Gilbert paid millions too much for land, appraisal says

An independent appraisal has confirmed what land experts told The Arizona Republic months ago: Gilbert overpaid by millions for undeveloped farmland it bought two years ago for future parks.

The February 2009 purchase was made without an appraisal and generated criticism from local real-estate experts, who criticized the $300,000-per-acre price as "out of tune" with market conditions.

But town officials so far have declined to apologize to angry residents, and Town Manager Collin DeWitt insisted the deviation from market value was within an "acceptable" range.

"There is no denial that a higher price was paid for this land, but there is also recognition that the totality of this negotiation will benefit the town well past our memories of it," DeWitt said in a summary report.

Gilbert paid about $42.8 million for 142.5 acres of land in south Gilbert, but the land was worth $27.4 million, according to a report from Tempe appraiser Dennis Lopez.

Town officials say the actual difference between cost and market value is less than it appears because Gilbert also received $6.9 million in rights of way and easements in the deal.

In exchange for those components, Gilbert paid nearly $7.4 million for landowner Bernard Zinke's two homes and dairy infrastructure, allowing the town to bypass a potentially costly legal condemnation battle when it needs to raze the buildings to make way for wider roads.

In all, Gilbert spent $50.2 million for properties worth $41.6 million, still $8.6 million over the appraised value.

The town is paying $39,350 for Lopez's appraisal and a third-party audit by attorney Gary Birnbaum. The audit remains under the attorney-client privilege between the Town Council and Birnbaum, but it may be released to the public next week.

Former Town Manager George Pettit, who retired in February under pressure from a disgruntled Town Council, negotiated the transaction with Zinke directly.

The Town Council had directed Pettit to secure two future park sites in the town's underserved, still-developing southern region. Although the parks are not slated for development anytime soon, there was some urgency in securing the land before developers could snatch it to build more houses, Pettit had said.

"The purchase of open-space property for parks contended with the development of rooftops and agricultural efforts," DeWitt said in his report.

There were only about three locations that met Gilbert's requirements for site selection, and Zinke's properties were identified as the best fit, DeWitt said.

But the longtime dairy farmer was an "unwilling seller," and Gilbert had to raise the ante to persuade him to sell, he said.

The land deal included an 80-acre parcel near Greenfield and Chandler Heights roads, where the town hopes to build sports fields, a lake and ramadas. Gilbert paid $24 million for the land, which Lopez appraised at $13 million, or $162,500 per acre.

Three miles to the north, the town bought 62.5 acres of land at Greenfield and Germann roads for $18.8 million, well over the appraised value of $14.4 million, or $232,000 per acre.

Although it was standard town policy to order an appraisal on every land acquisition, Pettit neglected to do so for the Zinke properties.

It's the only time among numerous land acquisitions that Gilbert has not first ordered an appraisal, officials say.

News of the $300,000-per-acre transaction surprised many local real-estate experts, who wondered why the town would pay a premium price for land they felt was quickly depreciating in value.

Sources did not give a specific opinion on the value of the Zinke property, but they agreed it would not have appraised for $300,000 an acre, even at the peak of the real-estate bubble.

Gilbert used $10 million in voter-approved bond money along with about $32 million in public-facilities bonds to pay for the land.

Future system-development fees, paid by developers through construction permits, are expected to repay about $16 million, while $10 million will come from property-tax revenue. The remaining $16 million must come from the general fund.

Three sitting Town Council members, up for re-election this spring, voted to approve the land deal: Les Presmyk, Dave Crozier and Linda Abbott.

While stopping short of an apology for the controversial deal, town officials said they've tweaked the town's land-purchase policies to prevent a similar gaffe in the future.

by Parker Leavitt The Arizona Republic Jan. 8, 2011 12:00 AM





Gilbert paid millions too much for land, appraisal says