(1) The market value of licensed landfills for each reappraisal cycle shall be determined through use of the royalty method. If during the course of a reappraisal cycle it becomes necessary, pursuant to 15-7-111, MCA, to adjust the market value of the licensed landfill to account for the addition, deletion, or retirement of property, the market value shall be determined through use of the same royalty method.

(2) The royalty method that will be used to determine the market value of licensed landfills will be applied using the following steps:

(a) The department shall estimate the amount of waste coming into the landfill for the appraisal period. The owner of the licensed landfill or its agent shall provide copies of its Department of Environmental Quality, Solid Waste Management System License Renewal Application for each of the immediate five years prior to the appraisal period. The amount of tonnage reported on the applications for the referenced five-year time period will be reviewed to estimate the annual increase of waste tonnage for the remaining economic life of the licensed landfill.

(i) The following calculation will be used to estimate annual incoming waste tonnage:

tons from the most recent year

x (1 + estimated annual increase)

= estimated first year tonnage.

(b) The department shall estimate the licensed landfill owner's annual tipping fees less any bulk discounts for the appraisal period. To accomplish this, the licensed landfill owner or its agent shall identify its annual tipping fees rate for compactor vehicles for the immediate five years prior to the appraisal period. The landfill owner shall identify its annual bulk discount rate by providing copies to the department of all of its annual disposal contracts. The discounted tipping fees for the immediate five years prior to the appraisal period will be reviewed to estimate the annual increase in the discounted tipping fees for the appraisal period. When calculating the discounted tipping fees, the department shall be aware of any potential aberrations identified by the licensed landfill owner or its agent that may exist in the documentation submitted by the landfill owner or its agent pursuant to this section. The department shall take those aberrations under consideration when calculating the discounted tipping fees.

(i) The discounted tipping fees will be calculated as follows:

most current year tipping fees

x (1- most current year bulk discount)

x (1 + estimated annual increase)

= discounted tipping fees for the projected remaining economic life of the licensed landfill. 

(c) The department shall calculate the remaining capacity of the licensed landfill for each tax year. To accomplish this, the existing capacity at the beginning of the projection period will be taken from the estimate recorded on the landfill owner's most recent Solid Waste Management System License Renewal Application.

(i) To compute the remaining capacity for each tax year, the tonnage received during the year must be converted into cubic yards of landfill that would be filled. The compaction ratio is used to make the conversion.

(ii) The number of cubic yards used during each year is calculated as follows:

tons received

÷ compaction ratio

= cubic yards used.

(iii) The remaining capacity shall be calculated as follows:

total landfill capacity

- cubic yards used

= airspace capacity before accounting for cover materials.

(iv) If cover materials are used in the landfill, the remaining capacity shall be calculated by multiplying the airspace capacity above-computed by .85 to account for the industry standard of reduction of remaining airspace by 15% for cover materials, otherwise no adjustment for cover material will be made.

(d) The department will use a royalty rate to calculate the estimated royalty payment for each tax year.

(i) The first year's royalty payment is computed as follows:

tons received first year

x discounted tipping fees

x royalty rate

= royalty payment.

(3) The discount rate shall be applied to each year's royalty payment as determined in (2)(d).

(4) The department shall estimate the reversionary value of the closed landfill. To accomplish this, the landfill owner or its agent shall provide the department with a projected closure date. The reversionary value will be discounted to the present worth.

(5) Any other property related income not included in the above calculations shall be added to the overall property value. The department shall consider the cost approach, the sales comparison approach and the income approach to value and use the most defensible approach in estimating the value of the other property related income.

(6) The market value of any improvements to real property owned by the lessee, and not included in the royalty agreement between the lessee and the land owner, will be added to the overall property value.

(7) The department shall calculate the final valuation for each tax year in the appraisal period applying this rule.

(8) Any information required to be supplied by the licensed landfill owner shall be held as confidential by the department.