THE STATE OF NEW HAMPSHIRE SUPREME COURT In Case No. 2013-0613, Appeal of Town of Gorham, the court on November 25, 2014, issued the following order: Having considered the briefs and oral arguments of the parties, the court concludes that a formal written opinion is unnecessary in the case. The Town of Gorham (Town) appeals an order of the New Hampshire Board of Tax and Land Appeals (BTLA) granting the petition for abatement filed by the taxpayer, Portland Pipe Line Corporation. We affirm. The BTLA found the following facts. The taxpayer operates two crude oil pipelines that run through twenty-seven towns from Maine to the Vermont border with Canada. A 4.95-mile segment of underground pipeline is located in Gorham. This segment of pipeline is part of an integrated, 166-mile crude oil pipeline delivery system. For real estate tax purposes, the Town assessed the value of the 4.95 miles of pipeline as follows: $4,541,600 in tax year 2008, and $5,941,700 in tax years 2009 and 2010. The taxpayer appealed those assessments to the BTLA pursuant to RSA 76:16-a (2012). Before the BTLA, the primary dispute between the parties concerned the fair market value of the 4.95-mile segment of pipeline. Each party relied upon expert appraisals and testimony to establish that value. The taxpayer relied upon appraisals of the property prepared by John H. Davis, III, who, using both the income and cost approaches to valuation, arrived at the following market value estimates: $2,324,000 in 2008, $2,545,000 in 2009, and $2,503,000 in 2010. In applying the income and cost approaches to valuation, Davis used the unitary method of valuation. Under that method, the property within a particular jurisdiction is valued based on the fair share of the value of an operating enterprise of which the property is an integral part. The Appraisal Institute, The Dictionary of Real Estate Appraisal 202 (5th ed. 2010). The unitary method values operating assets as a system, not as individual assets or pieces of a system. See id. This method is typically associated with the valuation of public utilities. Id. Thus, Davis valued the entire pipeline as a single economic unit and then allocated a value to the Town for the 4.95-mile segment of pipeline located therein. For the income approach, Davis developed an estimated income for each year based upon the revenue and expense data the taxpayer reported to the Federal Energy Regulatory Commission (FERC). Davis applied a capitalization rate to the income and then, using the FERC data, split the value associated with transporting oil through the pipeline and that associated with unloading
and storing crude oil in Maine. Davis concluded that 62% of the taxpayer s income was from the pipeline and 38% was from unloading and storing crude oil. For the cost approach estimate, Davis used Marshall Valuation Service data for the replacement cost of the pipeline, applied a physical depreciation factor, and added the value of the right of way reflected in the municipal assessment of these items. In his final reconciliation of value, Davis gave 67% weight to the income approach and 33% weight to the cost approach and then allocated the reconciled value to the property based upon the length of the pipeline located in the town in relation to the length of the entire pipeline (4.95 miles out of a total of 166 miles). The Town relied upon the appraisal report prepared by George E. Sansoucy, P.E., who used only the cost approach to valuation. Sansoucy estimated the market value of the property as follows: $6,600,000 in 2008, $6,900,000 in 2009, and $6,000,000 in 2010. Sansoucy did not use the unitary method of valuation. Neither expert used the comparable sales approach to valuation because of the lack of evidence of comparable sales of pipeline property. The BTLA stated that it considered the extensive testimony of each expert witness... both on direct and cross-examination, along with their qualifications and experience in valuing this type of property. Although the BTLA did not agree with all of Davis s key assumptions and did not accept his value conclusions at face value, it found his appraisals to provide a better starting point for arriving at the fair market value of the property than Sansoucy s appraisal because Davis, unlike Sansoucy, used the unitary method. The BTLA found that valuing the entire pipeline as a single economic unit and then allocating values to the Town results in a more credible opinion of value that is consistent with the Property s highest and best use. The BTLA explained: Clearly, if the Property were somehow removed from the pipeline, its value would be far less (i.e., scrap metal value...) and the market value of the remainder of the pipeline would also be significantly diminished. The BTLA reasoned that because the 4.95-mile segment of the pipeline is an integral part of the whole economic unit[,]... if it were valued in isolation it would not be valued at its highest and best use. The BTLA found Sansoucy s estimates to be too high and to be not credible. The BTLA faulted Sansoucy for relying solely upon the cost approach and for focusing on the value of the taxpayer s assets in the town instead of as part of an integrated pipeline system. Because Davis relied exclusively upon the financial data that the taxpayer reported to the FERC and because the BTLA agreed with the Town that this data probably understated the actual income potential of the pipeline, the BTLA increased his income estimates by 25%. The BTLA also adjusted 2
Davis s capitalization rate, deciding that a capitalization rate of 11% for each tax year was reasonable. Because the BTLA augmented the pipeline income by 25%, the BTLA found it reasonable to conclude that pipeline revenues would comprise a higher percentage of total revenues, and, thus, decided that the split between pipeline generated revenues and other revenue would be 75%/25%. With regard to Davis s cost approach, the BTLA found that because he did not include some cost items, such as pumping stations, in his estimates, it was necessary to adjust his cost estimates upwards by 25%. Based upon Davis s appraisals and the BTLA s own judgment and experience, the BTLA decided that the taxpayer s property should have been assessed at $3,840,000 in tax year 2008, $4,088,000 in tax year 2009, and $4,384,000 in tax year 2010. The BTLA ordered that the amount paid on the value in excess of these abated assessments must be refunded to the taxpayer with interest. See RSA 76:17-a. Our standard for review of BTLA decisions is statutory. Appeal of City of Nashua, 164 N.H. 749, 750 (2013) (quotation omitted). We will not set aside or vacate the order or decision appealed from except for errors of law, unless we are satisfied, by a clear preponderance of the evidence before us, that such order is unjust or unreasonable. Id. (quotation, brackets, and ellipsis omitted); see RSA 541:13 (2007). The BTLA s findings of fact are presumed to be prima facie lawful and reasonable. RSA 541:13. In reviewing the BTLA s findings, our task is not to determine whether we would have found differently or to reweigh the evidence, but rather, to determine whether the findings are supported by competent evidence in the record. See Appeal of Phillips, 165 N.H. 226, 235 (2013). We review the BTLA s rulings on issues of law de novo. See Appeal of City of Nashua, 164 N.H. at 750-51. On appeal, the Town first argues that the BTLA erred, as a matter of law, when it used the unitary method to assess the fair market value of the property at issue. The search for fair market value is not an easy one, and is akin to a snipe hunt carried on at midnight on a moonless landscape. Appeal of Pennichuck Water Works, 160 N.H. 18, 37 (2010) (quotation and brackets omitted). The determination of fair market value is a question of fact. Id. We have previously recognized the extraordinary difficulties in placing a fair market value on the property of a regulated utility. Id. (quotation omitted). Because of this difficulty, we give the trier of fact considerable deference in this area. Id. (quotation omitted). We have repeatedly stated that the trier of fact may use any one or a combination of five appraisal techniques in valuing public utility property: original cost less depreciation (rate base), comparable sales, cost of alternative facilities, capitalized earnings, and reproduction cost less depreciation. Southern N.H. Water Co. v. Town of Hudson, 139 N.H. 139, 141 (1994). Typically all relevant factors must be considered, but a trier of fact need not allocate specific weight to any one of the approaches listed. Appeal of 3
Pennichuck Water Works, 160 N.H. at 38 (quotation omitted). All of the enumerated approaches are valid, but all also have weaknesses. Id. The Town has failed to demonstrate that the BTLA s decision is erroneous as a matter of law. Although the Town argues that the BTLA s use of the unitary method is inconsistent with the legislative intent, the Town fails to identify any statute that specifically precludes the use of that method. The Town essentially faults the BTLA because it found the estimates of the taxpayer s expert, Davis, to be more credible than those of the Town s expert, Sansoucy. However, it is the BTLA s duty to resolve issues of fact and conflicts of opinion. See id. at 41. The BTLA is not compelled to accept the opinion evidence of any one witness, including expert witnesses. See id. As the trier of fact, the BTLA could accept or reject such portions of the evidence as it found proper, and was not required to believe even uncontroverted evidence. Id. We decline to disturb the BTLA s determination. To the extent that the Town argues that we have previously rejected the use of the unitary method, the Town is mistaken. In our prior cases, we have addressed whether there is record support for a tribunal s use or rejection of that method. We have not held that using the method is erroneous as a matter of law. See Public Serv. Co. of N.H. v. Town of Bow, 139 N.H. 105, 107 (1994) (upholding trial court s determination that unitary method had several weaknesses because there was ample evidence in the record to support that determination); Appeal of Town of Bow & a., 133 N.H. 194, 202-04 (1990) (upholding BTLA s approval of department of revenue administration s use of unitary method absent evidence that use of that method was unreasonable). The Town has failed to persuade us that the BTLA s use of the unitary method is unreasonable. We have never attempted to tie the fact finder s hands with a rigid fair market value formula in the absence of legislative directive. Appeal of Pennichuck Water Works, 160 N.H. at 38 (quotation, brackets, and ellipsis omitted). Rather, judgment is the touchstone. Id. (quotation omitted). Such judgment was appropriately exercised here. Southern N.H. Water Co., 139 N.H. at 141. The BTLA order reveals a careful and thorough consideration of each of the valuation methods, and its ultimate decision reflects this. Id. We, therefore, cannot say that the BTLA order is erroneous as a matter of law. See id. Nor can we conclude that the BTLA order is unsupported by the evidence. The BTLA s determination of the property s fair market value was based upon Davis s report and testimony. Further, the BTLA did not exclusively rely upon Davis s report and testimony. Rather, based upon its own experience and expertise, the BTLA made numerous adjustments and refinements to the valuation analysis. Appeal of Pennichuck Water Works, 160 4
N.H. at 41. Such reliance was proper, given the extraordinary difficulties in valuing public utility property. Id. at 37 (quotation omitted). The Town next argues that the BTLA erred by admitting into evidence appraisals prepared by the New Hampshire Department of Revenue Administration (DRA). An administrative agency is given broad discretion in determining the admissibility of evidence. Ruel v. N.H. Real Estate Appraiser Bd., 163 N.H. 34, 45 (2011). Moreover, the rules of evidence do not apply to BTLA proceedings. See RSA 71-B:7 (2012). Here, we cannot conclude that the BTLA improperly exercised that discretion. The BTLA determined that the DRA appraisals were admissible and relevant to the taxpayer s claim regarding the market value of its property, and the record supports those determinations. Although the Town advances numerous arguments to suggest that the BTLA erred as a matter of law when it admitted the DRA appraisals into evidence, the Town s arguments are unpersuasive. In making these arguments, the Town seeks to impose upon BTLA proceedings the evidentiary standards we have adopted for trial proceedings. See RSA 516:29-a (2007); N.H. R. Ev. 403, 702, 703. These evidentiary standards do not apply to BTLA proceedings. See RSA 71-B:7; RSA 541:17 (2007). Even if we were to agree that the DRA appraisals would have been inadmissible at trial, their admission in the [BTLA] proceeding does not render its decision unjust, unreasonable or unlawful. Appeal of Pennichuck Water Works, 160 N.H. at 40. The Town s arguments go to the weight to be afforded the DRA appraisals, not their admissibility. However, in this proceeding, the BTLA, as the trier of fact, was in the best position to assess and weigh the evidence before it. See Thompson v. C&C Research & Dev., 153 N.H. 446, 449 (2006). We defer to the BTLA s judgment on such issues as resolving conflicts in the testimony, measuring the credibility of witnesses, and determining the weight to be given evidence. See Cook v. Sullivan, 149 N.H. 774, 780 (2003). Our task on appeal is not to reweigh the evidence, but to determine whether the findings are supported by competent evidence in the record. Appeal of Phillips, 165 N.H. at 235. Affirmed. DALIANIS, C.J., and HICKS, CONBOY, LYNN, and BASSETT, JJ., concurred. Eileen Fox, Clerk 5