"With no guarantees to water, it was worth very little," Roman says the comptroller told the bank.

After four years in bankruptcy, Lakeview threw in the towel. On June 16, 1992, the firm defaulted on its loans and turned the New River land over to Valley National.

Conspiracy theory: After Lakeview's default, Del Webb acquired the New River property at less than market value as a result of a back-room deal of some sort.

Reality: Del Webb paid about as much per acre for the property as it has for other prime development sites across the country. It appears the company paid roughly market price for the land. No documentation has been made public suggesting the deal was anything but arm's-length.

Explanation: Roman says Valley National knew Del Webb had long been interested in acquiring the New River land. Del Webb and Lakeview signed an agreement in 1989 that provided an option for Lakeview to sell the land to Del Webb. That option, however, was never executed.

Several other potential buyers approached Valley National about the New River land, Roman says, but Del Webb made the best offer and had the financial strength to purchase the property.

"We had confidence that Webb would be able to perform at the closing table," Roman says.

The bank sold the land to Del Webb for $11 million, 15 days after Lakeview defaulted.

"I have a feeling there is an implication that we sold this at a discount to Del Webb because of some sort of deal that was going on," Roman says. "That simply was not the case. We sold the property to Del Webb at appraised value. That's what we did, and we took a loss." Despite taking a loss of at least $50 million on loans to Lakeview, Roman says the bank was delighted to sell the New River land for $11 million. "The value of the property was still dropping," he says.

The bank had another strong motivation to sell the land. At the time, the bank was being eyed by its eventual purchaser, Bank One. To make itself a more enticing target for a potential buyer, Valley National was aggressively selling more than $500 million in assets it had acquired by foreclosing on bad loans. Among those nonperforming assets was the New River land.

Valley National's efforts to improve its balance sheet paid off handsomely. Bank One's purchase of Valley National in 1993 increased shareholder wealth by more than $1 billion.

For Del Webb, the $11 million purchase price was nothing unusual. The price was right in line with other major land purchases the company has made in the last few years, especially when the $12 million water-lease payment to the Ak-Chin is factored in.

"That's more than what we paid for our Texas land, and close to what we paid for the Hilton Head [South Carolina] property," says John H. Gleason, Del Webb's senior vice president of project planning and development.

The county supervisors' auditorium is packed for the public hearing on the Villages.

The dividing lines are clear, although the logic is muddled.
Those against Del Webb's project speak in emotional language, frequently citing the reason they moved to New River was "to get away from the city."

They plead with supervisors to keep Del Webb out of their pristine environment. At the same time, they ignore the groundwater depletion, septic-tank pollution and piecemeal uglification of desert that already plagues their community.

Del Webb's proponents are cool and collected. A seasoned zoning attorney delivers a calm, analytical pitch that almost has you believing that 16,500 homes, three golf courses and a commercial center will benefit 5,600 acres of virgin desert.

The fray goes on for hours.
Outside, Del Webb chairman Phil Dion takes a break.
"Some people think we will live or die by this project," he says. "That's not true."

Dion says Del Webb has plenty of other development work on its platter around the country. But it is clear he expects approval.

High public demand for Del Webb's master-planned communities supports his case. Prospective homebuyers are camping out for days at a time, for example, to select lots at the company's new Terravita development in north Scottsdale.

Dion has no patience for critics living on mountainside homes overlooking Terravita, critics who say the project is a blight on the landscape.

"Why should we be forced to look at their ugly hillside homes?" he counters.

The us-versus-them attitude prevails throughout the night, and extends to the next meeting a few days later, when the supervisors finally approve Del Webb's master plan for the Villages project. Most of the critical issues--potential traffic problems, the question of leapfrog development, project density--remain unaddressed through the hours of meetings.

In offering an explanation of his "bigger-picture issues," Board of Supervisors chairman Tom Rawles unconsciously magnifies the shallowness of the debate on the Del Webb proposal: "We have no guarantees in a free society that no one will move in next door."

That is, no guarantees that someone with a spare $11 million and an Indian water lease might not settle in for a spell.

It is not certain that other developers will try to duplicate the Ak-Chin/Del Webb lease arrangement. That it was even completed caught many builders by surprise; its implications are just beginning to be discussed.

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