ASSESSING VALUES
Lawsuits provide opportunity to explore how valuations are set on properties owned by “public service” companies
Lawsuits shed light on valuations process
A dance of sorts between the ad valorem division of Oklahoma's Tax Commission and owners of “public service” companies plays out largely behind the scenes, every year.
Between April 15 and the third Monday of June, when Oklahoma's State Board of Equalization meets, the division's public service unit determines about 280 fair cash and assessed valuations on properties owned by for-hire pipeline, airline, railroad and utility companies.
State law requires that assessments on those properties be determined by the commission and certified by Oklahoma's equalization board because the companies involved are granted eminent domain rights not afforded to the general public.
And their fair cash and assessed valuations, good for the calendar year in which they are set, are significant. For 2019, the state equalization board certified about $18 billion in fair cash value on properties owned by public service companies.
Assessed values were set using ratios prescribed by state law, and those, in turn, generated hundreds of millions of dollars in tax revenue for the state.
Getting there takes a lot of work, said Joe Hapgood, a certified assessment evaluator who is director of the commission's ad valorem division.
Hapgood said the eight workers in the division's public service unit formulate those fair cash and assessed values using information regulated companies are required to submit to the commission by the end of April.
Along the way, they conference with company representatives to cover additional information, clarify points or discuss valuations.
“There is a lot of back and forth that goes on, but we only have about six weeks to work on that,” he said. “It has to be done by then.”
He said company officials unhappy about certified valuations must be allowed an opportunity to protest. The agency also must submit certified assessments to county assessors on properties located within their jurisdictions. Those assessors then notify boards of county commissioners and other local governing units about the revenues they can expect to receive so that local budgeting processes can be carried out.
“One of the big issues that counties, companies and us face is making sure that those revenues are appropriately distributed,” Hapgood said. “We work with the counties and companies to keep that as straight as we can. It is crunch time for the staff, for sure.”
Hapgood said his agency and most companies normally reach agreements on fair cash and assessed valuations before they are certified by the equalization board, which includes the governor, lieutenant governor, state auditor and inspector, state treasurer, attorney general, state superintendent of public instruction and the president of the board of agriculture.
However, that isn't always
the case, and companies that object to those fair cash and assessed values can dispute those in Oklahoma's courts.
This year, owners of three pipelines are doing so.
The board certified the assessed value of Cimarron River Pipeline, a natural gas line that is operated by a wholly owned subsidiary of DCP Midstream in Oklahoma's Panhandle and northwestern Oklahoma, at $3,945,079. The company counters its assessed value instead should be $1,441,091.
The board certified the assessed value of DCP Southern Hills Pipeline, a multi-state natural gas liquids line owned by DCP Midstream, Phillips 66 and Spectra Energy Partners, at about $67.5 million. The companies counter the assessed value for the line, which runs from the northwest corner of Oklahoma to the Red River, should be about $32.2 million.
The board certified the assessed value of Valero Partners Wynnewood LLC's refined- petroleum-products pipeline at $16,680,500. The company counters the line's assessed value should be $10,511,000.
The venue for considering the cases is Oklahoma's
Court of Tax Review, a judicial process overseen by the Oklahoma Supreme Court.
In such cases, the court assigns cases to panels of district court judges drawn from judicial districts where the assets are located.
If a company still disagrees with what a panel of judges determines is the appropriate value for its property, it can appeal that decision to the Supreme Court for additional consideration.
Hapgood and attorneys representing those companies declined to comment on those specific cases. However, Hapgood said disputes rarely are adjudicated by courts.
Outside of that six
weeks, he said, the division and its public service unit regularly interact with the companies it sets values upon to keep abreast of changes involving the companies or their industries.
“Every day we show up here, there is something new you learn,” Hapgood said. “Just think of the challenges of trying to value an overall company, what portion of it is in Oklahoma, and what portion of those assets and their valuations are in each taxing jurisdiction in the state.
“It gets to be a pretty complex deal, before you even get into all the other appraisal issues the company and we want to work out.”