011-7 Wyo. Code R. §§ 7-6 - Appraisal Methods

(a) The appraisal techniques which the Department may use include the approaches described in this section. Each approach used shall be an appropriate method for the type of property being valued; that is, the property shall fit the assumptions inherent in the appraisal method in order to calculate or estimate the fair market value of the property. Each approach used shall also consider the nature of the property or industry, and the regulatory and economic environment within which the property operates.

(b) The Department appraisers shall estimate fair market value utilizing specific appraisal standards which reflect three distinct methods of data analysis: i.e. sales comparison or market; cost; and income capitalization. One or more of these approaches shall be considered in all determinations of value, except when utilizing a "best information appraisal ".

(i) Market Approaches to Value

(A) The Sales Comparison. The comparable sales approach is an appropriate method of valuation where there is an adequate number of reliable arms-length sales and the properties subject to such sales are similar to the property being valued. Comparable sales shall be adjusted to reflect differences in time, location, size, physical attributes, financing terms or other differences which affect value. The use of this approach to value depends upon:

(I) The availability of comparable sales data;

(II) The verification of the sales data;

(III) The degree of comparability or extent of adjustment necessary for time differences; and

(IV) The absence of non-typical conditions affecting the sales price.

(B) The Stock and Debt. The stock and debt approach is a method of estimating the value of property based on the premise that the total assets (property) are equal to the total liabilities plus owner's equity. This approach substitutes for the conventional market data approach by equating market prices at which fractional interests in the property, or similar properties, have recently sold recognizing other existing claims on assets and premiums paid to acquire entire interests. The approach is normally used when there are not sales of whole properties comparable to the subject property.

(ii) Cost Approaches to Value

(A) Replacement Cost. The replacement cost approach is a method of estimating the value of property based upon the cost of construction at current prices of a substitute property which provides utility or usefulness equivalent to the property being appraised, constructed with modern materials and according to current standards, design, and layout. The replacement cost shall consider all forms of depreciation and appreciation. The appraised value of associated land shall be added to the depreciated replacement cost.

(B) Reproduction Cost. The reproduction cost approach is a method of estimating the value of property based upon the cost of construction at current prices of an exact duplicate or replica using the same materials, construction standards, design, layout, and quality of workmanship, embodying all the deficiencies, super adequacies and obsolescence of the subject building. The reproduction cost shall consider all forms of depreciation and appreciation. The appraised value of associated land shall be added to the depreciated reproduction cost.

(C) Historical Cost. The historical cost approach is a method of estimating the value of property based upon the actual or first cost of property at the time it was originally constructed and placed in service. In an assembled property, the historical cost as of any date means, the first cost as defined, plus all subsequent additions and replacements less deduction or removals. The historical cost shall consider all forms of depreciation and appreciation. Items such as construction work in progress, plant held for future use, acquisition adjustments, non-capitalized leased property, materials, supplies and other items shall also be included to the extent they are taxable and not otherwise valued.

(iii) Income Capitalization to Value

(A) The Income or Capitalized Earnings Approach. In the income capitalization approach, an appraiser analyzes a property's capacity to generate future by converting anticipated benefits and capitalizes the income into an indication of present value. The principle of anticipation is fundamental to the approach. Techniques and procedures from this approach are used to analyze comparable sales data and to measure obsolescence or enhancement in the cost approach.

(I) Yield Capitalization is used to convert future benefits, typically a periodic income stream and reversion, into present value by discounting each future benefit at an appropriate yield rate or by applying an overall rate that explicitly reflects the investment's income pattern, change in value and yield rate.

(1.) Net operating income or cash flow is discounted to fair market value using a capitalization rate developed by the methods described in Section 7 of this Chapter.

(2.) For the purposes of this subsection, cash flow is the difference between dollars paid and dollars received. Dollars received include all revenues generated from operating assets. Dollars paid include all current expenses and capital expenditures, or annual allowances therefore, required to develop and maintain the income stream. Cash flow must also take into account all legally enforceable restrictions on the property.

(II) Direct Capitalization is a comparable sales technique that utilizes units of comparison. Each unit is divided by a sales price.... There are three levels of comparison: equity, preferred, and long-term interest paid.

(1.) For the equity comparison, the market value is obtained using six (6) units of comparison utilized in development of capitalization ratios: Revenue, Cash Flow, Earnings, Dividends, Capital Spending and Book Value. The price per share is used to develop the average unit ratio comparisons.

(2.) For the preferred comparison, the market value is obtained by dividing the preferred dividends paid by the company by the market preferred yield of that rated stock.

(3.) For the long term debt comparison, the market value is obtained by dividing the company's long term interest expense by the appropriate debt yield for the appropriate debt rating.

(4.) The values achieved through the three comparisons are totaled together to develop an estimate of total value for the company.

(5.) All non-operating and/or other exempt property included in the total value shall be removed to arrive at a fair market value for the subject company using the Direct Capitalization method.

Notes

011-7 Wyo. Code R. §§ 7-6

Amended, Eff. 3/22/2023.