Wednesday, Feb. 9, 2005 | 9:26 a.m.
A keystone in the ongoing audit of Clark County land transactions could be a thorough examination of the process of assigning value to the land.
Examination of a land exchange involving the county's Aviation Department showed that a local land broker, Scott Gragson, netted a $5 million profit last year when he was able to assemble and sell a 38-acre parcel at Durango Drive and Windmill Lane from airport property.
Portions of the property were advertised for sale by the county for use only as a cemetery, but the deed never reflected that restriction, and subsequent land-use plan and zoning changes allowed commercial development.
Clark County Commissioner Lynette Boggs McDonald, who represents areas controlled by the Aviation Department, asked for the audit after public complaints surfaced. County management has asked auditors to look at the specific deal and other airport land transactions, and as the audit goes forward, have instituted a hold on swaps and leases of airport land.
Clark County Audit Director Jerry Carroll said the appraisal process would be a focus for him and his staff.
"We are going to be looking at that," he said. "What we're going to be looking at is not only if those appraisals are reasonable, but also if there is a better way to doing them."
Commissioner Bruce Woodbury, who represents the area where the land swap occurred, said he believes the appraisals should be a focus of the inquiry.
The low price for the original sale from the county to Gragson for $2.6 million allowed the developer to make "a huge amount of money," Woodbury said.
"When this type of situation occurs, why did our appraisers appraise it so low?" Woodbury asked.
Randy Walker, Aviation Department director, has pointed out several reasons why the appraisal came in low. One of the primary reasons is that the master plan for land use in the area slated the land for residential zoning.
Former Commissioner Erin Kenny had insisted on the residential designation in the plan several years ago.
However, the eventual owner of the land sought first a change in the master plan for the land to commercial, and then successfully sought commercial zoning.
Walker has said that the county's appraisers cannot speculate what the ultimate use will be -- if the master plan calls for residential, then the appraiser has to assume that residential will be the final product.
The problem with that is that master plans and final zoning are malleable, said John Hiatt, a member of the Enterprise Town Advisory Board. The upshot is that land buyers can get property cheap from the county, then change those designations and sell it for huge profit or develop it in ways the county and the county's appraisers didn't anticipate.
"In general, it always seems that appraisals of raw land for purposes of trade or whatever never seem to reflect the uses to what land will be ultimately put, and therefore are not a fair reflection of market value," Hiatt said. "The bottom line is in these trades or sales or whatever of public land, the public is not at the table. A buyer is there, a developer is there, but the public is not at the table.
"Typically, the public lands are sold for a lot less than what that land would be sold for had it been in private hands at the time of the sale."
Shelli Lowe, one of a select group of seven appraisers who work for the county's Aviation Department, doesn't disagree.
Appraisals for local, state of federal governments can include "a long, arduous, time process," she said, during which the land value can be changing rapidly. That can mean a significant difference in value between the time of an appraisal and a resale by the new owner.
Land transactions for the airport are frozen for six months while deals are negotiated and closed. In a market as fluid as Las Vegas', that can spell a huge change in value.
Lowe said that doesn't mean appraisers always get it right.
"There are appraisals that are wrong, and I'm sure I've been wrong, too," she said. Lowe, a Member of the Appraisal Institute, is also charged with investigating complaints of improper appraisals in Southern Nevada.
She declined to discuss any specific case, but said evidence of biased appraisals is very rare.
That doesn't mean that those judging the appraisals are happy with the result. Ideally, all sides are equally unhappy, said Lowe, who has been working in the Las Vegas market for more than 30 years.
"People are always unhappy with me," she said. "Developers always think you're too high. Sellers always think you're too low. Everyone always thinks their own property is worth the most."
Lowe, who did not work on the Gragson deal, said the county maintains a hands-off policy with her, which is how it should be.
"All an appraiser has is their integrity, and mine's not for sale," she said.
One thing Lowe, Hiatt and Woodbury agree on: The problem of appraisals could be swept aside by auctioning the land instead of using property as chips for swaps or other transactions.
The market, Lowe said, can determine the value of land much more efficiently than an appraiser can estimate.
"That's the market, honey," she said. "Let the market speak. I don't think they have to waste the time and money on appraisals in the process.
Woodbury said he sees public auctions as the key to putting aside controversies over land values and the perception, if not reality, of sweetheart deals.
Any land swap would have to be only in "an extraordinary situation where it would be clearly in the public interest," he said. "It should probably be a very rare occurrence, if ever."
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