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Billboard
Articles Base:
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VALUATION
OF BILLBOARD STRUCTURES
As with the appraisal of other property
for local tax purposes, the three accepted approaches to value (income, sales
comparison, and replacement cost less depreciation) are applicable to the valuation
of billboard structures.
The sales comparison approach requires
verifiable accurate sales information of individual billboards. Outdoor advertising
structures are generally sold in bulk, and the transfers include ongoing concern
and host agreements. These transfers typically are not recorded on filed deeds;
therefore, it may be difficult to obtain information on the sale of billboards.
When information becomes available, an allocation of the sales price for billboard
structures may be necessary.
The income approach requires net operating
income/economic rent to be capitalized into a value for a specific property.
While the income from a ground lease may be capitalized into a value, the income
realized from the sale of advertising space is business income that is subject
to other taxes in North Carolina. If the income approach is used, economic rent
must be applied. Therefore, careful consideration and accurate income analysis
must be made or the income approach will not yield reliable results.
Due to the many difficulties inherent
in the appraisal of billboards when applying the sales comparison and the income
approach to value, our office recommends that for assessment purposes in North
Carolina, these structures should be appraised using the cost approach to value
with billboards being treated as personal property. The cost approach provides
an efficient methodology to uniformly value billboard structures. The replacement
cost less depreciation avoids the complicated allocation process and other issues
associated with the income and market approaches. The data contained in this
manual is based on information extracted from material costs, labor, and other
integral components of billboard construction. The valuation of each sign will
be determined by calculating the replacement cost new (RCN) and then deducting
depreciation based on an effective age depreciation schedule. The effective
age schedule is provided to assist appraisers in estimating loss in value due
to physical depreciation, functional and economic obsolescence. As a result
of the revision process for 2009, the billboard depreciation schedule has been
calculated based on billboards showing little, if any depreciation, and in most
cases, appreciating over time. The depreciation schedule is based on a 25-year
life for wooden structures and a 50-year life for steel structures. It is recommended
that the depreciation not be lowered more than 40 percent remaining good as
long as the structure is continuing to produce a viable income stream.
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