Watson Millican & Company’s technical experts were retained through counsel for a tax assessor of a large Midwest U.S. city to assist in the valuation of a series of petroleum product storage and distribution terminals for ad valorem tax assessment and respond to various terminal owners’ valuation protests. Ad valorem taxes are property taxes in the United States where an owner annually pays a tax based on the fair market value of their taxable property.
The Dispute
The dispute was over the ad valorem taxable value of six petroleum product terminals spanning thirteen years. Watson Millican expertise provided included terminal design, operations, financial performance, cost of construction, and industry standard practices for receipt, storage, blending, and loading of gasoline, diesel, ethanol and additives, and appraisal practices, along with analysis of approximately 50 sales of petroleum product terminals across the U.S.
Watson Millican & Company Scope
Watson Millican developed the income, cost and sales valuation methodologies consistent with prevailing appraisal practices to conclude to market values for the terminals for the years being protested by the owners. This required detailed review of the owners’ throughput and financial records to develop a forward income projection, estimation of the replacement cost and total depreciation of each terminal, and collection with analysis of petroleum product terminals across the U.S. during 2004-2018. The analysis required experience and knowledge of pipeline and terminal operations, commercial practices, and market factors for supply and demand for gasoline, diesel, and ethanol.
The determined assessed values for the storage terminals for ad valorem tax purposes across an initial seven-year period were upheld by the district court and the state appellate court after completion of a bench trial. Watson Millican continues to assist the city tax assessor with ongoing valuation of the same petroleum product storage terminals.
Project Scope:
Value of ad valorem tax claim: US $15 million
Services: Petroleum Product Terminal and Pipeline Operations; Commercial Practices; Supply and Demand of Gasoline, Diesel and Ethanol
Sectors: Terminals and Distribution