RIDGWAY – The Ouray County Commissioners were not persuaded by the argument set forth by the owner of Elk Mountain Resort to reduce the property’s 2007 and 2008 assessed value from over $14 million to just over $7 million at a public hearing on Monday.
The commissioners unanimously denied a petition by Tavitac Corporation, the owner the now-closed 275-acre Elk Mountain Resort, located on Horsefly Mesa’s Dave Wood Road, to reduce the assessed property value from $14,858,410 to $7,327,000 for the tax years 2007 and 2008. (The Ouray County Board of Equalization did agree to settle with the owner on the actual value of $10,250,000 for the owner’s protest to the 2009 valuation.) The high-end backcountry resort has a total of 47 buildings that include dining facilities, lodging facilities and the Valhalla Shooting Club, which offered a variety of shooting sport scenarios. The resort opened for business during the summer of 2003 but then closed in May 2009 and is now for sale.
While there was nobody on hand to represent the corporation at Monday’s hearing at the Ouray County 4-H Event Center in Ridgway, a memo to the commissioners from the owner’s representative, Neil M. Goff, stated that the $7,327,000 figure was determined in accordance with Colorado law by applying the income, market and cost approaches to valuation. Because the resort operated at a net loss in the 2006 (-$7,383,920), 2007 (-$3,598,968 and 2008 (-$2,876,163) tax years, Goff stated that an income approach to the valuation was inapplicable.
“These figures demonstrate that the resort was poorly planned and designed and ill conceived from its inception, and therefore the cost approach to the valuation is incorrect unless a significant obsolescence factor is appropriately considered and applied,” Goff stated in the memo. Furthermore, he stated that two years of “aggressive, world-wide marketing” has indicated to the owner that the improvements at the resort “add no actual value to the resort.”
Goff continued his argument by stating that the best use of the resort is as vacant land and therefore, application of the market approach to the value cannot consider the value of improvements in comparable sales data and must consider “only the value of the real property.” He added that the increasing net income figures demonstrate that the resort became more profitable (lost less) as its operation as a hotel/resort and clubhouse was waning. “The aforementioned facts, and the supporting arguments in this memorandum, clearly indicate that the $14,858,410 actual value for Tax Years 2007 and 2008 represents a significant overvaluation of the Resort,” Goff concluded.
For the commissioners, the argument wasn’t so clear.
“The sum of all these improvements equals zero?” Commissioner Lynn Padgett asked. “Because it has been super developed and overdeveloped, that means it is actually worth nothing, according to the applicant. I have a lot of issues with their business model but I don’t think the applicant has proven that the improvements equal zero.”
“This is an interesting argument but not a compelling one,” Commissioner Heidi Albritton said.
As Commissioner Keith Meinert looked through the accounting statements the owner submitted, he concluded that many of the figures don’t make sense.
“Not only are they un-audited, they don’t make sense,” Meinert said. “I think if we or anybody should seriously consider the nature of the arguments they are making, we would have to demand audited statements of accounting.”
For example, Meinert pointed from the submitted statements that wages in 2006 totaled over $4 million and increased every year after that. “When you look at the fact that losses have decreased every year largely because wages increased every year, I think there is something weird going on in their books. Something else must have been anticipated if they can afford to pay themselves $4 million in 2006…I am extremely not persuaded.”
“They don’t come close to proving their case as to why the property should be devalued to $7 million,” Padgett said. With that, she made a motion to deny the petition and it was unanimously denied.