The country club and golf properties Oro Valley wants to buy are worth three times what the town would pay for it, an appraisal shows.
Oro Valley's Town Council is expected to vote tonight on whether to buy El Conquistador Country Club for $1 million. The town would turn it into a community center and recreation center — and would raise the sales tax rate to pay for the renovations.
Watch live updates from the Town Council meeting, beginning at 6 p.m. on Tucson.com
The appraisal, obtained by the Star through a public records request, shows the as-is market value of the property is $3.25 million. It also lists as "risk factors" the "uncertainty about future financial feasibility of the golf course operation."
It lists "positive factors" as the good location of the property and the low purchase price compared to the market value or the cost of building the same facilities from scratch, which appraisers peg at $42 million.
In a paragraph that is bold-faced and italicized in the appraisal document, the appraisers warn about the distressed property:
"The subject property has been operated with negative cash flow for several years. Since the property is lender-owned, the owner has been unwilling to provide capital for extensive renovation or improvement."
The appraisers, Southwest Appraisal Associates, go on to say the "country club is currently operating with negative cash flow exceeding $1 million" and "the resort golf, fitness and tennis segment has a negative annual net income of more than $300,000."
The appraisal also notes that there is an oversupply of golf courses in the area, and "the only sales of golf course properties in Tucson during the last four years were distressed."
The town plans to spend about $5.5 million over five years to renovate the country club building and the golf courses. To pay for the renovations, town leaders propose raising the town's sales tax by a half-cent per dollar. The current sales tax is 2 percent, or $2 on a $100 purchase. The new rate would be 2.5 percent, or $2.50 on a $100 purchase.
The town expects to subsidize the golf operation for a few years, with an estimated deficit in the first year of up to $1.3 million. After renovations and better marketing, the town's projections push the golf business out of the red in four years.