Wednesday, April 24, 1996 | 11:59 a.m.
The Las Vegas Convention and Visitors Authority is expected to appeal a verdict awarding more than $9 million to owners of 3 1/2 acres of land near the convention center.
If the decision isn't overturned, it could cost the agency almost $11 million with interest. The LVCVA receives the bulk of its money from hotel and motel room taxes.
The appeal is likely to assert that District Judge Don Chairez erred in allowing jurors to consider property appraisals higher than those mandated by the state Legislature in condemnation cases.
But the winning attorney said the state Supreme Court has ruled that jurors must use the highest-possible appraisal in determining what state agencies must pay landowners for property obtained under eminent domain.
In February 1995, the landowners, John Reese and Ray and Bryant Buckwalter, offered to sell the property at the corner of Desert Inn and Paradise roads for convention center expansion and road improvements. Their asking price was $4.8 million. A 1993 LVCVA appraisal valued the land at $4.1 million, and a 1994 appraisal raised it to $4.5 million.
By law, the LVCVA needed to get an updated appraisal, which came in at $5.4 million. In the meantime, however, the landowners hired two appraisers -- one local, one from California -- who came in with appraisals of $9 million and $9.7 million. The landowners revoked their $4.8 million offer last October.
Both sides agreed the differing appraisals and testimony from a UNLV economics professor were key factors in convincing a majority of the eight-member jury to award the landowners a price three times higher than Strip frontage or property directly across from the convention center.
But that's about all they agreed on.
"The government likes to cheat, and this time it got caught," said Kermitt Waters, attorney for the landowners. Waters argued that a gaming complex could have been built on the site and he used that to justify the higher appraisals for "fair market value" of the property.
"The LVCVA offered an appraisal using the most-probable price someone could get for selling the land," Waters said. "That's bankers' criteria. The Supreme Court says you have to use the highest price."
Not so, said LVCVA officials.
"My understanding of the statutes is that appraisers are supposed to use the most-probable value instead of the highest-possible value," said LVCVA Director Manny Cortez. "We submit that to the landowners and say, 'This is the fair-market value. We can't go beyond that.'"
"In 1993, the Legislature changed the definition of fair-market value to the most-probable price from the highest price, but the District Court used the highest price," said Dale Haley, the assistant district attorney representing the LVCVA.
Also at issue was the testimony of a UNLV professor, Tom Carroll, who disputed an alternative LVCVA valuation that was based on an income analysis. Carroll compared certain financial ratios from other gaming ventures that gave a higher value for the property than the LVCVA appraisal.
"The typical approach is for each side to get an appraiser, because you don't have a willing buyer and seller as you would in a normal transaction," Carroll said. "An alternative method for valuing a property is an income analysis.
"The LVCVA expert came up with income of $11 million a year for a casino on that site. The trick is to figure out how to turn income into a value for the whole facility. The state appraiser's problem is that he has only projected income and came up with a faulty figure.
"The LVCVA was assuming no growth and a very high discount rate, or cost of capital, of 20 percent, which is higher than junk bonds. All I did was look up two rates that reflected actual market prices. The jury decided a 10 percent rate was much more realistic."
That was a critical decision, said Carroll, because the lower the capitalization rate, the higher the property value.
Realistic or not, the decision left LVCVA officials vowing to appeal, and other government employees fuming.
"We can't afford to write this off to experience," Cortez said. "We're going to get our attorneys working on this."
"We paid $18 million for 20 acres where the Landmark used to stand. That included $3 million for demolition and related expenses, and it works out to a lot less than what they were asking," said one LVCVA executive who asked not to be identified.
"It's tax money, not our money. We could have said we'll give them more, but we didn't."
But Waters said: "If they don't like the price, we'll be happy to take the property back. Meanwhile, that's why eminent domain is a function of the judiciary -- you can't have the foxes guarding the henhouse."
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