Ex-official defends land deal with city

Leila Navidi / Sun file photo

Former Las Vegas City Councilman Michael McDonald stands in July 2007 near the site of a proposed retail and senior housing project to be developed by his company.

By Steve Kanigher

Sunday, May 9, 2010 | 2 a.m.

Alex Richards

Land transactions raise concerns?

Alpha Omega Strategies acquired this vacant 3.9-acre parcel of land from Las Vegas for $1.3 million and then sold it to the owners of Mariana's Supermarkets for $3.1 million, transactions that were recorded at the same time on April 6, 2009.

After purchasing 3.9 acres of land from Las Vegas last year for $1.3 million, a development company led by former Las Vegas City Councilman Michael McDonald immediately sold it for $3.1 million, Clark County records show.

The land was part of a larger parcel that the Las Vegas City Council agreed in 2007 to sell at a bargain price to McDonald’s company, Alpha Omega Strategies, so he could develop senior housing and other uses.

McDonald said the money he made on the sale of the smaller parcel will pay for improvements necessary to build the multiuse project on the balance of the 13.4 acres he is buying from Las Vegas. City officials agreed with his strategy.

The 3.9 acres were sold to the owners of Mariana’s Supermarkets, who plan to build a grocery store on the site, McDonald said.

When informed of the transaction by the Sun, Bruce Snyder, an attorney for the Las Vegas City Employees’ Association, said city officials’ decision to sell land to Alpha Omega for $1.3 million when they could have sold directly to the supermarket for $3.1 million “on face value doesn’t pass the smell test.”

With the city facing a general fund deficit of $80 million for fiscal 2011 and the potential for massive employee layoffs, Snyder said: “This is the kind of stuff that drives us nuts.”

The project has its roots in 2007, when the City Council agreed to sell Alpha Omega 13.4 acres along Decatur Boulevard, just south of Vegas Drive, for $6.5 million.

That sale price was about $3 million less than two appraisals and $2 million less than what the city paid for the land between 2000 and 2002. City officials said at the time that selling the land for less than what the city paid for it was justified because of the need for senior housing.

But nearly three years after McDonald entered the contract, no senior housing has been built on the site. The deadline by which Alpha Omega must complete the purchase of the property has been extended at McDonald’s request. According to the most recent agreement with the city, Alpha Omega must close escrow on the remaining land by September 2012.

McDonald said the sale 13 months ago of the 3.9-acre parcel not only generated money to develop the balance of the site but that “we’re trying to give back to the neighborhood. We’re bringing in a grocery store that the neighborhood desperately needs.”

Alpha Omega has begun grading and installing utilities on the entire parcel, including the more than nine acres still owned by the city.

City spokesman Jace Radke says the city’s redevelopment agency allowed Alpha Omega to sell that property specifically for revenue to grade the site and install utilities throughout the development.

“If the developer were to walk away from the project, the city will have a construction-ready site with utilities that is ready to be developed,” Radke said.

McDonald said his company expects to make less than a 1 percent profit on the development.

“There’s such a critical need for senior housing that this project cannot fail,” McDonald said. “It won’t fall flat. It will get done. Every elected official you can imagine has been helping us.”

McDonald blames the project’s delays on unforeseen economic circumstances, including the drying up of the tax credit market for low-income housing construction. City officials agree.

The development, which will be financed mostly with state and city housing funding, has been scaled down from 600 units of senior housing to a minimum of 460 units, along with the grocery store, fire station, park, fast food outlets and other businesses.

Alpha Omega must build at least 400 of the housing units by the end of 2012.

The city can withhold the certificate of occupancy for the residential units if the fire station is not completed beforehand. Radke said the fire station is expected to cost Alpha Omega $3.3 million.

A neighboring landowner, Decatur Shopping Center Associates of 1401 N. Decatur, has sued the city, Alpha Omega and HJEE LLC, which is managed by Hipolito and Ana Maria Anaya, owners of Mariana’s Supermarkets. The lawsuit alleges that by constructing a fence around the proposed development, the defendants are violating a long-standing agreement with the city that allows shopping center customers to park on that land through 2013.

One of McDonald’s partners, James Bruce Bayne, complains that the lawsuit has delayed the Anayas’ plans to build the supermarket.

In their lawsuit, the owners of Decatur Shopping Center allege that while McDonald was still on the City Council, he told the shopping center’s property manager that the shopping center would eventually be taken over by the city for redevelopment.

While the city never initiated condemnation proceedings, the lawsuit states that McDonald’s mention of a potential eminent domain taking harmed the shopping center’s ability to market itself or make future plans.

McDonald “is the same guy who as a city councilman said years ago that my client was going to lose its property rights,” said Las Vegas attorney Daniel Foley, who represents Decatur Shopping. “That he’s now back as a developer doesn’t seem right.”

But McDonald said he never had any such conversation with anyone affiliated with the shopping center.

“That never happened,” he said. “I always fought for the people and I was always opposed to eminent domain. I was the only member of the council who voted against taking people’s property away to widen U.S. 95.”

As a politician who served on the council from 1995 to 2003, McDonald was known as a strong advocate for his ward who was commonly referred to as “Councilman Pothole.”

“Everyone who knows me knows that I always fought for seniors and for people who were less fortunate,” he said.

But McDonald, a former police officer, was also known for controversy.

He was found guilty of violating ethics laws by city and state ethics panels for advocating that the city purchase the Las Vegas Sportspark, which was owned in part by one of his employers.

McDonald lost his re-election bid in 2003 largely because he was a consultant to former strip club owner Michael Galardi who, along with four former Clark County commissioners, was convicted in a bribery scheme.

In 2004, a year after McDonald left office, Alpha Omega offered the city $8 million for the Decatur land. But a city-ordered appraisal concluded the land was worth $6.5 million.

By the time the city agreed to sell the 13-plus acres to McDonald’s company in 2007, fresh city appraisals estimated the value of the land to be as much as $9.6 million. Still the city agreed to sell the acreage for $6.5 million, the amount of the prior appraisal.

The Sun sought comment about the development from Ward 5 City Councilman Ricki Barlow, an ardent supporter of the senior housing project, and from Scott Adams, the city’s chief urban development officer, whose staff worked on the development agreement with Alpha Omega, but they didn’t return phone calls.

The only person speaking for the city on the matter so far is Radke.

“It is important to note that this site has been vacant and a blight on the surrounding neighborhood for many years, and there is a great need for senior housing in Las Vegas,” he said. “The city had a developer interested in the site and negotiated an agreement to yield affordable senior housing, a new fire station and retail on a site sorely in need of redevelopment.”