In Re All Assessments, Review of Ad Valorem Assessments of Public Utility Companies for Tax Year 1998

IN THE COURT OF APPEALS OF TENNESSEE

AT NASHVILLE

On Remand from the Supreme Court of Tennessee on Opinion on Petition to

Rehear Filed December 8, 2000

IN THE MATTER OF ALL ASSESSMENTS, REVIEW OF AD VALOREM

ASSESSMENTS OF PUBLIC UTILITY COMPANIES FOR TAX YEAR

1998

A Direct Appeal of Administrative Proceedings of the Tennessee State Board of

Equalization

No. M2000-03014-COA-RM-CV - Filed April 11, 2001

On remand from the Supreme Court, this Court was instructed to consider the factual issue of

whether the action of the Board of Equalization reducing the appraised value of public utility

tangible personal property for tax year 1998 caused the ratio of such property’s appraised value to

its market value to be equal to the ratio for tangible personal property within each local jurisdiction

that is appraised and assessed by local taxing authorities. We find that there is substantial and

material evidence to support the Board’s action in reducing the appraised value for the tax year 1998

and that it resulted in an equal ratio for locally assessed personal property.

Tenn.R.App.P. 12; Direct Review of Administrative Proceedings by the Court of Appeals;

Order of the Tennessee State Board of Equalization Affirmed

W. FRANK CRAWFORD , P.J., W.S., delivered the opinion of the court, in which ALAN E. HIGHERS,

J. and HOLLY KIRBY LILLARD, J., joined.

Jeffrey D. Moseley, Franklin, For Appellant, Williamson County

Donnie E. Wilson, Robert B. Rolwing, Memphis, For Appellant, Shelby County

Jean Dyer Harrison, Nashville, Co-Counsel, Williamson County

Paul D. Krivacka, James Charles, Nashville, For Appellant Metropolitan Government of Nashville

and Davidson County

Paul G. Summers, Attorney General and Reporter, Jimmy G. Creecy, Chief Special Counsel,

Nashville, For Appellee, Tennessee State Board of Equalization

T. Arthur Scott, Jr., Suzanne S. Cook, Kingsport, for Appellee, Appalachian power Company and

Kingsport Power Company

James W. McBride, Washington, D.C., Stephen D. Goodwin, Memphis, Brigid M. Carpenter,

Nashville for Appellee, Coalition of Public Utilities

OPINION

This issue comes to us on remand from the Tennessee Supreme Court in a case we originally

decided on August 20, 1999.1 That case involved a direct appeal from an order of the Tennessee

State Board of Equalization (the “Board” or “Appellees”) which granted equalization relief to all

centrally-assessed taxpayers on the basis of a settlement agreement (the “BellSouth Settlement”)

between the Metropolitan Government of Nashville and Davidson County, Shelby County, and

Williamson County (collectively, “Petitioners” or “Appellants”) and BellSouth Telecommunications,

Inc. (“BellSouth”). The BellSouth Settlement, in turn, had its roots in the settlement resolution of

a federal lawsuit filed by various railroad and air carriers against the Board. The federal action dealt

with whether centrally and locally assessed commercial and industrial property was being assessed

at the same ratio of appraised value to fair market value. Under the settlement in that case, the Board

agreed to reduce the plaintiffs’ personal property tax valuations for the tax years at issue as well as

future tax years.

The end result of the BellSouth Settlement was that the Board, in order to comply with its

statutory mandate to “[t]ake whatever steps. . .are necessary to effect the equalization of

assessments,” granted a 15% reduction in personal property valuations for the 1998 tax year to all

public utilities and common carriers. See T.C.A. § 67-5-1501(b)(3) (1998). Appellants herein,

Metropolitan Government of Nashville and Davidson County, Shelby County, and Williamson

County, appealed the Board’s decision to this Court. We reversed the Board’s actions, and held that

the Board was not authorized to reduce the valuation of taxable property below the fair market value

of that property absent legislative authorization. See In re: All Assessments, C.A. No. 01A01-9812-

BC-00642, slip op. at 13 (Tenn. Ct. App. Aug. 20, 1999). On appeal, the Tennessee Supreme Court

reversed, holding that the Board did have the legal authority to reduce the appraised value. See In

re All Assessments, 2000 WL 1710174, at *7 (Tenn. 2000). On a Petition to Rehear filed by

Metropolitan Government of Nashville and Davidson County, Shelby County, and Williamson

County, the Supreme Court remanded this case to us for determination of whether there was a factual

basis for the Board’s actions in reducing the appraised value. Specifically, the Court charges us with

determining:

whether the Board’s action in reducing the appraised value of public

utility tangible personal property for tax year 1998 caused the ratio of

such property’s appraised value to its fair market value to be equal to

such ratio for tangible personal property within each local jurisdiction

that is appraised and assessed by local taxing authorities.

In re All Assessments, 2000 WL 1800643, at *1 (Tenn. 2000).

1

A detailed account of the facts in this case can be found in the “Factual and Procedural Background” portion

of the opinio n of the Te nnessee Su preme C ourt. See In re A ll Assessm ents, 2000 WL 1 710174, at *2 (Tenn. 2000).

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Our analysis of the Board’s action is governed by T.C.A. § 4-5-322(h) (1998), which sets out

the standard of review of administrative proceedings as follows:

(h) The court may affirm the decision of the agency or remand the

case for further proceedings. The court may reverse or modify the

decision if the rights of the petitioner have been prejudiced because

the administrative findings, inferences, conclusions or decisions are:

(1) In violation of constitutional or statutory provisions;

(2) In excess of the statutory authority of the agency;

(3) Made upon unlawful procedure;

(4) Arbitrary or capricious or characterized by abuse of

discretion or clearly unwarranted exercise of discretion; or

(5) Unsupported by evidence which is both substantial and

material in the light of the entire record.

In determining the substantiality of evidence, the court shall take into

account whatever in the record fairly detracts from its weight, but the

court shall not substitute its judgment for that of the agency as to the

weight of the evidence on questions of fact.

(emphasis added). Although T.C.A. § 4-5-322 does not clearly define "substantial and material"

evidence, courts generally interpret the requirement as "something less than a preponderance of the

evidence, but more than a scintilla or glimmer." Wayne County v. Tennessee Solid Waste Disposal

Control Bd., 756 S.W.2d 274, 280 (Tenn. Ct. App. 1988)(citations omitted).

T.C.A. § 67-5-1509 provides additional guidelines for determining if there was a factual basis

for the Board’s actions in this matter. That statute provides, in relevant part:

(a) Upon its consideration of reports made to it, together with the

evidence submitted therewith or other information available, the

state board or the assessment appeals commission, if such has been

created by the state board under § 67-5-1502, shall take whatever

steps it deems are necessary to effect the assessment of property in

accordance with the constitution of Tennessee and the laws of this

state. The board shall by order or rule direct that commercial and

industrial tangible personal property assessments be equalized using

the appraisal ratios adopted by the board in each jurisdiction. Such

equalization shall be available only to taxpayers who have filed the

reporting schedule required by law.

T.C.A. § 67-5-1509(a) (1998)(emphasis added).

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While this Court may consider evidence in the record that detracts from its weight, the court

is not allowed to substitute its judgment for that of the agency concerning the weight of the evidence.

See T.C.A. § 4-5-322(h) (1998), McClellen v. Board of Regents of State University, 921 S.W.2d

684, 693 (Tenn. 1996); Pace v. Garbage Disposal Dist., 390 S.W.2d 461, 463 (Tenn. Ct. App.

1965). The evidence before the tribunal must be such relevant evidence as a reasonable mind might

accept as adequate to support a rational conclusion and such as to furnish a reasonably sound basis

for the action under consideration. See Pace, 390 S.W.2d at 463.

Finally, we note that, although an agency is required to consider evidence admissible in a

court of law, agencies are not limited to such evidence. See T.C.A. § 4-5-313(1) (1998). T.C.A.

§ 4-5-313 provides, in part:

§ 4-5-313. Evidence; affidavits; notice

In contested cases:

(1) The agency shall admit and give probative effect to

evidence admissible in a court, and when necessary to ascertain

facts not reasonably susceptible to proof under the rules of court,

evidence not admissible thereunder may be admitted if it is of a type

commonly relied upon by reasonably prudent men in the conduct

of their affairs. The agency shall give effect to the rules of privilege

recognized by law and to agency statutes protecting the

confidentiality of certain records and shall exclude evidence which in

its judgment is irrelevant, immaterial or unduly repetitious.

(emphasis added).

Based upon the above legal authorities, we find that the Board’s action was supported by

substantial and material evidence. We believe both the BellSouth Settlement and the settlement

entered in federal court between the Board and the railroad and air carriers constitute evidence upon

which the Board could properly decide that the 15% reduction in personal property assessments was

necessary. Either settlement agreement qualifies under the language of T.C.A. § 67-5-1509 as

“information” the Board was permitted to consider in “justly and equitably” equalizing assessments.

See T.C.A. 67-5-1509(a), (b).

We hold, therefore, that the Board’s action in reducing certain public utility personal property

assessments for the tax year 1998 did cause the ratio of such property’s appraised value to its fair

market value to be equal to the ratio for tangible personal property within each local jurisdiction that

is appraised and assessed by local taxing authorities.

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Additionally, we note that in this Court’s original opinion we pointed out, concerning the

BellSouth Settlement, that the petitioners herein, Metropolitan Government of Nashville and

Davidson County, Shelby County, and Williamson County, along with the intervenors:

joined in a compromise and settlement agreement with BellSouth in

which BellSouth would dismiss its tax appeals for the 1994, 1995,

and 1996 tax years but would be granted a fifteen percent reduction

in the valuation of its personal property for tax years 1997 and 1998.

The comptroller on behalf of the Board joined in the agreement and

further agreed to conduct a declaratory proceeding to receive evidence

on whether the locally assessed commercial and industrial personal

property is being valued at full market value by virtue of the use of

the form prescribed in T.C.A. § 67-5-903 (f).

In Re: All Assessments, C.A. No. 01A01-9812-BC-00642, slip op. at 4 (Tenn. Ct. App. Aug. 20,

1999). While not a part of the record in this case, we believe the result of the declaratory proceeding

reinforces the board’s action. The final decision and order in the declaratory proceeding before the

Tennessee State Board of Equalization affirmed the initial order of the administrative judge and

ruled “that Tenn. Code Ann. §67-5-903 undervalues locally assessed commercial and industrial

tangible personal property by a factor of 11.6% for property in reportable Group 1 and by 16.6% in

reportable Group 5.”

Accordingly, the order of the Board of Equalization allowing a 15%reduction in the

valuations of tangible personal property for the 1998 tax year is affirmed. The case is remanded to

the Board for such further proceedings as may be necessary. Costs of the appeal are assessed against

Petitioners.

__________________________________________

W. FRANK CRAWFORD, PRESIDING JUDGE, W.S.

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