The World's Largest Land Lease Bill

Harvey McElhanon has put a lot of change in his jeans with his famous Arizona institution: the necktie-slashing western steakery in North Scottsdale known as Pinnacle Peak Patio. Since the 1950s, it's been a regular on the tourist circuit, pulling in busloads of folks from all over the world who want to chow down two-pound porterhouse steaks and cowboy beans.

But McElhanon is convinced somebody's been trying to chow down on him. This 59-year-old cowboy businessman is certain that one of the state major developers is conspiring with the Arizona Department of Land to get rid of him--to force him to give up his state land lease and move out so a newer, fancier development can replace him.

This isn't the first time McElhanon has thought he was the object of a secret plot. You get the impression conspiracies are as real to him as the hungry hawks circling the granite slopes of the mountains in his backyard. But this time, he bandies about a fist full of state records that back up his strange story. This time, Harvey McElhanon isn't just serving up beans.

"Maybe I'm just paranoid, but isn't this interesting?" he begins, thrusting yet another document forward.

IN 1983, HARVEY McELHANON decided to expand his patio to provide an outdoor cookout area. He already owned the ten acres the restaurant sits on, but he needed more room. He signed a ten-year lease with the state land department on a twenty-acre parcel just a short wagon ride from his property. For about $10,000 a year, McElhanon could cart all the tourists he wanted in a horse-drawn wagon to a cookout on those twenty acres. He put in a few picnic tables, a couple of grills, some bathrooms and a bandstand. A twelve-hour-a-day workaholic, McElhanon's expansion turned the restaurant from a little mom-and-pop steak house to a 1,600-seat turista trap that he claims grosses $4 million a year. He calls it the "World's Largest Western Steak House."

In 1986, McElhanon suddenly got the World's Largest Land Lease Bill. The state informed him it had reconsidered the value of his land, deciding it was worth $150,000 an acre and therefore, was raising his rent 1,500 percent. His bill went from about $10,000 to $150,000. The next year was even worse: the state now wanted $300,000 a year to lease a piece of dirt for outdoor barbecues.

McElhanon has discovered that his new bills started arriving a year after developer Jerry Nelson told the state he and his associates wanted to buy 640 acres of public land in the area for an elegant housing development that included a city park, a desert museum and shops. Nelson, who has a 20 percent interest in the project, wanted to call it Troon North to play off the success of his Troon Village development. Oh yes, and the development plan just happened to include McElhanon's twenty-acre cookout site.

However, Nelson says, he doesn't even want McElhanon's twenty acres, and "never did." "Most of that twenty acres is zoned commercial. That was highest and best use for benefit of the people of Arizona," he says. "It is zoned for offices and restaurants. Perhaps someone will put in competition for Mr. McElhanon, I don't know. Perhaps somebody can come put an attractive cowboy restaurant on that land.

Nelson grumbles: "People who have state leases should not have the advantage over others in the marketplace. He has the lease. I don't have the lease. He does. Don't put his shoes on my feet."

McElhanon doesn't believe Nelson. "They want a class development and I am an eyesore," McElhanon says, admitting his place sits like a poor pitiful cousin in an area where rich folks now live. "You don't do the things that happened to me unless you want to eliminate somebody. I think Jerry Nelson has tremendous clout with the land department."

State Land Commissioner M. Jean Hassell bristles at the suggestion his department persecuted McElhanon because it was cozy with Nelson. "I don't even know Jerry Nelson," he says. "I've met him and I've shaked [sic] hands with him, but I don't know him. I would definitely not call his relationship with the state land department cozy. He has no reason to be cozy with us, nor we with him." Hassell says the department must have upped McElhanon's the lease because the land was rezoned to commercial and reappraised. Even so, he acknowledges that upon becoming commissioner in 1987, he instantly saw the rent was excessive and began negotiating to bring it down. But Hassell says--and McElhanon agrees--the two could never negotiate a lower rent. "I told him two things. I told him we'd set a reasonable rent based on his use of the land. I also told him we would not renew his lease when it expired. I was fair and straightforward with him. There is no conspiracy."

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Terry Greene