ROCKINGHAM — The Rockingham Selectboard and the Bellows Falls Village Trustees recently met with Rockingham's Lister Chair Camilla Roberts to review the Listers' rationale behind accepting an appraisal of the Bellows Falls Dam that reduced its value by about $18 million.
The appraisal by George Sancoucy PE, LLC, commissioned by the state, was completed in June. The dam and its associated facilities were appraised at $108 million, or about $18 million less than was expected.
“Your questions are legitimate and you have a right to answers,” Roberts told the Joint Board. “That's why we're here.”
The two boards were slated to set the coming year's tax rate for the town of Rockingham. With the state commissioned appraisal cutting $18 million from the fiscal year 2011 Grand List, the Joint Board was forced to raise taxes from 68 cents to 73 cents, an unexpected increase to many of the board members.
Regarding the Sancoucy appraisal, Selectboard Member Ann DiBernardo felt the town “got screwed.”
Selectboard Chair Tom MacPhee also objected, based on the necessity of raising taxes another 2.5 cents because of the new allocation of 84 percent Vermont/16 percent New Hampshire, since the facility straddles both states.
That's less than the split that was set in 2002, which was 90 percent Vermont/10 percent New Hampshire.
The changed split of allocation of value between Vermont and New Hampshire is actually within the acceptable 20-percent range, Roberts said.
“Because we are talking about big numbers, the difference is huge to a small town like Rockingham. I can understand why it's difficult to accept,” she added.
Roberts said the dam appraisal had to be included for the upcoming fiscal year's Grand List.
According to Lister David Gould, “The Town of Rockingham Grand List is filed effective April 1, 2010. Any 'grievance' had to be filed by June 8, 2010 [and] ...can be filed by a property owner or agent in an effort to gain clarification of values or seek reductions in value based on updated data.
“TransCanada 'grieved' the valuation [and] following the grievance, the Rockingham Listers received new data [the Sansoucy appraisal] and adjusted TransCanada's valuation accordingly.”
The Listers noted that “there remain some uncertainties in the state study that may turn out to be untenable in future years … that may include … imputed operating and maintenance expenses (which were higher than the actual expenses), the imputed extra value of the power as a renewable source, and the assumed cost of capital.”
The full report is yet to be received, said Roberts.
“According to Sancoucy, they are going over the report with a fine-toothed comb,” she said, to be sure issues of confidentiality are not being violated before they release the full report.
The split
In court documents from the 2002 decision USGen New England, Inc. v. Town of Rockingham, which affected the previous owner of the property, “the court was not persuaded by [USGen's] evidence,” and went with the then-Town Lister's acceptance of the split at 90/10.
Roberts clarified further that there didn't seem to be any methodology used to attain the split referenced anywhere in the transcript of the case.
She referred to a conclusion: “Although we presume the Lister's allocation is correct, the presumption is locative only, and any admissible evidence can rebut this presumption.”
The Listers presumed on the wording “locative only” as meaning “then and there,” at the time of the judgment of the case.
“The judge's reason for ruling in the favor of the Listers is not relevant now,” the Listers' memo to the Joint Boards reads. “The method used currently in the State appraisal is …used by competent appraisal firms …including Synapse Energy Economics, the consulting firm that the Town hired previously to do this work.”
It is an industry-wide standard, according to Roberts.
Methodology
Roberts and her fellow listers found Sancoucy's methodology sound and, according to the charge of their office, accepted the appraised value of $108,110,000, as well as the 84/16 percent allocation between Vermont and New Hampshire.
Roberts was very clear in her statements before the Boards that their decision was based on “sound methodology. We need to be rational using a clear method [of appraisal] that can be proved,” Roberts said.
The 2006 value of $126 million “was the best information available prior to Grievance,” the Listers' memo to the Joint Board reads. “The State appraisal was issued during the grievance period, becoming new information to consider.”
The Board of Listers was satisfied with the lengthy background, projections and methodologies Sancoucy explained the firm used to come to its appraisal assessment. Sancoucy's professional credentials were examined. The Board of Listers verified that the three approaches to value had been considered: future anticipated income and expense attributable to the facility, sources of information and data used, and market trends.
Behind the assessment
According to The Listers' Handbook, the three approaches to determining fair market value are cost approach to value, market data approach (sales comparison approach) to value, and income approach to value (income capitalization).
The three approaches to value can change from year to year, according to Roberts. “This assessment is good for this year. We will do a partial reassessment again next year,” Roberts stated.
Fair market value as defined by state law as “the price which the property will bring in the market when offered for sale and purchased by another, taking into consideration all the elements of the availability of the property, its use both potential and prospective, any functional deficiencies, and all other elements such as age and condition which combine to give property a market value.”
According to Roberts, the Sancoucy report makes note that all of TransCanada's properties along the Connecticut River have been kept in very good condition.
“That means that someone coming in buying the property wouldn't have to do a whole lot of upgrades or equipment repairs,” she said.
The handbook continues, “In determining estimated fair market value, the sale price of the property…is not solely determinative.”
In order to estimate fair market value, Listers must first determine the highest and best use of the property.
“Highest and best use” relates to the monetary return one can realize from a property.
To determine the highest and best use, Listers consider what is physically possible, what type or types of use are legal, what is financially feasible, and in today's market and the near future, what use will bring in the most monetary return.
Part of a hydroelectric facility's “highest and best use” value is in direct relation to energy costs.
With competition rising in the market from wind and solar energy, future hydroelectric facility use values may stabilize or even drop.
“With prices in carbon taxes coming down and the rise in green power,” Roberts said, she felt Sancoucy's assessment of the TransCanada facility was solid.
At this point, TransCanada's income and expense are confidential. Sansoucy is making sure that confidentiality is not violated in their report before releasing it to the public.
While Selectboard member Ann DiBernardo suggested an independent appraisal at a cost to the town of approximately $30,000, Roberts said that is moot. The appraisal is accepted in time for the Town's annual Grand List Report and the setting of the tax rate for the coming year.
The taxable Grand List number for setting the Rockingham tax rate for FY 2011 is $4,738,544, up from $4,521,620 last year; and the Bellows Falls Grand List number is $2,631,972, up from $2,441,963.
Lastly, the Board of Listers noted in the memo to the boards that “the changes are due to new construction and subdivisions, covenant housing values returned to full-market value, the extensive renovations of three subsidized housing properties, correction of data errors, and the increase in the value of the TransCanada hydro facility.”