Thursday, Feb. 23, 2006 | 7:12 a.m.
Lately there has been plenty of emotion, and not enough sober analysis, regarding Bill Walters' proposed agreement with the city of Las Vegas to replace his Royal Links Golf Club with a residential development. Specifically, critics have claimed that if the city of Las Vegas were to approve the agreement, which would result in the building of 1,200 homes on a 160-acre site, it would be to the detriment of taxpayers.
A story by the Las Vegas Sun's Steve Kanigher on Sunday offered an excellent point-by-point assessment of what such a deal would actually mean for all involved - Walters, the city and, most importantly, the taxpayers.
Kanigher's story was based on an independent study the Sun commissioned to determine whether Walters' offer to pay the city $7.2 million and cancel a favorable water contract in return for lifting a deed restriction, which now limits the land's use to a golf course, is a reasonable amount or one that hurts taxpayers. The firm selected hadn't done any business with the Sun or any related companies. (In the interest of further disclosure, Walters has done business with American Nevada Corporation, a development firm owned by the Greenspun family, owners of the Sun.)
The City Council and Walters believe such a deal makes sense, but because of the harsh criticism of it, the Sun commissioned the study to examine the transaction itself.
Stout Risius Ross Inc. (SRR), a company that specializes in investment banking, property valuation and business restructuring and performance improvement, found that the public would gain as much as $38 million under the proposed agreement, about three times what Walters' $12.2 million projected profit would be.
How did SRR arrive at this conclusion?
In a city that has had to impose watering restrictions, in large part because of a prolonged drought that has affected the Colorado River, the water savings alone are a critical and essential part of this deal. If the golf course is closed, then 904,000 gallons a day would be returned to Lake Mead and used instead by homeowners and other businesses. Las Vegas, which has been searching far and wide for more water to keep pace with growth, should seize any opportunity when it can use more water from the Colorado River for residential or commercial purposes.
With respect to the deed restriction, confining the land to use only as a golf course means that the land isn't as valuable as if it were zoned for residential development. SRS estimates that Royal Links is worth $23.6 million as a golf course and $43 million if the deed restriction is removed. But even with that possible $19.4 million gain to Walters, his profit would be $12.2 million once his $7.2 million payment to the city is subtracted.
The study did not set out to assess every issue involved in the deal - the Nevada attorney general has an investigation under way to look at what motivated this and previous transactions involving Walters, who purchased the 160-acre site in 1999 for $894,000. So far the taxpayers have committed $265,000 toward this investigation.
The study also didn't assess the impact - if any - to local government due to the fact that some of the homes in the residential development would be close to a city wastewater treatment plant. The city of Las Vegas has estimated that as much as $28 million might have to be spent to reduce odors if homes are built on what is now a golf course.
That estimate, however, is contingent on a planned expansion of the city plant, which isn't expected for a minimum of six to eight years. Even then the expansion may not be needed for another 18 years if North Las Vegas builds its own treatment facility as expected. By that time, experts say that state-of-the art equipment could be ready to contain nearly all odors from the plant. Some homes could be as close as 20 feet to the facility, but the impact on homeowners would seem to be negligible since the Clark County Commission already has approved homes as close as 150 feet to the wastewater treatment plant.
What has happened is that critics of Walters, both inside and outside of government, have tried to muddy the waters involved in what, at times, has seemed to be a complicated issue to the public. Many of the critics have made it personal - and their rhetoric in opposing the deal has bordered on hysteria - when it never had to be.
Could Walters profit from this deal? Yes. But what some critics of this deal seem to forget is that this land is owned by Walters, not the city, and the upside belongs to him as the landowner.
And while the study found that the city's investment in the land was about $4.7 million when it sold the parcel to Walters (the property's appraised $5.6 million value less Walters' $894,000 purchase price), the city stands to do very well under this deal. SRR notes that based on the city's investment, and the $29.3 million to $38 million public benefit from Walters' proposed agreement, it would equal an annual rate of return that would be more than 10 times what the city's current return is on its other investments.
It has also been suggested that the city could get a better deal from Walters by putting pressure on him to pay more in return for lifting the deed restriction. The city certainly could try, and perhaps could get more. The city has leverage, because only it can lift the deed restriction. But so does Walters, because he has a profitable golf course. Walters could decide the city is asking too much and just keep running the golf course, which SRR estimates is making $2.5 million a year. Of course, by continuing to run the golf course, Walters will continue to use 904,000 gallons of water each and every day.
According to the SRR report, the deal as it stands now is one where both Walters and the city will benefit financially. Those are the facts - minus the demagoguery.
Today the Sun is going to deliver copies of the independent study to the mayor, members of the Las Vegas City Council and Walters. The study that the Sun commissioned is the kind of report that either the City Council or Walters should have undertaken themselves a long time ago. If they had done so, and done a much better job of explaining what the deal would mean for taxpayers, it would have rendered moot all the needless squabbling that we have instead been subjected to for so many months now.
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