011-7 Wyo. Code R. §§ 7-7 - Capitalization Rate Development

(a) The capitalization rate is any rate used to convert an income stream into a present worth of future benefits. The rate reflects the relationship between one year's income or an annual average of several years' income and the corresponding value. The Department shall annually calculate capitalization rates based upon the band of investment method as defined by these rules for all Department assessed industries. The primary components of the rate shall include capital structure (book, market and/or regulatory) as determined for the industry and/or company being appraised (if industry data is not available or applicable) and cost of capital (debt, preferred, and equity) as developed in appropriate money markets.

(i) Band-of-investment shall mean the method based on the concept that the capitalization rate is equal to the weighted average cost of the debt and equity portions of the capital investment. Proper development and application of the band-of-investment requires obtaining and analyzing data by industry type for:

(A) The percent of debt and equity which makes up the capital structure as determined from published financial sources (Mergent Bond Record, regulatory reports or other recognized financial materials available to the Department). The determination shall be done by industry type and subgrouping (if sufficient data is available for review) by corporate bond rating or other means if bond ratings are not available.

(B) Debt rate estimates used in the band-of-investment method shall reflect the average current cost of yield to maturity of outstanding issues of debt financing for the year ending closest to the lien date of appraisal. The rates shall be taken from published financial sources (Mergent Bond Record, Standard and Poor's Record, Public Utility Financing Tracker and/or other recognized financial materials available to the Department). The determination shall be done by industry type and sub-grouping (if sufficient data is available for review) by corporate bond rating or other means if bond ratings are not available.

(C) Preferred rate estimates used in the band-of-investment method shall reflect the average current cost of market yield of outstanding issues of preferred stock financing for the year ending closest to the lien date of appraisal. The rates shall be taken from published financial sources (Mergent Bond Record, Standard and Poor's Record, Public Utility Financing Tracker and/or other recognized financial materials available to the Department). The determination shall be done by industry type and sub-grouping (if sufficient data is available for review) by corporate bond rating or other means if bond ratings are not available.

(D) The current cost of equity shall be based on data from the capital markets of public utility industries. Equity rates shall reflect the representative cost of equity financing for a given industry and sub-grouping (if sufficient data is available for review) by corporate bond rating or other means if bond ratings are not available as of the lien date of appraisal. The current cost of equity will be developed by accepted models in the appraisal and financial communities. These models shall include, but are not limited to, equity risk premium (ERP), capital asset pricing model (CAPM), and the discounted cash flow model (DCF). The sources of required data shall be taken from published financial sources, i.e. (Value Line, Morningstar, Inc. Ibbotson-"Stocks, Bonds, Bills and Inflation", Wall Street Journal, regulatory filings, Federal Reserve Bulletin, Public Utility Financing Tracker and/or other recognized financial materials available to the Department).

(b) The Department shall conduct a public meeting for presentation of the capitalization rates to be used for the current Department assessed companies' property valuations no later than the 15th day of March each year. Notice of the date and time of the meeting shall be provided to all interested parties at least thirty days prior to the meeting. Upon written request submitted at least 5 days prior to the meeting interested parties may, at the meeting, present written or oral comments on the proposed capitalization rates. The Department will make available the final determination of the capitalization rates on the Department's web site on or before March 31st or as soon thereafter as possible. This final determination of rates shall not affect the rights of a taxpayers to object in accordance with contested case procedures of the Administrative Procedure Act (W.S. 16-3-101 et seq.).

Notes

011-7 Wyo. Code R. §§ 7-7

Amended, Eff. 3/22/2023.