"Airport Land Use: Taxpayers lost out in McCarran land swaps"

Sunday, March 20, 2005

DEPRECIATING DEALS: Taxpayers lost out in land swaps
Records show buyer got back property for less than airport paid
"Hey, look, I'm always wondering how people are able to sell things at the
prices that they do. I wish I was that smart," Walker said. "You'd have to
talk to people in real estate who are a lot smarter than me. I'm an airport
director." - County Aviation Director Randall Walker
By ADRIENNE PACKER and J.M. KALIL 
The Las Vegas (NV) Review-Journal


On at least three occasions, land broker Scott Gragson traded property to
McCarran International Airport and then reacquired it nearly two years later
for less than he originally sold it for, a Review-Journal investigation
shows. 

That means the properties depreciated hundreds of thousands of dollars even
as the Las Vegas Valley ranked among the nation's hottest real estate
markets. 

Asked how that could occur, airport officials said the dirt lots lost value
while owned by taxpayers because the county placed deed restrictions on them
prohibiting certain types of development. 

In one case, however, Gragson reacquired a 15-acre parcel from the airport
and then sold it for a $1.8 million profit within nine days. 

"That deal is, very simply, crazy," said professor Mike Clauretie of the
Lied Institute for Real Estate Studies at the University of Nevada, Las
Vegas. "If there's no illegalities going on here, then this at the very
least is a grossly inefficient way for the county to deal with this land."
Questions surround another of the three deals in which Gragson traded the
airport land that he later reacquired. 

In June 2000, Gragson was preparing to trade to the county 15 acres near the
Las Vegas Beltway and Russell Road for comparably valued property the county
owned elsewhere in the valley. 

Before the deal was completed, Gragson persuaded county commissioners to
rezone 10 of those acres to allow denser residential development. 

The zoning change increased the value of the property by as much as $130,000
an acre, according to county planners. That, in turn, reduced the acreage
Gragson had to surrender in the land swap. 

The rezoning conflicted with the area's master plan. It also contradicted
the stated purpose of the pending land swap: to block residential
development under flight paths. 

Planning officials supported the rezoning. Airport officials opposed the
change in writing but did not speak at the June 21, 2000, commission
meeting. No one at the meeting mentioned that the property was under
consideration for a land swap. 

Commissioners spent less than 30 seconds on the matter. 

"Given the lateness of the hour and the fact your staff is in favor and
Planning Commission and Town Board -- we'll accept `yes.' " Gragson
consultant Tina Fierro quipped, drawing laughter from commissioners and the
audience. "Unless you want a full presentation." 

"Move for approval," Commissioner Mary Kincaid-Chauncey responded. 

The measure passed 4-0 with yes votes from Kincaid-Chauncey and
commissioners Lance Malone, Myrna Williams and Bruce Woodbury. 

Four months later, commissioners voted to buy the 15 acres from Gragson for
$3.2 million. Two years later, the commission voted to sell the land back to
him for $2.84 million. 

The land depreciated by $360,000, or 11 percent, in the two years it was
owned by the public. 

Commissioner Yvonne Atkinson Gates, who has criticized the airport land
program for years, said Thursday she was unaware Gragson was reacquiring
land he had previously sold the county. She said that information should
have been included in reports provided to commissioners in advance of board
meetings. 

"This whole land exchange (program), in my opinion, has been a joke,"
Atkinson Gates said. "Now this confirms my thoughts and suspicions and
concerns." 

Clark County Manager Thom Reilly said the discovery of the incidences in
which land was transferred back and forth between Gragson and the airport
triggered additional questions about the land exchange program, which
already is the subject of two investigations. 

"The closer we look at each exchange, whether it's through the media or our
own internal staff, it seems to be raising more questions about the
appropriateness of these land trades," Reilly said. "They don't pass the
smell test." 

Questions swirling around the land exchange process also have led county
officials to consider taking the program away from the airport. 

"It makes the further argument that zoning and real estate should be under
one roof and away from the airport," Reilly said. 

The airport has dabbled in real estate for decades, but its role
dramatically expanded in 1998 following its receipt of 5,300 acres of
federal land near McCarran under the Southern Nevada Public Lands Management
Act. 

The airport launched the land exchange program to limit residential
construction beneath noisy flight paths. The idea was to foster commercial
and industrial development there instead. 

Toward that end, McCarran officials attached deed restrictions to the former
federal land and began offering to trade it for privately held parcels. 

Gragson, the grandson of former Las Vegas Mayor Oran Gragson, has been the
successful bidder in 20 of the 46 land exchanges conducted by the airport. 

In January, the Review-Journal detailed a lucrative deal in which Gragson
acquired county land that had been advertised as cemetery-use only and then
sold it to a developer who plans to build a grocery store. Gragson's profit
in the deal was $5 million. 

Subsequent stories disclosed numerous instances where Gragson quickly
flipped publicly owned land for massive profits and raised questions about
the accuracy of airport land appraisals. 

The reports sparked an investigation by the Clark County auditor, Las Vegas
police and the U.S. Department of the Interior. The FBI is conducting a
separate probe. 

The three instances in which Gragson reacquired land he had traded to the
airport all involved property near Russell and the Beltway. 

The initial land trades occurred in 2000 and 2001. He reacquired the
properties, which totaled 40 acres, in 2002 and 2003. 

The appraised value of each parcel dropped while owned by taxpayers,
allowing Gragson to reacquire them for a total of $1.78 million less than he
had sold them for. 

County Aviation Director Randall Walker recommended that the commission
approve those and other swaps with Gragson. 

Walker said last week he was not sure whether he previously knew Gragson was
swapping land to the airport and getting it back later. 

"I don't remember it, but I can't say I wasn't aware of it at the time,"
Walker said. "We've had other requests to do that, and the answer has been
no." 

Walker said nothing illegal occurred in the cases where Gragson traded land
to the airport and subsequently got it back at a lower price, nor were any
county rules violated. 

But in retrospect, it probably would have been prudent to avoid trading land
back to Gragson, he said. 

"It's just cleaner not to do it that way," Walker said. "If we get it at one
value and then reduce the value and it goes to the same person, that takes a
lot of explaining. Any time you could avoid raising a question, I think
that's a good thing." 

Throughout the land exchange program, the airport has focused on acquiring
parcels and combining them into larger assemblages for release at some point
in the future. 

Out of the hundreds of parcels the airport has acquired, those returned to
Gragson represent half of what has been reintroduced back into private
ownership, Walker said. 

Walker said the Clark County School District had planned to build a bus
maintenance facility on one of the parcels ultimately returned to Gragson. 

But after that deal fell through, Walker said there was no reason to keep it
because it wasn't practical to fit the 15-acre parcel into a larger
assemblage. 

"We had this parcel we didn't really want. It was of no use to us," Walker
said. 

Upon reacquiring this parcel, Gragson sold it for a $1.8 million profit
within nine days, realizing a 64 percent profit. 

Walker maintains the land depreciated by having the deed restrictions placed
on it. Also, Walker said, the parcel had been further devalued by losing
about 2.2 acres of its developable area because a flood control channel was
installed along its southern boundary. 

However, he noted the second appraisal on this land was done 13 months
before the airport deeded it back to Gragson. Gragson's ability to sell it
for a quick profit likely stems from appreciation of the parcel during those
13 months, Walker said. 

Walker acknowledged some people might be skeptical that the land appreciated
in value 64 percent in that time. 

"Hey, look, I'm always wondering how people are able to sell things at the
prices that they do. I wish I was that smart," Walker said. "You'd have to
talk to people in real estate who are a lot smarter than me. I'm an airport
director." 

Walker said he did not remember details of the 2000 zoning change that
boosted the value of other land just before Gragson traded it to the
airport. 

The county's master plan, which is a guide to future development, designated
the two 5-acre parcels for use as a business or industrial park, uses
compatible with airport operations. 

The airport opposed the rezoning. 

"Staff believes the subject parcels to be more ideally suited for business
park/industrial uses," Walker wrote in his letter to commissioners. 

The zoning change would have permitted Gragson to build 180 apartments on
the site. It came at the same time he was negotiating to trade it to the
airport and had the effect of raising the value of the property just prior
to the land swap. 

Walker said he did not realize that the zone change was such a drastic
departure from the fundamental aim of the airport disposal plan -- to block
residential development beneath flight paths. 

But if there is going to be some type of residential development, Walker
said apartments are preferable to homes. 

"We're working very hard to keep residential away from flight paths," Walker
said Thursday. "If I had my choice, we'd have apartments over homes. People
with apartments have leases. If they don't like (the noise), they can leave.
If you have a house, you can't just pick up and leave." 

However, in a November 2002 county report obtained by the Review-Journal,
Walker called that argument "invalid." 

In that document, Walker expressed concerns that developers were targeting
airport land and successfully converting the zoning to allow apartments. 

One argument for such zone changes, Walker said in the report, was that
apartment renters can pick up and leave if they choose. 

"This argument is invalid, as current law prohibits local governments from
restricting multifamily dwellings to rental-only occupancies, and allows the
conversion of apartments to condominiums with little effort," Walker's
report states. 

Gragson did not respond to numerous telephone messages left at his office,
on his cell phone and at his home. 

Atkinson Gates, a four-term commissioner, has long opposed the land exchange
program but received little support from her colleagues. She acknowledged
that she often would not take part in land exchange votes out of disgust. 

"It makes the commission look stupid," Atkinson Gates said. "That's what
happens when you have bureaucrats basically running everything and the
commission is only that of a policy-making board. We rely on our staff to
provide us with adequate information. Otherwise, what good is the staff?"

Attached Graphic/Photo:

Falling land values.

Crews grade land for a future office park near Russell Road and the Beltway
on Wednesday. Land broker Scott Gragson traded the property to Clark County
in 2001, then got it back in 2003 for $745,000 less than what he sold it
for. He then sold it nine days later for a $1.8 million profit.

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