Judge sets Mohegan Sun tax assessment — $152.2M

Dec. 16--WILKES-BARRE -- A Luzerne County judge has seemingly brought an end to a years-long disagreement between the Wilkes-Barre Area School Board and Mohegan Sun Pocono over the property assessment of the Plains Township casino.

And while neither side got the jackpot it was looking for, the casino would appear to be the clear winner.

With the school district claiming the property should be valued at $270 million and the casino saying $140 million, Judge Thomas F. Burke Jr. decided on Wednesday to set the value at $152.5 million, the county's assessment. Burke determined both sides were unable to meet the burden of proof to change the value of the property.

Under current tax rates. Mohegan Sun will pay $3.84 million in real estate taxes: $2.66 million to the Wilkes-Barre Area School District, $911,248 to the county and $270,000 to the township.

If the court had accepted Mohegan Sun's arguments, their tax bill would have dropped to $3.53 million. If the court had accepted the district's assessment, the bill would have been nearly double that.

In his opinion, Burke said the chief witnesses for both parties were "not credible."

Charles A. Moyer, MAI, prepared the 149-page report on which Mohegan Sun's claim hinged.

But Burke said Moyer's report contained several significant mistakes, some of which Burke called "troubling."

First, Burke's opinion said Moyer claimed during his testimony to have hired an outside firm, Quad Three, to confirm his opinion on the value of the property. However, Quad Three is mentioned nowhere in Moyer's lengthy report, Burke's opinion said, and on cross-examination, Moyer claimed to have not "formally engaged" Quad Three.

But in evidence produced by the school district from an assessment of the property in 2012, Moyer did include a formal engagement with Quad Three in his report.

"There was no legitimate explanation, nor any excuse, for Moyer having failed to use similar data and to have undertaken a formal engineering consultation in the present matter," Burke's opinion reads.

Burke pointed out other issues in Moyer's report, including his failure to obtain construction costs of several buildings on the property and his use of a depreciation value on each building of 40 percent. Burke called this depreciation value "overstated," given that some buildings on the property are newer than others.

Burke's criticisms of the process used by Michael Cahill, the expert appraiser for the school district, were nearly as scathing.

Cahill, who Burke's opinion states is a licensed appraiser in Colorado, received a temporary practice permit in Pennsylvania -- despite this actually being unnecessary, Burke writes.

Burke described Cahill's cross-examination as being filled with "utter confusion," with Cahill initially testifying that someone in his office would have filled out an application, checking a box labeled "NO" to indicate there was no "federally related transaction."

However, counsel for Mohegan Sun provided Cahill with a copy of the application. The "federally related transaction" section had the "YES" box checked, and the application was signed by Cahill.

Burke wrote this error, noting he hoped it was not a purposeful misrepresentation, served to "seriously, if not categorically, undermine (Cahill's) credibility with the Court in this matter."

Burke also had issues with Cahill's method of determining the value of the property.

Cahill used a system which focused not only on the physical value of the property, but also on the potential value of the business thereon.

Burke noted that Cahill's company, Hospitality Real Estate Counsellors, emphasizes this valuation method for appraising casinos for investment banking purposes.

However, Burke wrote that, in Pennsylvania, appraisal of a casino for the purposes of a tax assessment can only take the value of the property into account, not that of the business.

Burke noted Cahill's lack of experience in the realm of appraising casinos for tax purposes, saying he's only done it six times before, and never before in Pennsylvania.

With expert witnesses on both sides being determined not credible, Burke's only option was to fall back on the county's assessment of the property.

Luzerne County Manager C. David Pedri said the value set by the court will be a boon to the county, as it'll bring in $200,000 more in taxes each year.

Pedri said the value set simply makes sense.

"The law is very clear we can only assess on property value, not on potential profitability," Pedri said.

Pedri said he couldn't be sure if either the Wilkes-Barre Area School District or Mohegan Sun would appeal Burke's decision, but for now, the county would make plans around the extra $200,000 yearly.

Requests for comment to Mohegan Sun were not immediately returned.

Ray Wendolowski, solicitor for the Wilkes-Barre Area School District, said on Friday that he was not aware that an opinion had been returned, and that he would not be able to comment until he read it completely.

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