CHARLESTON, W.Va. (Legal Newsline) - The West Virginia Supreme Court of Appeals, in a ruling last week, said state tax officials properly appraised Century Aluminum's inactive Ravenswood plant.
The state's high court, in a 3-2 ruling filed May 29, affirmed a Jackson County Circuit Court order upholding a county board's decision concerning the state Tax Commissioner's 2010 appraisal of the plant.
The 2010 tax year appraisal followed the plant's shutdown in 2009.
At issue are the values regarding four categories of Century's industrial personal property: machinery and equipment; furniture and fixtures; computer equipment; and inventory.
The tax department determined the appraised values to be $34,971,956 for machinery and equipment; $312,687 for furniture and fixtures; $533,540 for computer equipment; and $18,281,654 for inventory.
According to the tax return filed by Century, the "owner's values" were $50,860,998 for machinery and equipment; $286,681 for furniture and fixtures; $523,759 for computer equipment; and $18,281,665 for inventory.
The company, objecting to the tax department's valuations, filed a protest with the Jackson County Commission, sitting as the Board of Equalization and Review, on Feb. 9, 2010.
Century maintained that the tax department failed to take into account "economic or functional obsolescence" in determining the values. It also contended that the department's 50 percent reduction in the value of its machinery and equipment was "arbitrary" and that it should have been reduced even more.
After holding a hearing Feb. 13, 2010, the Board of Equalization and Review sent a letter to the company dated Feb. 18, 2010, advising it that the board would not make any adjustment to the tax department's valuations.
On March 19, 2010, Century appealed the decision to the circuit court.
On Sept. 1, 2010, the court held a hearing and heard both sides' arguments. On Nov. 17, 2010, it affirmed the board's decision.
On appeal, Century argues the circuit court erred in upholding the tax department's policy of how it considers functional and economic obsolescence for categories of assets other than machinery and equipment; and that the court was wrong in ruling that the department's policy of artificially limiting its consideration of obsolescence to a 50 percent reduction in the case of machinery and equipment complied with the requirement that property be valued at fair market value.
Attorney General Darrell McGraw represented the county commission and Craig Griffith, who was appointed tax commissioner in June 2010.
The state Supreme Court, in its 27-page per curiam opinion, concluded that the circuit court's factual findings are supported by "substantial evidence" and are not "clearly erroneous."
"Absent from the legislative rule requiring the Tax Commissioner to consider functional and economic obsolescence is any directive regarding how the Tax Commissioner must go about 'considering' economic and functional obsolescence," the justices wrote. "Moreover, West Virginia Code of State Rules § 110-1P-188.8.131.52 does not require the Tax Commissioner to make any adjustment to the valuations made regarding property because of physical deterioration, functional obsolescence and economic obsolescence.
"Rather, all that is required of the Tax Commissioner in applying the cost approach to valuation is that the Tax Commissioner will think about or contemplate three types of depreciation: physical deterioration, functional obsolescence and economic obsolescence."
Simply put, there is a lack of substantial evidence to support Century's argument that the tax department refused to consider functional and economic obsolescence for categories of assets other than machinery and equipment, the Court said.
As for the 50 percent, the Court said the reduction in value is supported by the evidence in the record.
"The only evidence offered by Century Aluminum regarding the 50 percent reduction for obsolescence was from Mr. (Alexander) Hazen, Century Aluminum's appraiser, who testified that 'there's several ways you can go with an obsolescence analysis. Many appraisers just take an arbitrary percentage and say, well, it's this percentage or that percentage but you're really better off trying to work out a number mathematically that can be done,'" the Court wrote.
Absent from Hazen's testimony is "any suggestion" that the department deviated from any standardized principles of appraising property in using the "mathematically-derived" 50 percent reduction, the Court said.
Chief Justice Menis Ketchum dissented, as did Justice Brent Benjamin. The two sided with Century.
The Court's ruling comes amid attempts by the company to restart the plant in the near future.
More than 600 workers lost their jobs when the plant closed in 2009, and hundreds of the plant's retirees lost their health benefits.
A deal to restore some coverage is contingent on the plant's reopening.
From Legal Newsline: Reach Jessica Karmasek by email at firstname.lastname@example.org.