Scottsdale is close to settling a costly condemnation case for state land that took a decade to acquire.
Earlier this month, the Scottsdale City Council agreed to pay Hualapai LLC nearly $7.8 million for 6.9 acres of land the city needed for a water treatment plant.
In July 2006, Hualapai outbid the city for the land at an Arizona State Land Department auction. Hualapai bid $6.16 million for a property that was appraised in early 2006 for $4.86 million.
Both sides agreed to the settlement that still must be approved by the Arizona Court of Appeals and Maricopa County Superior Court, Scottsdale City Attorney Bruce Washburn said.
"The council approved this settlement and in my opinion it was beneficial to have this matter resolved," Washburn said.
Scottsdale's complicated condemnation case, with nearly six years of litigation, involved some unusual twists and speculation on land values that were at least $8 million apart.
Scottsdale got the cart before the horse when it leased the land from the state in 2005 as it started a $35.8 million expansion of its Central Arizona Project water-treatment plant. The trouble started when the city got outbid for land it intended to buy.
Ultimately, the two sides agreed to negotiate a price for the land between $5.27 million and $13 million. The site is west of Pima Road at Hualapai Drive just north of Loop 101.
Bidding war for land
At the State Land Department auction in July 2006, Scottsdale and Hualapai submitted 14 bids between them starting at $4.86 million before the city bowed out.
"Hualapai's strategy as they described it themselves was to take advantage of the lease the city entered into," Washburn said. "They always intended to sell the land to the city."
It's "impossible to know" whether the city could have ultimately saved money by continuing the bidding war with Hualapai rather than go through condemnation and the legal battle they ultimately chose, he said.
Hualapai and its principal Robert Kimball of Paradise Valley and the company's attorney did not return calls seeking comment.
Scottsdale applied to buy the land in 2002 but the property was not appraised and brought forward for auction until 2006.
The State Land Department agreed to lease the land to the city in late 2005 so it could start construction on the treatment plant to meet federal requirements.
The 10-year lease was structured so that the city would pay $2,400 the first year and $1 million per year after that. No one was worried about the $1 million payment because Scottsdale assumed it would own the land in less than a year.
When Hualapai won the bidding, it argued that the $1 million lease set the value of the land higher than the city's estimates.
City fought to exclude lease
Scottsdale, which filed its condemnation lawsuit in September 2006, argued that the lease was invalid because then Mayor Mary Manross was the only person who signed the document and it had not been approved by the City Council. Superior Court Judge Jeanne Garcia ruled against the city in a summary judgment and declared the lease valid.
Scottsdale won a summary judgment on a motion to exclude the lease by invoking the project-influence rule. Under that provision, in a condemnation case, the market value cannot be positively or negatively altered by the public project that spurred the condemnation.
That led to the negotiated settlement.
Scottsdale has already paid Hualapai $5.2 million because that was the agreed-upon minimum value of the property.
The Scottsdale City Council on July 3 authorized the remaining payment of $2.52 million to settle the case with Hualapai.
by Peter Corbett - Jul. 19, 2012 The Republic | azcentral.com
After 6 years, Scottsdale is settling state-land case
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