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Appeal of New Hampshire Electric Cooperative, Inc.

Supreme Court of New Hampshire

June 2, 2017

APPEAL OF NEW HAMPSHIRE ELECTRIC COOPERATIVE, INC. (New Hampshire Board of Tax and Land Appeals)

          Argued: January 12, 2017

         Board of Tax and Land Appeals

          Sulloway & Hollis, P.L.L.C., of Concord (Margaret H. Nelson and Derek D. Lick on the brief, and Ms. Nelson orally), for the petitioner, New Hampshire Electric Cooperative, Inc.

          Mitchell Municipal Group, P.A., of Laconia (Judith E. Whitelaw and Walter L. Mitchell on the joint brief, and Mr. Mitchell orally), for respondents Town of Andover, Town of Brentwood, Town of Grafton, Town of Lempster, Town of Lyme, Town of New Hampton, Town of Northfield, Town of Plainfield, Town of Thornton, and Town of Warren.

          Gardner, Fulton, & Waugh, PLLC, of Lebanon (Shawn M. Tanguay on the joint brief), for respondent Town of Colebrook.

          Donahue, Tucker & Ciandella, PLLC, of Meredith (Christopher L. Boldt and Eric A. Maher on the joint brief), for respondents Town of Epping and Town of Unity.

          George E. Sansoucy, self-represented, by joint brief.

          Joseph A. Foster, attorney general (Laura E. B. Lombardi, senior assistant attorney general, on the brief), for the New Hampshire Department of Revenue Administration, as amicus curiae.

          Pierce Atwood, LLP, of Portland, Maine (Jonathan A. Block on the brief), for Unitil Energy Systems, Inc., Northern Utilities, Inc., and Granite State Gas Transmission, Inc., as amici curiae.

          Judy A. Silva, Cordell A. Johnston, Stephen C. Buckley, and Margaret M.L. Byrnes, of Concord, for New Hampshire Municipal Association, by brief, as amicus curiae.

          LYNN, J.

         New Hampshire Electric Cooperative, Inc. (NHEC) appeals an order of the New Hampshire Board of Tax and Land Appeals (BTLA) denying 16 of NHEC's 23 individual tax abatement appeals regarding its property located in 11 of the respondent municipalities for tax year 2011 and 12 of the respondent municipalities for tax year 2012. We affirm.

         I

         The relevant facts follow. NHEC is an electric cooperative, which means that it is member-owned by its customers. NHEC provides electricity distribution services to approximately 80, 000 members in 115 municipalities, but it does not engage in the generation of electricity and provides only incidental transmission services. NHEC operates under a "regulatory compact" that grants NHEC a franchise to operate a monopolistic electric distribution company. In return, NHEC is required to provide electric service to all who request it within its territory and to keep its utility property in good working order. Unlike a privately-owned utility, NHEC's rates are not set by the New Hampshire Public Utilities Commission (PUC). Instead, NHEC's member- elected board of directors establishes NHEC's electricity rates based upon "cost of service" principles.

         NHEC's property consists primarily of wooden utility poles, attachments and conduits over public and private rights-of-way, substations, land, buildings, and other equipment located in some, but not all, of the municipalities. The parties' experts agreed that NHEC is professionally managed and that its property is in good condition and is well maintained.

         A municipality's selectmen are required to appraise the value of the property located within the municipality, including utility property. See RSA 75:1 (Supp. 2016); RSA 72:8 (2012); see also RSA 72:9 (2012) (stating that utility property that is situated in more than one town "shall be taxed in each town according to the value of that part lying within its limits"). Separately, the New Hampshire Department of Revenue Administration (DRA) appraises NHEC's property at the state level for purposes of the RSA chapter 83-F utility tax. See RSA ch. 83-F (2012 & Supp. 2016). For the 2011 and 2012 tax years, the municipal assessments of NHEC's property that are the subject of these tax abatement appeals were substantially higher than the DRA's assessments of the same property.

         NHEC filed tax abatement appeals to the BTLA for 23 municipal assessments of its property that occurred in 2011 and 2012. The BTLA held a consolidated hearing over nine days between January and February 2015 regarding NHEC's tax abatement appeals. During the hearing, NHEC presented expert witness testimony and an appraisal of NHEC's property from George K. Lagassa, a certified general real estate appraiser and the owner of Mainstream Appraisal Associates, LLC. In his appraisals, Lagassa estimated the market value of NHEC's property by reconciling the results of four valuation approaches: a sales comparison approach; an income approach, which estimated the value of NHEC's property by capitalizing the company's net operating income; a cost approach, which estimated the net book value (NBV) of NHEC's property by calculating the original cost less book depreciation (OCLBD) of NHEC's property; and a second cost approach, which estimated the value of NHEC's property by calculating the reproduction cost new less depreciation (RCNLD) of NHEC's property.

         NHEC also presented testimony from Scott E. Dickman, a New Hampshire certified general appraiser employed by the DRA in its Property Appraisal Division as a utility appraiser. Additionally, NHEC submitted the DRA appraisals that Dickman had prepared for the purpose of the RSA chapter 83-F statewide utility property tax. Dickman used the "unit method" to appraise NHEC's property. Under the unit method, an appraiser first values all of a utility's property as a whole and then allocates that whole unit value to the individual municipalities where the utility's property is located. To derive his unit value, Dickman primarily used two valuation approaches: a cost approach, which estimated the value of NHEC's property based upon the OCLBD of NHEC's property; and an income approach, which estimated the value of NHEC's property by capitalizing the company's net operating income.

         The municipalities presented expert testimony and appraisals from three certified New Hampshire assessors: Gary J. Roberge, CEO of Avitar Associates of New England, Inc.; Frederick H. Smith, of Brett S. Purvis & Associates; and George E. Sansoucy, who is also a licensed New Hampshire engineer. Roberge used an RCNLD approach to value NHEC's property in the municipalities for which he was engaged. Smith also used an RCNLD approach to value NHEC's property in the municipalities for which he was engaged. To estimate the value of NHEC's property in the municipalities for which he was engaged, Sansoucy reconciled the results of four approaches: a sales comparison approach; an RCNLD cost approach; an income approach that assumed a sale to a privately-owned, regulated utility; and a second income approach that assumed a sale to a publicly-owned utility.

         In July 2015, the BTLA issued a thirty-two page order granting seven of NHEC's abatement appeals and denying the remainder. For the appeals that it granted, the BTLA found that the municipal assessors acknowledged or reached value conclusions reflective of a material degree of overassessment of the properties at issue. Regarding NHEC's other appeals, the BTLA found that the Lagassa appraisals and DRA appraisals did not result in a credible opinion of market value and ruled that NHEC had not met its burden of proving that the local assessments were disproportional. Additionally, the BTLA reviewed the criticisms leveled at the assessment methodologies used by the municipal assessors, as well as the municipalities' responses to those criticisms, but it ruled that it need not address those points because challenges based upon assessment methodology do not, and cannot, carry NHEC's burden of proving disproportionality.

         NHEC filed a motion for rehearing. The BTLA issued a written order denying NHEC's motion in September 2015. This appeal followed.

         II

         Our standard for reviewing BTLA decisions is set forth by statute. See RSA 541:13 (2007); RSA 71-B:12 (2012) (providing that BTLA decisions may be appealed in accordance with RSA chapter 541 (2007)). The BTLA's findings of fact are deemed prima facie lawful and reasonable. See RSA 541:13; Appeal of Town of Charlestown, 166 N.H. 498, 499 (2014). "To prevail, the [appellant] must show by a preponderance of the evidence that the BTLA's decision was clearly unreasonable or unlawful." Town of Charlestown, 166 N.H. at 499; see also RSA 541:13. "We will not set aside or vacate a BTLA decision 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." Town of Charlestown, 166 N.H. at 499-500 (quotation and brackets omitted); see also RSA 541:13.

         III

         On appeal, NHEC argues that the BTLA erred by: (1) rejecting the DRA appraisals and Lagassa's appraisals; (2) ruling that NHEC had presented only methodological challenges to the municipalities' assessments; and (3) violating constitutional and statutory requirements that taxation be uniform and proportional by rejecting NHEC's estoppel argument and allowing local municipal assessments to be ...


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