ARIZONA'S ISLAND PARALYZE

THE STATE HAD GRAND HOPES FOR DEVELOPING ITS $80 MILLION ISLE IN LAKE HAVASU. IT'S BEEN A REAL BEACH.

When Robert P. McCulloch was building Lake Havasu City in the late 1960s, he needed something to draw settlers to the sparsely populated lake on the western Arizona border.

So he purchased the London Bridge, dismantled it, and rebuilt it at his fledgling aquatic playground, hoping to lure buyers into the development.

A bridge needs something to cross, so McCulloch dredged a channel for his expensive ornament to span. In the process, he severed more than 1,000 acres known as Pittsburg Point from the mainland and created the state's only habitable island.

Since its curious birth, the island has sat largely unchanged, a vast, brushy, brown lump dotted by a few mobile homes, an abandoned airport and a cantankerous old sewage treatment plant.

It's referred to simply as "The Island" by locals who cross the bridge to walk around it or loll on its barren beaches.

Had McCulloch been a man of lesser ambition, he might have spared Lake Havasu City--and Arizona officials--one of the most protracted and vehement land fights in the history of a state that has seen many.

Since McCulloch's death, the island has become state property. Arizona acquired it from the federal government in a swap valued at $80 million, or more than $76,000 an acre. It is among the most expensive pieces of land the state has ever acquired--a price more suited to high-rise lots along Central Avenue in Phoenix than to lizard habitat. In fact, 80 million dollar bills would cover The Island, three inches deep.

Hoping to recoup some money from its investment, the state has spent ten years and more than a half-million dollars trying to develop The Island in some fashion, including building houses on it.

But those efforts have run head-on into fierce resistance from residents of Lake Havasu City, where political guerrilla warfare is something of a local sport.

City residents point out--correctly--that state officials (and the feds before them) promised them in writing when they took over The Island that no homes would ever be built there. The Arizona Land Department, they believe, is trying to welsh on that deal. So for years, local politicians and irate residents have locked horns with the government, blocking every effort to do something with The Island.

After years of contention and aborted negotiations, the fate of McCulloch's creation remains unfathomable.

The state is making next to nothing on its $80 million investment, and local residents are unwavering in their efforts to block unwanted development.

Now, in a bizarre development that makes sense only to locals, a shadowy group known as the "Stakeholder's Process" is negotiating the future of The Island. The group meets in secret and keeps no records of its discussions.

Secret negotiations by an ad hoc committee to decide the fate of an $80 million island that the state owns but cannot touch, an island that can only be reached by crossing London Bridge?

What hath Robert McCulloch wrought?
@rule:
@body:Historians say that disputes among Native Americans who lived along the Colorado River were settled with long wands made by stripping branches from trees pulled from the ground. Perhaps the land that became The Island was a source of debate even then. That might explain why almost no trees grow there now.

As the white man marched west across the continent, the forbidding land that is now Lake Havasu City generated little interest. But there were a few hardy souls who found that sun-baked stretch of the Colorado River inviting. When they yearned to revisit civilization, they faced a two-day journey south to the Parker Strip, defined in one government document of the day as "a place for tribeless Indians and shiftless white men."

Nothing much changed until just before World War II, when Southern California began to notice its growing thirst. Los Angeles and the cities around it formed the Metropolitan Water District, which built the Colorado River Aqueduct and the Parker Dam. The dam created 45-mile-long Lake Havasu.

At about the same time, army engineers surveyed and plowed a series of emergency airstrips in the region. One of these was Site Six, on Pittsburg Point overlooking the new lake. During World War II, Site Six became a rest camp for battle-scarred air crews, complete with rough barracks and a mess hall. Adventurous visitors could try burro and rattlesnake meat as well as more standard fare.

In 1946, ownership of the camp at Site Six passed from federal hands. Vic and Corrine Spratt left the bustle of Needles, California, to operate the place as a hunting and fishing camp. Visitors who remember say the new owners left the original menu pretty much intact. But fishing was good and the Spratts made a modest income from the crude resort.

Robert P. McCulloch roared into this bucolic scene in the early 1960s and changed it forever. He picked Lake Havasu as a place to test the outboard motors his company manufactured, and then went a step further. He bought a bloc of land next to the lake and decided to put a city there: Lake Havasu City, where people could work at his factories and enjoy fishing and water sports, as well. From the mid-'60s to the late 70s, McCulloch's own fleet of aging airliners brought prospects from as far away as the East Coast to see and buy Lake Havasu City.

While McCulloch was staking out lots in the desert for sale, Interior Secretary Stuart Udall began looking at the lake, as well. In 1964, the Department of the Interior published a study of the land along the Colorado River. The 400-page document made one thing clear: Usable riverside land was too rare and valuable for private development. It had to be held for public use "in perpetuity."

Udall's study found that most riverside land was just too rough and rocky for camping and launching boats. But one area stood out as a great place for public use to be maintained: the land around newly planned Lake Havasu City, including Pittsburg Point.

McCulloch's salesmen pounced on this policy with feral glee. They promised their bleached prospects, still dizzy from plane rides out of Chicago or Kansas City, that the area fronting the lake would be maintained in its natural state forever "as a federal park." Those early lot buyers remember the promises, and they can produce tattered brochures from their scrapbooks as proof. According to these old tracts, what is now The Island and the land around it was never supposed to be the site of homes.

The U.S. Department of the Interior, as it often does, contracted with Arizona's Land Department to oversee the public use of this important land. The Land Department, in turn, contracted with the Arizona Parks Department to manage the designated parks. The Parks Department allowed McCulloch to work on its behalf as "master concessionaire." That contract, struck in 1965, put the California entrepreneur and his company in charge of this public land, able to subcontract with lessors and get a percentage of the fees paid the feds every year.

With control of Pittsburg Point, McCulloch bought that outdated bridge from the City of London in 1968 and transported it, stone by stone, to Lake Havasu City. The channel was gouged to create The Island. The novelty bridge quickly paid for itself, attracting a new wave of lot buyers and guaranteeing the town's commercial success.

The Island languished for nearly two decades. A few businesses leased land for "approved" uses: a marina, a hotel, a camping facility. McCulloch himself bought 100 acres in The Island's center for future development. Things might have remained quiet to this day if it hadn't been for the Central Arizona Project.

@rule:
@body:By 1985, CAP was well under way, and the federal government had a problem: It owed Arizona a lot of money for land used to dig the canal to Phoenix and points south. So a deal was cut. The feds offered the Arizona Land Department $100 million worth of federal land in exchange for state land gobbled up by CAP. State officials looked around and found one piece of land they really liked, land purportedly worth more than four-fifths of the deal they finally struck. The real estate they liked so much was The Island, along with other federal lands around Lake Havasu City.

At first, no one noticed much change. The land would be state park instead of federal. But the state Land Trust--proceeds from which subsidize public education, among other government causes--had other plans.

"Our objective," deputy state land commissioner Glendon Collins says, "has always been to get the value of this land out for the trust. It is a major asset and it has potential to create revenue, to ease the burden on Arizona's taxpayers."
But The Island lies inside Lake Havasu City's boundaries. And when Collins and his aides came to town to explain its new status, the townsfolk grew restless.

"We had almost 600 people show up at the high school," James Spezzano, the city's mayor at the time, recalls. "The people from State Land brought two DPS people with them, for protection." A retired labor negotiator, Spezzano worked hard to protect his small city's interests.

"We wanted to prevent the state from developing that land without any input from us," he says. "We wanted to get our foot in the door to try and direct some of those negotiations."
For a man with no cards to play, Spezzano did pretty well. He got state officials to give Lake Havasu City land on The Island already containing their sewage treatment plant, and control of old Site Six.

But the most important part of the "memorandum of understanding" that Spezzano and Land Department officials signed promised there would be no residential development on The Island. Ever.

By this time, McCulloch had long since passed from the scene (when he died in 1977, almost all of the 17,000 lots in his dream town had been sold) and control of his land interests in Lake Havasu City had devolved to MCO Corporation, the Fountain Hills subsidiary of Houston-based conglomerate MAXXAM. And MCO, which still managed The Island as "master concessionaire," had other ideas about building houses.

First MCO sued the state Land Department to establish its continued place in all land decisions affecting The Island and its continued cut of all concession fees--a lawsuit it won in 1990. Second, the company began attempts to develop the 100 acres it got from McCulloch, only to hit the brick wall of Lake Havasu City's government.

There have been at least four planning efforts financed--in whole or in part--by the state since the mid-'80s to figure out what to do with its $80 million real estate diamond in the rough. The planning efforts have cost more than $600,000 and none has seen the light of day. Most recently, a two-year effort that cost more than $250,000 broke up on the rocks and shoals of Lake Havasu City government examination.

The common denominator in all the failed plans: Each called for some residential development. Houses on The Island are bitterly opposed by a vocal group of Lake Havasu City old-timers, including most of the real estate community.

Gary Baumkirchner, a red-haired fireplug of a man, has been a driving force behind this opposition. Baumkirchner founded and runs the largest real estate firm in the area. His company is behind one out of every four houses sold in Lake Havasu City, where every third person seems to be selling land or building houses, or both.

So why would a town's biggest realtor fight having more houses to sell? It seems odd, especially when those houses would be in a very special place--Arizona's only island. Baumkirchner himself has called the idea "a real estate company's delight."

Baumkirchner and his allies claim they're acting to preserve the promises they gave Lake Havasu City's buyers 20 years ago, and to protect the area's beaches and coves for the people who live there now.

"I don't know what gives MCO the right to come back here and change their minds after 20 years," the fiery realtor says. "I'd like to see us explore other directions. I've never had anybody come up to me and say they want residential on The Island. I would personally like to see resorts instead."
Resorts would make sense, except for one problem: Getting to Lake Havasu is difficult. Whether you drive north from Yuma, west from Phoenix or east from California, the roads are two-lane and narrow. There's an airport, with two flights out when the weather permits, but it can't accommodate jetliners. As a result, the hotels are seldom full, except during spring break.

Although MCO and the state consider residential housing imperative to developing The Island, Baumkirchner is steadfast in his opposition.

"They're ripping the heart out of our city to repay debts for Phoenix and Tucson," he says. "Why are we constantly having this [residential housing] shoved down our throats? The only people who want this are State Land and MCO. Our future is at stake here. You'd think the State of Arizona would want to preserve recreational land. The demand for it goes up every day."
Baumkirchner and his allies are formidable. The last time MCO tried to push development plans through the city, Island defenders raised opposing petitions signed by more than 6,000 in a matter of weeks. In a town where 4,000 votes wins a city council seat, politicians took notice. Many Lake Havasu City residents are willing to see more than a rusting sewage treatment plant and an old airport on The Island. They talk of beaches, parks, tennis courts, hiking trails, even golf courses. These things cost money.

Public funds could be used to pay for such amenities, if they were available. They're not. The little city has its hands full financing basic infrastructure.

State land commissioner C. Jean Hassell thinks he has the answer, if he could only get Lake Havasu City's politicians and zealots to agree.

@rule:
@body:Hassell is a friendly bear of a man, as tall as Baumkirchner is short. He smiles a lot and speaks with a disarming drawl. But The Island has taxed his patience.

"There's just no place like it," Hassell says, referring not to The Island's terrain but to Lake Havasu City's political landscape.

State Land's solution to local needs and state demands for revenue is the proverbial "public-private partnership"--developers who buy state land on the Island would pay fees to finance the parks, beaches and other public facilities people in Lake Havasu City want.

The hitch: According to Hassell and his advisers, the only economically feasible plan calls for residential development, and that raises the hackles of locals and starts the debate all over again.

Hassell's hopes are simple. "I would at least like some plan that would make sense, that we could agree to and get that behind us. I look at that Island and all I see is just a fantastic opportunity for Lake Havasu City," he says.

After two years of work with planning consultants and a citizens' committee, a plan that everyone could live with seemingly took shape last year. Sure, there were houses, but they were surrounded by a ring of public beaches and parks that circled The Island. Even Baumkirchner, who sat on the committee, seemed to grudgingly accept the plan.

But the plan contained a time bomb. All the drawings showed a golf course snaking from what's now the deserted airport. Everybody seemed to like the golf course, and it became the centerpiece of the whole concept. Everybody but MCO, that is. Company executives said the golf course was unworkable because it would meander through land owned or leased by at least four different entities. As a replacement, they called for a series of parks.

State Land agreed with MCO.
"That's it!" Lake Havasu City Mayor Richard Hileman reportedly said. "The Land Department has just killed the plan."
Hileman turned the controversy over to a group called the "Stakeholder's Process," which has acted outside the eye of public meetings to collect basic points of view from all sides of the debate.

The Stakeholder's Process--an odd combination of debate by mail and smoke-filled room--is spearheaded by Richard Rumage, a retiree whose previous claim to fame was the ability to write a series of locally printed opinion pieces in the almost unreadable jargon of an old miner.

Is such a process legal? Dan Barr, Phoenix attorney and spokesman for Arizona's First Amendment Coalition, isn't sure.

"Clearly, it violates the spirit of the open meetings law for a public body to have given their authorization totally to this group," he says. "It's kind of a de facto advisory committee. . . . It's certainly very disturbing."
Disturbing it may be, but the good people of Lake Havasu City have small regard for the niceties of constitutional law. To local politicians, the bizarre process provided breathing room, time to allow tempers on both sides of the debate to cool. It is also a chance to cut deals without having to worry about the press. Although both local newspapers squawked to open the process for a few days, no serious opposition was ever voiced.

The unofficial, private group invited Hassell to play, and the land commissioner accepted. "I agreed to participate in this," he says, conceding that he feels a sense of urgency to recoup on the state's $80 million Island.

Still, he says, nobody is standing in line for a chance to develop The Island.
"I think people are scared to death of Lake Havasu City," Hassell says.
But MCO still owns that 100 acres, and the descendant of McCulloch's empire is tired of waiting for a solution. Beginning last month, MCO execs moved to build 500 homes on their Island land. Their stated threat to the city: Let us build or we'll sue.

"We saw no real end in sight," says MCO exec Greg Bielli. "We just kept hearing about erosion of our position." Bielli worries that the current plan for The Island progressing through City Hall looks like one that will prohibit houses. MCO wants to break ground before the city and state can stumble into such a deal.

"If they don't accept our application, we have possible legal remedies," Bielli says.

@rule:
@body:Despite the protracted imbroglio, state officials attempt to put the best face on The Island saga. They stubbornly defend their decision to take The Island off the feds' hands.

"Despite all we've been through," the Land Department's Glendon Collins says, "The Island remains an excellent asset."
Not everyone holds that view. Land appraiser Paul Johnson (no relation to Phoenix's ex-mayor) calls the $80 million figure "too expensive" for The Island, whose recent history he terms "a mess."

Longtime Lake Havasu City resident Ken Standal, executive vice president of the local board of realtors, says when it comes to The Island, everything is relative.

"If you put it on the market today, you probably wouldn't get a penny for it. You'd have to sell it for $100 million, and who'd want to buy it?" he says.

Standal believes no useful appraisal of The Island's value has ever been done. "It seems to me the only way it can be appraised is as it's developed. No one's ever gone outside the community to find [the value of] comparable properties," he says. "I think to get a true appraisal of The Island, that's exactly what you'd have to do."

Bob Deitrich, whose California appraisal and consulting firm has done work in the Lake Havasu area, is more optimistic.

"In 15 years, that land will become very valuable, when the current leases are up and the Land Department can sell or lease it. On that basis, I think it was a good long-term investment," Deitrich says.

But after nearly nine years of wrangling, Land Department officials are hungry for a plan that would show some promise for a return on their investment.

"In Lake Havasu City, we get one problem solved and it just sits there and waits for another," Collins laments.

So if he had to do it all over again, would Collins urge the state to acquire The Island?

"I'm not going to answer that," he says.

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