Journal of Property Tax Assessment & Administration


It is often difficult to find information regarding the appraisal of public utilities and other centrally assessed properties presented in an easy to understand logical manner. Appraisal literature from professional appraisal organizations primarily offers proper procedures for appraising real and/or personal property. Occasionally one may find a great presentation at the annual Appraisal for Ad Valorem Taxation of Communications, Energy, and Transportation Properties workshop at Wichita State University in Wichita, Kansas. However, even those great presentations are sometimes a little difficult to use and apply in everyday appraisal activities. This is particularly true with regard to the income approach. This article addresses some of those difficulties and describes some simple but useful income approach techniques and procedures that can be applied in this unique appraisal arena. Application of the level-equivalent discounted cash flow model and why it may be preferable to standard discounted cash flow (DCF) techniques is discussed. Next, three different types of capitalization rates and their proper application are presented. The discussion then turns to why direct capitalization is occasionally misused by central appraisal practitioners. Finally, the impact of growth in income and value over the projection period is examined. The methodologies discussed in this article should be useful to appraisers in the valuation of centrally assessed properties as well as general commercial properties.

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Income approach to value