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Though the sewer line may be considered an income-producing
property in itself, the capitalization of income approach is of
no use to this Court unless the income can be adequately
estimated at the time of valuation, the time when the completed
sewer line was placed in service.5 We find that the income from
the sewer line could not be adequately estimated by using Mr.
Jones' approach. We find that the cost method of valuation is
appropriate in this case.
The cost of construction of the sewer line has been fully
stipulated. The cost of the sewer line connecting the treatment
facility to Brookshire was $350,000. Imperial paid approximately
$150,000 of its own funds, and the remainder consisted of the
$200,000 disbursed from the escrow account.
We find that the cost of the sewer line is its fair market
value and hold that the cost of the sewer line, less the amount
petitioner paid, is includable in petitioner's gross income as a
contribution in aid of construction.
5 It should be noted that in Exhibit 9, received in
evidence in EPCO I, petitioner estimated that the Brookshire
sewer line would have produced $360,157 of income discounted over
50 years, based on an individual $18-monthly rate for 266 trailer
pads. The undated exhibit was prepared subsequent to the
construction of the sewer line and does not take into account
either the $200,000 of contribution in aid of construction funds
disbursed from escrow, the possibility of potential customers
from Pine View, or a possible increase in the monthly sewer rate.
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