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Public Service Company Valuations. Greg Wood & Michael Connolly NC Department of Revenue. What was it worth back then?. 1999 Toyota Camry. The 1999 Toyota Camry MSRP was $23,263 (when purchased new).

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public service company valuations

Public Service Company Valuations

Greg Wood & Michael Connolly

NC Department of Revenue

slide4

The Alliance of American Insurers estimated that the parts for a 1999 Toyota Camry would cost $101,335 if bought one part at a time (plus assembly cost).

    • Journal of Property Valuation and Taxation Volume 13 – Number 2
unit approach
Unit Approach
  • The appraisal of PSC utilizes the Unit Approach. This involves appraising the company as a unit, and not individual components.
    • So we are appraising the 1999 Camry and not the individual parts of the car.
who are the public service companies
Who are the Public Service Companies?
  • Airline
  • Bus
  • Motor Freight
  • Communication
  • Gas
  • Pipeline
  • Power/EMC
  • Railroad

Rolling Stock

Unit

who is not a public service company
Who is NOT a Public Service Company?
  • Wireless Companies
  • Cable Companies
  • Water Companies
  • Radio/Television Companies
  • Cell Tower Companies
psc stats from ty 2010
PSC Stats (From TY 2010)
  • NCDOR appraised over 25 Billion in PSC Value.
  • On average, counties get about 3% of their property tax base from PSC.
  • The amount of value certified to the counties from PSC range from 11 million (smallest county) to 3.2 billion (largest county).
  • There were only (8) counties that have a larger property tax base than the 25 Billion we appraise.
valuation timeline
Valuation Timeline
  • January 1st through March 31stis the annual listing period for PSC to file with the NCDOR (Extensions are granted – the larger companies don’t file till June).
  • April the Annual Sales Assessment Ratio Study is finalized (Equalization of PSC).
  • April – June working appraisals.
  • July – August all values are being finalized and are being double checked before certifications are sent.
valuation timeline cont
Valuation Timeline – cont.
  • August – September certifications are mailed out to all county and municipalities.
  • September is mostly spent answering calls regarding certifications.
  • October – November preparing the Tax Levying Jurisdiction Sheet.
  • December – Prepare new PSC forms.
two types of psc
Two Types of PSC

Only Airplanes, Buses, Tractors & Trailers

appraisal of rolling stock
Appraisal of Rolling Stock
  • We appraise the Rolling Stock of the Airline, Bus & Motor Freight Companies using trend factors similar to how you appraise your BPP.
cost approach
Cost Approach
  • By taking the Total Operating Plant less depreciation we obtain the Net Operating Plant.
    • Remove Items such as: Pollution Abatement & Non-Taxable Items
    • Add Back in items such as:CWIP, Fuel & Leased Property
income approach
Income Approach
  • By dividing the Net Income of a PSC by an industry cap rate we can arrive at an appraised value for the company.
  • Things considered are Income Averages (3 Year, 5 Year) Performance History
    • When using the income approach as an indicator, the direct capitalization and yield capitalization are both acceptable methods.
stock debt approach
Stock & Debt Approach
  • The value of a Public Service Company may be obtained by summing up the value of it’s Stock & Debt.
correlation of values
Correlation of Values
  • Upon reviewing all (3) methods, we have to determine which methods carry the most weight and come up with a final value for the PSC.
cost vs value
Cost vs. Value
  • Cost does not equal Value!!!
from the richmond county daily journal written in 2009
From the Richmond County Daily Journal (written in 2009)

“…Progress Energy broke ground Friday on an addition to its Richmond County plant which will add $2 million a year to the county tax base and bring hundreds of construction jobs.When completed, the Richmond County Progress Energy Complex will produce twice as much electricity as Progress Energy’s Sharon Harris nuclear plant in New Hill with 1,800 megawatts and will be the second largest site in utilities’ network.The new $600 million addition to the present plant and a new transmission line will add 12 more jobs to the 34 already in place…”

cost vs value example
Cost vs. Value - Example

600 Million Project

- 300 Million (Pollution Abatement)

300 Million of taxable cost (Original Cost)

300 Million (Original Cost)

- 45 Million (Transmission Lines)

255 Million (OC-TL)

255 Million (OC – TL)

x .45 (NC OC to NC Unit Value Ratio)

115 Million Value

115 Million Value

x .(65/100) County Tax Rate

$747,500 To Bill

The .45 Factor comes from the NC Unit Value divided by the NC Original Cost

nc cost to nc unit value ratio
NC Cost to NC Unit Value Ratio
  • NC Original Cost = 15,000,000,000
  • NC Unit Value = 6,750,000,000
  • Ratio/Factor = .45
  • If your County has $800,000,000 of Original Cost this is going to equate to $360,000,000 of Value.
    • (800 Million X .45) = 360 Million
how is distribution done
How is Distribution done?
  • Distribution is done by allocating and/or apportioning value to taxing districts based on the investment in that county/municipal/district.
    • This is done by using factors such as: Original Cost, Miles of Wire, Mile of Tract, etc.
psc with 1 000 000 value
PSC with $1,000,000 Value

The total cost (1,500,000) divided by the Value (1,000,000) gives us a factor of .667

distribution summary
Distribution - Summary
  • NCDOR finalizes the value of a PSC before any distribution is considered.
  • The current market value of an individual piece of property is irrelevant as it will only be used for distribution purposes and not for appraisal purposes.
    • Remember – we are appraising the company as an unit – not its individual components!!
system property unit psc
System Property – (Unit PSC)
  • All Property that is used by a PSC in its Public Service Activities.

(This includes leased property).

    • Examples - Office Buildings, ROW, Transmission Lines, RR Lines, (Land deemed needed by the FERC)
    • System property is part of the Unit Value.
leased equipment
Leased Equipment
  • 105-334 Duty to file report…
    • (a) Every Public Service Company shall report … to the Department of Revenue … property it owns and the system property it leases.
  • 105-335 Appraisal of property of PSC
    • b) … Property leased shall be included in the appraising the value of its system property …
nonsystem property unit psc
Nonsystem Property - (Unit PSC)
  • All Property owned by a PSC but not used in Public Service activities. (This includes leased property).
  • Examples - Old depot being used as mixed commercial shops, abandoned ROW, house on a lake being rented.
  • Nonsystem is appraised using the county schedule of values – thus real property is reappraised every reappraisal.
certifications
Certifications
  • Certifications are typically mailed out around the end of August to early September.
  • Certifications tell the county or municipality whom to bill and what value to bill.
certification sample
Certification Sample

Taxpayer

System Value

System Value – Equalized

(80%)

Non-System Value

Total Value

sales assessment ratio study
Sales Assessment Ratio Study
  • Used primarily for equalization of PSC.
  • Shows the county its Level of Assessment
    • Key years are – Reappraisal, 4th & 7th.
    • If ratio falls below 90% on a key year, then equalization occurs.
equalization of a psc
Equalization of a PSC
  • Equalization only applies to the: Communication, Gas, Pipeline, Power and Railroad Companies.
    • Only the companies we appraise using the Unit Approach that includes Real Property.
  • We do NOT equalize Airline, Bus and Motor Freight Companies.
    • We are only appraising the rolling stock
equalization cont
Equalization – Cont.

This chart is based on the numbers from the previous slide. Without equalization (in this example) Non PSC taxpayers would be assessed at close to 82% of what their real property is actually worth in year 7, whereas the PSC would be assessed at 100%.

tax levying jurisdiction sheets
Tax Levying Jurisdiction Sheets
  • Our office maintains a list of all taxing districts (by county) for the PSC to use for their annual filings.
  • The list explains which districts cover areas within a county.
tax levying jurisdictions
Tax Levying Jurisdictions
  • The PSC use this list along with their records, to know which districts they need to be reporting to.
  • On January 1, based on the Tax Levying Jurisdiction Sheets, the PSC are going to take a snapshot of what they own within each Jurisdiction.
    • It is very important that your county checks this list, and updates as needed.
macon county
Macon County

Notice the “*” This means the county must total, thus when adding all “*” value together, you should get the total county value.

counties that total
Counties that Total
  • If all your parcels within your county have a county tax + a fire or municipality tax, then your county “Totals”.
    • If your county totals – the value of all districts should total back to the county total.
commonly asked questions
Commonly Asked Questions
  • What is the appraised value of a building located at parcel X owned by Progress Energy?
  • Answer –

There is technically no appraised value assigned to that parcel.

  • There is value assigned to the district where this parcel is located, based on allocation factors.
commonly asked questions41
Commonly Asked Questions
  • Are we assessing a car that Duke Energy leases?
  • Answer –

Yes, we are assessing everything in the Unit Approach that the PSC owns and leases.

commonly asked questions42
Commonly Asked Questions
  • You (The Local Taxing Jurisdiction) did not receive a value for a PSC that you believe you should have?
  • Answer –

Are the Taxing Jurisdiction Sheets correct?

If not – these need to be updated ASAP.

Ultimately we will contact the company for you.

commonly asked questions43
Commonly Asked Questions
  • What if your distribution is off a few dollars, when trying to total for billing?
  • Answer –

This is normal, as the numbers are being rounded. A company with a value in the millions can easily be off a couple of dollars when distributing to numerous jurisdictions.

commonly asked questions44
Commonly Asked Questions
  • Does the NCDOR perform audits on the PSC?
  • Answer –

Yes, we conduct audits on the PSC. The regulated PSC also are audited by various Regulatory Commissions.

commonly asked questions45
Commonly Asked Questions
  • What if through an audit the DOR discovers that the PSC was in (4) counties instead of the previously reported (3)?
  • Answer –

The DOR would conduct a discover using NCGS 105-312. Keep in mind, the pie (unit value) wont get any bigger because of a discovery, and at least one county would have to give a refund.

solar wind farms
Solar, Wind Farms
  • If a Solar or Wind Company sells electricity to anyone other than the public – they are not a PSC and should be locally assessed.
    • Ex. SunEdison located in Davidson County sells electricity generated from a solar plant directly to Duke Energy. This property should be locally assessed.
solar power exemption
Solar Power - Exemption
  • NCGS 105-275(45)

80% of the appraised value of the Solar Energy Electric System shall be exempt. (One time application is required)

  • SEES is defined as only the equipment used directly for the conversion of solar energy to electricity.

** Currently no exemption for Wind **

psc exemptions
PSC Exemptions
  • GS 69-25.16
    • Exempts all property for a Power Generating Plant, as long as the Fire Protection District was created prior to May 1, 1971
  • 160A-544
    • Exempts all personal property for any PSC as long as the Municipal Service District was created prior to January 1, 1977
  • 117-3
    • Exempts all property owned by a Telephone Membership Corporation
shape files from gis
Shape Files from GIS
  • Determines taxable boundaries for the county, municipalities and special districts
  • Maintained majority of time by the county
  • Imperative that Public Service Companies use most current version
  • Sept/Oct/Nov time frame critical for Public Service Companies updating their records
  • Files are emailed to us to check then uploaded to our webpage
macon county gis shape file
Macon County GIS Shape File

Franklin FD

Town of Franklin

Town of Highlands

Highlands FD

psc mailing information
PSC Mailing Information
  • The NCDOR keeps a list of all PSC and their contact information.
  • We mail this out to the assessors each year with the Certifications.
  • Our website also keeps this list on it and it can be found at: www.dornc.com/downloads/property.html

The username and password are supplied at the bottom of the Certifications.

questions
Questions

You may contact our office at 919-733-7711

Or via email

greg.wood@dornc.com

michael.connolly@dornc.com

sonya.morgan@dornc.com