Oct 10, 2002 By Paul Sunyak 6 min read

The Uniontown Area School District has already approved a settlement agreement that reduces the assessed value of Nemacolin Woodlands Resort & Spa from $68.5 million to $39 million for tax year 2003 – even though the resort’s 2003 tax appeal hearing won’t take place until next Wednesday. The settlement agreement quietly approved by the school board in August also sets the resort’s assessed value for tax purposes for years 1999 through 2002, when the resort paid its real estate taxes under protest as the matter played out in court.

The retroactive assessments for those years represent significant reductions. For example, the resort’s assessed value for tax year 2002 will plunge from $16 million to $10.8 million under the settlement agreement.

Nemacolin Woodlands also gets a total school district tax credit of $962,721 in the settlement agreement, which translates into at a credit of $120,346 per year for eight years. This deal runs from 2003 through 2010.

The settlement agreement is basically the result of behind-the-scenes negotiations that took place between Nemacolin Woodlands Inc. and the school district, which took the lead among local taxing bodies in a long-running court battle to determine the resort’s fair market value for taxation purposes.

Uniontown Area School District Superintendent Charles Machesky provided a copy of the four-page agreement at the request of the Herald-Standard. Its final paragraph states that the resort, the school district and the other taxing authorities “will not disclose or discuss the terms and conditions of the Settlement Agreement and Release with any other entity or individual except as may be required by law.”

However, while the school district is satisfied with the agreement’s outcome, the Fayette County commissioners have yet to approve the agreement and its call to predetermine a 43 percent tax assessment reduction for the resort for 2003.

That reluctance is mainly due to the fact that the county doesn’t believe it proper to pre-approve the resort’s 2003 value before it goes through a formal hearing before the county’s Tax Assessment Appeals Board, as approximately 10,000 other property owners are doing this year.

James A. Hercik, CPE, the county’s chief assessor, said that assistant county solicitor John Cupp Jr. has recommended that the commissioners hold off on signing the agreement until after the appeal hearing takes place.

“We’re not going to sign it until after the appeal hearing. There’s language in the agreement for tax year 2003. Our attorney recommended that we wait until after the hearing to see how the board renders its decision,” said Hercik.

It’s possible that the tax appeal board will lower or increase the resort’s assessment, or vote to keep it the same as the $68.5 million assessed value determined by Cole Layer Trumble, the firm that recently completed the first countywide reassessment since 1958.

In addition to the school district and county, two other taxing bodies – Wharton and Henry Clay townships – must approve the settlement agreement. For tax year 2003, the agreement covers 10 parcels in Wharton and one in Henry Clay.

Machesky said Wednesday that he’d make available any documents in his possession related to the Nemacolin Woodlands case. He also said that a $100,000 August contribution to the school district from Nemacolin owner Joe Hardy was not part of the settlement agreement.

Hercik said that even if Nemacolin’s assessment were reduced to $39 million at some point, it would still carry the biggest assessed value in the county.

Sources familiar with the situation, speaking on condition of anonymity, said that Nemacolin hired an expert in the resort appraisal field who used the income/expense method as the basis for determining the resort’s worth.

That approach is available to the owners of commercial properties and has been used in appeals filed by the owners of Uniontown Mall and Laurel Mall. So instead of determining the resort’s value based on the cost-to-build or the comparable market sales approaches, Nemacolin based its case on its income and expense streams.

However, the case file in the Fayette County Prothonotary’s Office contains little detail on how that figure was derived. A pretrial statement, filed by the school district attorney on Feb. 4, said that school district appraiser James R. Lignelli of Pittsburgh had determined the market value of the resort to be $33.7 million in 1999, $39.1 million in 2000, $39.2 million in 2001 and $45.1 million in 2002.

Those figures coincide with those mentioned in a letter from school district attorney Gregory C. Melucci to then-Superintendent Darrell Uphold on Feb. 7. That letter also states that Nemacolin appraiser Peter Gloodt had pegged the value of the resort at $15.5 million for 1999, at $15.8 million for 2000 and at either $16.6 million or $17.9 million for 2001.

“Although both appraisers generally agree on total revenues for the tax years, anywhere from $40 million to $42 million, it appears that the substantial disagreement is on a line item known as ‘deferred maintenance and reorganization costs,'” wrote Melucci. “Nemacolin Woodlands’ appraiser consistently deducts anywhere between $11 million to $14 million for these costs, and continues to deduct these costs despite the fact that they have been accounted for in tax year 1999.

“Mr. Lignelli does not deduct for this line item expense since he believes it is a figure which should be included in capital reserves and management fees.”

Sources familiar with the situation, again speaking on condition of anonymity, said they wouldn’t be surprised if the following scenario plays out: Nemacolin Woodlands has its appeal hearing on Oct. 16, after which the board doesn’t grant a reduction to $39 million as called for by the settlement agreement.

The resort then would appeal the case to court, as is the right of any property owner. At that point, the resort would ask the court to consolidate the 2003 case with the one filed back in 1999, when the school district and the resort each challenged the Nemacolin Woodlands assessment in court.

If a judge grants the request to consolidate, these sources say, the parties would again be free to negotiate a settlement.

Lignelli reportedly prepared a 120-page appraisal report on Nemacolin Woodlands for the school district. However, Machesky did not have a copy at his disposal Wednesday afternoon. He pledged to try to obtain that document if it is available in the school district office.