Tbm-Wc Sabine, LLC v. Sabine Parish Board of Review

STATE OF LOUISIANA
COURT OF APPEAL, THIRD CIRCUIT

17-1189

TBM-WC SABINE, LLC

VERSUS

SABINE PARISH BOARD OF REVIEW

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APPEAL FROM THE
ELEVENTH JUDICIAL DISTRICT COURT
PARISH OF SABINE, NO. 67,678
HONORABLE STEPHEN B. BEASLEY, DISTRICT JUDGE

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SYLVIA R. COOKS
JUDGE
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Court composed of Sylvia R. Cooks, Billy H. Ezell, and John E. Conery, Judges.

AFFIRMED. Ezell, J. concurs.

William R. Huguet
Kean Miller LLP
333 Texas Street, Suite 450
Shreveport, LA 71101

Phyllis D. Sims
Kean Miller LLP
400 Convention Street, Suite 700
Baton Rouge, LA 70802
Attorneys for TBM-WC Sabine, LLC: Plaintiff/Appellant

Brian A. Eddington
8941 Jefferson Hwy., Suite 200
Baton Rouge, LA 70809
Attorney for Sabine Parish Assessor, Cindy Manasco: Defendant/Appellee

Robert D. Hoffman, Jr. APLC
7039 Hwy. 190—E. Service Road
Covington, LA 70433
Attorney for The Louisiana Tax Commission: Amicus Curiae

COOKS, Judge.

FACTS AND PROCEDURAL HISTORY

TBM-WC Sabine, LLC (TBM) owns a natural gas pipeline and surface

equipment at its Amine facility, all located within Sabine Parish, Louisiana. TBM

filed a tax return, known as a rendition, with the Sabine Parish Tax Assessor’s

office for tax year 2015. In its rendition TBM set forth the dimensions and age of

its “Toledo Bend-Wildcat system” pipeline (pipeline) which it identified as

comprising “approximately 12.5 miles of 16[inch] trunkline and 19 miles of 10

[inch] trunkline.” According to documents submitted by TBM, nineteen miles of

ten-inch pipeline were installed in 2013 at a total cost of $6,317,880 and twelve

and nine-tenths miles of sixteen-inch pipeline were installed from 2009-11, at a

total cost of $6,967,071. The document further indicates that nineteen miles of this

pipeline is in 96% good condition and twelve and nine-tenths miles is in 86-91%

good condition. Additionally, TBM provided information that the surface

equipment at its Amine facility was installed between 2002 and 2010 at a total cost

of $1,426,140. TBM stated the facility was idle at the time of its tax filing but the

pipeline was still in use. TBM asserted in its submission to Sabine Parish Assessor

Cindy Manasco (Assessor Manasco) that the combined fair market value of the

pipeline and surface equipment should ultimately be valued for 2015 tax purposes

at $1,979,600 based on an 85% reduction in fair market value for obsolescence of

both the pipeline and the surface items comprising its idle facility.

Applying the information provided by TBM, Assessor Manasco, using a

State approved series of tax tables1, calculated the base fair market value of the

facility. This valuation is not disputed. In its rendition, TBM requested a

1
La.Admin Code, tit. 61, Pt V, §1307.

reduction in fair market value asserting obsolescence for both its surface

equipment and pipeline. In an exhibit in support of this request TBM describes the

pipeline’s current capabilities as follows: “Gas can easily flow north and south

across the system at any given time with existing access to multiple takeaway

pipeline operators.” In addition to this information, TBM provided Assessor

Manasco an unaudited, unauthored, single-page financial statement captioned

“Toledo Bend Midstream Holdings, LLC and Subsidiaries Consolidated Income

Statements” covering the period of December 31, 2013 to December 31, 2014.

Toledo Bend Midstream Holdings, LLC is the parent company of TBM and other

subsidiaries. This one-page income statement for the parent holding company does

not delineate information specific to TBM Sabine, LLC. TBM also provided a

single-page document, with no supporting data, purportedly showing the utilization

percentage of its Wildcat pipeline. These documents and information were the

only items submitted to Assessor Manasco in support of TBM’s requested 85%

reduction in the assessed value of its pipeline. Assessor Manasco found the

information regarding obsolescence of the pipeline insufficient to establish the

requested 85% reduction for fair market valuation of the pipeline. Instead, she

applied a 12% reduction for obsolescence regarding the pipeline and a 90%

reduction in the assessed value of TBM’s surface equipment for its facility.

Assessor Manasco assessed TBM’s property for the tax year 2015 in Assessment

No. 2754, placing an assessed value on TBM’s pipeline and surface equipment of

$13,840,600 resulting in an ad valorem tax bill for TBM’s Sabine Parish property

of $192,500.

TBM did not protest the 90% reduction concerning its surface equipment. It

did, however, appeal the 12% obsolescence reduction for the pipeline to the Sabine

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Parish Board of Review2 (the Board) asserting the reduction was too low for its

pipeline at the Amine facility. TBM did not appear at the hearing before the Board

and did not submit any additional information to the Board. The Board upheld

Assessor Manasco’s assessed value of the pipeline.

TBM appealed the Board’s decision to the Louisiana Tax Commission

(LTC). It submitted additional information and testimony at the hearing before the

LTC which it did not submit to Assessor Manasco to support its request for

obsolescence, though available to it at the time of filing its rendition. LTC issued a

Decision and Order awarding an additional 10% obsolescence on the pipeline for a

total reduction in assessed value of 22%. LTC did not articulate any factual basis

for its decision nor did it find that Assessor Manasco abused her discretion. LTC

made no mention of its findings regarding the ruling of the Board subject to its

review. Additionally, LTC did not find that Assessor Manasco’s appraisal of the

fair market value of the pipeline was in any way incorrect or that it was not made

in conformity with the tables promulgated by LTC.

LTC’s ruling resulted in a new assessed value of TBM’s property at the

Amine facility placing the fair market value of the property at $12,456,540,

reducing TBM’s net ad valorem tax bill for 2015 to $173,000.

Assessor Manasco appealed LTC’s ruling to the Eleventh Judicial District

Court which reversed and vacated the LTC’s ruling and reinstated the decision of

the Board upholding Assessor Manasco’s assessed fair market value of TBM’s

pipeline and her 12% reduction for obsolescence. TBM appeals the judgment of

the district court alleging four assignments of error.

2
The Sabine Parish Police Jury acts as the Sabine Parish Board of Review in these tax
matters when a taxpayer protests assessments of its property by the parish assessor.

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TBM’s Assignments of Error

1. In accordance with the Louisiana Administrative Procedure Act
(La.R.S. 49:964(G), the district court applied the incorrect standard
of review to the LTC’s decision, as it wholly failed to demonstrate
that “substantial rights of the appellant have been prejudiced.”

2. Similarly, under the Louisiana Administrative Procedure Act, the
district court did not defer to the LTC with respect to its review of
the documentary and testimonial evidence presented at the hearing,
including whether the LTC’s conclusions “were arbitrary or
constituted an abuse of” its discretion.

3. The district court failed to recognize the Constitutional mandate of
“correctness” under Article 7, Section 18(E) of the Constitution of
the State of Louisiana, and erred in finding that the LTC made an
“assessment,” and “exceeded [its] authority” in its review and
decision.

4. The district court erred in finding that the 10% obsolescence
granted by the Louisiana Tax Commission was not supported by
the evidence.

ANALYSIS

Under the provisions of the La. Const. art. 7, §18(D) the parish tax assessor

enjoys the exclusive right to “determine the fair market value of all property

subject to taxation within [her] respective parish.” This court, in ANR Pipeline

Company v. ANR Pipeline Co., 11-379 p. 11 (La.App. 3 Cir. 8/10/11), 73 So.3d

398, 405, specifically held:

Parish tax assessors appraise the value of property within their
parishes. It is incumbent upon taxpayers positioned to claim to [sic] a
reduction of their ad valorem tax liability to prove they are entitled to
that reduction . . . The determination of whether the information
provided is satisfactory rests within the sound discretion of the
assessor subject to review on several levels.

The Louisiana Constitution provides for review of the correctness of a

parish tax assessor’s assessment in La. Const. art. 7, §18(E): “first by the parish

governing authority, then by the Louisiana Tax Commission or its successor, and

finally by the courts, all in accordance with procedures established by law.” The

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Louisiana Constitution specifically designates LTC’s function in this scheme as

one of “review” as opposed to assessment. La. Const., art. 7, §18(E). TBM asserts

“the burden of investigating and obtaining data for determination of fair market

value [is]upon the assessor, not the taxpayer.” Our courts have repeatedly rejected

this assertion. This court noted in ANR Pipeline that La.R.S. 47:2324 provides a

parish assessor “may rely on self-reporting by the taxpayer” and further noted that

“our courts have long held that the party seeking obsolescence bears the burden of

producing sufficient evidence to the assessor.” ANR Pipeline, 73 So.3d at 402-04

(citations omitted). TBM faults Assessor Manasco for failing to “gather all the

necessary information to determine the fair market value” of its pipeline. But,

under the law including the administrative rules promulgated by LTC and settled

jurisprudence, it was incumbent on TBM to provide all data and information to

Assessor Manasco to support its request for adjusting the fair market value of its

pipeline on the basis of obsolescence. TBM makes no showing and no assertion

that the additional information it provided LTC in its effort to convince LTC to

change the assessment was unavailable to it when it filed its rendition. In Dow

Chemical Company v. Pitre, 468 So.2d 747, 754 (La.App. 1 Cir.) writ denied 474

So.2d 1308 (La.1985) (emphasis added) the first circuit, reversing the LTC’s re-

assessment of property, stated:

The constitution provides that assessments are to be made by
the assessor. It is apparent to this court that Dow was attempting to
circumvent the constitutional framework by withholding information
from the assessor in an effort to have the Tax Commission make the
actual assessment. Apparently, Dow felt that it would be strategically
advantageous to have its assessment made by the Tax Commission,
due to Dow’s deteriorating relationship with the assessor. However,
the Tax Commission may not usurp the constitutional authority of an
assessor by utilizing factual data which was available to the taxpayer,
yet withheld from the assessor. This is not to say, however, that the
Tax Commission cannot review and correct an erroneous assessment.

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TBM did not assert in its appeal to LTC that Assessor Manasco’s assessment

of the fair market value of its pipeline was an erroneous assessment or that she had

failed to use the proper tables or appraisal approach provided in the administrative

code promulgated by the LTC. In fact, Assessor Manasco’s determination of the

fair market value of the pipeline was not called into question before the Board on

review or before the LTC on appeal. In Transcontinental Gas Pipeline

Corporation v. Louisiana Tax Commission, 09-1988, 09-1989, 09-1991, 09-1992,

p. 22 (La. 3/16/10) 32 So.3d 199, 212-13 the supreme court explained the method

of valuation used by parish assessors determining the assessed value of intrastate

pipelines:

The parish assessors use the depreciated replacement cost of the
property located within their parish to determine its fair market value,
utilizing guidelines promulgated by the LTC. This method looks at
what it would cost to replace the assessed property new less
depreciation. The record reflects that this method used by the parish
assessors, replacement cost new less depreciation, is more appropriate
for non rate-regulated entities.

Under the administrative rules promulgated by the LTC, parish assessors are

directed as follows:

1. Pipelines, except those regulated pipelines, which are assessed as
public service properties as provided by R.S. 47:1851(K), are to be
assessed by parish assessors. Two separate classes of pipelines are
identified because of differences in function, design and quality.
The two classes are “lease lines,” which are generally of lower
quality, subject to changes in routes, etc.; and, “other pipelines,”
which are generally larger and of higher quality.

2. Both classes of pipelines are to be assessed in the taxing district
where located. A copy of LAT Form 14 is to be provided the
pipeline owner. Surface equipment associated with pipelines
(compressor stations, booster stations, etc.) are to be reported
separately on LAT Form 5. Surface pipeline related equipment is
to be valued individually at cost factored to current value less
physical deterioration. Pipelines are to be valued for assessment
purposes at cost less physical deterioration. A cost schedule is
provided for the various sizes of “other pipelines” (See Tables

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1307.A and B). Represented in these schedules is the cost-new, as
of the appropriate assessment date, for the different size pipelines.
This cost is to be reduced for the appropriate allowance for
physical deterioration (See Table 1307.C), based on the age of the
pipeline, by multiplying replacement cost by the appropriate
percent good factor . . .

TBM offers no basis to conclude that Assessor Manasco abused her

discretion in arriving at a 12% reduction for obsolescence but instead, relying on

additional information provided to LTC but not presented to Assessor Manasco,

attempts to have the fair market value of its intrastate pipeline assessed by a

method not provided for by statute or administrative rules. TBM ignores the

fundamental basis for valuing intrastate pipeline, such as this one located solely

within Sabine Parish, from the basis used to value interstate or public service

pipelines for which a different method of valuation is used for ad valorem tax

appraisals. In the valuation of public service or interstate pipelines the appraiser

“looks to the value of the business itself or the going concern of the company, and

not just the hard assets of the company.” Transcon., 32 So.3d at 212. In its effort

before LTC, and now before this court, TBM attempts to use this method of

valuation to assess its intrastate asset in Sabine Parish. It is an entirely different

exercise to determine the fair market value of the pipe in the ground by a cost less

deterioration method in accordance with the legislatively and administratively

mandated method of appraisal which Assessor Manasco employed, as opposed to

the method provided for intrastate pipelines which takes into account the value of

the going concern applying all three general accounting methods of appraisal. As

concerns the subject pipeline the administrative code now directs the parish

assessor to consider the effect of economic obsolescence on the final determination

of whether to reduce the assessed fair market value for obsolescence when

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properly “substantiated by the taxpayer in writing.” La. Admin. Code tit. 61, pt. V

§1301(A)(2) (emphasis added). This court held in ANR Pipeline that, despite the

2009 change in the law making it mandatory to consider obsolescence when

“substantiated by the taxpayer,” the assessor “still retains the discretion to

determine whether the taxpayer has substantiated that obsolescence.” ANR

Pipeline, 73 So.3d at 403. In its attempt to convince Assessor Manasco that she

should make an adjustment to the actual fair market value for TBM’s pipe in the

ground based on its asserted 85% reduction for obsolescence, TBM submitted

inadequate information to substantiate its request. Though TBM makes much

effort to lay the lack of substantiation of its claim at Assessor Manasco’s feet, the

law places that responsibility squarely on TBM.

The standard of review in this case for both the district court sitting as an

appellate court, and this appellate court reviewing the decision of the district court,

is set forth in the Administrative Procedures Act, La.R.S. 49:964(G).3 In ANR

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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 substantial
rights of the appellant 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) Affected by other error of law;

(5) Arbitrary or capricious or characterized by abuse of discretion or clearly
unwarranted exercise of discretion; or

(6) Not supported and sustainable by a preponderance of evidence as determined
by the reviewing court. In the application of this rule, the court shall make its own
determination and conclusions of fact by a preponderance of evidence based upon
its own evaluation of the record reviewed in its entirety upon judicial review. In
the application of the rule, where the agency has the opportunity to judge the
credibility of witnesses by first-hand observation of demeanor on the witness

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Pipeline, this court relied on the second circuit’s reasoning in Jones v. Southern

Natural Gas Company, 46,347, 46,348, 46,351 (La.App. 2 Cir. 4/13/11), 63 So.3d

1080, 1088, writ not considered, 11-1242 (La. 9/23/11), 70 So.3d 800, and writ not

considered, 11-1242 (La. 11/4/11), 75 So.3d 911, to affirm the district court

judgment reversing the LTC’s ruling and reinstating the parish tax assessors’

assessments. The second circuit in Jones set forth an appellate court’s standard of

review succinctly:

On review of the district court’s judgment, the court of appeal owes
no deference to the factual findings or legal conclusions of the district
court. Smith v. State, 39,368 (La.App. 2 Cir. 3/2/05), 895 So.2d 735,
writ denied, 05–1103 La.6/17/05), 904 So.2d 701, and citations
therein; Bailey v. EnerVest, [45,553 (La.App. 2 Cir. 6/30/10) 43 So.3d
1046].

Under the Administrative Procedure Act, La. R.S. 49:964(G), the
district court and court of appeal may reverse or modify the agency’s
determination if the substantial rights of the party seeking review 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 agency’s statutory authority,
(3) made upon unlawful procedure, (4) affected by other error of law,
(5) arbitrary or capricious or characterized by abuse of discretion or
clearly unwarranted exercise of discretion, or (6) manifestly erroneous
in view of the reliable, probative and substantial evidence in the
record. Smith v. State, supra; Bailey v. EnerVest, supra.

Id. at 1088.

In this case, the district court, functioning as an appellate court, reversed the

decision of LTC and reinstated Assessor Manasco’s assessment finding LTC’s

determination “was neither supported nor sustainable by a preponderance of the

evidence and exceeded the authority of the Tax Commission, which is expressly

limited by the Louisiana Constitution to review and not assess.” We review the

stand and the reviewing court does not, due regard shall be given to the agency’s
determination of credibility issues.

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decision of the district court de novo. TBM’s assignments of error focus on the

district court’s review of LTC’s rulings and whether or not the district court

employed the proper standard of review or applied the provisions of La. Const. art.

7, § 18(E) properly. But the proper focus of this court’s review is to determine

whether TBM has shown that Assessor Manasco abused her great discretion in

finding TBM’s submissions insufficient to substantiate its requested reduction in

fair market value for economic obsolescence of the pipeline. In reviewing LTC’s

decision we must determine “whether the commission manifestly erred when it

determined that [the assessor] abused [her] discretion in determining that the

[taxpayer] failed to sufficiently substantiate [its] claims of economic

obsolescence.” ANR Pipeline, 73 So.3d at 403. In this regard we agree with the

district court’s conclusion that TBM fails to show Assessor Manasco abused her

discretion in awarding a 12% reduction in fair market value rather than TBM’s

requested 85% reduction.

As we have previously noted, TBM accepts Assessor Manasco’s

discretionary determination of the base fair market value of TBM’s property at its

Amine facility and of its pipeline located in Sabine Parish. Indeed, this

determination was made by Assessor Manasco based on data provided by TBM

and applying that information to tax tables promulgated by LTC. The tax tables

provide information as to the average cost per mile of pipeline and sets forth the

percent good as to condition based on actual age with 26.5 years being the

accepted life-span of a pipeline for valuation purposes. A review of the tables

promulgated by the LTC and the information provided by TBM shows virtually the

same cost per mile in a given year and shows the same percent in good condition

for each year of age of the various sections of this pipeline. In valuing the surface

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equipment, the parish assessor is given greater latitude and exercises more

discretion in deciding whether to accept the taxpayer’s figures showing

depreciation or to require more information from the taxpayer and/or to look to

other market information. As noted earlier, TBM had no complaint with Assessor

Manasco’s acceptance of TBM’s depreciated value of the surface equipment of its

idled Amine Plant and in exercising her discretion to accept that information as

sufficient substantiation supporting her 90% reduction for obsolescence regarding

that property. Despite accepting these favorable determinations based on

information provided by TBM, as is its duty to provide, it now argues that although

Assessor Manasco apparently exercised proper discretion when she made these

decisions she somehow failed to appropriately digest the information provided to

her by TBM when she concluded the information shows that TBM’s pipeline has a

reduced fair market value of “only” 12%, but that the information was not

sufficient to substantiate the requested 85% reduction. She reached this conclusion

based on her consideration of the information provided exercising her discretion

after consulting other assessors. We also note that TBM does not argue in these

proceedings that it has shown entitlement to its requested 85% reduction or that

LTC erred in failing to reach that conclusion, asserting only that LTC properly

found it is entitled to a 22% reduction for obsolescence.

LTC offered a cryptic explanation of its ruling stating only that:

Taking into consideration the evidence presented by all parties,
the Commission determined that the Taxpayer provided information
to indicate additional obsolescence was in order for this property. The
Commission determined an additional 10% obsolescence should be
added to the 12% provided by the Assessor to include a total of 22%
additional obsolescence of the Assessor’s value . . .

Applying its expertise, technical competence, specialized
knowledge, and based upon the entirety of the record, the Commission

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does hereby determine the fair market value of the subject pipeline
and personal property, Assessment No. 2751, located in Sabine parish,
Louisiana, to be[:]

Pipeline and Personal Property Fair Market Value
$12,456,540[.]

This is a far cry from “an articulated analysis of the facts” as directed by the

Louisiana Supreme Court in Miller v. LAMMICO, 07-1352, p. 28 (La. 1/16/08),

973 So.2d 693, 711. LTC offered no explanation of how it arrived at its

conclusion and seems to be substituting its’ discretion for the parish assessors’

which it is not constitutionally empowered to do. LTC does not say how Assessor

Manasco abused her discretion in allowing a 12% reduction or for that matter that

it found such an abuse of discretion. LTC does not enjoy the Parish Tax

Assessor’s exclusive, constitutionally mandated discretion in making assessments

of taxpayer’s property. As we have previously stated, its function is limited to one

of review rather than assessment. La. Const. art. 7, §18(E). See also Bailey, 43

So.3d at 1056. The Parish Tax Assessor’s assessment is presumed valid unless the

taxpayer proves otherwise. Gisclair v. La. Tax Commn., 09-7, 09-8 (La. 6/26/09),

16 So.3d 1132. We also note that, despite the fact that TBM took no issue with

Assessor Manasco’s determination of the base fair market value of its property and

took no issue with her reduction for obsolescence of 90% for the surface

equipment at TBM’s Amine facility, LTC says it “determin[ed]” the fair market

value of the pipeline and the “personal property” of TBM located in Sabine Parish.

The only issues before LTC were the correctness of the Board of Review’s ruling

upholding Assessor Manasco’s 12% reduction for obsolescence of the pipeline and

whether Assessor Manasco abused her discretion. Neither the fair market value of

TBM’s property and pipeline or the 90% reduction for obsolescence of its surface

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property was before the LTC. TBM has never objected to those determinations.

Based on our review of the record we cannot say Assessor Manasco abused her

discretion in finding TBM’s submissions supported only a 12% reduction in fair

market value based on obsolescence. TBM complains that Assessor Manasco

offers no basis for arriving at a 12% reduction, but the record does not support a

finding that Assessor Manasco abused her discretion in allowing such a reduction.

We find TBM failed to substantiate its asserted 85% reduction in fair market

value for its intrastate pipeline in Sabine Parish. We also find TBM fails to show

Assessor Manasco abused her discretion when she determined that TBM’s

submissions did not adequately substantiate its’ requested reduction for

obsolescence. Our review of the record supports the district court’s ruling and for

the reasons stated we affirm the district court judgment. All costs of this appeal

are assessed against TBM-WC Sabine, LLC.

AFFIRMED.

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