Hughes may get adverse decision

Jeff Schweers

Friday, Aug. 15, 1997 | 11:20 a.m.

Southern Nevada's largest private landholder may have to pay more property taxes than originally assessed by the Clark County assessor's office on more than 14,000 acres of vacant lands.

After hearing damaging testimony concerning the appraisal on which the Howard Hughes Corp. based its appeal, the Nevada Board of Equalization Thursday adjourned for a week "to come up with some guidelines" for recalculating the taxable value for the land, said Harry Schlegelmilch, the state attorney for the board.

"They haven't decided anything yet," Schlegelmilch said after the day-long hearing at McCarran International Airport. The board will reconvene Aug. 21 at 1:30 p.m. in Carson City.

But County Assessor Mark Schofield said the board had obviously rejected the 19 percent discounted cash flow rate used by appraisers for Hughes to come up with a value $254 million lower than the $372 million originally assigned to the land by county appraisers.

To approve the reduction would have cut $2.5 million in additional property tax revenue from the county rolls.

"No question in my mind. They did reject it," Schofield said. "We don't know what the effect will be, but it could potentially increase the taxable value higher than the original value protested at the county board of equalization."

Mark Brown, senior vice president for Hughes, disagreed with Schofield.

"One of the important things is they were directed in future years to use the discount cash flow methods," Brown said. "We view that as a victory, to view Summerlin as one entire parcel in the future."

Brown said there's a good chance the board recalculations will give Hughes some of the relief it has been looking for.

Hughes successfully won a first appeal before the county equalization board, getting its property reduced to $303 million.

But Hughes filed a second appeal before the state board, asking for a reduction on 14,372 acres to $118.5 million. Martin Lutsky, property tax manager for the Rouse Co., which bought Hughes for $520 million last year, said the company then amended its recommendation to $209 million.

That still represents a $1.7 million reduction in the county rolls.

The basis of the Hughes appeal was an appraisal by Dunn & Associates, who used a discounted cash flow rate of 19 percent to put the land's value at $245 million. Discounted cash flow is a method used to predict for investors what a land will be worth in the future.

Sherri Lowe, an independent appraiser hired by Schofield to analyze the Dunn appraisal, told the board that she found several errors that had reduced the assessed value by $21.4 million. Using the same data in the Dunn report, Lowe recalculated the land value at $271 million.

County appraisers said all Dunn did was validate Hughes' business plan for its investors, and showed recent sales of Hughes lands going at an average of $47,500 an acre for 1,800 acres.

"We felt our appraisal was accurate," Brown said.

Board members later discussed using a discounted cash flow rate in the range of 14 percent, which more accurately reflects the discount rate used on other similar properties.

Rose Dominguez, a member of the five-person panel, said she hopes to achieve fairness and tax equalization.

"Somebody has to pay their fair share of the taxes," Dominguez said.

Dominguez said the board made the right decision to deliberate for one week because "it does nobody any good to reach a hasty decision."