NOTICE: This opinion is subject to motions for reargument under V.R.A.P. 40 as well as formal
revision before publication in the Vermont Reports. Readers are requested to notify the Reporter
of Decisions by email at: JUD.Reporter@vermont.gov or by mail at: Vermont Supreme Court,
109 State Street, Montpelier, Vermont 05609-0801, of any errors in order that corrections may
be made before this opinion goes to press.
2016 VT 100
No. 2015-356
TransCanada Hydro Northeast Inc. Supreme Court
On Appeal from
v. Superior Court, Windham Unit,
Civil Division
Town of Rockingham March Term, 2016
John P. Wesley, J.
Robert E. Woolmington of Witten, Woolmington, Campbell & Bernal, P.C., Manchester Center,
for Plaintiff-Appellant.
William H. Sorrell, Attorney General, William E. Griffin, Chief Assistant Attorney General,
and Mary L. Bachman, Assistant Attorney General, Montpelier, for Defendant-Appellee State.
Richard H., Saudek of Diamond & Robinson, P.C., Montpelier, for Defendant-Appellee
Town of Rockingham.
PRESENT: Reiber, C.J., Dooley, Skoglund, Robinson and Eaton, JJ.
¶ 1. EATON, J. Taxpayer TransCanada Hydro Northeast, Inc. appeals from a
Windham County Superior Court order setting the value of its Bellows Falls hydroelectric
facility (the facility) at $130,000,000, with $108,495,400 taxable by the Town of Rockingham
(Town).1 Taxpayer argues that the superior court erred when it relied on testimony of the
Town’s expert witness. We correct the trial court’s valuation to read $127,412,212, and affirm.
1
For the purposes of this tax appeal, the parties stipulated that 85% of the value of the
facility is attributed to the portion in Vermont, with the remainder attributed to the portion in
New Hampshire. Further reference to the value of the facility in this opinion is with regard to
¶ 2. The facility, which has been in continuous operation since 1928, is one of five
hydropower dams owned by taxpayer situated along the Connecticut River and is located partly
in Vermont and partly in New Hampshire. It has a nameplate capacity of 40.8 megawatts (mw)
and a net peak capacity of 49.5 mw, and produces, on average, about 258,700 megawatt hours
(mwh) of energy per year. It was first licensed by the Federal Energy and Regulatory
Commission (FERC) in 1938. In 1979, the facility was relicensed for a period of forty years;
that license is set to expire in 2018. Taxpayer acquired the facility and its surrounding property
from USGen New England, Inc., in 2005.2 Because taxpayer is an independent wholesale power
producer, the electricity generated by the facility is sold at hourly market rates established by
ISO New England, an independent system operator. This is in contrast to sales under power
purchase agreements (PPA), where the sale price is contracted at a flat rate.
¶ 3. This dispute arose in 2012 when the Town listed the facility on its grand list at
$108,110,000, the same value at which the facility had been listed the previous two years.
Taxpayer did not challenge the 2010 or 2011 valuations, but appealed the 2012 listing to the
the entire facility, and not solely the portion attributed to the Town, unless otherwise stated. As
noted by the trial court, a small portion of the facility’s value on the Vermont side of the
Connecticut River is assigned to associated land and land rights in the upstream towns of
Weathersfield, Springfield, and Windsor. The value of the land in those towns is not disputed
and accounts for the mathematical disparity between 85% of the $130,000,000 and the Town’s
proposed value of the facility.
2
Under the ownership of USGen, the facility was the subject of litigation before this
Court. In USGen New England, Inc. v. Town of Rockingham, the Court discussed the
difficulties in valuing a hydroelectric facility in a deregulated electrical power market. 2003 VT
102, ¶ 1, 176 Vt. 104, 838 A.2d 927 (USGen I). As we reiterated in that opinion, “the income-
production of [the] hydroelectric facility will be extremely relevant, if not determinative, to its
value.” Id. ¶ 21 (citing New England Power Co. v. Town of Barnet, 134 Vt. 498, 505-506, 367
A.2d 1363, 1368 (1976)). The parties agreed that the income capitalization method was the
preferred method of valuing the facility. In USGen New England, Inc. v. Town of Rockingham,
the taxpayer disputed the analysis of the Town’s expert witness on valuation of the facility. 2004
VT 90, ¶ 1, 177 Vt. 193, 862 A.2d 269 (USGen II). In USGen II, we affirmed the superior court
decision establishing the value of the facility at $102,608,000, of which $90,377,100 was
attributable to the Town.
2
Board of Civil Authority, and then to the superior court pursuant to 32 V.S.A. § 4461(a). The
State of Vermont intervened in the appeal on behalf of the Town.
¶ 4. At trial, both taxpayer and the Town presented expert testimony as to the value of
the facility. The experts’ opinions on value varied substantially, ranging from taxpayer’s
estimate of $84,000,000 to the Town’s estimate of $130,000,000. Taxpayer offered testimony on
value from Daniel Peaco, an engineer and consultant. Peaco employed an income-based
approach to valuation of the facility using a discounted cash flow (DCF) analysis,3 and
concluded that on April 1, 2012, the fair market value of the facility was $84,000,000, of which
$67,000,000 was attributable to the Town.4 The Town offered expert testimony from George
Sansoucy, a registered professional engineer in New Hampshire and a certified real estate
appraiser in several states, including Vermont. Sansoucy prepared an appraisal of the facility
using both the DCF analysis and a comparable sales analysis.5 He concluded that based on the
DCF method, the facility had a value of $116,417,250, and that based on the comparable sales
approach, it had a value of $142,287,750. After reconciling the income and sales values,
Sansoucy concluded that the fair market value of the facility on April 1, 2012 was $130,000,000,
of which $108,495,400 was attributable to the Town. The difference between the two appraisals
amounts to $41,495,400. The experts’ opinions were complex, and taxpayer has made several
challenges to the court’s acceptance of the Town’s expert’s opinion. Most of the issues taxpayer
raises on appeal pertain to specific inputs or assumptions made by Sansoucy in each of the two
3
As discussed in greater detail below, the DCF method is an income-based approach to
valuation that considers future revenues, minus the cost and expenses, discounted to present
value.
4
This calculation again accounts for the mathematical disparity between 85% of the
$84,000,000 and taxpayer’s proposed value of the facility due to the small portion of the
facility’s value on the Vermont side of the Connecticut River that is assigned to associated land
and land rights in the upstream towns.
5
As detailed below, a comparable sales analysis relies on the sales of comparable
facilities to determine fair market value.
3
methods of valuation he employed. Accordingly, to give context to the challenges raised on
appeal, a detailed discussion of how the experts arrived at their opinions on value is necessary.
I. Methods of Valuation
A. Income-Based Approach
¶ 5. Both experts relied, at least in part, on a DCF analysis, an income-based approach
to valuation. This approach converts the future benefits of property ownership—that is, the
income the property will generate—into an expression of the property’s present worth by
discounting each future benefit at a rate that reflects the investment’s income pattern, value
change, and yield rate. In Beach Properties, Inc. v. Town of Ferrisburg, we explained this
approach as follows:
The income approach is based on the proposition that a rational
investor would pay the fair market value for a piece of property,
which is the price (P) that, when multiplied by the rate of return
available from alternative investments of comparable risk (the
capitalization rate or R), is equal to the property’s expected net
income (I). In other words, if the known factors are capitalization
rate and net income, the price of the property may be calculated by
dividing the net income by the capitalization rate: P = I/R.
161 Vt. 368, 372, 640 A.2d 50, 52 (1994) (footnote omitted).
¶ 6. Converting periodic income and reversion into present value is called discounting,
and the rate of return is called the discount rate. In a DCF analysis, a yield rate is applied to a set
of projected income streams and a reversion to determine whether the investment property will
produce a required yield given a known price of acquisition. The critical elements in the DCF
approach are net income or revenue (I), which can be discounted back to present value using the
predetermined discount rate (R), to arrive at price (P). Net income is dependent on projected
revenues, including capacity revenue and energy prices, less expenses. It is then discounted by a
discount rate, or rate of return, which represents the cost of borrowing money to pay for the
purchase of an asset. A lower projected cost of capital generally results in a higher estimated fair
market value. Although both experts’ DCF analyses employed the same general methods,
4
differences in the inputs and treatment of certain variables resulted in vastly different opinions on
value.
¶ 7. Each expert’s revenue projection was derived from annual generation figures
multiplied by the predicted price of electricity for the particular future year. Both experts made
certain assumptions about the facility’s generating capacity, using historic data regarding stream
flows and facility operation. The primary difference in the experts’ calculations stems from
differences in the number of years used to determine the average generation in megawatt hours.
Sansoucy relied on a ten-year average of generation, for the years 2000 through 2011, a time
period he determined would capture the evolving trends of increased rainfall on the Connecticut
River and increased efficiency and capacity at the facility during that time. He predicted that
future generation would be 258,700 mwh per year. Peaco relied on a twenty-year average of
generation, for the years 1991 through 2011, a time period he determined would account for
fluctuations in short term hydrologic phenomena. He predicted that future generation would be
242,000 mwh per year, 16,700 mwh less than Sansoucy’s estimated generation.
¶ 8. The experts also differed in their projected expenses, which accounted for a
difference in fair market value of approximately $8,400,000. Both parties considered two main
categories of expenses in their DCF analyses: (1) maintenance costs and capital expenses; and
(2) protection, mitigation, and enhancement expenses (PM&E).6
¶ 9. The primary differences in the experts’ calculations were with regard to their
treatment of capital expenses and the treatment of the projected costs of relicensing. Among
maintenance costs and capital expenses, Sansoucy considered the costs of operation and
maintenance (O&M), administrative and general costs, and capital expenditures. He allocated
about $55 per kilowatt (kw) of capacity, or $2,200,000 per year in the first year, to O&M, which
he considered to include maintenance with a life of one year or less. He then assigned 1% of the
6
PM&E expenses are associated with certain requirements imposed by FERC and which
which may accompany relicensing.
5
value of the facility per year to capital improvements with a life longer than one year—
amounting to approximately $1,300,000 in the first year—which he explained was comparable to
what similar companies were spending on capital projects. He also included $1,500,000 in
expenses associated with the expected costs associated with FERC relicensing in 2018 and
amortized the expenses over the life of the forty-year license at $38,000 per year.
¶ 10. Inherent in Sansoucy’s DCF analysis is the facility’s remaining value at the end of
the term of the DCF, or terminal value. The inclusion of terminal value in Sansoucy’s DCF has a
significant impact on the present value of the facility and is intended to reflect the reasonable
expectation that after twenty years, the length of the DCF term, the facility will continue to
operate and produce revenue. Sansoucy estimated that in 2031, the facility will generate a net
operating cash flow of $22,725,000. He capitalized the after-tax net operating cash flow at a rate
of 9% and concluded that a reasonable estimate of the facility’s value in the year 2031 would be
about $176,000,000. Discounted back to 2012, the terminal value represented $33,900,000 in
2012 dollars.
¶ 11. Rather than assigning a percentage of the facility’s value to capital improvements
over the period of the FERC license, Peaco identified two categories of capital expenses:
baseline capital expenditures, which taxpayer would incur yearly, and large capital expenses,
which taxpayer would incur on a one-time basis. He arrived at the baseline capital expenses by
reference to taxpayer’s reported capital expenditures for twelve of its hydroelectric facilities over
a period of five years, and the one-time capital expenses by reference to several planned large-
scale projects, such as the overhaul of the facility’s turbines at an estimated cost of $6,976,000.
After allocating a dollar amount per kw of capacity for the baseline capital expenses, Peaco
subtracted the cost of the one-time capital expenses to arrive at a cost of $12 per kwh. Unlike
Sansoucy, Peaco did not account for the return on the capital expenditures by projecting a
corresponding increase in the value of the facility itself.
6
¶ 12. Rather than amortize the projected cost of relicensing over the life of the forty-
year FERC license, Peaco adjusted his final DCF analysis downwards by the estimated costs
associated with obtaining and complying with a FERC license. These costs included the actual
cost of getting the license and the cost of complying with the license, or PM&E costs. Relying
on an estimate from taxpayer, Peaco determined that the actual cost of relicensing would amount
to $1,000,000. To determine the PM&E expenses for the Alternative Licensing Process, Peaco
consulted a 2001 FERC study7, which estimated a cost of $58 per kw for projects ranging in size
from 25 mw to 100 mw. Relying on that study, and assuming a buyer would reduce the value of
the facility by $100 per kw, Peaco determined that PM&E expenses would amount to
$4,700,000. He then subtracted this figure from the final appraisal value.
¶ 13. Also unlike Sansoucy, Peaco did not include a terminal value in his DCF analysis
because he argued that it inflated the fair market value of the facility, and that the uncertainty
related to potential capital improvement requirements and operating restrictions in the FERC
licensing process render a terminal value moot.
¶ 14. Finally, the experts discounted the projected net income to determine fair market
value. The discount rate depends on two factors representing the cost of borrowing money to
pay for the purchase of an asset: the rates of return on debt and equity and the ratio of debt to
equity. A lower projected cost of capital typically results in a higher estimated fair market value.
Relevant to this appeal, the experts relied on different debt rates and debt to equity ratios—a
disagreement resulting in $11,000,000 of the difference in their valuations.
¶ 15. Sansoucy ran his DCF over a period of twenty years, using a debt rate of 6%, an
equity rate of 10.5%, and a 50:50 debt-to-equity ratio. He relied on financial reports from a
number of major energy companies and compared their debt payments to their overall debt, as
7
Hydroelectric Licensing Policies, Procedures, and Regulations: Comprehensive Review
and Recommendations, Staff of the Federal Energy Regulatory Commission Report to the United
States Congress, May 8, 2001, http://www.ferc.gov/legal/maj-ord-reg/land-docs/ortc_final.pdf
[https://perma.cc/TM4J-VE35].
7
well as the debt to equity split reported by recent purchasers of hydropower facilities. Sansoucy
testified that his debt rate was based on the rate at which a potential purchaser could borrow
capital, and that his equity rate was based on the returns investors in the market were realizing on
similar acquisitions. After investigating the debt-to-equity split reported by recent purchasers of
similar facilities, Sansoucy concluded that an even split between debt and equity accurately
represented the higher on-peak production over that of a typical hydroelectric facility as well as
the strong financial structure necessary for a potential purchaser. From these figures, Sansoucy
arrived at a 7% weighted average cost of capital (WACC). Adjusted to account for property
taxes, Sansoucy achieved a discount rate of 8.6%. Using these data points, he then utilized eight
different financial scenarios to develop a range of DCF values for the facility. These eight
scenarios represented the volatility in the energy market and the uncertainty of inflation rates.
Each scenario applied an inflation rate of either 2.5% or 3% to an energy escalation rate of 0%,
1%, 1.25%, 1.5%, 2.5%, or 3%. The resulting fair market value ranged from a low of
$98,307,900 to a high of $142,287,750. He then averaged the eight values to arrive at an
estimate a fair market value of $116,417,250.
¶ 16. Peaco ran his DCF over thirty-seven years to account for the entire term of the
renewed FERC license, using a debt rate of 7.3%, an equity rate of 12%, and a 55:45 debt to
equity ratio.8 He used a WACC developed using the build-up method to calculate a return of
approximately 12% on equity. His debt rate was based on the Baa bond rate9, which was 5% in
2012, which he adjusted upwards to 7.3% because of the project’s small size and because he
8
This table represents the cost of capital and discount rates employed by each expert in
their respective DCF analyses:
Debt Rate Equity Rate Debt:Equity WACC
Sansoucy 6% 10.5% 50:50 7%
Peaco 7.3% 12% 55:45 7.8%
9
Credit ratings are assigned letters by credit rating agencies. Moody’s assigns bond
credit ratings of Aaa, Aa, A, Baa, Ba, B, Caa, Ca, and C.
8
assumed it would be financed using non-recourse debt. He did not attempt to verify his
assumptions with financial data of comparable companies or market analysis. His equity rate
was based on the risk-free Federal Treasury Bond rate of 3%, which he rounded up to 12% based
on his assumption as to what a buyer would require. After researching publicly available
information on comparable companies, Peaco arrived at a debt to equity ratio of 55:45. From
these figures, Peaco arrived at a WACC of 7.8%. Applied to the net income, Peaco estimated a
fair market value of $84,000,000.
B. Comparable Sales Valuation
¶ 17. A comparable sales analysis, or cost approach, is used to develop an indication of
the fair market value of a facility, based on the assumption that a buyer would pay no more for
the property than the cost of producing an equally desirable substitute. This approach considers
the prices at which comparable properties were sold on the open market, divided by either the
rated or nameplate capacity, or by the reported annual generation, which is then adjusted to
extrapolate for the subject property, taking into account qualitative and quantitative differences
between that property and those selected as comparable. This method estimates price per
capacity (price per kilowatt hour per year, or kwh-yr), which can be used to estimate the fair
market value based on annual generation.
¶ 18. Sansoucy relied on a comparable sales analysis as an additional metric to help
determine the fair market value of the facility. Peaco did not undertake a comparable sales
analysis. Sansoucy noted that although energy and capacity prices have declined in recent years,
comparable sale prices per kwh-yr do not reflect a corresponding decline. He attributed this
price stability to four things: (1) a proportional decrease in interest and equity rates in the
generating industry, which have resulted in reduced discount rates used by the industry to value
potential hydro facility purchases; (2) the reliability of hydroelectric properties as investments;
(3) the recent emphasis on renewable energy sources; and (4) long term energy price forecasts.
9
Sansoucy concluded that economic conditions affecting discount rates have balanced the effect
of declining energy and capacity prices and ultimately on the sale price of hydro facilities.
¶ 19. Sansoucy’s comparable sales analysis arithmetically averaged twelve sales or
verified offers to purchase hydro-electric generating facilities that took place between 2007 and
2011.10 The twelve sales were chosen for their location, motivation of buyers and sellers,
financial conditions surrounding the sale, supply and demand in the region, and the physical and
economic characteristics of the assets that comprised the property being sold. Sansoucy largely
considered sales in the northeast region of the country, where rainfall and river conditions are
most similar to those on which the facility itself is located, although he also considered three
sales in Wisconsin. Of the twelve sales, two facilities were located in Vermont, four in New
York, one in New Hampshire, two in Maine, and three in Wisconsin. One facility, the Stillwater
facility in New York, was listed twice: the first time was a sale announcement at $0.66 per kwh-
yr, and the second was an actual sale at $0.67 per kwh-yr. These were the two highest prices per
kwh-yr in the analysis. A second facility in the analysis, the Newfound facility in New
Hampshire, was listed as an offer and not a sale.
10
This table reproduces the relevant portion of Sansoucy’s comparable sales data used to
develop his average and median price per kwh-yr.
State Sale Date Sale Price ($) Net Capacity Generation Sale price/ Capacity
(MW/yr) kwh-yr ($) Factor
NY 8/1/2007 27,000,000 12 66,252 0.41 63%
ME 11/30/2007 1,750,000 0.867 3,140 0.56 41%
NY* 9,300,000 3.15 14,000 0.66 51%
NY 9/5/2008 9,410,000 3.15 14,000 0.67 51%
VT 12/11/2008 9,000,000 4.85 22,311 0.40 53%
WI 3/23/2009 22,000,000 9.1 51,978 0.42 65%
ME 11/2/2009 95,000,000 31.88 186,786 0.51 67%
NY 3/18/2010 80,100,000 33 167,390 0.48 58%
WI 4/1/2010 6,100,000 2.7 10,428 0.58 44%
WI 1/5/2010 80,000,000 33.3 140,751 0.50 48%
VT 9/1/2011 28,500,000 18.1 67,258 0.42 42%
NH** 3,000,000 1.5 5,829 0.51 44%
* Sale announcement.
** Verified offer, but no final sale.
10
¶ 20. From the twelve sales, Sansoucy derived an average sale price of $0.51 per kwh-
year. He then made three upward adjustments to the average price per kwh-yr based on
qualitative and quantitative factors he felt rendered the Bellows Falls facility more desirable than
many of the comparable facilities. These adjustments were made because the facility is among
the best hydroelectric facilities in the region as a result of taxpayer’s recent upgrades and capital
investments, ongoing maintenance, efficiency of operation, automation, and coordinated
operation.
¶ 21. Sansoucy’s first adjustment was to raise the price per unit of electricity based on
additional revenue he attributed to the facility’s ratio of on-peak to off-peak generation, which he
assumed was higher than other hydroelectric facilities in New England. He noted that a typical
ratio would be 47% on-peak to 53% off-peak generation, and that the facility generated 51.3% of
its energy on-peak and 49.8% off-peak. He did not consider the ratio of on-peak to off-peak
generation among those facilities in the comparable sales analysis, however. His second
adjustment was to raise the price per unit of electricity by half the value of the facility’s total
ancillary revenue. He indicated that although most of the individual comparable sales will
receive at least some ancillary revenues, he did not believe any would capture as much ancillary
revenue as the facility itself. Again, he did not consider the ancillary revenues of the facilities in
the comparable sales analysis. Sansoucy’s third adjustment was to increase the facility’s sale
price by an additional 5% because he believed the facility was entitled to a premium value
compared to the other twelve sales. He stated that the facility was a “good plant, with a very
high capacity factor, good water, lots of it.” Based on an annual generation figure of
258,700,000 kwh-yr, at an average price per kwh-yr of $0.55, Sansoucy thus calculated that, as
of April 1, 2012, the facility had a comparable sales-based fair market value of $142,287,750.
He then adjusted his DCF-based value of $116,000,000 by reference to his comparable sales-
based value to arrive at a fair market value of $130,000,000, of which $108,495,400 was
11
attributable to the Town. Although this figure is, coincidentally, the mid-point between the DCF
value and the comparable sales value, Sansoucy did not average the two to arrive as fair market
value. As he explained, “the sales comparison approach was 142 million for [the facility], the
median of the income approach was 116 million. . . our middle of the road DCF was
134 million. . . so we reconciled in 2012 Bellows at 130 million.”
II. Trial Court’s Findings
¶ 22. The trial court found Peaco’s $84,000,000 appraisal to be an “incredibly low
value” that was “irreconcilable with the great weight of evidence and testimony.” The court felt
that “[i]t strains reasonableness to insist that the current value is more than twenty million dollars
less than what it was in 2001,” and that because Peaco’s appraisal was “well below any listed
value of [the facility] for more than a decade prior to 2012,” it “undermine[d] the defensibility of
[taxpayer’s] position as well as its expert’s credibility.” It found Sansoucy’s $130,000,000
appraisal, on the other hand, to be “a supported and reliable estimate of the fair market value of
[the facility] as of April 1, 2012.” Even “[a]ccepting that any fair market value calculation is at
best an exercise in informed estimation,” the trial court considered “Sansoucy to be, decidedly,
the more credible expert witness.” Finding that taxpayer “presented no credible alternative to
fair market value,” the trial court held that $130,000,000 was “a supported and reliable estimate
of the fair market value” of the facility.
¶ 23. The trial court stated that Peaco’s model was unpersuasive for several reasons,
including (1) that it assumed, without evidentiary support, that potential purchasers would insist
on a 20% pre-tax (12% after tax) equity return; (2) his financial assumptions were not verified
with the financial data of comparable companies or market analysis; (3) there was no explanation
for the two-percentage points added to the debt rate; (4) he fully deducted the cost of large
capital improvements without recognizing the corresponding increase in value the investment
would return; (5) he deducted $4,700,000 for PM&E expenses without support for specific
12
expenditures, which overstated the impact of relicensing on the fair market value; (6) there was
no evidentiary support for the assertion that the facility would have no value at the end of its
license term; and (7) the DCF analysis valued the facility at less than $0.35 per kwh-yr, which is
well below the price of even inferior facilities. Although the trial court acknowledged that
Sansoucy’s comparable sales analysis was “susceptible to critique,” it ultimately found his
conclusion that the facility had a fair market value of $130,000,000 to be accurate and credible.
This appeal followed.
¶ 24. Taxpayer raises two issues on appeal. First, taxpayer raises a number of
challenges to the trial court’s acceptance of the Town’s comparable sales computation, arguing
that it was in error because it: (1) was based on offers rather than completed sales; (2) was
without adjustment for time, location, size, or inclusion of above-market power contracts; and
(3) relied on three upward adjustments from computed average values without supporting data.
Second, taxpayer challenges the trial court’s acceptance of Sansoucy’s DCF analysis because
(1) the discount rate was based on below-market debt rates; (2) the estimates of capital costs
were unsupported and inconsistent with actual costs; and (3) the computations failed to account
for costs associated with FERC licensing. For its part, the Town contends that the trial court’s
decision must be affirmed because taxpayer does not contest the trial court’s central finding that
taxpayer presented no credible alternative fair market value.
¶ 25. The trial court reviews tax appraisal determinations from a board of civil authority
de novo. 32 V.S.A. § 4467. The trial court is charged with determining the correct valuation of
the property—the fair market value—and equalizing the fair market value to ensure that the
property is listed comparably to the value of corresponding properties within the town. Id.; see
also Kachadorian v. Town of Woodstock, 144 Vt. 348, 350, 477 A.2d 965, 967 (1984) (“First,
the fair market value of the property must be determined. Next, the fair market value must be
‘equalized’ to ensure that the property is listed comparably to corresponding properties in town.
13
When comparable properties exist, their current market value must be compared with their
current listed value to arrive at an equalization rate. This rate must then be applied to the subject
property’s fair market value to produce the proper listed value.”). On appeal to this Court, the
trial court’s conclusions will be affirmed “where they are reasonably drawn from the evidence
presented.” Dewey v. Town of Waitsfield, 2008 VT 41, ¶ 3, 184 Vt. 92, 956 A.2d 508. “We
defer to the court’s determinations with regard to evidentiary credibility, weight, and
persuasiveness.” Id.
¶ 26. “The burden of persuading the trier of fact that his property is over-assessed . . .
remains with the taxpayer throughout the entire proceeding.” Kruse v. Town of Westford, 145
Vt. 368, 372, 488 A.2d 770, 773 (1985); see also New England Power Co. v. Town of Barnet,
134 Vt. 498, 508, 367 A.2d 1363, 1369 (1976) (“It is to be emphasized . . . that the burden of
persuasion as to the contested issues in a § 4467 hearing remains at all times with the
taxpayer.”). The taxpayer may burst the bubble and defeat the presumption in favor of the
appraisal by presenting “credible evidence fairly and reasonably tending to show that [the]
property was appraised at more than its fair market value.” Adams v. Town of West Haven, 147
Vt. 618, 619-20, 523 A.2d 1244, 1245 (1987) (quotation omitted); see also Rutland Country
Club, Inc. v. City of Rutland, 140 Vt. 142, 145, 436 A.2d 730, 732 (1981) (“[T]he presumption
of validity of a city’s evaluation is overcome when credible evidence is introduced fairly and
reasonably indicating that the property was assessed at more than the fair market value.”
(quotation omitted)).
¶ 27. On appeal before this Court, the superior court’s determination “will be deemed
presumptively correct and its findings will be conclusive if they are supported by the evidence.”
Lake Morey Inn Golf Resort, Ltd. P’ship v. Town of Fairlee, 167 Vt. 245, 248, 704 A.2d 785,
787 (1997). We will not set aside the trial court’s findings of fact unless they are clearly
erroneous, V.R.C.P. 52(a)(2), and we will affirm its conclusions where they are reasonably
14
drawn from the evidence presented. See, e.g., Harte v. Town of Bennington, 153 Vt. 256, 258,
571 A.2d 53, 54 (1989).
III(A). Validity of the DCF Analysis
¶ 28. Taxpayer’s first challenge is to Sansoucy’s income valuation. Taxpayer raises
three separate arguments: that (1) Sansoucy’s discount rate was based on below-market debt
interest rates; (2) his estimates of capital costs were unsupported and ignored future capital costs;
and (3) he failed to account for costs associated with FERC relicensing. The State disagrees,
describing the trial court’s estimate of fair market value using the DCF analysis as reliable and
adequately supported by market data and taxpayer’s own records, compared to Peaco’s DCF
analysis, which relied in some cases on assumptions unsupported by data or market evidence.
¶ 29. The trial court’s determination of fair market value relied on Sansoucy’s
comparable sales analysis and his DCF analysis. “We have described income capitalization as
probably the most accurate way to establish value of commercial properties at least in theory, but
have also cautioned about the pitfalls and difficulties in this approach.” USGen I, 2003 VT 102,
¶ 21 (quotation omitted). “The key is comparability, and economists and other experts will
frequently differ, at times widely, as to what comparable investments will yield, even where
there is agreement on what constitutes comparability.” Beach Props. Inc., 161 Vt. at 373, 640
A.2d at 52. The trial court’s ability to hear and consider the competing testimony and give it the
weight it feels it deserves is therefore critical.
¶ 30. It is taxpayer’s burden to persuade this Court that the facility is over assessed, and
this burden is not met by “simply impugning the [Town’s] methods or questioning its
understanding of assessment theory or technique.” Sondergeld v. Town of Hubbardton, 150 Vt.
565, 568, 556 A.2d 64, 66 (1998). To prevail, taxpayer must demonstrate that valuation is
arbitrary or unlawful. Id. The resolution of conflicting evidence is left to the discretion of the
15
trial court. Rutland Country Club v. City of Rutland, 137 Vt. 590, 591, 409 A.2d 591, 592
(1979).
¶ 31. Here, the experts’ DCF analyses resulted in a $32,000,000 difference in
valuation.11 The difference in the experts’ equity rates—1.5%—resulted in a substantial portion
of that $32,000,000, although taxpayer does not dispute the trial court’s rejection of taxpayer’s
assumption that prospective purchasers would demand a 12% return on investment. While the
court acknowledged that a 12% return on equity may be desirable to a potential purchaser, it
found Sansoucy’s debt and equity rates to be more compelling because he successfully
demonstrated how both were supported by a market basis.
¶ 32. Sansoucy’s DCF analysis relied on a 6% debt rate. He testified that he calculated
the debt rate by analyzing financial reports of a number of major energy companies and
comparing their reported debt payments to their overall debt. From this data, he determined that
assuming a potential purchaser could borrow capital at a 6% interest rate on April 1, 2012 was a
conservative estimate. Taxpayer now argues that this rate is, by Sansoucy’s own admissions, a
below-market debt rate. Although Sansoucy did testify that his debt rate was below what the
Treasury would pay, he explained that it was based on taxpayer’s own records of what it was
able to borrow as a private company.
¶ 33. While we agree with taxpayer that the “selection of [the] rate is of paramount
importance in the capitalization process,” because “[r]elatively small variations in the rate will
significantly change the fair market value,” Beach Props., Inc., 161 Vt. at 373, 640 A.2d at 52
(quotation omitted), we do not find the trial court’s acceptance of a 6% debt rate to be invalid.
Considering Sansoucy’s debt rate, the trial court concluded that it was calculated based on
taxpayer’s own reported debt payments as well as those made by similar corporations. It
concluded that taxpayer’s challenge failed to demonstrate that Sansoucy’s debt rate was invalid,
Sansoucy’s DCF analysis resulted in a value of $116,417,250, compared to Peaco’s
11
$84,000,000.
16
and that taxpayer failed to produce data to contradict his calculation, going as far as to state that
Peaco’s discount rate appeared to be “driven less by data with connection to actual market
forces, and more by the impact each choice makes on suppressing the overall value.”
Recognizing that there is “no exact science informing calculations of the sort attempted here,”
the trial court found that Sansoucy was able to demonstrate a market basis for his debt rate,
which it found to represent sound estimates and valid inputs.
¶ 34. Taxpayer also challenges Sansoucy’s calculation of capital expenses. It argues
that Sansoucy’s estimate of capital costs was based on an unsubstantiated assumption that capital
expenses would account for 1% of the facility’s value annually and ignored future capital costs,
resulting in the overstatement of net income. The differences in the parties’ estimates resulted in
a difference in valuation of about $8,400,000.
¶ 35. At trial, Sansoucy testified that he calculated the capital maintenance and capital
expenditures necessary to maintain the facility in the shape or condition it was in on the date of
the valuation, April 1, 2012. He assigned 1% of the value of the facility per year to long-term
capital improvements because allocating a percentage of the value of the facility to capital
expenses allows for spending on maintenance to increase over time relative to the value of the
facility.12 Sansoucy arrived at 1% of the value of the facility after analyzing the confidential
documents of a wide variety of hydroelectric facilities and determining that 1% of the value of
the facility per year is comparable to what similar companies were spending on capital
improvements.
¶ 36. Taxpayer argues that Sansoucy’s treatment of capital expenditures fails to account
for the costs that will be borne by taxpayer in the upcoming years for necessary and planned
capital improvements. These include baseline capital expenditures, or recurrent costs that the
facility could expect to incur annually, and one-time capital expenses to be expensed in the year
12
Sansoucy calculated that 1% of the value of the facility, which he assumed to be
$130,788,000, was $1,308,000 in the first year of the calculation.
17
they are planned, including projects to overhaul the facility’s turbines and repair portions of the
dam. Discussing taxpayer’s treatment of expenses, Sansoucy explained that some expenditures
increase revenue, decrease operating costs, or increase efficiency, which in turn creates value,
and that to the extent such expenditures add value to the facility, they should not be expensed
from revenue, as they were in taxpayer’s analysis. In Sansoucy’s opinion, if capital
improvements are written off as expenses without appropriate consideration of their contribution
to value or efficiency, the value of the facility as a whole may be understated. He explained that
in the appraisal of real estate, “you have to be very cautious with capital investments and capital
improvements, to the extent that they add value to the property they should not be expensed from
revenue, thereby reducing the property value as a result.” Sansoucy thus concluded that
taxpayer’s failure to consider the contribution of expenditures on value or efficiency resulted in
the lower valuation.
¶ 37. The trial court noted that it was “persuaded by [Sansoucy’s] explanation of the
appropriate treatment of capital expenses,” and found taxpayer’s approach to be “flawed on its
face.” After reciting its understanding of Sansoucy’s approach, the court adopted his logic,
concluding that “fully deducting the cost of a large capital improvement” without “recognizing
the added value” of those improvements would “artificially devalue” the facility. For this
reason, the trial court found taxpayer’s treatment of capital expenditures to be “flawed on its
face.” The trial court rejected taxpayer’s analysis in favor of Sansoucy’s more credible
approach.
¶ 38. Here, the trial court carefully explained its decision making process and how it
was influenced by the experts’ testimony. “If the trial court considered the various approaches
offered, assigned weight to each approach, and provided a thorough explanation for its findings
and conclusions we will not overturn the court if its order ‘appears to be fair, just and equitable
according to the evidence presented.’ ” USGen II, 2004 VT 90, ¶ 49 (citing Town of Barnet, 134
18
Vt. at 506, 367 A.2d at 1368); see also Barrett v. Town of Warren, 2005 VT 107, ¶ 5, 179 Vt.
134, 892 A.2d 152 (“We will not disturb a fair market value determination unless an error of law
exists.”). We conclude that the trial court’s reliance on Sansoucy’s analysis, including the
decision to assign 1% of the value of the facility per year to long-term capital improvements, and
its rejection of taxpayer’s expert’s approach, was within its discretion.
¶ 39. Finally, taxpayer argues that Sansoucy failed to account for costs associated with
FERC relicensing. It is clear from the record, however, that Sansoucy included $1,500,000 in
expenses associated with the expected costs of relicensing in 2018, and that he amortized the
total cost over the forty-year license at $38,000 per year because he considered the license to be
similar to “a long-term permit.” He did not include a separate estimate of PM&E expenses for
three reasons: first, taxpayer informed him that all PM&E costs had been incorporated into
operations, maintenance, and capital budgets and were not separately identified; second, the
facility had undergone most upgrades required for relicensing following the relicensing in 1979;
and third, incidental PM&E expenses would be adequately represented in operations and
maintenance. Peaco, on the other hand, relied on a FERC study outlining the PM&E expenses
associated with relicensing, estimating that it would incur $100 per kw, or $4,700,000 in PM&E
expenses, which it then subtracted from the value of the facility.
¶ 40. The trial court considered both parties’ estimates for the cost of relicensing. It
found that Peaco offered little support for the $4,700,000 in PM&E expenses, that the onetime
reduction in the final value of its DCF overstated the impact of relicensing on the fair market
value, and was unpersuaded that the figure was a reasonable estimate of relicensing expenses in
light of the FERC report. It also found that in relying on the 2001 FERC study, Peaco failed to
differentiate between the costs incurred by a facility undergoing its first relicensing compared to
a subsequent relicensing. The trial court found Sansoucy’s modest PM&E expenses, amortized
over the forty-year life of the license, in conjunction with the sizeable yearly operations and
19
maintenance allocation, to be a more plausible estimate of the likely costs and risks associated
with relicensing. The court again explained its decision making process and how it was
influenced by the experts’ testimony. For the same reason that we affirm the court’s decision to
accept the capital expenditures in Sansoucy’s analysis, we affirm the treatment of relicensing
costs. We conclude that the trial court’s reliance on Sansoucy’s estimate of the cost of
relicensing, and its rejection of taxpayer’s expert’s approach, was within its discretion.
III(B). Validity of the Comparable Sales Valuation
¶ 41. Taxpayer’s second challenge is to Sansoucy’s comparable sales valuation.
Taxpayer first argues that Sansoucy failed to account for necessary adjustments among purported
comparable facilities. Specifically, taxpayer contends that Sansoucy failed to account for the
date of sale, location or size of the comparable facilities, or the inclusion of above-market power
contracts. The Town disagrees, arguing that Sansoucy did, in fact, account for these factors in
his analysis. Upon review of the record, it is clear that Sansoucy did account for the date,
location and size of the comparable facilities, and the inclusion of power purchase agreements, in
his analysis.13
¶ 42. In his appraisal, Sansoucy explained that the data did not indicate a need for an
adjustment for the date of the sales, stating that “[i]t is clear from the comparable sales data . . .
that during the time period between 2006 and [2012], economic conditions affecting discount
rates have a balancing effect on declining energy and capacity prices and ultimately on hydro
sale prices.” He testified that “by 2012 in a de-escalating market for electricity, natural gas, the
sale price for hydroelectric plants were holding up very well at their pre-2010 levels.”
Considering this explanation, the trial court found that the negligible difference in price per kwh-
yr obviated the need for a time adjustment.
13
Sansoucy explained at trial that “in appraising, you adjust the comparable property to
be similar to the subject property.”
20
¶ 43. Sansoucy’s appraisal also demonstrates that he not only considered the location
and size of the comparable facilities, but that he made corresponding adjustments for those
factors. He adjusted the price per kwh-yr relative to the location of the facilities and prices in
those energy markets. Discussing the sales of facilities in Tennessee, Sansoucy noted their
location and adjusted the price per kwhr-yr upward to reflect the higher prices in those energy
markets. He also included facilities both larger and smaller than the Bellows Falls facility,
variations that necessarily accounted for price differences resulting from size differences. The
trial court acknowledged these adjustments, stating that Sansoucy “adjusted the price for the
[facility] upwards to $0.55 per kwhr-yr based on quantitative and qualitative factors he felt
rendered [the facility] a more desirable facility than many of the comparables.”
¶ 44. Furthermore, despite taxpayer’s contention, Sansoucy did consider whether to
make adjustments to account for the inclusion of facilities that market production through power
purchase agreements (PPAs). He testified that despite the difference between such facilities and
the Bellows Falls facility, the Bellows Falls facility remained comparable because it “essentially
has a PPA with its affiliate,” where power is transferred to TransCanada Power Marketing,
repackaged with other power plants, and resold into the marketplace. Sansoucy testified at
length about the selection and evaluation of comparable sales for his analysis, testimony the trial
court considered. Although taxpayer argues that Sansoucy failed to account for certain factors,
the record shows otherwise, and we will not disturb the trial court’s findings.
¶ 45. Taxpayer also contends that the Town’s comparable sales analysis incorrectly
relied on three upward adjustments from computed average values without supporting data, and
that these adjustments increased the value of the facility in the comparable sales analysis by
$7,760,000. Specifically, taxpayer argues that Sansoucy’s upwards adjustment from $0.50 per
kwhr-yr to $0.55 per kwhr-yr was based on the assumptions that none of the comparable
facilities generate more than 47% of the time during peak hours, that their sale prices did not
21
reflect the potential to generate as much ancillary revenue as the Bellows Falls facility, and that
the Bellows Falls facility would be entitled to an additional premium compared to the other sales.
¶ 46. This Court will uphold an adjustment where the appraiser’s conclusion that the
value of the subject property should or should not be adjusted was rationally derived from the
evidence. See Garilli v. Town of Waitsfield, 2008 VT 91, ¶ 13, 184 Vt. 594, 596, 958 A.2d
1188, 1191 (2008) (mem.). When an expert’s findings are supported by the evidence, “we must
defer” to their valuation, “even if the record contains contradictory evidence.” In re Southview
Assocs., 153 Vt. 171, 178, 569 A.2d 501, 504 (1989). “Where the record contains some basis in
evidence for [the appraiser’s] valuation, the appellant bears the burden of demonstrating that the
exercise of discretion was clearly erroneous.” State Hous. Auth. v. Town of Northfield, 2007 VT
63, ¶ 5, 182 Vt. 90, 933 A.2d 700 (quotations omitted); see also Vt. Elec. Power Co. v. Town of
Vernon, 174 Vt. 471, 472, 807 A.2d 430, 433 (2002) (mem.) (“We will defer to the state
appraiser when the determination is rationally derived from his findings, even where
contradictory evidence exists.”). The central question is whether the decision “reveals to the
parties and this Court how the decision was reached.” Lake Morey Inn, 167 Vt. at 251, 704 A.2d
at 789; see Beach Props., 161 Vt. at 371, 640 A.2d at 51 (noting findings “must state clearly
what evidence it credits and why, so that the parties and this Court will know how the decision
was reached”). The rationale underlying this requirement is to assure this Court and the parties
that the trial court’s determination of fair market value was not a guess. See New England
Power Co., 134 Vt. at 503, 367 A.2d at 1367 (“Findings . . . indicate how the ultimate conclusion
is arrived at, and remove from that ultimate conclusion any suspicion that it is only a guess.”).
¶ 47. At trial, Sansoucy testified that his upward adjustments were based on several
primary factors, both quantitative and qualitative in nature. As he explained, the quantitative
factors accounted for the facility’s on-peak and off-peak generation and its ancillary revenue,
while the qualitative factors accounted for several of the facility’s attributes, including its
22
location on the Connecticut River system, taxpayer’s control of the river system, the general
quality and condition of the facility, its relatively high head,14 and the facility’s ability to sell into
multiple markets.
¶ 48. According to the record, Sansoucy testified that the purpose of the comparable
sales analysis is to calculate an average price per kwhr-yr of all of the sales in the analysis and to
adjust that figure to represent the facility itself. To accomplish this, he considered the difference
between the quantitative and qualitative factors of the facility relative to all twelve market sales
and determined whether the facility itself was better than, equal to, or worse than the market;
whether the facility would be more desirable, equally as desirable, or less desirable than the
market. He then made a judgment as to what the competition and price would bring for the
facility if offered, in comparison to what other alternate investments in hydroelectric facilities
could buy.
¶ 49. He testified that he made quantitative adjustments for the on-peak to off-peak
ratio and ancillary revenue because both factors created a differential from the average sale in the
market generally. He declined to make adjustments for other quantitative factors because they
did not result in a differential from the average sale. Essentially, he adjusted the price per kwh-
yr upwards to reflect the fact that the facility’s ratio of on-peak to off-peak generation and
ancillary revenue were higher than those of the average facility in the market generally: on-peak
being 51.3%, compared to the straight run-of-the-river at 47%. He then monetized the difference
between the facility and the straight run of the river, using the price of on-peak dollars per
kilowatt as of April 1, 2012 and calculating how much more money the facility would make than
the straight run of the river. He went through the same steps for ancillary revenues, which are
services received for certain attributes. Sansoucy explained that in his experience, although most
individual comparable sales receive at least some ancillary revenues, few, if any receive such
14
A high head provides more energy for the same expenditures on operations and
maintenance.
23
revenue at the same level as the Bellows Falls facility. He then calculated the difference
between the Bellows Falls facility and those in the comparable sales analysis. Considering these
factors, Sansoucy made an upward adjustment on the price per kwh-yr of $0.007 for the facility’s
superior on-peak generation, and $0.006 for its superior ancillary revenue.
¶ 50. Explaining the qualitative adjustments, Sansoucy testified that as an appraiser, he
considered all twelve market sales and made a judgment as to what the competition and price
would bring for the facility if offered for sale compared to alternate investments in hydroelectric
facilities. He considered several characteristics of the facility, including the amount of water on
the river, taxpayer’s control over that water, and the ability of the facility to use that water, as
well as the river head and the marketplace which taxpayer can sell into. Considering these
characteristics, Sansoucy testified that he concluded that the facility was superior to many of the
comparable sales. Considering all these factors, Sansoucy made a 5% upward adjustment on the
price per kwh-yr.
¶ 51. The trial court acknowledged that as with many appraisals based on comparable
sales, certain adjustments based on the appraiser’s expert assessment may be critiqued as
subjective. Considering Sansoucy’s explanation of the factors influencing his adjustments to the
average price per kwh-yr, the trial court found merit in his assessment that the facility is
generally a more desirable hydroelectric facility than the average facility. We note that
Sansoucy’s adjustments were relative to the average facility in the market generally, regardless
of whether the Bellows Falls facility is more desirable than the average facility in the comparable
sales analysis, specifically. Regardless, we agree with the trial court that Sansoucy’s assessment
is supported by the record. Sansoucy explained the basis for his adjustments, including features
of the river and the facility itself that elevated it above the average hydroelectric facility. Given
the qualitative and quantitative factors presented at trial and the range in sale price per kwr-yr,
which was as low as $0.40 and as high as $0.67, it is reasonable that the trial court found
24
Sansoucy’s adjustments to $0.55 to be warranted. Furthermore, the trial court stated that it was
not persuaded by taxpayer’s argument that adjustments based on Sansoucy’s expert assessment
must be entirely disregarded as lacking support.
¶ 52. As stated above, we will uphold adjustment where the court’s conclusion that the
value of the subject property should or should not be adjusted was rationally derived from the
evidence. See Garilli, 2008 VT 91, ¶ 13. Sansoucy’s findings were supported by the record,
despite taxpayer’s arguments to the contrary, and “we must defer to the [court] when its findings
are supported.” In re Southview Assocs., 153 Vt. at 178, 569 A.2d at 504. It is clear how the
trial court’s decision was reached, and that its conclusions were rationally derived from its
findings and based on a correct interpretation of the law. We will not reverse the trial court
merely because it relied on Sansoucy’s assessment rather than Peaco’s. See Weyerhaeuser Co.
v. Town of Hancock, 151 Vt. 279, 286, 559 A.2d 158, 163 (1989) (stating court “not bound to
accept evidence of either party”); Kruse, 145 Vt. at 374, 488 A.2d at 774 (noting that trier of fact
is under no obligation to accept, interpret, or apply evidence in accordance with views of either
party; it is within its discretion to determine weight, credibility and persuasive effect of
evidence).
¶ 53. Finally, taxpayer argues that the Town’s comparable sales analysis was
incorrectly based on sales and offers, rather than entirely on completed sales. The Town
disagrees with this argument, suggesting that it is standard in a sales comparison approach to
“gather data on sales, listings, contracts, offers, refusals, and options relating to properties
considered competitive with, and comparable to, the subject property.”
¶ 54. We acknowledge that the type of property involved in this appeal, a hydro-electric
generating facility, is difficult to value. See USGen I, 2003 VT 102, ¶ 21 (noting that “utility
property tends to be unique, or close to it, and the methods for valuing it are complicated and
frequently contested”). Such facilities are not frequently bought or sold in the usual sense, nor
25
are they readily marketable. Regardless, we have held that “[t]he touchstone for property tax
valuations is fair market value.” Sondergeld, 150 Vt. at 567, 556 A.2d at 66; see also Royal
Parke Corp. v. Town of Essex, 145 Vt. 376, 378, 488 A.2d 766, 767–68 (1985) (“[Section 3481]
makes fair market value the standard for appraisal.”). Fair market value is “the price that the
property will bring in the market when offered for sale and purchased by another.” 32 V.S.A.
§ 3481(1)(A). We have recognized that the sales of comparable properties “between a willing
buyer and seller at arms-length” are a valid basis for estimating fair market value. Barrett, 2005
VT 107, ¶ 6 (quotation omitted). This approach relies on voluntary sales that generally take
place in an open market, with parties acting in their own best interest. Id; see also Black’s Law
Dictionary 1535 (8th ed. 2004). (defining arm’s length transaction as between two unrelated and
unaffiliated parties; or “between two parties, however closely related they may be, conducted as
if the parties were strangers, so that no conflict of interest arises between buyer and seller.”).
Such sales must be made in good faith, “and not to ‘rig’ a fair market value.” Barrett/Canfield,
LLC v. City of Rutland, 171 Vt. 196, 199, 762 A.2d 823, 825 (2000).
¶ 55. Although an actual sale provides “strong, if not conclusive, evidence of fair
market value,” the statute does not limit a determination of fair market value to actual sales,
allowing for consideration of the price the property will bring on the market. Id. (quotation
omitted). Certain situations may require courts to “look beyond a sale,” such as “where some
evidence undermines the bona fide nature of the sale.” Id. In Barnett v. Town of Wolcott, we
held that listings, or unaccepted offers to sell, are not reliable evidence of fair market value in a
comparable sales analysis “because they reflect a mere hope rather than ‘the price which the
property will bring in the market when offered for sale and purchased by another.’ ” 2009 VT
32, ¶ 10, 185 Vt. 627, 970 A.2d 1281 (mem.) (citing 32 V.S.A. § 3481(1)). Unlike a listing, an
offer, or unaccepted offer to buy, reflects more than the mere hope of a sale; it represents what
26
the property would bring in the market if the sale was completed. It does not, however, rise to
the level of reliability we demand to estimate fair market value.
¶ 56. Here, Sansoucy’s comparable sales analysis considered ten sales, an offer, and a
sale announcement. Recognizing that an appraisal is “far from an exact science,” the trial court
found Sansoucy’s reliance on sales and offers, rather than sales alone, to have “little measurable
impact” on the analysis. As the trial court noted, Sansoucy’s comparable sales analysis relied on
an average price of $0.51 per kwh-yr and median price of $0.50 per kwh-yr. He then adjusted
the price of the facility upwards to $0.55 per kwhr-yr based on quantitative and qualitative
factors he felt rendered it more desirable than many of the comparables. At an expected annual
generation of 258,705,000 kwh-yr, Sansoucy estimated a comparable sales value of
$142,287,750. He then selected the midpoint between the comparable sales value and the DCF
value of $116,417,250 for a fair market value of $129,352,500, which he adjusted upward to
$130,000,000. This value—$129,352,500—represents an average price per kwh-yr of $0.50,
$0.01 less than the average price in the comparable sales analysis.
¶ 57. Excluding both the offer to purchase the Newfound facility in New Hampshire
and the sale announcement for the Stillwater facility in New York, however, the average price
per kwh-yr would be $0.495 per kwh-yr, a difference of $0.015.15 After adjusting that price per
kwh-yr upwards by $0.04, an adjustment we have affirmed above, and considering the same
expected annual generation of 258,705,000 kwh-yr, the comparable sales value without the
offers is $138,407,175. The midpoint between that value and the DCF value of $116,417,250 is
$127,412,212—$1,940,288 less than Sansoucy’s valuation.16 This lower figure represents an
15
Sansoucy’s analysis relied on twelve sales, at $0.41, $0.56, $0.66, $0.40, $0.42, $0.51,
$0.48, $0.58, $0.50, $0.42, and $0.51 (all in kwh/yr). Excluding the sale announcement ($0.66)
and the offer to purchase ($0.51), the average of $0.41, $0.56, $0.40, $0.42, $0.51, $0.48, $0.58,
$0.50, and $0.42 is $0.495 kwh-yr (4.95/10 = $0.495).
16
As noted supra, ¶ 21, Sansoucy testified that he did not average the DCF and
comparable sales values to arrive as fair market value; rather, as he explained, he “reconciled”
27
average price per kwh-yr of $0.49, or $0.02 less than the average price in Sansoucy’s comparable
sales analysis.
¶ 58. We will not set aside the trial court’s findings of fact unless they are clearly
erroneous, V.R.C.P. 52(a)(2), and we will affirm its conclusions where they are reasonably
drawn from the evidence presented. See, e.g., Harte, 153 Vt. at 258, 571 A.2d at 54. Here, the
trial court’s decision to credit an offer and a sale announcement in the same manner as an actual
completed sale resulted in an inflated comparable sales value of nearly four million dollars and
an inflated fair market value of nearly two million dollars. This is not an insubstantial figure.
We therefore conclude that the fair market value of the Bellows Falls facility should be reduced
by the amount attributable to the inclusion of the offer and sale announcement in the comparable
sales analysis relied upon by the trial court. Because “the record affords the means of correcting
[the trial court’s] error,” the case will not be remanded, and we will enter judgment here. Brooks
v. Brooks, 131 Vt. 86, 94, 300 A.2d 531, 536 (1973) (citing Doyle v. Polle, 121 Vt. 335, 339-40,
157 A.2d 226, 230 (1960)). Accordingly, as calculated above, we hold that the facility shall be
listed at a fair market value of $127,412,212 for the tax year 2012.
The trial court’s valuation is corrected to read $127,412,212, and the remainder of the
decision is affirmed.
FOR THE COURT:
Associate Justice
the values. Because the $130,000,000 figure is, coincidentally, the average between the
comparable sales value and the DCF value, rounded up from $129,352,500, we have likewise
reconciled the DCF value and the adjusted comparable sales value by averaging them.
28
TransCanada Hydro Northeast, Inc. v. Town of Rockingham
Court: Supreme Court of Vermont
Date filed: 2016-09-09
Citations: 2016 VT 100, 203 Vt. 289, 154 A.3d 486
Copy Citations