Vermont Supreme Court: Rethink Vernon power-line values
VERNON -- The Vermont Supreme Court has ordered reconsideration of the $92 million tax value of substations, transmission lines and other property here, calling into question the manner in which that value was set.
The court ruled partly against and partly in favor of Vermont Transco LLC, which owns heavy-duty electrical infrastructure designed to transmit power generated by the Vermont Yankee nuclear plant and the Vernon Hydroelectric Station.
At issue are property values that initially were set by Vernon in 2011 and then upheld by the state in 2013. While the court ordered "further findings" on how those values were determined, it is unclear what the ultimate, actual impact of that ruling will be.
Attorney Richard Coutant, who represents Vernon, believes that "there is no requirement for a new appraisal, and I do not read the decision as requiring a new hearing." But he added that "others may disagree" with his assessment.
Court documents say Vermont Transco is the successor to Vermont Electric Power Co. Inc., more commonly known as VELCO. In 2006, VELCO created Vermont Transco and transferred its assets to that company, though VELCO continues its operational and management functions.
Kerrick Johnson, a VELCO spokesman, said the company pays more than $20 million in property taxes annually in Vermont and has tax relationships with roughly 180 towns. In general, he said, the company has "a very good relationship" with those towns.
"Overall, we don't have a lot of these (appraisal appeal) cases," Johnson said. "We're trying to strike an appropriate balance between how much electric ratepayers should pay and what a town's taxpayers should be receiving."
But there has been no easy agreement in Vernon, where Vermont Transco owns five electrical substations, seven transmission lines, a fiber-optic line, land and utility easements.
Effective April 1, 2011, the Vernon listers set a tax value of $92 million for those properties, and that value was upheld by the town's Board of Civil Authority. The company appealed to the state, where another appraiser set the same $92 million value.
Vermont Transco's appeal to the Vermont Supreme Court followed. Court documents show that a professional appraiser hired by Vermont Transco calculated a total property value of $83.1 million -- nearly 10 percent less than the town and state appraisal.
The Supreme Court notes that it has seen this argument before.
"This is the second time in less than fifteen years that the state appraiser and this court have considered the depreciation schedule and appraised value of taxpayer's transmission equipment and realty within (Vernon)," the ruling says.
That's a reference to an appeal of values set during Vernon's 1999 townwide reappraisal; at issue was electrical-transmission property owned by VELCO. At the time, the court sided with the state's appraiser.
In this case, Vermont Transco made four main arguments to the Supreme Court:
-- The state's appraiser should have used a different methodology to calculate depreciation.
-- The state appraiser's determination of the properties' fair market value "is not supported by a sufficient analysis of ‘core factual issues'" including the life span of the company's equipment in Vernon.
-- Some of the company's assets should have been depreciated by both the town and the state during the first year of service, just prior to the value being set in 2011.
-- The state appraiser should not have assigned a value to the company's utility easements.
The Supreme Court ruled against Vermont Transco on the first and third issues.
Justices rejected the depreciation-methodology argument, noting that Vermont Transco's own appraiser had used a method different than the method advocated by the company in its appeal.
Also rejected was the company's request for first-year depreciation, with the Supreme Court saying Vermont Transco's "approach violated accounting practices described by the town's witness as long-standing and conventional. The state appraiser did not abuse its discretion in accepting the town's evidence on this point."
However, the court sided with Vermont Transco on two other points.
First, the justices found that the state appraiser gave "few reasons" for agreeing with the town's assessment of the useful life of Vermont Transco's equipment.
The state's appraisal is therefore "insufficient," the court decision says. "It is beyond the scope of a state appraiser decision to calculate the depreciated value of each stick of furniture, but it is necessary to a fair process that the basis for accepting the town's depreciation figures receive a more complete explanation."
Also, the court said legal precedent shows that utility easements -- like all easements -- are not subject to Vermont's municipal property tax. So that means the town and the state improperly included those easements when calculating the value of Vermont Transco's assets in Vernon.
Contacted on Monday for reaction to the decision, Coutant noted the court's two findings in favor of Vermont Transco but seemed optimistic that the property values might not change much.
"In my opinion, the court has ordered the state appraiser to prepare additional findings on the life span of the property at issue, and has ordered that the value of the easements be deducted from the appraisal," Coutant said. "Otherwise, the decision and the valuation will stand."
Regardless of the ultimate value placed on Vermont Transco's properties in Vernon, the case also spurred two state Supreme Court justices to raise questions about these types of cases.
Associate Justice Beth Robinson noted that "there is no statute, rule, or other authority that requires a uniform approach to valuing, for example, the type of electric-transmission facilities at issue in this case."
That fact leads Robinson to worry about "a patchwork of town valuation practices" across Vermont. She urged lawmakers and other state officials to take a closer look at the issue.
"A patchwork scheme imposes on a transmission-utility taxpayer the added burden of depreciating and valuing its hundreds of miles of transmission lines in small, town-by-town increments," Robinson wrote. "And a utility seeking predictability, consistency and uniformity might have to appeal dozens of tax assessments, still facing the possibility that disparate adjudicators may be persuaded to adopt different methods."
Also, Associate Justice John Dooley assailed the state's process for hearing appeals in such complex tax cases. In particular, Dooley said the state's "poor quality decision" in the Vernon case didn't provide enough detail so that he could fully support his fellow justices' decision.
"In my opinion, a case of this size and complexity, where each party is fully represented by counsel, belongs in Superior Court where the judge is more used to evaluating expert testimony of this intricacy and is skilled in producing a good quality and complete decision," Dooley wrote. "The Legislature should reconsider the unfettered (appeal) choice the current statute allows and restrict larger cases, like this, to court appeals."
Mike Faher can be reached at firstname.lastname@example.org or 802-254-2311, ext. 275.
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