Sunday, Feb. 19, 2006 | 12:35 p.m.
From the start, there has been one central question about Bill Walters' plan to replace his Royal Links Golf Club with a residential development: Is he offering Las Vegas a fair price to build homes on his land?
Although myriad other issues have emerged amid an ongoing state investigation into the deal, the question from which most others flow is whether Walters' offer to pay the city $7.2 million to lift a deed restriction is a reasonable price - or a sweetheart deal that shortchanges taxpayers.
To examine that question, the Sun commissioned an independent analysis by a financial advisory firm that, to further assure objectivity, does not do business with the Sun or any related companies.
The study's conclusion: Las Vegas taxpayers would make out much better than Walters if his plan to build 1,200 homes on the 160-acre site is approved.
The analysis found that the public would gain as much as $38 million from the deal, three times Walters' projected $12.2-million profit.
"The transaction as proposed is reasonable to the city of Las Vegas from a financial point of view," the analysis said.
The 23-page report was prepared by Stout Risius Ross Inc., a company that specializes in investment banking, property valuation and business restructuring and performance improvement. The company has offices in Washington, Chicago, Cleveland and Detroit.
The potential public advantages identified by SRR include:
When the city sold the land to Walters in 1999, the city's investment was roughly $4.7 million - the property's appraised $5.6 million value minus Walters' $894,000 purchase price, the study said.
Based on that investment, the estimated $29.3 million to $38 million public benefit from Walters' proposed housing deal equals an annual rate of return more than 10 times the city's recent return on its other investments.
The Royal Links deal, SRR calculated, would produce an annual return of 31.7 percent to 37 percent on the city's investment. In contrast, the city's return on other investments, excluding special assessment districts, was 2.74 percent in fiscal 2005.
The vast majority of the projected public benefits stem from water revenue.
If the golf course closes, the 904,000 gallons of so-called gray water - non-potable water from a city treatment plant adjacent to Royal Links - now used there could be returned to Lake Mead. In exchange, the Southern Nevada Water Authority would receive return flow credits that would make an equal amount of drinkable water available to valley residents and businesses.
The sale of that water at market rate instead of the golf course's deeply discounted price would produce an extra $16.5 million, according to SRR.
The anticipated recycling of that water would generate an additional $5.6 million to $14.3 million, the study found.
While very little of the low-grade water used at the golf course is recyled, the study estimates that more than two-thirds of the water "saved" by closing it - about 695,100 of the 904,000 daily gallons - would be used instead by residential customers at the Royal Links site and elsewhere.
Those potential public benefits from the Royal Links proposal, the study found, significantly eclipse what Walters stands to take away from the land deal.
As a golf course, Royal Links is worth $23.6 million, SRR said. But if the deed restriction is lifted to make the land available for residential development, the property's value would be $43 million, or $265,000 per acre, the analysts concluded.
From that possible $19.4-million gain, Walters' $7.2-million payment to the city would reduce his estimated profit to $12.2 million.
Walters' Royal Links plan is on hold pending an investigation into the city of Las Vegas' dealings with him in regard to the property over nearly the past decade.
One key issue in that probe - which Nevada Attorney General George Chanos hired a San Francisco law firm to conduct because of a potential conflict of interest stemming from his own land deal with the city - is the same question examined by SRR: whether Las Vegas would be receiving fair value for removing the deed restriction.
When the land, at 5995 E. Vegas Valley Drive, was sold by the city to Walters in 1999, the deed restriction was intended to preserve the acreage as a buffer between an adjacent city wastewater treatment plant and nearby residential communities.
The SRR analysis did not address the question of whether taxpayers potentially might have to spend tens of millions of dollars to reduce odors from that plant.
Last fall, in a report vigorously disputed by Walters, a panel of wastewater treatment experts told the city that Las Vegas might have to spend up to $28 million to reduce odors from the plant if Walters builds homes on Royal Links.
If Walters' development plans are approved by the Clark County Commission - the land is in an unincorporated part of the county - some homes could be as close as 20 feet from the treatment plant's property line.
Clark County already has approved residential developments as close as 150 feet to the south and east of the city plant, and since 1995 also has had homes next to its own treatment plant, one mile south of the city facility.
The odor mitigation estimate is based on a planned expansion of the city plant. That expansion, however, is not expected to occur for at least six to eight years - and may not be needed for as long as 18 years if North Las Vegas, as planned, builds its own treatment facility, said David Mendenhall, the plant's environmental manager.
A plant expansion potentially two decades away logically would utilize state-of-the-art equipment capable of containing nearly all odors, experts say. And that, Walters argues, would mean that the city would not have to spend any extra money to reduce odors on behalf of Royal Links homeowners.
"If they put in no-odor equipment to begin with, it's a moot issue," Walters said.
Steve Kanigher can be reached at 259-4075 or at [email protected].
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