e - Mass Cases

TABLE OF CONTENTS
Page
STATEMENT OF THE ISSUES .............................. 1
STATEMENT OF THE CASE ................................ 1
STATEMENT OF FACTS ................................... 5
SUMMARY OF THE ARGW MENT .............................. 8
ARG~~ENT ............................................ 10
I. Keyspan's appeal never addresses
the proper legal Issue in this
case ...................................... 10
11. Keyspan has extraordinary evidentiary
burdens since all of ita challenges are
to matters entrusted to the Board.........lz
111. The Board addressed this case
precisely as Watertown requires ........... 14
IV. The AsseSSOrs met their watertom burden..l5
A. The Assessors provided substantial
evidence that utility property sells
for greater than its net book cost ... 15
E. Keyspan failed to rebut the
Assessors' sales evidence at
trial and cannot establish that
the Board lacked substantial.
evidence for its findings ............ 24
i. Keyspan had no affirmative
evidence showing that utility
property only sells for its net
book cost ....................... 25
1

ii. Keyspan had no evidence showing
that the sales premiums were
paid for other than utility
propcrty ........................ 27
...
111. Neither the seller's existing
rates nor expenses determine
what will be paid to buy the
property ........................ 32
C. Substantial changes in regulatory
po1.icy permit sales at more than
net book cost ........................ 36
V. With Watertown rebutted Keyspan had the
burden of overcoming the presumptive
validity of the assessments ............... 41
VI. Keyspan's other criticisms are
irrelevant, immaterial and largely
incorrect ................................. 43
VII. Because Keyspan also failed to meet its
burden on the real property the Board
properly affirmed the assessment .......... 48
CONCLUSION .......................................... 49

TABLE OF AUTHORITIES
MASSACHUSETTS CASES
Analogic Corp. v. Board of Assessors of Peabody
45 Mass. App. Ct. GO5 (1998) ........................ 35
Attorney General v.
Department af Telecommunications and Energy
438 Mass. 256 (2002 ............................. 38.39
Attorncy General v.
215 Mass. 394 (1913
Haverhill Gas Light: Co.
................................ 31
Boston Edison C0.v.
Board of Assessors of Boston
402 MasE. 1. (1988) ............................ 10,13,14
Boston Edison Co. v.
Board of Assessors of Watertown
387 Mass. 298 (1982) ............................p assim
Boston Gas Co+ v. ASS~SSO~S of Boston
331 Mass. 549 (1956) ............................. L3,35
Boston Gas Co. v.
Department of Telecommunications and Energy
436 Mass. 233 (2002) ................................ 40
Uehydratinq Process Po. v. City of GlOuCeSter
334 Mass. 287 (1956) ................................ 48
Eoxboro Associates v.
Board US Assessors of Foxborough
385 Mass. 679 (1982) ................................ 41
General Electric Co. v.
Roaxd of Assessors of Lynn
333 Mass. 591 (1984) ............................. 11,46
iii

Halampton Associates v.
Board Of Assessors of Northampton
52 Mass. App. Ct. 110 (2001) ..... .. .42
J.A. Schlaiker v.
Board of Assessors of Great Barrington
365 Mass. 243 (1974) .......................... 11,27,41
Massachusetts Institute oE Technology v.
Board of Assessors of Cambridge
422 Mass. 447 (1996).... ............................ 13
Montaup Electric Co. v.
Board of Assessors of Whitman
390 Mass. 847 (1984) ....................... 14,15,42,49
Olympia & York State St. Co. v.
Board of Assessors of Boston
428 Mass. 236 (1998) ................................ 14
Peterson v. Board of ASSeSSOrS of Boston
62 Mass. App. Ct. 428 (2004) ........................ 35
Pollard v. Conservation Commission of Norfolk
73 Mass. App. Ct. 340 (2008) ........................ 18
Reliable Electronic Finishing Co.,Inc. v.
Board of Assessors of Canton
410 Mazx. 381 (1391) ................................ 42
School. Committee of Boston v. Board of Education
363 Mass. 125 (1973) ............................. 46-47
Stow Municipal E.lec. Dep't. v.
Department of Public Kltil.
426 Mass. 341 (1997) . ...........................p assim
Syms Corp. v. Commissioner of Revenue
436 Mass. 505 (2002) ................................ 13
Tennessee Gas Pipeline CO. v.
Board of Assessors of Agawam
428 Mass. 261 (1998) ......................... 13.14.15
iV

APPELLATE TAX BOARD CASES
Boston Edison Company v.
Board of Assessors of the C ity of Everett
20 Mass. App. Tax Bd. Rep. 3 (1996) .............. 10,24
STATUTES AND REGULATIONS
G.L. c. 58A, § 13 ................................ 12,24
G.L. c. 164, 5 96 ................................... 23
G.L. c. 164, 5 21 ................................... 3~
15 u.S.C. 5 79j (b)(2) ............................ 20,23
DPU/DTE ORDERS
DTE 99-19
(,3oint. Petition of Boston Edison Pa.) .17.33
DTE 03-40 ........................................ 38,40
OTHER AUTHORITIES
Appraisal Institute, The Appraisal of Real
Estate (13‘” Ed. 2008) ............................... 35
Phillips, The Regulation of Public Utilities
ra
(3 Ed. 1993) ........................................ 29,31
V

STAT- OF THE 58SW8 -
1. Whether the Board had substantial evidence for
finding that market transactions confirm that buyers pay
more than net book value ("net book") for utility property.
2. whether the Board had substantial evidence for
finding that changes in DPU policy make it possible that
utility property would sell at greater than net book.
3. Because the Assessors adequately rebutted any
presumption that the property could only sell at net book,
whether the Board's finding that Keyspan failed to meet its
burden of demonstrating that its property wan overvalued
was sufficient xeaaon to deny abatement.
4. Whether the Board correctly found that Keyspan
failed to meet its burden that its land was overvalued.
STATEMENT OF THE CASE
--"I___
Appellant's discussion of the proceedings i s accurate
but its recounting of the decision is incomplete and
partially incorrect. It is incomplete because it omits any
reference to the Appellate Tax Board's ("Board") actual
disposition.
The omission appears designed to permit
Keyspan to cast this appeal as one in which picking at the
minutia of expert's work or the Board's valuation
methodology might change the result. Keyspan therefore

ecounts that the Board found net book "no longer a
reliable indicator of value" and moves right on to
discussing the property's value. Brief of Keyspan ("Brief")
at 4. That description elides the essence of the decision.
Keyspan rolled the dice that the analysis set out in
Boston Edison Co. v. Board of ;4ssessors of Watertown, 387
Mass. 298 (1382) ("Watertown") would require that the Board
find the fair cash value of its property is net book. It
elected a "single reliance on net book value as the
determinant of fair cash value", but "relied primarily on
theory.'' RA. 104. Its case "focused and was largely
dependent on the testimony of" an economist who did little
but put a face on the Watertom syllogism by providing
testimony correctly characterized by the Board as simply
repeating a "premise". RA. 16, 76. Its witnesses dutifully
insisted that net book was always the property's worth but
they neither offered actual evidence nor supported that
with an appraiser who might temper their dogmatism with a
more credible analysis. RA. 79, n.31, 80.
The Board recognized that any relevance of net book
cost to fair cash value now requires evidentiary support.
It reached this conclusion in large part because it had
been shown market transactions at prices hundreds of
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millions of dollars higher than they should have been had
Keyspan's theory been correct. It had no trouble realizing
chat Keyspan's attempts to explain these prices away
similarly suffered from "lack of substantiation, which
fundamentally undermined" Keyspan's case. RA. 23.
The Board also found that since its last utility
valuation case there had been a continued reorientation of
DPU policy that made Keyspan's "single reliance"
unsustainable. In consideration of these facts, the Board
held that the Board of Assessors ("ASSe8SOrS") had
satisfactorily met their burden and had successfully put
the relevance of net book cost into question. RA. 103.
Despite the clear import of that evidence Keyspan
maintained its absolute but unsupported reliance on net
book. The Board held that Keyspan had "failed to offer
persuasive evidence of the fair cash value of the
property," RA. 80, and ruled that it did not "sustain its
burden of establishing that the property's value wan less
than its asseased value for fiscal year 2004."
RA.83,104.110. The Board therefore refused any abatement.
This outcome is never once mentioned in Keyspan's
brief which focuses instead on the Watertown findings and
criticism of the Board's value calculations. Hawever, the
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Board's election to continue beyond its conclusion that
Keyspan failed to meet its burden of proof, and to
determine the value of the property, although helpful and
comfortably supportive of the ultimate result, is legally
redundant and renders irrelevant Keyspan's prospecting for
flaws in valuation technique.
Keyspan's description of the decision is also
partially incorrect. It repeatedly contends that the Board
found that "as a result" of a change in regulatory policy
the "contemporaneous regulatory environment" explains sales
of utility property above net book cost. Brief at 1, 4, 23.
Yet what the Board actually found requires no causal
explanation. Simply. it found there waa an active, vibrant
market in the sale of utility property and sales data
existed. No longer must utility valuation cases merely
seek a "possible" answer to a hypothetical. question ("why a
buyer would want to pay more than Edison's net book
value..."). Watertom, 387 Mass. at 305.
The Board's finding that the strict regulatory policy
undergirding Watertown no longer existed was an independent
basis for its conclusion that net book does not equate to
value. The magnitude of the transactions in the market
alone rebutted the watertom presumption. No matter the
4

cause, the elephant in the room was documented sales of
utility property at huge premiums over net book. The Board
recognized that net book no longer drives value because
both the cause and effect of the Watertown logic are
obsolete.
STATXMENT OF FACTS
Because many of the facts relevant to the iasues in
this appeal relate to transactions and regulatory policy
there is no bright line between fact and legal analysis.
Nor can many of the facts be usefully presented independent
of some degree of argument ao they will not appear here.
There are three sets of facts, however, of direct relevance
to the Assessors' unique burden and which had primary
importance in the outcome of the case. Keyspan's efforts,
and failure, to convince the Board that these facts meant
other than what they plainly do mean determined the course
of the trial and dictated the result.
The first fact is that utility property, including the
property in this case, has consistently been bought at
prices substantially more than its net book cost. RA. 3934-
35. The sale of the Boston Gas property is typical.
The taxable property at issue is owned by B08tOn Gas
Company ("Boston Gas"). Until 2000, Boston Gas was wholly
5

owned by Eastern Enterprises ("Eastern"). In November
2000, Eastern was acquired by Keyspan Corporation
("Keyspan") and in 2008 Keyspan was acquired by National
Grid. PA. 7, 3832.
The Keyspan acquisition of Eastern is a useful lens
through which to see this case. It is one of the sales
passed off by Keyspan as too complex and multifaceted to be
capable of revealing useful data. In reality the Board was
able to both examine it in fine detail and appreciate its
significance in broad strokes.
Three years before the tax dare for this case, Keyspan
paid $1,754,415.231.84 for Eastern, a sum which exceeded
the net book cost of EaSteTn'S assets by over a billion
dollars. RA. 667,669. Eastern was comprised of three
utility companies and a few unregulated businesses so
Keyspan argues that nothing useful can be learned because
information relevant to Boston Gas's taxable utility
property is irretrievably buried beneath layers of
corporations and enterprise attributes. Brief at 32; RA.
3968.
Keyspan records reflect, however, that the price it
paid just for Boston Gas (net book of assets $271,008,000)
was $1,021,320,749 "based on multiple of book value of
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3.7686". RA. 668, Note "B" . That is an "acquisition
premium" above the net book of the Boston Gas assets of
$750,312,749.00.' This premium was paid €or "the utility
operations of Boston Gas Company," RA. 3623 and, despite
Keyspan's insistence it represents intangible value, was
booked as "utility plant in service." RA. 3990, 1867.
The second significant fact is that the "apparent
policy" of the DPU which was the foundation for the
Watertown case no longer exists. The Board traced its
transformation since 1982 providing context, logic and
detail. RA. 88-97. In reality the effort was more than was
necessary since the simple, largely conceded, fact is the
strict Watertown rationale was effectively laid to rest in
1997 when the DPU analyzed the impact of its changed
policies on valuing utility distribution property. Then
the agency whose "carryover rate base" rule is the
foundation of Keyspan's theory did exactly as the Board did
here; it considered the impact of DPU regulation on the
possible sale of utility distribution property and valued
it at 50% depreciated reproduction cost ("RCNLD") and 50%
' Accounting adjustments changed the numbers somewhat. In
the Boston Gas rate case the Eastern premium was described
as "approximately" $1.127 billion and the Boston Gas premium
$812,950,019. RA. 2707.
7

net book. It did this while specifically conducting the
Watertown analysis but reached a different Outcome because
its "recently changed" carryover rate base policy meant a
buyer "should pay more than original cost less
depreciation.'' This Court affirmed. Stow Municipal Elec.
Dep't. v. Department of Public #til., 426 Mass. 341, 345-
347 (1937) ("Stow").
The third fact found significant by the Board is that
the property at issue is no longer subject to strict cost
based rates of the sort employed at the time of Watertown
and necessary for i ts logic to prevail. In place of rates
based exclusively on recovery of expended coats plus return
on rate base there are now Performance BaSed Rates ("PBR").
FA. 3952. Keyspan's witness, Dr. Tierney, agreed this is
"a significant change in the rate making process €or
regulated utilities in Massachusetts." RA. 3668.
aDbMAIcy OF THE ARQUMENT
Keyspan's appeal never addresses the fact that it wa3
found to have provided no evidence that the assessment8
were in error and, as a result, they are presumed valid.
Consequently, much of what Keyspan argues is irrelevant.
(pp.10-12) It has also elected to appeal only factual
8

findings, which are final, or matters committed to the
judgment of the Board. (pp.12-14)
The Board correctly analyzed the issues and found that
the Asse8sors met their burden of putting the relevance of
net book in doubt. First they provided evidence of sales
of utility property at greater than net book cost. (pp.14-
24) Keyspan failed to affirmatively show that utility
property sale prices would be capped at net book cost
lpp.25-27) OK rebut the significance of the sales premiums
since it failed to convince the Board that the premiums
were only for non-utility property or an "enterprise".
(pp.27-36)
The Board also properly found that DPU regulations
concerning sale of utility property and the manner in which
rates are set had substantially changed since 1982. (pp.
36-41) With the Watertown presumptions rebutted, Keyspan
reacquired, and failed to meet, the burden of proving any
effect of regulation or that its property was otherwise
overvalued. (pp.41-43) Even if Keyspan's valuation
criticisms were relevant they are immaterial and, in any
event, wrong, (pp. 44-45
Board's refusal to abate
(pp.48-49)
including that directed at the
the taxes on Commercial Point.
9

AR0-E
I. Keyspan's appeal never addresees the
proper legal issue in this caae.
The Board waa quite explicit in what it did and was
thorough in explaining why. First, it found that the
Assessors had met their burden under Watertown and had
called the relevance of net book into question. RA. 100-
103; see section 111 in€ra. Although the Board was
*'particularly" convinced by the sale8 evidence, it also
supported its conclusion with the changed regulatory
environment. ThiE should hardly have come as a surprise to
Keyspan since that trend began over 20 years ago in Boston
Edison Co. v. Board of Assessors of Boston, 402 Mass. 1
(1988). continued in Boston Eddison Company v. Board of
Asses6ors of the City of Everett, 20 Mass. App. Tax Bd.
Rep. 3 (1996). and became indisputable in Stow where this
Court both acknowledged that the policy underlying
Watertown had changed and affirmed the DPU's conclusions
about the effect of that change on value.
Nevertheless, Keyspan essentially offered net book and
rested. Despite the inevitable loss of the presumption of
net book it provided no facts to support its position, only
Dr. Tierney's "economic model" which the Board disbelieved.

The Board was "not persuaded either by the appellant's
assertions regarding net book value or the evidence
presented to support them." RA. 104.
No valuation witness of any kind was called by
Keyspan. NO one was offered to give any credible assistance
'coward calculating any impact of regulation. RA. 79, 80.
Left only with a discredited, absolute position the Board
therefore found the taxpayer "failed to sustain its burden
of demonstrating that the assessed value of the property at
issue in these appeals was greater than the fair cash
value." RA. 110. That finding is dispositive.
Such failure results in the presumption that the
assessment is valid as a matter of law. J.A. Schlaiker v.
Board of Assessors of Great Barrington, 365 Mass. 243, 245
(19741. While Keyspan spends much of its brief challenging
the Board's valuation discussion its complaints are
irrelevant since no substantial evidence i s needed to
support an assessment presumed valid. General Electric Co.
v. Board of Assessors of Lp'm, 393 Mass. 591, 600 n.4
(1984). It is "only necessary in this case for the board
to disbelieve the taxpayers' witness to sustain the
ame8sment." Schlaiker, 365 Mass. at 246. "Even if the

oard was wholly incorrect" it makea no difference where
the "taxpayers had not met their burden of proof." Id.
Keyspan just pretends this never happened and focuses
on the Board's conclusions rith respect to Watertown and
its findinga on value. Yet so long as there is substantial
evidence for the Board's conclusion concerning the former
the rest is legally irrelevant.
11. Keyspan has extraordinary
evidentiary burdens aince all of its
challengee are to matters entrusted to
the Board.
Among Keyspan'B multiple criticisms of the Board's
decision it i s notable that none allege that it failed to
follow the proper legal standards, particularly the
Watertown line of cases, in every particular. There are
only claims of misconstruing facts, wrongfully interpreting
data or improperly applying valuation techniques.
Keyspan is, therefore, relegated to fighting this
battle on terrain sharply tilted in favor of the Board. To
the extent it has challenged factual findings, these are,
by statute, final. G.L.c. 58A, §13. Challenges to
valuation methodologies are equally fruitless since the
Board's selection and application of those to specific
types of property has always received deference,
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Massachusetts Institute of Technology v. Board of Assessars
of Cambridge, 422 Mass. 447, 452 (1936). (Court must
"respect the board's judgment concerning the feasibility
and fairness of alternate proposed methods cf property
valuation"); General Electric Company, 393 Mass. at 605.
Even greater "latitude" is granted the Board when valuing
utility property. Boston Gas Co. v. Assesgors of Boston,
334 Mass 549, 580 (1956).
Keyspan's challenges to the Board's conclusions about
the uti]-ity sales, regulation, and the extent to which
either reflect or impact buyers' behavior are also directed
to factual conclusions which, if not final, are entitled to
considerable deference. So long as substantial evidence
exists with respect to any of those matters the court
"defer[sl to the board's judgment on where to draw the
line." Boston Edison v. Boston, 402 Mass. at 14.
Keyspan must therefore convince this Court that,
taking the facts a8 final, there is no substantial evidence
for the Board's ultimate conclusions. Tennessee Gas
Pipeline Co. v. Board of Assessors of Agawam, 428 Mass.
261, 262 (1998); Sps Corp. v. Commissioner of Revenue, 436
Mass. 505, 511 (2002). That standard requires Keyspan to
establish that a "contrary conclusion is not merely
13

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a possible but a necessary inference from the findings.“ Id.
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quoting Olppia & York State St. Co. v. Board of Assessors
of Boston, 428 Mass, 236, 240 (1998).
111. The Board addressed this case
precieely aa Watertown requirea.
Under Watertown and the cases which follow, the
taxpayer’s usual burden of proof is suspended until
assessors present “evidence showing that a potential buyer
would pay more than the net book value” for utility
property. Tennessee Gas Pipeline Co., 428 Mans at 263.
Failing that evidence ”net book value is the proper
valuation method. “ Id. ’
Once there is “some evidence offered by the assessors
to show that, because of such circumstances, the relevance
of [net book value) is put in question”, however, the
2
An unexplained shift has occurred in the standard.
Watertom described the assessor’s burden as demonstrating a
‘possibility”, or “potential” and what “may” or “might”
happen. A “reasonable basis in logic” also sufficed.
Watertown, 387 Ma68. at 304-306. See also Montaup Electric
co. v. Board of Assessors of Wbhitman, 390 Mass. 841, 853-
855 (1984). The transformation to proof that a buyer
“would pay more” is plainly inconsistent with the course of
the cases. See e.g. Boston Edison Co. v. Boston, 402 Mass.
at 13-14 (addressing the question of whether a price above
net book ‘’might have been paid”; ‘‘a probability, or even a
possibility” is sufficient.)
.
14
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burden returns to the taxpayer to show “the absence of such
special circumstances.” Tennessee Gas Pipeline, 428 Mass.
at 264, quoting Montaup, 390 Ma8B. at 855. If the taxpayer
fails to meet that burden, it loses the presumption that
net book equals value and the impact of regulation must be
proven and quantified.
concluded that, a8 a factual matter, the regulatory
foundation of Watertown has vanished, raising the question
whether net book had any continuing relevance to valuation,
it analyzed the value of this property precisely as that
case instructs. FA. 85-104.
Although the Board ultimately
IV. The ABseB8OrE met their Watertown burden.
A. The AaaeaaOrB provided substantial
evidence that utility property sells for
greater than ita net book cost.
In the factual section of this brief are three of the
categories of findings which satisfied the ASGeSSOr8‘
burden and showed that “net book value is no longer a
reliable indicator of a regulated utility’s fair market
value.“ RA. 101. This included substantial evidence of
utility sales at greater than the net book cost of the
assets.
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This evidence was all undisputed insofar as the data
was concerned so the contest revolved around what it meant.
Keyspan insisted that these were sales of "enterprises" and
were not probative of anything relevant but the AsseSsorR
proved that these premiums were primarily paid to acquire
utility property.
It is important to recognize that utilit,y sales served
two functions in this case. First, the mere existence of
sales at greater than net book served as evidence that the
watertown presumption is not true. RA. 79. Second, the
financial details provided "market derived indicator[s]"
which could be used for valuation analysis. RA. 63-69,
3992.
Keyspan spends several pagea arguing that there is no
"necessary correlation" between the sale price of a going
concern and the fair market value of its assets. Brief at:
32-34. No one disputes this- hence Mr. Sansoucy's sales
analysis adjustment of the enterprise sales prices to boil
out the non-utility assets (see infra at 18, n. 3). But
for purposes of meeting the Watertown burden, the ASSeSSOrS
do not need to ahow that the sale price of the enterprise
"correlated" with the value of its property. Rather,
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Keyspan has to show that nane of the huge premiums paid for
the enterprise was attributable to ita property.
As part of both functions the Board was shown six
sales transactions in detail. It was also shown
various submissions by utilities wherein
representations were made concerning the market price
of numerous other sales. See, e.g. RA 1389-1392, 2976,
3039-3040, 3939. Included was Joint Petition of Boston
Edison Co. DTE 99-19 where the DPU calculated that the
average utility sale takee place at mare than twice net
book. RA. 3098. This was ample evidence that sales
above net book were “ubiquitous”. FA. 77.
The Assessors proved not only that sales
invariably take place at amounts greater than net book
but that the premiums paid were “primarily connected
with the value of the utilities’ tangible assets, and
not simply elements of enterprise value.” RA. 78. The
Board had substantial evidence for this finding
including the testimony of the ASSeSEIOrS’ witnesses,
admissions of the Company and industry in “various
regulatory filings and pre-filed testimony relating to
DPU regulatory proceedings” (Id.) and the treatment of
mergers and asset sales by government agencies.
17

Considering all that, the Board simply disbelieved
Keyspan's alternative explanations for the huge
premiums.
A goad deal of Keyspan's rebuttal to the import of
these sales prices was, and is, that the premiums were
paid for more than just utility property. The Board
concluded, however, that Mr. Sansoucy'a analysis
properly "accounted for assets unrelated to rate-
regulated property", and therefore proved that the
property alone also sold above net book. Moreover, he
had provided a reasonable method to extract non-
property assets so that he could perform a comparable
sales analysis. RA. 78. It is well within the
discretion of the Board to credit the testimony.'
Pollard v. Conservation Comiasion of Norfolk, 13 MaSS.
App. Ct. 340, 349 (2008) ("it is the (Board's)
prerogative to determine the probative value of expert
evidence. '' )
-
From the sale price, Mr. sansoucy was able to deduct the
value of current and other assets such as cash, cash
equivalents, tax credit8, gas inventory, pension assets,
and the like. Rh. 66,897-907, 3970-72, 3982 backup detail
at RR. 381-540. For example, $114 million, roughly onequarter
of the price, was determined to be attributable to
non-utility assets in the sale of Colonial Gas to Eastern.
RA. 66, 904. This still left a premium of $85 million
dollars more than the net book of the assets.
18

The Board found Chat some of the figures applied
in Mr. Sansoucy's analysis "required adjustment" and it
independently recalculated the magnitude of the premium
which had been spent for utility property. RA. 5a. For
purposes of the Watertown analysis, however, this
precision is unnecessary to support the BOaTd'8
conclusion that gas utility property sells for
substantially more than its net book cost.
The Board was also shown that utility companies well
understand that huge parts of the premiums are being paid
for utility property. This is evident from regulatory
filings, testimony and publications. For example,
Keyspan's claim that prices paid in enterprise sales are
categorically unrelated to asset value is undermined by the
fact that in its own public disclosures it indiscriminately
mixed asset and enterprise sales in the evaluation of
market prices. RA. 1389-1392, 1225-1226.'
Keyspan's regulatory filings also provided
"confirmation of the analysis of the assessors' experts."
RA. 78. Mr. Bodanza was called to the stand by Keyspan to
discuss the Colonial Gas sale and insisted that Eastern did
'The material at RA. 1225-1226 was created by Mr. Sansoucy
and reflects the form of the transactions Keyspan used when
making its presentation shown at RA. 1389.
19

not spend this money for utility property but for an
“entire enterprise”, the “whole entity”, including a
subsidiary called Transgas. RA. 3600-01.
The Board then Learned that in pre-filed testimony
to the D.P.U. Mr. Bodanza had explained the transaction
quite differently. There he said that, after deducting
$8 million dollars of the premium paid for Transgas, “an
up-front acquisition premium of $199.2 million will be
paid to accomplish the acquisition of Colonial’a gas
distribution operations. (Emphasis added)”. RA. 614.
Having effectively camed out any Colonial subsidiaries
or non-gas distribution side businesses by that
statement, Mr. Bodanza proceeded to reveal to what the
value of the “operations” (enterprise) was really
attributable- the gas distribution operations‘
“underlying assets” which he further described as
”primarily mains and services.” RA 616.
In a similar fashion Keyspan certified to the
Securities and Exchange Commission pursuant to 15
U.S.C. 5 79j(b)(2) that the price it was paying for
Eastern’s stock was wholly justified by the utility
property it was buying. The enterprise price, it
20

eported, bare “a fair relationship to the investment
in and earning capacity of the utility assets
underlying the securities being acquired.” m. 3232-
3233. This company filing proved not only that Keyopan
acknowledged that the value of the enterprise was
primarily the ”utility assets”, but reflected that the
SEC measures the reasonableness of an “enterprise” sale
by the value of the underlying utility assets, that
Keyspan and the SEC found reasonable a sale price of
more than double net book, and that a real market
exists, one where price is set “a8 a result of a
competitive process and substantial arm’s length
negotiation.“ RA. 3233.
The fact is that, except for certain obvious
adjustrnenta, the “enterprise“ is the property when
dealing with public utilities. This was the gist of
the testimony of David Effron, an accountant who had
participated in more than 250 utility cases. Mr.
Effron showed that acquisition premiums are “primarily
associated with the purchase of regulated assete.” RA.
75. Unlike Mr. Bodanza, who “simply asserted” the
contrary, RA. 25, Mr. Gffron proved his point with two
successive transactions involving the same property.
21
!

The 2000 transaction, see RA. 841, 673. was an
"enterprise" sale in which Southern Union Company
purchased three gas companies and four small
unregulated businesses. National Grid's 2006
acquiaition, by contrast, RA. 3886, 842, 754, was the
purchase of the same gas ccmpany property but
structured as an asset purchase, a form made inevitable
by the fact that the "enterprises" Southern Union had
acquired had since been dissolved. RA. 3886.
The first sale therefore included all of the
enterprise attributes, goodwill and going concern value
to which Keyspan attributes the multi-million dollar
premiums. The second sale had none of that, only pipe,
valves, gas inventory, and other tangible assets. RA.
4171-4172. Despite the different transactional
structures the price was almost exactly the same in
both sales. The enterprise attributes held no value
whatsoever. RA. 841, 842, 3888-3891.
Mr. Effron's example is illustrative of the fact that
there is really no significant difference between the
purchase of a utility company and the acquisition of its
property. The structure of the transaction may be designed
to accomplish a Like/kind exchange, PA. 801, or tax free
22

eorganization, FA. 3145, 2917, but, as the Board found,
"the record before it did not reveal a distinction between
enterprise value and the value of regulated assets that
would accaunt for an appreciable portion of the premium."
RA. 102.
The rules and practices of the several agencies which
regulate utilities demonstrate this as well. The Public
Utility Holding Company Act', for example, called for
Securities and Exchange Commission review of "the
acquisition of securities or utility assets" and resulted
in the Keyspan certification referenced above. The statute
groups both reviews in the same sentence, under the same
atandards and for the same purpose. 15 U.S.C. §79j(b) (2).
Massachusetts similarly combines authorization for
utilities to "consolidate or merge with one another, or
sell or convey their properties to another of such
companies ..." G.L.c. 164, 9 96. The authority and standard,
for mergers, RA. 3070, 3568, and pure asset sales, and the
"case by case review" principle (Id.; RA. 590-591, 35201,
are used interchangeably because they are effectively the
same transaction.
'The Act, 15 U.S.C. 5s 79-792-6 wasrepealedin 2005 but in
effect during the years at issue.
23

Utility accounting rules also require identical
treatment of mergers and asset sales with the acquisition
premium from each accounted for in the same manner. RA.
3881-82. Indeed the entire "carryover rate base" policy
which underpins Keyspan's single approach to value is a
product of merger cases. See, Everett, 20 Mass. App. Tax
Ed. 77 at 120 n.10; m. 175 n.47, 48.
All of this evidence showed prima facie that the sales
occur at huge premiums over net book and that a large part
of these premiuma are paid for the taxable property of the
utility. The burden was therefore on Keyspan to rebut that
evidence and show that in each case only the net book cast
of the assets was paid to acquire them.
B. eyep pan failed to rebut the Assessore' ealee
evidence at trial and cannot eatablish that the
Board lacked substantial evidence for its
findings.
The Board's factual findings with respect to the
sales evidence are final. G.L.c. 58, § 13. To prevail
Keyspan must therefore convince the Court that the
Board erred because, on the facts found, it is a
"necessary inference" that no part of any premiums paid
in these transactions could be for the purchase of
utility property. Keyspan's evidence remains nothing
24

ut unsupported insistence that under no circumstances
would anyone ever pay more than net book €or regulated
utility property because utility rates '*net' value. RA.
3509, 162 n.24.
i.Keyapan had no affirmative evidence
showing that utility property only
sella for it8 net book coat.
Keeping the Boston Gas acquisition in mind, Keyspan's
burden can be formulated as having to attribute all of its
$750 million dollar premium to anything but Boston Gas's
utility property. At trial Keyspan attempted this in
several ways. First it presented two witnesses. Mr.
Bodanza, as the Board observed, "simply asserted" that the
premium was for "some unspecified element of Eastern's
enterprise." RA. 25. The Board justifiably discounted his
testimony.
Dr. Tierney was the main witneas for Keyspan on this
point. She stuck by her guns and remained admirably
consistent, if not credible, while insisting that BOStOn
Gas's property would never sell for more than net book.
Yet shackled to hex theory she then had to affirm that a
strategically critical and practically irreplaceable 12
million barrel cryogenic gas tank currently has a value of
zero. RA. 3645. Her theory requires that three million
25

a
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e
a
m
a
e
e
e
*
e
a
a
m
a
a
*
e
a
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e
a
a
feet of working, income producing, gas pipe, RA. 4115, and
twenty million dollars worth of new, but yet unueed,
utility property is also worth nothing. RA. 3646.
Similarly, her net book catechism required that she claim
that 30 plus acres of waterfront land in Boston is worth
about the same, ($368,196) RA. 287, as a three bedroom
house in norcheater, and demands one believe that property
which would annually generate $35 million in profit would
be worth only $24 million on the market. RA. 3948-3949.
When asked to step out6ide of her "economic model,"
RA. 3553, Dr. Tierney offered nothing backing her claim
save an insignificant DPU order ratifying two companies'
decade old agreement that one be allowed to park a piece of
property with the other and buy it back later at its net
book cost.' RA. 166, n.37. Essentially Dr. Tierney defended
her ground with circular logic and admitted she had no
actual evidence. When asked whether she could testify
that, in fact, in transactions with which she was familiar
all sums paid above net book cast were for something other
' Keyspan repeatedly harps on this case, FW. 585-596,
lamenting that the Board "simply omitted'' any consideration
of it. Brief at 29. Its circumstances, particularly that
it never "ordered" anything, just "approved" the sale
agreement of the parties, is sufficient to justify why it
was ignored. RA. 593.
26

than utility property she could only admit *I don't know
that." RA. 3553.
The Board found no backing for the testimony of Mr.
Bodanza or, on this point, that of Dr. Tietney either. The
Board's conclusion that testimony is deficient is a finding
of fact and final. Schlaiker, 365 Mass. at 245.
ii. Keyepan had no evidence that the aales
premiums were paid far other than
utility property.
In addition to her affirmative economic model, Keyspan
also used Dr. Tierney to try and rebut the Asse8sors'
market sales information, the overwhelming evidence which
"particularly" impressed the Board by showing that buyers
regularly pay more than net book for regulated utility
property. RA. 102-103. Her principal approach, relied upon
again in Keyspan's brief, was to deny that any conclusions
can be reached becauee these sales usually include more
than just utility property. FA. 3543, 3553.
Keyspan's first cut was to claim that since most
sellers were holding companies the premiums were actually
paid for affiliates and unregulated income streams of the
acquired entity. RA. 156, 3486-3489. The surface appeal of
this challenge was undermined by the breakdown of the
Eastern sale for which Keyspan's om records eliminated all
21

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e
e
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a
e
a
e
*
a
e
e
8
a
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of the affiliates and isolated the sale price of Boston
Gas. RA. 668. Meanwhile Boaton Gas's DPU filing showed
that in the relevant year it had no other source of revenue
f
but that generated by its utility property. The BOaTd'B
review of all of the other sales similarly caused it to
reject the claim that "unrelated businesses, regulated or
otherwise, accounted for all or even an appreciable portion
of the acquisition premium." RA. 79.
With the "affiliates and unrelated income" line of
defense undermined, Keyspan next decided to claim the
premiums paid for utility companies are explained by the
need to own the whole company rather than just the
property. Arguing that the three quarters of a billion
dollars was paid so that Keyspan could assume the helm of
"The Enterprise" like some publicly traded Captain Kirk,
Dr. Tierney beamed down a list of intangible enterprise
attributes which she claimed justified the $750 million.
None had the benefit of either factual support or common
sense. RA. 79-80, 102, 174, 3490.
"Intellectual property" was the first. That is an
item which appears never to have been an asset of Boston
' Boston Gas had revenue of $650,000,000 in 2000 of which
only $515,507 (.000786%) was not produced by the utility
property as 'sales" ox "Trans. gas of others." RA.1968.
28

a
a
*
a
e
a
e
a
a
a
e
m
0
a
*
0
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0
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e
Gas and no example was offered of what this might mean for
a company that pushes gas through a pipe. PA. 3692.
Intellectual property is not a category in the Boston Gas
nor DPU standardized Uniform syatem of Accounts. FA. 1941,
1946-1949, 971-1136, 4007.
"Brand name" was the next intangible asset proffered
by Dr. Tierney. RA. 3691. Certainly her credibility was
not aided by her insistence that this contributed to the
sale price of an entity whose iconic gas tank and fleet of
vehicles had the brand name sanded off and replaced with a
new name twice in the eight years &fore the trial. RA. 79-
80 ~
The next supposed explanation was "customer base".
This asset has real value to certain types of business but
is difficult to justify when every customer is captive to
monopoly service. FA 4006. Mr. Charles Phillips, an author
on these matters relied upon by Dr. Tierney, RA. 162,n.24,
recognized that with public utilities "no specific value
can be attached to the company-customer relationship."
Phillips, The Regulation of Public Utilities at 351 (3'd,
Ed. 1993) ("Phillips"); RA. 3689. The Same point was made
by this Court in Stow which explained that there i s no
29

a
enhancement in value to an enterprise from a "largely
captive class of customers." Stow 426 Mass. at 346.
Management "acumen" and workforce "attributes" were
also pushed forward as an explanation for the premium. Yet
no one, at leaat no one without a contract, is an asset of
the company subject to sale. Moreover, the reality belies
the claim since in each successive acquisition the
management of the acquired enterprise is largely
jettisoned. RA. 4172, 4006, 3620-21.
As for the workforce it is also not an asset available
to be sold. Further, the sales value DE the workforce is
questionable in an industry where much of the work is
subcontracted, PA. 3854, and in which the existing
employees are more of an albatross than a benefit; a point
starkly demonstrated by the promises to regulators and
unions to preserve jobs. RA. 3071, 767, 2952. 3036, 4169.
Indeed, the hypocriay of the claim that Keyspan spent
$750 million for Boston Gas's "workforce" is borne out by
the fact that a bare few pages after ite brief touts these
supposed "significant value elements", workforce becomes
the chaff which is sa bloodlessly and efficiently milled
away after a merger to create "synergies." Brief at 32; RA.
30

a
e
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*
4007. After all, what eLae axe "post-merger cost savings
from reduction of duplicative staff, facilities and systems
plua resultant economies of scale,'' Brief at 35, but proof
positive that the motivation of the buyer is that it only
really wants the property?
As the last fire break against the increasingly
obvious Keyspan offers up that the premiums are paid for
business values which can only be identified aa the
mysterious ether that is left over when everything else is
accounted for; goodwill and "going concern" value. Brief at:
33-35.
These are values which clearly exist in some
businesses; the New England Patriots, a case cited by
Keyspan, being a good example. Utilities, however, have
state owned and controlled franchises and captive
customers. G.L. c. 164, § 21; AttOfney General v. Haverhill
Gas Light Co., 215 Mass. 394 (1913). They are not among
businesses with any "going concern" value. This court has
said preViOU6ly that goodwill and going concern value are.
"considerationa that do not apply to a regulated monopoly".
Stow, 426 Mass. at 346. Going concern "is a social value
and belongs to the public instead of the public utility
company." Phillips, at 353: RA, 3693.
31

Keyspan's argument requires one to accept that, in the
case of its own purchase, it attributed more than triple
the value to Boston Gas's intangible "enterprise"
attributes than it did to the property that generates
93.9993% of the revenue. The Board had ample basis €or
rejecting Keyspan's unsupported and counterintuitive claims
that the sales premiums were wholly explained by these
vague theoretical enterprise attributes.
iil. Neither the seller'@ exieting rates
nor expenses determine what will be
paid to buy the property.
Keyspan makes additional arguments that the sales
prices should be disregarded because they reflect only
value unique to the entire enterprise, and not the value of
utility property, The first reason offered is that
acquisition of the enterprise is supposedly necessary
because the buyer needs to employ the seller's "rate order
in place" in order to obtain net revenues sufficient to
justify the premium. Brief at 28. In a similar vein it
claims that the "substantially reduced" expenses which the
buyer of the utility property might enjoy will not be
available unless the entire company is bought. Brief at 35-
37. These latest attempts to find some value in the
"enterprise" simply confirm that Keyspan has no evidence
32

whatsoever disproving what is apparent-a buyer gets nothing
of any substantial value by buying the company compared to
just buying the property.
With respect to the first point it is true that
because a merger is a more common form of acquisition,
"freezing" che existing rate structure typically provides
the baseline against: which operational savings are measured
and the recovery of an acquisition premium justified.
However nothing but the parties' election to structure the
transaction as a merger results in recovery of the premium
in that fashion. A different approach was taken in Joint
Petition of Boston Edison Co., DTE 99-19 where the DPU
encouraged the merger by expressly promising that recovery
of the acquisition premium would be a necessary part of
"any future rate proceeding',. RA. 3067-3068, 3112. The
DPU's approach in these transactions is ''tailored to
circumstances presented," RA. 3111, and if the buyer of
just Boston GaS'Q utility property could demonstrate that,
after incorporating the property into its system, there
would be a net gain to ratepayers the DPU would surely set
rates to facilitate the transaction.
Keyspan's second argument is that no one would buy
just the property, as opposed to the company, because there
33

is "no possible cost reduction" if one just buys the
property and the "acquired company's operating costs-would,
of course, not be subject to post-acquisition reduction in
a sale of tangible personal property alone." Brief at 32,
35-31.
To the contrary, the acquired company's operating
costs would be more than reduced; they would be eliminated
upon the sale of the personal property alone. In their
place would be the acquiring company's operating costs
which, Keyspan has already acknowledged, would be
"substantially reduced" because of economies of scale and
synergies. Brief at 36. Keyspan cannot, and never attempts
to, explain why it claims the synergies are unavailable
unless the property is acquired enmeshed with all those
redundant expenses with which the enterprise is saddled.
Keyspan also seema to make a legal argument that the
ability of a buyer to operate the property more profitably
should not be treated a8 an attribute of the property but
as one of the selling enterprise and this supposedly
invalidates the relevance of the sale price. Yet
consideration of that fact is required to properly value
the property.
34

‘To provide sound value indications, the appraiser
must carefully address and forecast investors’
expectations or changes in income levels, the
expenses required to ensure income, and probable
increases or decreases in property value.”
Appraisal Institute, The Appraisal of Real Estate at 446
(13th Ed. 2008).
The goal i s the net income “attributable to” the
property. Analogic Cow. v. Board of Assessors of Peabody,
45 Mass. App. Ct. 605, 612 (1998). See also Boston Gas, 334
Mass. at 570; Assessors of Quincy 309 Mass. at 67 (the
“earning capacity of this underground system for the
distribution and sale of gas”) (emphasis added).
Forecasting changes from the experience of the current
owner is not only allowed, it is necessary for a valid
appraisal. Appraisal of Real Estate at 481.’
For BoBton Gas all of the income is generated by use
of the rate regulated utility property. Buyers of the
property believed they could operate more efficiently. RA.
That savings may be generated by firing telephone
operators OK billing clerks, not those operating the pipes.
does not matter. See, e.g. Peterson v. Board of Assessors
of Boston, 62 Masa. App. Ct. 428. 435 (2004) (calculating
net income by deducting “general and administrative costs,
property management fees, security costs, repair and
maintenance, cleaning, utilities, insurance and
miscellaneous nonreimbursable expenses”), Appraisal of Real
Estate at 486 (deducting accounting, legal, clerical help,
postage and advertiaing).
35

3262-3264. This contributes to what they were willing to
pay for the property just like anticipation of savings in
energy costs, security, snow removal, or management fees
would affect the price paid for an office building or strip
mall.
C. Substantial changes in regulatory
policy permit sales at more than
net book coat.
The Board went into considerable detail tracing the
“marked” changes in DPU policy which, during the tax years,
was in “sharp contrast“ to that at the time of Watertown.
RA. 97, 99. It found that a case-by-case treatment of a
request to recover an acquisition premium plus “DPU’s
adoption of performance-based rates ._. constituted a change
in regulatory policy that in many instances will affect the
price paid ...”. FS. 99.
Keyspan disputes these conclusions arguing that the
1993 Mergers and Acquisitions decision was the high water
mark of any expectations that a buyer of the property might
recover and profit on an amount paid greater than net book.
Never mind that Stow found otherwise four years later,
Keyspan insists that after 1993 it was “less, not more,
likely” that a buyer would anticipate such recovery. Brief
at 27.
34

The first response to this argument is to take it from
the other direction and point: out that even if Xeyspan is
correct and the policy i s stricter than ever, DPU policy
has demonstrably not restricted sale of utility property to
net book. The Watertown theory was a hypothetical economic
exercise and, lacking sales data, the court did not pretend
otherwise. But even if regulation is unchanged, the market
proves the impact of the policy is not as predicted. That
alone is enough to meet the Assessors' burden.’
In any event the change is indisputable. In fact
Keyspan casually concedes that two-thirds of the carry-over
rate base policy has been abolished.
First, as the Board found, the policy “changed from a
mandatory rule always limiting a buyer of utility property
to the seller’s rate base to a case-by-case determination.“
’ This is not particularly surprising. The Watertown
analysis purports to abide by the fair cash value standard
but never considers the seller at all. For Watertom to
work, the seller must be, as expressed by Dr. Tierney,
“indifferent” to the sale price, RA. 3572, something the
market clearly disproves. See, e.g, RA. 3188, (six bidders
for Colonial Gas), RA. 3232-33, (price set after
’competitive process and substantial arm’s length
negotiations”). An equally valid question, never raised in
Watertom, is why would shareholders approve the sale of
utility property at its net book cost, particularly when,
as demonstrated by Mr. Sanaoucy, the cash return to
investors is considerably more than return on rate base.
FA. 666, 3934, 4001-4002.
37

RA. 98-99: Stow 426 Mans. at 347. See also Attorney General
v. Department of Telecommunications and Energy, 430 Mass.
256, 263 (2002); Petition of Boston Ga8 Co. DTE 03-40 RA.
2716 11.337. Keyspan blithely accepts that "of course" the
matter ia "unvaryingly" handled on a case-by-case basis,
Brief at 27, unaware of, or ignoring, the fact that this
Court has already held that single policy change alone was
"certainly" enough to support the same weighing of RCNLE
and net book used in thia case. Stow, 426 Mass. at 347.
A second change is similarly conceded then avoided by
Keyspan. Watertown clearly assumed, and indeed the carry-
over rate base policy formerly provided, that a buyer of
property at greater than net book could nat receive a
return on the acquisition premium and would not receive a
return of it either. RA. 166. Keyspan references that the
new DPU policy is one of case-by-case consideration
'permitting recovery of an acquisition premium" but then it
changes the subject to assert that "no case" has allowed a
"step-up in rate base". Brief at 26, 28.
Not so fast. This Court has specifically acknowledged
that the DPU has "reversed its previous policy of per se
disallowance of recovering an acquisition premium."
Attorney General, 438 Mass at 263. And Keyspan concedes
38

that under the new policy the UPU has allowed "the
opportunity for the recovery of a premium". Brief at 28;
RA. 3511. Most cases shown the Board permitted the buyer
tc recover the acquisition premim one way or another. FA.
2980. 3112, 3162.
Therefore two of the three elements of the old carry-
over rate base policy are admittedly gone.
There is now a
case-by-case determination and the buyer inevitably also
gets the return of the entire purchase price. Either
change- let alone both- is sufficient to justify the
Board's conclusion.
AB to the third element, a return on the premium, the
buyer obviously expects to recover it. Returning to the
Keyspan purchase of Boston Gas the aCquiSitiOn premium was
"puahed down" to the books of the Boston Gas. FA. 1867 n.*.
See Attorney General, 438 Mass. at 263. This required that
the property generate an additional $22,665,437 annually to
repay it. See also RA. 3318. Keyspan also "pushed down"
$650 million of the debt onto the books of Boston Gas. RA.
2708-2710, n.136. This was booked by Boston Gas as an
"advance from Keyspan" and repaid to it with interest at
7.78a-another $49,834,072 per year. RA. 1884,3991, 4117-18.
39

True no premium went into rate base, but that money all
found its way to the buyer.
The Board also found that another regulatory change,
PBR, undercut the premise of the Watertom case.
RA. 99. PER rate plans "replace the traditional cost-of
service/rate of return method for setting company
distribution rates." PetiCion of BOStOn Gas, DTE 03-40 at
RA. 2829.
PBR are rates intended to create an incentive for
operational efficiency. The reward, as DK. Tierney
explained, is PBR "would allow for an increase in return,"
to the company, RA. 3589, or, as this Court has described
it, they wkeepIlthe extra" profits. Boston Gas C0.v.
Department of Telecommunications and Energy, 436 Ma88. 233,
235 (2002). This falls within Watertown's third category
by which an Assessor can show that the property might sell
€or more that net book cost - the 'return actually being
earned by the utility exceed" the approved rate of
return. Watertom, 387 Mass. at 306 (emphasis added); RA.
3934.
Keyspan attempts to finesse this fact in a curious
fashion, conceding that "an efficient utility may over-earn
under PBR" then trying to avoid the significance of that
40

admiasion with nothing other than an anemic ‘but then again
it may not‘. Brief at 30. Yet that it “may“ is all
Watertom requires to switch the burden back to Keyspan.
With both the policy changes, and the impact on value,
unambiguously expressed by the DPU, the Board easily found
the “realization” of the regulatory change raised as a
“possibility” in Watertown. RA. 97. Keyspan’s election to
decline any factual inquiry into the degree to which these
new policies affect value, opting instead for total
obeisance to the immutable purity of net book, made the
Board’s treatment of the matter inevitable.
V. With Watertown rebutted Keyepaa had the
burden of overcoming the presumptive
validity of the assesements.
The Board found that the A6SeSSOXS met their burden
under watertown and had offered substantial evidence that
called the relevance of net book coat into question. RA.
80, 83. This left Keyspan with two burdens.
It continued to have the burden discussed above to
show that the valuation placed on its property i s
excessive. Schlaiker, 365 Mam. at 245; Foxboro Associates
v. Board of Assessors of Foxboxauyh, 385 Mass. 679, 691
(1982). The Watertown presumption may have sufficed to
meet that burden but it waa rebutted. As a result, because
41

Keyspan continued to rely exclusively on the alleged effect
of regulation, it nww had to "prove the effect" of that
regulation. Reliable Electronic Finishing Co., fnc. v.
Board of Assessors of Canton, 410 Maso. 381, 382
(effect of contamination); h'ampton Associates v.
Assessors of Northampton, 52 Mass. App. Ct. 110
(effect of rent restrictims); Montaup, 390 Mass
(1991)
Board of
2001)
at 854.
It failed to meet either burden when it declined to offer
anything but theories.
Although it never offered any valuation evidence at
all Ksyspan now raises several other methods by which it
says it undercut the assessment. First it argues that
supposed "inconsistencies" between Mr. Sansoucy's trial
appraisal and assessment appraisal are enough to meet its
burden. Brief at 44. The changes alluded to were in fact
largely refinements, frequently rendered posaible by more
complete information collected in discovery. RA. 3932,
3933. All were explained to the Board which was,
justifiably, more impressed by Mr. Sancoucy's work than it
was concerned that methodological changes or recalculatione
were made in the intervening 4 years. RA. 4013-4020.
Keyapan's other complaint is that the Board ignored
evidence of the assessment of other utility property; a
42

minor system owned by someone else in Hyde Park as well as
assessments of Boston Gas property in BO other communities.
Brief at 42-44. This was evidence the Board correctly
determined was of “no probative value”. Rh. 35.
In the first circumstance the property at issue was
about 3.6% of the value of Boston Gas’s system. It hardly
merited a full blown appraisal for submission to the
Department of Revenue. RA. 3370, 3360. With respect to
the values set by the 80 other communities, their falling
into line to assess the property at net book reflects both
the ciirrent prerequisites for deviating from net book and,
perhaps, the towns’ reluctance to do so in the face of the
utilities’ demonstrated propensity for flexing their
muscles against the likes of Agawam, Whitman and Watertown.
In any event, neither comparison say8 anything about the
value of the property at issue here.
VI. Keyapan’e other criticisms are irrelevant,
immaterial and largely incorrect.
In the face of a record which proved without serious
question that utility property sells at huge premiums over
net book, that the carry-over rate baae has been modified
to the point that the Watertown presumptions no longer
43

apply, and that pure cost of service rate making has been
replaced, Keyspan rested on unsubstantiated theory.
Keyspan's brief ignores its complete failure to provide
evidence that the as~essrnant was in error and takes off on
a line of criticisms of the Board's enlightening, but
legally superfluous, valuation decision. Even if Keyspan's
complicated recalculations and hyper technical critiques
matter they fail to justify remand for three major reasons.
First, every one of Keyspan's demanded adjustments,
singly or together, results in a valuation which still
dwarfs the assessment of $223,200,000. RA. 108-103. That
is because, deapite the conservative approach the Board
took, it is apparent it was convinced by Mr. Sansoucy's
analysis. After making the adjustments it felt were
required, the Board determined that the value of the
personal Property was $336,848,000. RA. 108.
After deriving that figure the Board then proceeded to
"account (for) the contemporaneous regulatory environment"
and averaged the number with net book. Id. Yet if there is
a lack of substantial evidence for anything the Board did
in this case it was its decision to water down its real
conclusions by performing this calculation. As the Board
recognized. economic depreciation, derived from actual
44

income and sales data and part of Mr. Sansoucy's analysis,
already accounted for any effect of regulation. RA. 48-49,
3932. There is no justification in the record or in theory
for accounting for "the regulatory environment" again by
averaging the derived value with net book.
The Board acknowledged it had a "significant question"
whether net book had any continuing relevance. RA. 100. It
appears obvioua that two practical considerations led to
its decision to average. First, it wished to remain
"consistent with [I precedent", RA. 107, and to use "the
combined valuation approachea ratified by" this Court in
Boston and Stow. PA. 109. Second, it seems likely the
Board accepted the averaging technique for the same reason
the AsseSSOrS did not cross appeal on this point. Even
with the averaging the result still exceeded the assessment
by more than $20 million.
Second, Keyspan's criticisms all address matters left
by law to the judgment of the Board. The decision
demonstrates this was hardly a sloppy or ill considered
outcome, where the Board Eound an error or felt there
should be an adjustment which had a material effect, it
adopted what it considexed to be the proper figures and
performed its own calculations. IC changed Mr. Sansoucy's
45

operation and maintenance costs, RA. 53-4, his economic
depreciation percentage, RA. 55, his sale price to net book
ratio, RA. 68, and ultimately his opinion of value. Beyond
that the Baard found the analysis 'fundamentally sound".
RA. 51.'0
The methodological complaints raised in the brief were
explored below and the Board, for good reason. disagreed
with or found immaterial these alleged "errors." This kind
of microscopic evaluation of the details of the parties'
various expert analyses is justifiably left to the judgment
of the Board which, in this case, heard 21 days of
testimony, fully understood what it wa8 doing, and quite
carefully reached its conclusions. General Electric Co.,
393 Ma88. at 608 ("we defer to the Board's judgment aa to
what evidence to accept and which method or methods of
valuation to rely on."); School Committee of Boeton v.
Io Keyspan relentlessly refers to MT. SanBOuCy's value as
being the exclusive psoduct of an income analysis,
apparently to then tee up allegations of methodological
flaws. Brief at 13, 22, 50. A8 the Board understood, Mr.
Sansoucy used 3 approaches to value and primarily
reconciled his cost approach value based on the economic
depreciation revealed by an income approach to account for
rate regulation. RA. 911, 4004-5. His "novel" EBITDA
multiplier is precisely the method Keyspan used to
calculate value in the market. Brief at 4, 13; RA. 1383,
3986.
46

Board of Education, 363 Mags. 125, 128 (1973) (Court's role
not to engage in "complex fact determinations").
Finally, to the extent this Court cares to inspect the
detail of the Board's valuation conclusion, the criticisms
are primarily inaccurate as well as irrelevant and ill
conceived. The alleged failure to "factor for property
taxes" is demonstrably incorrect as ad valorem taxes were
deducted from earnings in the income analysis. RA. 908,
3996, 4099. The logic of the selection of the "anomalies"
which led to Mr. Sansoucy's selecting information from some
years and not others was explained in detail, RA. 3995,
4098, 1430-31, and resulted because Boston Gas had under
reported ita income. The complaint that Mr. Sansoucy used
reproduction cost when replacement cost was appropriate,
Brief at 13 n.8, overlooks his deduction for
"superadequacy" which transforms the reproduction figure to
one representing replacement cost. RA. 3331. The cast iron
main replacement program which would allegedly dampen the
interest of any buyer of the property arose from 1991
regulations and a 1998 DPU order; neither of which appear
to have chilled the ardor of Keyspin to pay a billion
dollars €or the property in 2000. RA. 2426, 3846.
41

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VIK. BOcLLusB Keyspan also failed to meet ita
burden on the real property the Board
properly affirmed that aeaessment.
Keyspan continues its perplexing approach to the
Commercial Point property by announcing in its Brief that
the property "as a whole suffers from 100% economic
obsoleEce". i.e. it is worth zero. Brief at 47-48. This is
now the fourth different value Keyspan has offered,
following Mr. Logue'a $7.5 million "hypothetical" value for
the land, (a/k/a the one known "to be false", RA.30, 3748),
and his "actual valuation" of the land which is "in
accordance with the expert report of Susan F. 'rierney", PA.
241, which in turn is claimed by Keyspan to be $5E0,595,
Brief at 10, asserted by Mr. Logue to be $388,196, RA. 30,
287, and never quantified at all by Dr. Tierney.
In addition to his wandering figures, Mr. Logue
offered nothing which would meet the requirement that
structures on land be taxed with the land. Dehydrating
Process Co. v. City of Gloucester, 334 Mass. 287, 292-293
(1956). Even if his hypothetical contributing land value
(or any of Keyspan's three other numbers) was accepted by
the Board it would then have to somehow be combined with
the value of the tank on the land as to which Mr. L ope was
silent and Keyspan dished up net book.
48

Mr. Lope had other problems. He ignored the highest
and best use of the property to which he himself had
testified. RA. 30-31. He assumed "crucial facts ... that were
at best speculative" and concluded by offering a value
based on circumstances that "under no foreseeable
circumstances could.be realized. " RA. 31.
The quoted findings of the Board are final. The Board
had every reason to discount his testimony and conclude
that, on the land value as well, Keyspan "failed to provide
sufficient probative evidence to establish the fair cash
value of the Commercial Point parcel or to undermine the
value placed upon the property by the ASSeSSOrS." RA. 32.
In this posture the Board has no obligation to accept
Keyspan's invitation to relieve it of its burden, grab one
of the "numbers of land values before the Board €or its
consideration" and determine fair cash value. Brief at 49.
CQNCLUBION
In Mantaup the Board's decision in which it refused to
consider net book cost was remanded by this Court because
there was "no indication" that the assesmr had "presented
any evidence at all", and the Board had "nowhere
explain[ed]" any reasoning yustifying why, anyone would pay
more than the net book cost of that property. In this case
49

the Board extensively evaluated the ieaue exactly as
prescribed, had enormous amounts of compelling evidence and
has supported its findings and reasoning in detail. The
decision of the Board should be affirmed in all. reapects.
Dated: June 18, 2010
Respectfully submitted,
BOARD OF ASSESSORS OF
THE CITY OF BOSTON
By its Attorneys,
navia L. Klebanoff (Bdq #274550)
Gilrnan, McLaughlin & Hanrahan, LLP
101 Merrirnac Street
P. 0. Box 9601
Boston, MA 02114-9601
(617) 227-9999
50