COLO. INTERSTATE v. PROPERTY TAX, No. 99CA1032.

• Decision Date: 31 August 2000
• Docket Number: No. 99CA1032.
• Citation: 28 P.3d 958
• Parties: COLORADO INTERSTATE GAS COMPANY, Petitioner-Appellant, v. PROPERTY TAX ADMINISTRATOR MARY HUDDLESTON, Respondent-Appellee, and Colorado State Board of Assessment Appeals, Appellee.
• Court: Colorado Court of Appeals

28 P.3d 958

COLORADO INTERSTATE GAS COMPANY, Petitioner-Appellant, v. PROPERTY TAX ADMINISTRATOR MARY HUDDLESTON, Respondent-Appellee, and Colorado State Board of Assessment Appeals, Appellee.

No. 99CA1032.

Colorado Court of Appeals, Div. II.

August 31, 2000.

Rehearing Denied November 9, 2000.

Certiorari Denied August 6, 2001.

Colorado Interstate Gas Company, Karen L. Pauley, Elizabeth B. Herdes, Colorado Springs, Colorado, for Petitioner-Appellant.

AT & T Communications Inc., Lacey Stevenson, Englewood, Colorado, Amicus Curiae for Colorado Interstate Gas Company.

Public Service Company of Colorado, James D. Albright, Denver, Colorado, Amicus Curiae for Colorado Interstate Gas Company.

Ken Salazar, Attorney General, Larry A. Williams, Assistant Attorney General, Denver, Colorado, for Respondent-Appellee.

Ken Salazar, Attorney General, Mark W. Gerganoff, Assistant Attorney General, Denver, Colorado, for Appellee.

Opinion by Judge TAUBMAN.

In this action for judicial review of an administrative agency action, petitioner, Colorado Interstate Gas Company (CIG), appeals the decision of the Board of Assessment Appeals (BAA) upholding the valuation of its property by respondent, the state property tax administrator (PTA). We affirm.

This action arises out of a tax valuation of CIG's public utility property in Colorado. In making a tax valuation, the PTA is required to value as a unit all CIG's property located both inside and outside Colorado. After valuing the entire property, the PTA must allocate to Colorado the proportion of the actual value that in her judgment accurately represents the value of the property within Colorado. Section 39-4-106, C.R.S., 1999.

Here, the PTA valued CIG's property as a unit at approximately $450 million. CIG appealed that decision to the BAA, arguing that $450 million was an over-valuation and that thus, the portion of CIG's property located in Colorado was also overvalued.

The parties agreed that, on appeal to the BAA, the only issue for consideration would be whether, under the income approach to appraisal, financing or "flotation" costs must be included in the calculation of CIG's costs of capital. Such costs include transaction fees such as underwriting costs, attorney fees, advisory fees, and printing and registration of securities fees that are incurred by a buyer when purchasing property through debt or equity financing.

It is undisputed that the income approach as applied here is determined by dividing the projected net cash flow a prudent buyer could expect to receive from the property by the buyer's cost of capital used to finance the purchase.

The BAA concluded that the PTA had properly excluded the financing costs because such costs are hypothetical. That conclusion is the focus of CIG's appeal.

I.

Initially, we note that CIG has not named the BAA as a party to this appeal as required by § 24-4-106(11)(d), C.R.S.1999.

Ordinarily, a case will be dismissed if the BAA has not been named a party. See Capital Associates International, Inc. v. Arapahoe County Board of Commissioners, 802 P.2d 1180 (Colo.App.1990)

(the BAA must be made a party to appeals for judicial review of its decisions). However, here, the BAA entered its appearance, filed a notice of non-participation, and has been served with the briefs and other papers filed. Consequently, because the effect of the above is the same as if the BAA had been named as a party, we will consider the BAA as a party to this appeal and address the appeal on the merits.

II.

CIG contends the BAA erred as a matter of law in concluding that the PTA was not required to include financing costs in the calculation of CIG's costs of capital. We disagree.

At the outset, we note that in their briefs the parties refer to the PTA and the BAA interchangeably. Nevertheless, because this appeal challenges the order of the BAA, we focus our analysis on its conclusions.

The appropriate procedures for taxation and valuation of public utility property are dictated by a statute separate from that covering other types of property. See § 39-1-103(3) and § 39-4-101, et seq., C.R.S.1999. According to § 39-4-102(1), C.R.S.1999:

The [property tax] administrator shall determine the actual value of the operating property and plant of each public utility as a unit, giving consideration to the following factors and assigning such weight to each of such factors as in his judgment will secure a just value of such public utility as a unit:

(a) The tangible property comprising its plant whether the same is situated within this state . . .

(b) Its intangibles, such as special privileges, franchises, contract rights and obligations, and rights-of-way . . .

(c) Its gross and net operating revenues during a period of time not to exceed the most recent five year period, capitalized at indicative rates;

(d) The average market value of outstanding securities during the preceding calendar year, if such market value is determinable.

The Assessors Administrative and Assessment Procedures Manual outlines the appraisal approaches the PTA follows in making a valuation of public utility property pursuant to § 39-4-102. First, the PTA considers the historical cost of all the property, both tangible and intangible, that comprises the operating property of the public utility. Second, the PTA capitalizes the utility's income. Third, the PTA considers the average market value of the company's outstanding securities during the preceding calendar year if such market value can be determined. According to the manual, this third approach is a variation of the market approach to appraisal and is used because of the infrequent sales of public utility property. 2 Assessors Reference Library § XI at 11.3 (revised 9-99).

After making the value determination, the PTA must allocate for Colorado tax purposes that portion of the actual value that accurately represents the value of the property within Colorado. Section 39-4-106(2)(b), C.R.S. 1999.

An ultimate fact involves a question of law or a mixed question of law and fact that settles the rights and liabilities of the parties. Samaritan Institute v. Prince-Walker, 883 P.2d 3 (Colo.1994). Ultimate facts ordinarily are phrased in the language of the controlling statute or legal standard. State Board of Medical Examiners v. McCroskey, 880 P.2d 1188 (Colo.1994).

An ultimate finding of fact will be sustained if it has a reasonable basis in law. Board of Assessment Appeals v. AM/FM International, 940 P.2d 338 (Colo.1997).

When interpreting statutes, a reviewing court must give full effect to the intent of the General Assembly. Thus, the court must look to the words used in context and according to their plain and ordinary meaning. United Parcel Service of America, Inc. v. Huddleston, 981 P.2d 223 (Colo.App.1999).

A court may not extend the meaning of tax statutes beyond the clear import of the language used, and the court should not extend the operation of the statutes by analogy. United Parcel Service of America, Inc. v. Huddleston, supra.

A reviewing court may not substitute its judgment for that of the trier of fact, and may not set aside a decision of the BAA unless it is lacking in evidentiary support. Board of Assessment Appeals v. Colorado Arlberg Club, 762 P.2d 146 (Colo.1988). The credibility of witnesses, weight to be given witness testimony, and the sufficiency of the evidence presented are all matters within the fact-finding province of the BAA, and its ruling thereon will not be disturbed on appeal absent an abuse of discretion. Weingarten v. Board of Assessment Appeals, 876 P.2d 118 (Colo.App.1994).

There does not exist any Colorado appellate holding that addresses whether the PTA is required to include financing costs as part of the calculation of the costs of capital.

This issue presents a mixed question of law and fact, and the BAA's determination here was based on an ultimate finding of fact.

CIG argues that, as a matter of law, and based on "generally accepted appraisal standards," the BAA should have concluded that the PTA was required to consider financing costs in calculating CIG's costs of capital. CIG urges that the valuation of its property was inaccurate because, in excluding the financing costs, its determination of the costs of capital was too low, leading to a higher property value.

CIG argues in the alternative that, even if we find that as a matter of law the statute does not require the consideration of financing costs, substantial evidence does not support the BAA's determination.

To support its contention that a valuation of its property must include financing costs, CIG, throughout its briefs, refers to "generally accepted appraisal standards," without citing any authority which defines these standards. This phrase is used in tax statutes of other states. See Fla. Stat. ch. 195.096 (1999); Kan. Stat. Ann. § 79-505 (1999); Tex. Tax Code Ann. § 5.102 (1999); Wyo. Stat. § 39-13-103(b)(ii)(2000). However, it is not used in any of the relevant Colorado statutory, regulatory, constitutional, or case law authority. See Colo. Const. art. X, § 3(1)(a); § 39-4-101, et seq., C.R.S.1999. Therefore, we decline to rely on a standard of appraisal not applicable in Colorado.

In addition, CIG does not cite case law or statutory authority that supports its argument, but hinges its argument on a...