On Appeal from Property Valuation and Review Division Norman E. Wright, State Appraiser
Allan R. Keyes, Thomas M. Dowling, and Thomas S. Valente (On the Brief) of Ryan Smith & Carbine, Ltd., Rutland, for Plaintiff-Appellant.
Richard H. Coutant of Salmon & Nostrand, Bellows Falls, for Defendant-Appellee.
PRESENT: Reiber, C.J., Dooley, Skoglund, Robinson and Crawford, JJ.
¶ 1. This property tax appeal concerns the valuation of five electrical substations, seven transmission lines, a fiber-optic line, land, and utility easements located within the Town of Vernon. Taxpayer Vermont Transco LLC challenges a decision of the state appraiser fixing the 2011 listed value of taxpayer’s utility property in the Town at $92 million. We reverse and remand for further findings regarding the lifespan of the property to be used in calculating depreciation.
¶ 2. The equipment at issue in this case was designed and installed to handle the transmission of electric power generated by the Vermont Yankee Nuclear Power Plant and the Vernon Hydroelectric Station. Taxpayer is the successor to Vermont Electric Power Company, Inc. (VELCO), which operates Vermont’s electric transmission system.
¶ 3. The town listers set a value of $92, 023, 693 on the property effective April 1, 2011. This value was upheld by the Town of Vernon Board of Civil Authority. Taxpayer appealed to the state appraiser pursuant to 32 V.S.A. §§ 4461-4467.
¶ 4. On appeal to the state appraiser, the principal issue was the correct method of calculating depreciation with respect to the electrical equipment that comprises almost the entire value of the property. In addition, taxpayer and the Town disagreed about whether the valuation should include the value of utility easements and rights of way held by taxpayer, estimated by the Town’s appraiser at $277, 100. Finally, the parties disagreed about whether to apply depreciation for certain equipment’s first year of life.
¶ 5. In May 2013, the state appraiser issued a ruling setting the total value of the property at $92, 023, 700. The state appraiser agreed with the Town and its appraiser that an appraisal based on replacement cost new, depreciated in a straight line, provided the most accurate basis for estimating the value of the improvements. The state appraiser did not address taxpayer’s arguments that easements cannot be taxed and that depreciation should have been taken for 2010, the first year of service. This appeal followed.
¶ 6. Taxpayer raises four issues on appeal. First, it argues that the state appraiser should have used an alternative nonlinear depreciation schedule—the “Iowa Curve” method—because that method was previously approved by this Court in reviewing the method of property tax appraisal in Vermont Electric Power Co. v. Town of Vernon, 174 Vt. 471, 807 A.2d 430 (2002). Second, taxpayer contends that the state appraiser’s decision on fair market value is not supported by a sufficient analysis of the “core factual issues, including whether fair market value is best estimated by the economic or physical life of the assets, and what those lives are.” Third, taxpayer takes issue with the state appraiser’s decision to follow the Town’s appraiser in not depreciating assets during the first year of service. Finally, taxpayer challenges the state appraiser’s decision to include an appraised value for the utility easements.
¶ 7. In an appeal to the state appraiser, a town’s property appraisal is presumed to be valid and legal. City of Barre v. Town of Orange, 152 Vt. 442, 444, 566 A.2d 951, 952 (1989). If the taxpayer introduces evidence that his or her property was assessed above fair market value, the presumption disappears. Vanderminden v. Town of Wells, 2013 VT 49, ¶ 8, 194 Vt. 96, 75 A.3d 598. It is then up to the town to introduce evidence showing “either that it substantially complied with the relevant constitutional and statutory requirements or that its valuation was supported by independent evidence of fair market value.” Id. ¶ 8 (quotation omitted). The taxpayer has the ultimate burden of proving that the appraisal was incorrect. Adams v. Town of West Haven, 147 Vt. 618, 620 n.*, 523 A.2d 1244, 1245 n.* (1987).
¶ 8. We will not disturb the state appraiser’s findings of fact unless they are clearly erroneous. Vanderminden, 2013 VT 49, ¶ 9. “Our review of legal conclusions, by contrast, is nondeferential and plenary.” Barnett v. Town ...