be considered and applied in the valuation of Edison’s property. This court has recognized that depreciation is an element which can properly be considered in arriving at the value of property. (See Consolidation Coal Co. v. Property Tax Appeal Board (1975), 29 Ill. App. 3d 465, 331 N.E.2d 122.) The majority opinion concludes that the depreciation factor was not proved by the manifest weight of the evidence before the Property Tax Appeal Board (PTAB). The circuit court upon review of the record held that “the uncontroverted evidence in these proceedings established the existence and propriety of economic depreciation.” With this observation I agree. Corroborated evidence was submitted to the PTAB comparing the rate of return allowed under relevant ICC rate orders with the rates of return actually earned by Edison for the years 1970 through 1979. In all of these years the rates of return earned were less than rates of return allowed, i.e., allowable rates of return by ICC orders dated December 13, 1978, and October 12, 1977, were 9.03%. Edison’s earned rates, however, were considerably less, being 8.12% in 1976, 7.48% in 1977, and 8.31% in 1978. The difference between the rate actually earned and that allowed was 12.7% less in 1976; 19.6% less in 1977, and 10.6% less in 1978. Testimony adduced by Edison was to the effect that the inability to earn the allowed rate of return in an inflationary economy results in a lower market value of the utility’s assets. There was further testimony that the failure to earn the allowed rate of return was not related to incompetent management on the part of Edison. Expert testimony presented to the PTAB explained that economic depreciation is the same as economic obsolescence in that it is a decline in value of property due to conditions or causes outside of the property. In the Consolidation Coal Co. case, the reviewing court rejected a deduction as to the value of property based on the obsolescence factor because of conflicting evidence. In the instant case there is no conflicting evidence as to economic depreciation. It should be noted that at the hearing before the PTAB all the testimony was from witnesses for Edison. There were no rebuttal witnesses nor was contrary appraisal testimony presented. The failure to earn the rate of return authorized by the ICC was not unique to Edison but as acknowledged by PTAB was a problem being experienced by the industry as a whole. This fact should negate a conclusion that Edison’s failure to realize the allowable rate of return was caused by inefficient management or it must be concluded that such inefficiency permeated the entire industry. PTAB does not strongly urge the argument of inefficient management but instead urges that the failure to realize the allowable rate of return is attributed to a regulatory lag. PTAB suggests that if a regulatory lag is the cause of Edison’s problems, then Edison should seek a legislative amendment to the Public Utilities Act. This blithe assertion ignores the difficulties of changing the regulatory process so as to eliminate economic depreciation. It is further argued that Edison did not rely on or present any evidence of the economic depreciation 15% factor in proceedings before the ICC. The record discloses and it is recognized in the majority opinion that for a number of years Edison and the Will County taxing authorities over a span of years had entered into an agreement as to the valuation for purposes of taxation as to the personal property of Edison. This agreed valuation was presented at hearings before the ICC and it can safely be surmised that we would not have the present litigation if the Board of Review of Will County had not broken the agreement by levying an across the board 10% increase on the assessed valuation of Edison’s personal property. The ultimate valuation of Edison’s personal property which results from the litigation will in the future be presented at the rate-setting hearings before the ICC. There was comprehensive evidence of economic depreciation presented to the PTAB which was not adequately countered or refuted, and for this reason I disagree with the majority’s conclusion that the 15% depreciation factor was not supported by the manifest weight of the evidence.