 Nevada BLM officials are trying
to explain to federal investigators why they diverted
millions of dollars of potential land-sale profits away
from U.S. taxpayers and into the pockets of two big-time
Las Vegas land-exchange operators. |
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| One of the organizations
reaping major profits on the transactions was the
American Land Conservancy, a wealthy and well-connected
San Francisco-based environmentalist land-trading
"non-profit" very active in recent years in
both northern and southern Nevada. Nevada
senators Harry Reid and Richard Bryan have both
introduced federal legislation to smooth the path for
several ALC-arranged land exchanges. Secretary of the
Interior Bruce Babbitt is a founding board member of the
organization. Operating as a
broker between private property owners in northern
Nevada, the Bureau of Land Management, and a select group
of Las Vegas land developers, the American Land
Conservancy arranges "sweetheart deals for everyone
but the taxpayers," says Charles E. Hancock, former
BLM appraisal chief for the state of Nevada. Hancock,
who retired from the BLM in late 1989 but continued to
monitor what he saw as deteriorating land-exchange
practices, in late 1994 wrote the Inspector General for
the U.S. Department of Interior. That
letter, detailed and eight pages long, set off a
year-long audit investigation of bureau land acquisition
practices in Nevada, beginning in early 1995, when Acting
Inspector General Joyce Fleischman launched a review of
the exchanges cited by Hancock. Those
exchanges included some managed by the American Land
Conservancy and others managed by Olympic of Nevada,
Inc., a Flagstaff, Ariz. firm. The
draft report of the IG audit is now circulating through
BLM offices in this state and Washington for officials'
review and comment. At the
heart of the problem, says Hancock, are self-serving,
grossly inadequate land appraisals which the BLM
knowingly approves, at both ends of the state and on both
ends of the land exchanges. These skewed appraisals
greatly raise the price when the government is buying,
then greatly reduce the price when the government is
selling. Pocketing
the difference between those prices and the actual market
value of the properties, he points out, are real estate
operators like the American Land Conservancy, Olympic of
Nevada, and the private parties that they represent in
the transactions. Losing out, he says, are the taxpayers
and the public. As
an example, Hancock cites the $27 million exchange of
private lands near Reno for federally owned subdivision
lands in Las Vegas in 1994 -- an exchange brokered by the
ALC. Twenty million of the sum was
the listed exchange value of 3,700 acres on Mount Rose.
That figure, says Hancock, was "grossly
inflated." He
notes that "the appraisal report did not include a
market approach to value, historically the most
dependable." Instead,
the Bureau of Land Management let appraisers hired by the
Galena Ski Resort, owner of the 3,700 acres, determine
value "based on a very sophisticated subdivision
modeling approach and use of a discounted cash flow
technique," the reliability of which varies greatly
and can be, he says, self-serving. And
Hancock, in his letter to the IG, did cite several false
assumptions underlying the appraisal. Those
assumptions included, he says, 1) that the U.S. Forest
Service had issued a permit for the development of ski
lifts, 2) that Washoe County had approved all permits,
and 3) that the parcel included 778 acre feet of water
rights. In
actuality, says Hancock, none of those assumptions were
true. But Galena Resorts, which had acquired most of the
lands in 1987 for about $800 per acre, was able to get an
exchange value from their ALC-brokered deal with the
government of about $5,400 per acre. Based
on a write-down of Galena's investment that the firm took
in 1993, Hancock estimates that the resort company's
total per-acre cost probably did not exceed $1,400 per
acre -- leaving a per-acre profit of about $4,000, or a
windfall of about $15 million. He
says the normal steps in such a deal are: 1) the ALC
takes an option to purchase the private party's land --
often for the grossly inflated price desired by the
seller; 2)
The ALC arranges with the Forest Service to deed the land
to the U.S. government when the BLM gives
("patents") to the ALC certain desired federal
land of a value equivalent to the private parcel's
jacked-up selling price, and then 3)
once the valuable federal land is at hand, the ALC
activates its option to buy the private parcel desired by
the forest service. Not
only does this procedure rip-off the American taxpayer --
the real owner of the public lands -- says Hancock, but
none of the process is really necessary if
environmentally sensitive lands need to be acquired by
the government. The Federal Land & Water Conservation
Fund has about $9 billion available to spend on buying
such land, says
|
Hancock, and those funds are basically
untapped. The impact of such
federal land-exchanges has been especially strong in the
fast-growing Las Vegas area. Clark County commissioner
Paul Christensen says it has become a "dumping
ground for land exchanges." And
BLM officials admit that they've been flooding the county
with land exchanges. More, they say, are being processed
in Clark County than anywhere else. In
the last decade, according to Mike Dwyer, district
manager for Clark and southern Nye county, the BLM has
privatized 17,380 acres, with another 17,000 acres
available for development. The
process, says commissioner Christensen, " is
destroying our environment for 'save-the-environment'
somewhere else." While
the developers using the land swaps make a profit, he
said, there is no benefit to the citizens whose taxes
paid for the infrastructure that made the county land
valuable in the first place. Instead,
said Christensen, it's the reverse: thousands of
additional people then move to Southern Nevada, and hit
the environment with more carbon monoxide emissions and
other growth-related problems. Back in
Reno, retired BLM appraiser Hancock says one reason the
federal land-exchange procedure has become so common is
that it has come to function as a supplemental source of
income for Department of Interior land managers. He
describes it as almost a land-buying 'slush fund,' since
it allows them to make land acquisitions without using
budget funds. Another
reason the swaps have become common, Hancock says, is
that the federal land managers don't have to justify
their actions by demonstrating the land they want is a
high priority. That
differs from the procedure required when monies from the
Federal Land and Water Fund are used, he says. "You
have to justify your priorities and a lot of these lands
that the government is picking up by exchanges ... would
never shake out at a high-enough priority that
knowledgeable people would say, 'Hey, yeah -- we should
go ahead and buy this with public funds.'" One
result of this land-exchange boom, he says, is that
"the Forest Service and BLM have acquired lands
which the public, if they ever looked at it very closely
and if it ever came up for a vote, would say, "Hell,
no. You're not going to pay that kind of price for those
parcels." Another
is the huge profits made by the two main private
land-exchange operators in Clark County, the American
Land Conservancy and Olympic of Nevada, Inc. Hancock
notes that until recently the ALC owed the federal
government $8 million for Las Vegas subdivision land
acquired by exchange in 1994 from the BLM. To help clear
this debt, the ALC offered the government land which had
been valued by a reputable appraisal firm that same year
at $4.7 million, on which the ALC held an option. But
when negotiations were completed, the government had
agreed to accept a new value for the land of $10.5
million. The result, says, Hancock, is that taxpayers are
now in hock to the ALC for a little over $2 million. "The
question is," he says, "how these people can
dabble in real estate" and yet remain
"non-profits." "We
know that they're making money when they transfer these
lands to the subdividers, and you and I couldn't do that.
Somebody would blow the whistle on us if we were out here
brokering sales between two people and then taking a
piece off the top." "My
fundamental concern," says the former BLM appraiser,
is to "let the public get the return on it. Don't
let the land conservancy feather their nest with it. To
my knowledge, they've never donated any bird sanctuary to
the public like the Nature Conservancy does all the time;
Nature Conservancy's set up some beautiful refuges around
the world, but this outfit, hell, they're just kind of
feathering their own pay scale, I suspect." Hancock
says he has filed formal protests with the BLM on about
ten of what he calls the "sweetheart deals"
arranged by either the ALC or Olympic of Nevada. In
the case of the first two protests, the BLM ruled that
citizen Hancock lacked the legal standing to object -- a
ruling that could only be fought by the retired appraiser
at great expensive, in the courts. "If
someone is digging a tunnel under Fort Knox," says
the retired appraiser, "you shouldn't have to have
'standing' to turn 'em in."
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