Thursday, July 11, 2002 | 11:10 a.m.
Henderson city officials broke state redevelopment laws when they approved a master-planned community for up to $40 million in city aid, a lawsuit filed in Clark County District Court alleges.
In the civil lawsuit filed in May, Tom Hantges, a Henderson resident and an executive of USA Commercial Mortgage, alleges that the Henderson Redevelopment Agency improperly characterized the Tuscany project site as an abandoned mine, making it eligible for city money it could not otherwise receive.
The city first considered the planned 525-acre master-planned community as part of a new redevelopment area in March 2000, building its plans around a 365-acre former gravel pit in eastern Henderson. But at the time of the proposal by developer Commerce Associates, the land had been zoned residential for more than four years and as much as 96 percent of the former shallow-pit gravel operation had been rough-graded, according to city records.
Clark County aerial photographs from the previous fall show that about 850 house pads fringed the beginnings of an 18-hole golf course and a circular boulevard tentatively named Dream Lake Circle. Planning officials note that the photos show little if any trace of the roughly 15-feet deep pit remained.
Commerce Associates officials declined to comment for this story. Attorneys representing the city did not return phone calls seeking comment.
At Henderson City Hall, several officials deflected questions about the physical state of the pit, arguing that the lawsuit is motivated by an ongoing legal dispute between Hantges and Rolland Weddell, one of the majority investors in Commerce Associates. They also argued that though costs to finish re-shaping the pit may have been minimal, costs to construct flood control channels, roads, sewer and water lines are huge.
Critics of state redevelopment law argue, however, that the costs of building such infrastructure has little to do with reclaiming mines and even less to do with reshaping gravel pits, which typically are clean operations that require little cleanup. Critics say the 1999 law that first qualified abandoned mines for redevelopment money is too broad and in some cases allows planners to divert tax money that would otherwise benefit entire communities.
With the Tuscany redevelopment area, a projected $263 million in new taxes collected over 30 years is at stake. According to the current agreement with the city, those millions will be invested only within the city's three redevelopment areas -- each has a lifespan of 30 years -- rather than contributing to other city and state needs such as public safety and parks.
As with most redevelopment deals, the city promised Commerce a cut of the tax money generated from the area -- from $27 million to $40 million -- in order to persuade the developer to build in the "blighted" area. The thinking is that without the added incentive, developers would avoid the area and it would stay empty, doing little for tax rolls.
With Tuscany, however, the developer came to the city, asking for aid to save a project that wouldn't otherwise turn a profit.
In March 2000, lobbyist David Wood made the initial pitch to the city. He asked city staff to build a redevelopment area around Tuscany, the partially developed 525-acre project recently purchased by Commerce Associates. At the time, Barry Fieldman and Bob Unger, who manage Commerce, also served on the board overseeing city redevelopment staff. Fieldman served as chairman.
After paying a reported $30 million for the stalled Palm City project, Commerce Associates went through the numbers again and discovered the company couldn't make a profit without city aid, Fieldman has said.
In April, after two years of study, the Henderson City Council, acting as the city's redevelopment agency, approved the Tuscany master-planned community for up to $40 million in city aid. The claim of a former gravel pit on the site made it all possible.
City records and Clark County aerial photos show, however, that the pit had been largely erased by developer Jim Rhodes before the city began considering the site as a redevelopment area.
Henderson Mayor Jim Gibson and Ed Madonia, city redevelopment coordinator, argue that the conditions of blight still applied to the site.
"I don't care how much dirt he (Rhodes) moved," Madonia said. "He couldn't get anything done and he had to sell the property, so it was still economically blighted."
Like Commerce Associates, Madonia is less interested in the costs of reshaping the pit, calling them "miniscule in the big picture," and talks more about the costs of building infrastructure. An "over-sized" flood control channel to protect Tuscany's 1,900 homes and help drain the surrounding region will cost $13.5 million. Sewer and water lines will cost millions more. And Commerce must set aside land for a city park ($3.4 million), a school ($1.25 million), and a fire station ($460,000).
But these are not unusual costs. For more than a decade, in an effort to make growth pay for growth, the city has required developers of large master-planned communities to pay for similar costs out of their own pocket.
Gibson has supported that effort. But with Tuscany, there are too many obstacles to surmount without city aid, he said.
"There is a bigger mess out there than the picture (a county aerial photo) shows. And you still have the question of what more work in remediating the mine has to be done," Gibson said.
But Bill Collins, a state mining inspector with the Bureau of Mines, said no remediation is required with mines on private land such as the Stewart Gravel Pit.
"It's pretty much a walk-off," Collins said.
He said the land is typically clean and ready for development. Most, if not all of the work remaining at the Stewart pit when Commerce bought the land was the same work any developer must contend within the Las Vegas Valley, Collins said.
In Henderson, the Central Christian Church, the Henderson auto mall, a Green Valley shopping club and a residential neighborhood east of Boulder Highway have been built in the shallow hollows of former gravel pits, said Walt Lombardo chief of the Southern Nevada Division of Minerals.
"They're pretty simple to do," he said.
In his lawsuit against the city, Hantges argues that no gravel pit remained at the Tuscany site when Commerce purchased the land, so there could be no argument of blight.
"Accordingly, the city's approval of and assent to the terms of the OPA (owner participation agreement) despite the reality that the Tuscany property is not blighted or in any need of 'redevelopment' was arbitrary and capricious and constitutes a clear violation of the city's legal duty," Hantges says.
On the basis of that complaint, Hantges, as a taxpayer, is asking District Judge Michael Douglas to void the city's redevelopment agreement with Commerce Associates. The case will be heard July 29.
Madonia says he's confident the case will be decided in the city's favor.
The bottom line, Madonia said, "is does the gravel pit meet the criteria of improved land and does it meet the requirements of state law?"
Madonia says it does.
The 1999 legislation had three central architects: Carole Vilardo, president of the Nevada Taxpayer's Association, Carson City lobbyist Mary Walker, and Kerry Lyman, then-president of the Redevelopment Association of Nevada.
For close to a year they worked with the state's nine redevelopment agencies, crafting a new requirement that 75 percent of a redevelopment area contain "improved" land. The legislation closed a loophole that in 1998 allowed Douglas County to develop raw land using redevelopment funding -- at the expense, critics said, of schools and public safety departments already strained by limited funds.
Before the bill hit committee, abandoned mines were added to legislation and became eligible for redevelopment money.
Walker and Rob Joiner, Carson City redevelopment director, say Henderson is the only city in the state to benefit from the inclusion of abandoned mines.
"Henderson is an anomaly," Joiner said. "It was an industrial town with the mines, and now everything has grown up around them."
The ramifications for Henderson appear to have been understood quickly.
In late May 1999, the new legislation passed into law. By June, Fieldman, who was a four-year veteran of the city's redevelopment advisory board, was buying out investors in Rhode's Palm City project on behalf of Commerce Associates.
The following spring, just two months after completing the purchase of the property, Commerce Associates made its formal pitch for a new redevelopment area, setting into motion the eventual April vote by the redevelopment agency.
But even if a former gravel pit graded with house lots and the beginnings of fairways meets the state definition of blighted land, there still doesn't appear to have been enough of the pit to go around.
San Francisco-based Seifel Consulting, Inc., the company that researched the proposed Tuscany Hills Redevelopment Area to ensure it met Nevada redevelopment law, noted in its January 2001 report that the pit covered 469 acres, or about 57 percent of the 850-acre redevelopment area.
A former landfill, a radio station, an ice cream factory and other uses on another 200 acres gave the city slightly more than the required 75 percent improved land.
But records culled from the state Division of Minerals and state Bureau of Mines show the Stewart pit covered just 365 acres of the total 464 acres owned by the Stewart Gravel Pit limited partnership.
A representative for Seifel declined to discuss the figures, referring questions to another city-hired consultant -- San Leandro, Calif.-based law firm Meyers Nave. Meyers Nave did not return calls.
But if consultants measured "improved" land based on the land actually developed -- besides the former gravel pit, the remainder of the Stewart property was largely undisturbed -- improved land would comprise just 66 percent of the redevelopment area. The Tuscany project, Hantges argues in his lawsuit, is "simply partially improved or raw land," and as such, should not be eligible for city aid.
Vilardo plans to make her own case to legislators during the 2003 session. The shortcoming of state redevelopment law, she said, is that definitions remain too broad, inviting cities and developers to stretch the law to fit the project. When they do, other public services, such as police and parks, inevitably lose funding.
"You have a single redevelopment statute to accommodate all the different projects, so you get a lot of stretching of definitions and that bothers me," Vilardo said. "With the law as it exists today, the validity and value of redevelopment projects is going to be in the eye of the beholder."
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