Town of Rockingham’s Valuation of Hydroelectric Facility Upheld

In TransCanada Hydro Northeast Inc. v. Town of Rockingham, 2016 VT 100, the Supreme Court affirmed the trial court’s decision upholding the Town of Rockingham’s valuation of the Bellows Falls hydroelectric facility.

Issue: Taxpayer TransCanada Hydro Northeast, Inc. (“TransCanada”) appealed the Town of Rockingham’s valuation of its Bellows Falls hydroelectric facility, first to the Board of Civil Authority and then to the Superior Court, seeking a reduction in the Town’s $130,000,000 valuation. The State of Vermont intervened on behalf of the Town. At trial each party’s expert relied upon an income-based approach and a discounted cash flow analysis in reaching their respective opinions of value. The Town’s expert also conducted a comparable sales analysis as an additional metric to help determine fair market value. TransCanada’s expert valued the facility at $84,000,000, some $46 million less than the Town. The experts differed in the revenue projection, projected expenses (including capital expenses and relicensing costs), discount rate and several other factors applied to their analysis. The trial court found TransCanada’s expert’s opinion of value to be “incredibly low” and “irreconcilable with the great weight of evidence and testimony.”

Holding: The Court upheld, subject to certain mathematical adjustments, the decision of the trial court to uphold the Town’s valuation of the facility. The Court noted that income capitalization is among the most accurate valuation methods for commercial properties, and that it was a taxpayer’s burden to persuade the Court that a property is over-assessed and in doing so must demonstrate that the valuation in question is “arbitrary or unlawful.” The Court held that the discount rate and other assumptions relied upon by the Town’s expert were reasonable and valid and so too was the resulting opinion of value. Although the valuation was upheld generally, the Court adjusted the Town’s valuation from $130,000,000 to $127,412,212. The Court made this specific adjustment based upon its rejection of two comparables used in the Town’s analysis which were not completed transactions. The Town’s method of valuation was otherwise upheld.