- 16 -
over time; (2) Mr. Jones applied a discount rate that is
unrelated to the original transaction, circumstances, or original
parties; and (3) Mr. Jones characterized the construction of the
sewer line as a "bad investment" and contended that cost overruns
made the cost method approach to valuation inappropriate to this
sewer line.
Mr. Jones argues that the application of respondent's method
of valuation is inaccurate in this case because it values the
funds in escrow as of 1989, the date the funds became totally
available to petitioner. Mr. Jones contends that if the escrow
amounts were to enter into the valuation at all, the funds should
be discounted as though the funds represented actual customer
tap-on fees to be paid to petitioner over a course of years.
We do not agree. The escrow funds were available and used
for construction of the sewer line in 1988 and 1989 without
waiting for Brookshire customers to be "on-line". The sewer line
was fully completed and operational as of April 1989.
Mr. Jones also applied a 22-percent discount rate to the
sewer line income as the rate a willing buyer or investor would
expect because of the risk of this type of investment. Mr.
Jones' application of a 22-percent discount rate follows from
several assumptions that have no foundation in the record, and we
remain unconvinced that the application of a 22-percent discount
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