Lawsuit could cut golf course taxes

Monday, Feb. 9, 2004 | 11:29 a.m.

A Carson City judge is expected to rule this month in a legal battle pitting a prominent golf course developer against the Clark County assessor's office.

The case pits Billy Walters, a well-known and well-connected developer of golf courses and other commercial property, against local county government. Watching the case carefully are other golf course owners and operators, who are likely to ask for similar reductions if Walters wins his case.

If the rules for assessing golf courses are rewritten because of the case, the county could ultimately lose millions of dollars of annual property tax revenue.

Walters, who owns the Stallion Mountain, Royal Links, Desert Pines and Bali Hai clubs, has been battling the assessor for two years over the property taxes on the golf courses.

The appeals date back to the 2002-2003 tax year when Walters' representatives went to the Clark County Board of Equalization, then to the State Board of Equalization, both regular stops in the appeal process, arguing for dramatic markdowns on the Stallion Mountain and Royal Links courses. Both boards granted Walters Golf reductions in the value and, thus, in the final tax bill.

In February 2002, Walters' appeal with the county board reduced the value for Stallion Mountain from $40.7 million to $29.4 million. The board also reduced the value of Royal Links from $14.6 million to $14 million.

Six months later, Walters appealed the new, reduced numbers to the state board. Again, he won a partial decision. The State Board of Equalization reduced the value of Stallion Mountain to $26 million and Royal Links to $11.4 million.

But Walters' lawyers argued that the state board erred because it actually increased the value of the improvements built on the land, reversing a reduction in the improvements by the county board.

Walters' lawyers said the state board only had the authority to look at the one part of the tax bill they appealed -- the land value. This formed the basis of their appeal to District Court Judge Michael Griffin in October 2002.

"The decisions are 'clearly erroneous in view of the reliable, probative and substantial evidence of the whole record,' and are 'arbitrary or capricious or characterized by abuse of discretion,' " said Walters' attorney Dan Reaser, of the firm Lionel, Sawyer and Collins.

Griffin apparently agreed, at least in part. He ordered the state board to produce an accounting of the decision to raise the improvement value. The state board responded in September, but the lawyers for Walters argue that the response is insufficient and asked Griffin to reinstate the lower, earlier improvement values.

Mike Luce, Walters Golf's No. 2 man in Las Vegas, said he expects a decision from Griffin sometime this month. That doesn't mean the years-long war would be over. Griffin could call for further hearings, and even with a final decision, either side could appeal to the Nevada Supreme Court.

Walters is current on his property taxes, and if he wins the ruling the county would owe him the difference between what he paid and what is ordered.

Round two is already brewing over similar issues with Desert Pines and Bali Hai.

Walters has indicated that he will likely take the assessments for those clubs to court later this year. Although Walters doesn't own the land on which Desert Pines and Bali Hai sit, under lease arrangements with the city of Las Vegas and Clark County, respectively, he is still responsible for property taxes.

Last year the assessor's office put a value of $11.2 million on Desert Pines and $35.8 million on Bali Hai. The state board, which received the appeals directly due to the courses' status as properties leased from the government, knocked the values down to $10.5 million for Desert Pines and $24.2 million for Bali Hai.

Attorneys for Walters argued at the beginning of the battle that the land should be valued at $1,000 an acre for the first three courses, a total of 710 acres, and $5,000 an acre for the 160-acre Bali Hai just off Las Vegas Boulevard south of the Strip.

Assessors, however, had placed property values of up to $40,000 an acre for Stallion Mountain and $30,000 an acre for Royal Links land, the properties that ignited the property-tax battle. The improvements, including the landscaping of the courses, the roads and clubhouses, could total millions more.

The value would be $23 million for just the land at Stallion Mountain and Royal Links -- which together total 610 acres -- according to the assessor, versus a value of about $610,000 according to Walters' representatives.

Walters' representatives did not cite a final figure for the land plus millions more for the improvements on the properties, but using the formulation of their independent assessor it would have been a fraction of the values set by the assessor of $40.7 million for Stallion Mountain and $14.6 million for Royal Links.

Both sides modified their original positions. The assessor, based on successful appeals launched by Walters and other golf course owners, now has a four-tiered tax rate for golf course land that goes from $10,000 an acre for a private club to $25,000 an acre for a public club at a resort such as the Bali Hai.

Bali Hai and Desert Pines are not as far through the appeal process, but Walters Golf executive Luce sighs with exasperation when he considers the price tag that the assessors put on the Bali Hai property.

"They had Bali Hai at, like, $90,000 an acre," he said.

At the core of the arguments by Walters' attorneys is that the tax assessors are not following state law. They argue that the bible of property tax assessments, a manual called Marshall & Swift, has not been followed and should be the only guidance in determining the value.

The assessor and the Clark County District Attorney, who represents the assessor and the county board, disagree, charging that it is Walters and his lieutenants who are deliberately misinterpreting the state tax statutes.

Assessor Mike Schofield and the county argue that the law demands a value that estimates the replacement value of the property based on current market conditions. That is what they did, they say.

Walters' company has a totally different approach to the law which it is testing in court.

"Nowhere in the state law does it talk about replacement value," Luce responds. "The entire basis for our argument is that they are not following state law."

But the assessor and the district attorney's office argue that they have followed the admittedly complex administrative rules set by the Nevada Commission on Taxation.

The state board's decision last summer should have ended the battle over the issue, Deputy District Attorney Paul Johnson has argued. But he now admits that he doesn't expect it to end even when Griffin issues an opinion.

"This will go to the Supreme Court, I am sure," he said.

He said Walters' value of $1,000 an acre, which Walters' appraiser argued is the appropriate land value, is a fraction of what the land is worth.

"To me it sounds ridiculous," Johnson said.

It doesn't sound ridiculous to Walters' representatives, who promise that, as they have for the last three years, they will bring their appeals to the Clark County Board of Equalization this Feb. 25, then on to the state board this summer, and if necessary to the courts.

Luce said one of the greatest frustrations for the golf course developer is that even the marginal victories they have won in past years don't seem to be represented in the new valuations that come from the assessor annually.

"They raise them back up," he said of the land values. "The thing that is frustrating is they go, we get a reduction, then they raise it back."

Schofield said the valuations take into account the adjustments coming from the county and state boards, and his office is just following the standard, legally proscribed procedure.

Walters' courses are on par with every other golf course in Clark County, he said.

Schofield's deputy, Assessment Services Assistant Director Rocky Steele, said disagreements such as these with golf course companies are nothing new. Of about two dozen privately controlled courses in the county, the majority annually appeal the valuations set by the assessor's office.

All of those have been, over the years, successfully negotiated or decided by the county or state boards. Only Walters has taken the matter past the administrative level and on to court, Schofield and his lieutenants note.

"We believe strongly that the valuations we've placed on these properties are fair and just," Schofield said.

Golf courses are operated to make a profit. Golf course owners and managers argue that making a profit has become increasingly difficult as the market has become saturated with competition, the cost of water has gone up, especially in the last year, and property taxes continue to take a big bite from profits.

Stan Spraul, general manager of the Southern Highlands Golf Club and a board member of the year-old Nevada Golf Course Owners Association, said everyone in the business believes they are paying too much for property taxes. Not everyone is willing to take the issue as far as Walters, but appeals have become a routine part of the business, he said.

"I think that's just the standard thing," Spraul said. "We appeal it. It's reduced. We pay it."

But the industry is watching Walters' case carefully because it could shave hundreds of thousands from the annual bills of every privately controlled golf course, he said.

Luce said the difference between the Walters operation and other companies is that for one, Walters is local, while some of the other courses are owned by out-of-state operators, and for another, Walters has always been willing to take a stand.

"If he doesn't think something is right, he will challenge it," Luce said. "If he feels it is unjust he will challenge it. He will spend the time and the money."

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