By: John Woolard
The unique dynamics of the newspaper press market, coupled with dramatic improvements in printing press technology, in the last few years have had a major adverse impact on the market value of used doublewidth web presses. Some might even say the market has fallen off a cliff.
Because the press and press hall typically represents more than two-thirds of a newspaper’s total invested capital, this unusual market phenomenon offers publishers an outstanding opportunity to significantly reduce their property tax liability.
Most assessors determine the taxable market value for newspaper presses and other complex manufacturing equipment through the application of a prescribed “percent good” schedule to the “trended” reproduction cost basis.
Unfortunately, a major problem arises when the tax assessor’s “percent good” schedules do not account for abnormal obsolescence.
Abnormal obsolescence, in the form of functional or economic obsolescence, can be quantified through standard machinery-appraisal techniques and supported with comparable market sales data for similar presses.
For example, the excess newsprint cost associated with larger web widths, longer cut-offs, and smaller roll diameters typical of older model presses can be quantified in terms of abnormal obsolescence as compared to reduced newsprint cost features in current model presses.
This same obsolescence model applies to excess operating cost or loss of income (as compared with current models) associated with such factors as: pressroom labor cost, mechanical vs. digital controls, AC vs. DC power, shaft vs. shaftless drives, and color capacity.
Also, an out-of-balance supply/demand equation has caused an unprecedented decline in the global market for used doublewidth presses in just the last few years.
This documented erosion in market value primarily results from intense global competition leading to a proliferation of lower-cost new-model presses. Attractive pricing on new presses has produced an excess supply of older, outdated presses that have limited market demand.
Furthermore, recent studies of new press installations indicate the per-component cost of a modern press is 25-35% less than most tax assessors’ “trended” reproduction cost basis on older doublewidth arch-style presses and early-generation tower models.
Accordingly, the application of a market-based replacement cost, instead of the assessor’s reproduction cost, combined with a quantification of abnormal obsolescence, can yield comparable reductions in taxable value for used doublewidth newspaper presses.
The key to effective property-tax appeals for complex doublewidth web presses is to have a detailed knowledge of the unique issues affecting market value, coupled with a technical understanding of the assessor’s valuation process. A thorough assessment analysis of your newspaper’s press system should incorporate a detailed quantification of the abnormal functional and economic obsolescence supported by market sales data. Our experience indicates this type of comprehensive analysis consistently yields extraordinary property tax savings.