Swan Lake Moulding Co. v. Department of Revenue

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480 P.2d 713 (1971)

SWAN LAKE MOULDING COMPANY, an Oregon Corporation, Appellant, v. DEPARTMENT OF REVENUE of the State of Oregon, Respondent.

Supreme Court of Oregon, In Banc.

Petition for Rehearing Filed January 11, 1971.

Decided February 18, 1971.

*714 Ganong, Ganong & Gordon, Klamath Falls, for the petition.

No appearance contra.

On Appellant's Petition for Rehearing Filed January 11, 1971.

DENECKE, Justice.

On petition for rehearing the taxpayer contends that our decision disregards existing leases on the property, contrary to the requirements of ORS 308.235, which provides, in part:

"Taxable real property shall be assessed by a method which takes into consideration the improvements on the land and in the surrounding country and also the use, earning power and usefulness of such improvements, and any rights or privileges attached thereto or connected therewith * * *." (Emphasis added.)

We did not hold that the earning power of the property should be disregarded; however, the income from an existing lease is not determinative of that earning power. It is the potential income to be derived from the highest and best possible use. If the rent reserved in the lease is less than the property is capable of producing, the lessee's interest is more valuable and it is the entire group of interests in the property, lessor's and lessee's, that is valued.

Petition denied.