Part I - Desert visionary - East Valley Tribune: Thespeculators

Part I - Desert visionary

Print
Font Size:
Default font size
Larger font size

Posted: Sunday, October 9, 2005 6:52 am | Updated: 10:14 am, Fri Oct 7, 2011.

The father of Johnson Ranch has amassed more than his share of naysayers and opponents, but none can deny that George H. Johnson was right about one thing.

More than a decade ago, the Scottsdale-based developer envisioned a vast residential community in the Pinal County desert six miles southeast of Queen Creek, far beyond the edge of existing development.

The area was only accessible via dirt roads and had no power, drinking water or sewer connections. It had been designated for agricultural use and was surrounded by family farms.

Despite the warnings of economists and real estate experts — who said there wasn’t enough demand for homes that far from civilization — Johnson forged ahead, with a little help from county and state officials who facilitated the leapfrog development by approving zoning changes and sale of public land that made Johnson Ranch a reality.

"There was nothing out there at that time," Johnson recalled during an interview earlier this month. "Everyone thought I was crazy."

Ten years later, the area boasts about 20,000 residents. A slew of other developers have followed Johnson’s lead and built their own subdivisions, including The Villages at San Tan Heights, Copper Basin, Bella Vista Farms, Skyline Ranch and Circle Cross Ranch.

Growth in the suburb has outpaced that of communities much closer to big employment and commercial centers.

But growing just as fast is Johnson’s reputation as reckless and headstrong — and some say he’s operating on the edge of the law. He has made headlines frequently during the past two years, primarily because of his involvement in some high-profile water and land battles in Pinal County.

He’s been fined record amounts by two state regulatory agencies for failing to meet standards and follow rules.

His water and sewer utilities have been accused of using illegal means to intimidate or force out competition.

Johnson’s now-defunct La Osa Ranch project, a proposed 67,000-home community north of Tucson that would have become Arizona’s eighth-largest city at buildout, generated criticism in 2004 from environmental groups, American Indians, and the U.S. military, along with a lawsuit filed by Arizona Attorney General Terry Goddard.

The lawsuit, filed in February, contains 10 allegations of trespassing and environmental violations, mostly involving La Osa Ranch, including destruction of protected native plants, desecration of historical ruins, unlawful killing of endangered desert bighorn sheep and illegal discharge of well-drilling fluid and other contaminants into Arizona rivers.

Johnson has been involved in other lawsuits during the past two years, including some that accuse him of using his close ties with Pinal County officials to break laws and ignore commitments to his customers.

Through it all, he has adamantly defended his actions, sometimes asking forgiveness but rarely permission.

"There are not many environmentalists that like me, but they don’t understand what we’re trying to do," Johnson says. He insists that his goal has been to provide quality, affordable housing for working people.

One thing is certain: None of the controversy Johnson generates has deterred home buyers from flocking to the community that bears his name.

JOHNSON RANCH

At 7:30 on a Monday morning, a mile-long line of traffic trickles through one of the East Valley’s tightest bottlenecks.

Hundreds of cars and trucks edge westward down the two-lane Hunt Highway in northern Pinal County to a three-way stop that will take them north up Ellsworth Road, through the narrow streets of downtown Queen Creek and on to jobs and schools.

Before the week is through, the scene will repeat itself many times over.

"We have four rush hours a day," says Queen Creek Town Manager Cynthia Seelhammer, between construction crews, commuters and parents taking children to and from school.

At least 75 percent of the traffic passing through Queen Creek begins and ends to the southeast in Pinal County developments such as Johnson Ranch, San Tan Heights and Copper Basin. Only two roads connect the area to East Valley highways.

Queen Creek resident Alden Rosbrook says he has noticed a significant increase in traffic during the past 12 months.

"You can see it getting worse every day," Rosbrook says.

Road projects are under way or planned for the near future, but highways and parkways that would offer substantial relief are still years, if not decades, away.

Residents also have complained about the community’s expensive public services, scant local governance and lack of nearby amenities.

And yet the area’s builders keep building — at a rate of about 1,000 new houses per year — and buyers rush to purchase each home before the first batch of concrete is poured.

Several factors have contributed to the area’s growing congestion problem, including traffic obstacles such as mountains and washes, relatively cheap home prices and persistently low interest rates.

But it all began with Johnson Ranch.

George Johnson was largely unknown outside development circles in 1995, when he began seeking assistance from Pinal County officials and the State Land Department with the goal of building a 3,200-acre masterplanned community.

Although he had been active in East Valley real estate for about 20 years — primarily in Scottsdale, Tempe and Mesa — Johnson Ranch was to be his first foray into the more rural Pinal County.

Still, Johnson faced several hurdles. New neighborhoods would require roads, power, water, sewer, cable TV, trash pickup and other basic services. Furthermore, the land was all planned and zoned for agriculture, a far cry from the mediumdensity subdivisions Johnson and his investment partners envisioned.

The investment group included ABCDW LLC, a company managed by Conley Wolfswinkel, who received five years probation for a federal bank fraud conviction in 1993 and still owes taxpayers — plus a decade’s worth of interest — for his involvement in the Lincoln Savings and Loan scandal.

The partners already held about 1,500 acres of private land in the area. But much of the surrounding property they hoped to develop was state trust land, property that under the Arizona Constitution is to be sold for the maximum value and the money spent on public schools.

Johnson filed three applications with the land department in early 1995 to purchase a total of 996 acres of adjacent state land.

An internal memo from the land department planning and asset management section dated May 10, 1995, recommended denial of all three applications, arguing that because there was no development in the immediate area, the department would not be able to get much money for the land.

"Instead of the applicant, the ASLD should hold the property and benefit from an increase in land value that adjacent development will foster," planning and asset management adviser Melinda Schaefer wrote.

Schaefer noted that just weeks earlier, Pinal County officials had initiated an unusual comprehensive plan amendment at Johnson’s request to allow medium-density residential development on the land, even though it still belonged to Arizona’s taxpayers.

"Without the ASLD knowledge and at the request of the applicant, the Pinal County Planning and Zoning Commission on March 15, 1995, initiated a plan amendment on both the fee (private) and State Trust land within the proposed master planned community," the memo states.

However, Schaefer advised that selling the property at that time would shortchange the trust’s beneficiaries, Arizona schoolchildren.

"To dispose of the State Trust land for development now is premature and would not benefit the State Trust," she wrote.

Against the advice of Schaefer and land department economist Paul Palley, the department processed one of the applications and held an auction May 21, 1996, in which Johnson — the only bidder — purchased 136 acres of trust land for the minimum allowable price of $310,000.

That’s the current price of a three-bedroom home in the upscale Ponderosa Ranch section of Johnson Ranch.

PLANTING A SEED

Land department sales administrator Greg Novak, who still works with the department and was assigned to handle Johnson’s three applications, referred questions about the sale to deputy land commissioner Richard Hubbard, who has only been with the department since 2003.

Hubbard said he does not know why the land was sold, since that decision was made by the prior administration.

A memo written by Novak on January 11, 1996, appears to explain the department’s rationale for proceeding with the sale.

"If we move forward, the proposed disposition would be a ‘seeding’ venture in an attempt to facilitate and accelerate adjacent master planned development," Novak wrote.

"If successful, the master planned development will breed quality development and appreciate our remaining holdings which are quite considerable in this area."

Still, Novak’s memo does not explain why the department ignored previous arguments that it should postpone the sale of trust land until development was under way on adjacent private land.

The land department oversees about 9 million acres of state land granted to Arizona at statehood by the federal government.

The state constitution requires the land be managed for "highest and best use" for the beneficiaries of the trust, with the majority of proceeds going toward public schools.

Based on current market values, the trust could have received as much as 50 times more money if the sale had occurred today.

Johnson’s two other purchase applications were placed on hold by the land department with the intent of selling the land after its value increased. Johnson later withdrew his request to buy those parcels.

To date, the department has yet to complete another major land sale in the Johnson Ranch area, despite several pending requests.

Johnson says state land officials are now focused on selling parcels closer to metropolitan areas, because those sales are more lucrative.

"They’re doing the smart thing — they’re staying closer, getting the higher prices," he says.

"But what about the common man?"

Johnson has filed at least four additional applications to purchase state land since 1999, the year he sold the Johnson Ranch development to Scottsdale-based Sunbelt Holdings Inc.

None have been granted thus far.

"They don’t like us because we sued them for $60 million," Johnson says, referring to a complaint he filed in June against the state.

Johnson’s complaint is a counter action to Goddard’s lawsuit, filed in February, which accuses the developer of — among other things — negligent care of a herd of about 5,000 domestic goats that got loose from Johnson’s La Osa Ranch property and infected a nearby herd of rare desert bighorn sheep with a disease.

Many of the sheep suffered "blindness, scabbing and bleeding of the mouth," the complaint alleges, and at least 21 animals died.

His development company, Johnson International Inc., also is accused of bulldozing and clearing 270 acres of state trust land near the Ironwood Forest National Monument without permission, destroying native plants, wildlife and protected archaeological sites.

Johnson calls the state’s lawsuit "frivolous" and vows to clear his name.

"The truth will prevail," he says.

COUNTY TIES

The 73-year-old Johnson has a decade-long relationship with Pinal County. His development brought millions of revenue dollars to the county at a time when its economy had been struggling from the collapse of the mining industry.

He also paved roads, donated land for schools and raised money for San Tan Mountain Regional Park located in the county.

"That area’s pretty dear to my heart," Johnson said. "It’s been very good to us."

Family members of Pinal County manager Stan Griffis also have benefited from Johnson’s generosity.

Griffis’ son, Jeff Griffis, has worked for Johnson as a cable technician, and in October 2002 Johnson gave a plot of land worth an estimated $40,000 to Stan Griffis’ daughter, Michelle Griffis.

Stan Griffis has said he was not aware of the gift to his daughter, although public records show that she paid nothing for the land.

Although Johnson has racked up dozens of state Department of Environmental Quality violations and a record $80,000 fine for digging a well and transporting water without regulators’ approval, Griffis has remained a staunch supporter, often defending Johnson before the Arizona Corporation Commission.

During an April 2003 hearing, Corporation Commission Chairman Marc Spitzer criticized Johnson for using his relationship with Pinal County to defy DEQ requirements.

"With respect to compliance with DEQ, the first reaction we get is, ‘Well, maybe we can just have a Pinal County Board of Supervisors create a district and oust the commission’s jurisdiction and resolve the issue that way,’ " Spitzer said then.

During the same meeting, Commissioner Bill Mundell also criticized Johnson for getting developers in his service area to pay the entire $80,000 DEQ fine for him.

"They didn’t comply to begin with, and they don’t have to pay the fine themselves, and they keep their CC&N (certificate of convenience and necessity — the legal right to serve an area)," Mundell said. "What is the downside for Johnson Utilities for noncompliance?"

However, Johnson has maintained that the fines were simply the result of paperwork errors and did not affect the company’s service.

The Pinal County Planning and Zoning Commission also showed its support for Johnson in January 2004, refusing to vote against the proposed La Osa Ranch project in southern Pinal County despite pleas from a cavalcade of military brass, American Indian leaders, environmentalists and archaeological experts who attacked the project, calling it everything from a criminal attack on the environment to a potential threat to military victory in Iraq.

Representatives from the Army National Guard Aviation Training Site and Silver Bell Army Heliport, adjacent to the proposed community, warned the commissioners that La Osa Ranch would disrupt three of the state’s eight major flight-training routes. They said finding new routes would cost the Army millions of dollars and hurt the country’s defense effort.

"We’re being scrunched in with our ability to conduct operations if the La Osa development is put in place," Brig. Gen. Bruce Bodin said during the meeting. "It basically shuts us down."

Although the meeting ended with a continuance, an earlier motion to approve the La Osa project fell short by just one vote, with commissioners Alex Acosta, Ray Harlan, Pat Dugan and Dixon Faucette voting in favor.

"There has been nothing said here today that says, ‘No, you can’t do this,’ " Harlan said before casting his vote.

Still, in the face of negative media coverage statewide regarding La Osa Ranch, Johnson finally abandoned plans for the development and sold the property, along with a water company in Maricopa called Sonoran Utility Services, to Vanderbilt Farms LLC, owned by Ashton and Brandon Wolfswinkel, sons of Conley Wolfswinkel.

UTILIZING UTILITIES

Johnson owns more than 30 companies and has said he is worth approximately $200 million. Most of his businesses involve real estate or utilities, including water, sewer and cable TV.

Much of Johnson’s recent focus has been on expanding his utilities empire, and he has a reputation for using it as leverage against other developers and water providers — with the help of Pinal County officials.

In February, developer Lennar Communities Development sued the Pinal County Board of Supervisors for letting Johnson’s Sonoran Utility Services fail to provide water and wastewater systems by a contractually agreed upon deadline, resulting in big losses for the company because it could not sell new homes without utilities.

The lawsuit contends that Johnson convinced Lennar executives to put the Board of Supervisors in charge of special water and wastewater districts, and then hire Sonoran to provide those services to Lennar’s planned community in Maricopa.

According to Lennar’s complaint, the county supervisors ignored pleas to oust the utility or force Johnson to abide by the contract when he failed to deliver on his promises.

That’s when Johnson sold Sonoran Utility Services to Vanderbilt Farms — one of Lennar’s competitors.

"Now we’ve been told by Mr. Johnson that he no longer has any interest in Sonoran and he has turned over the entire ownership and operation to a Wolfswinkelcontrolled entity," Lennar attorney Clare Abel wrote in a letter to Pinal officials in March 2004. "We have no information about Mr. Wolfswinkel’s experience in water and wastewater utility management."

Lennar vice president Alan Jones told the Tribune in August that the water utility has been sold again, to a "reputable" utilities provider called Global Water, and that his company does not plan to pursue its legal complaint any further.

Another lawsuit, filed by Diversified Water Utilities Inc. in February 2002, alleged that the Pinal County Board of Supervisors conspired to take away the small water utility’s future business and give it to Johnson.

County officials again created a water improvement district that overlapped Diversified’s territory, and then put Johnson in charge of it, usurping Diversified’s statesanctioned right to serve water to the area.

After a two-year legal battle, Pinal County officials finally signed a settlement agreement in May 2004 dissolving the Skyline Water Improvement District and terminating a potentially lucrative 30-year service contract with Johnson-owned Shea Utilities LLC.

Despite their past differences, Diversified owner Scott Gray says he and Johnson have reached an agreement and are no longer fighting over territory.

"We look forward to working with Johnson Utilities for the betterment of our community," Gray says.

It’s unclear whether Johnson’s recent efforts to mend relationships with Lennar and Diversified are a matter of epiphany or necessity, his explanation sincere or scripted.

"You try to put away the past," he says, "and we’d much rather focus on positive things than negative things."

FUTURE DEVELOPMENT

Despite the La Osa failure, Johnson still has plans to create new communities that would stretch the south East Valley’s boundaries even farther.

One such project is detailed in an application Johnson filed in July 1999 with the land department to purchase 1,600 acres of state trust land east of Mesa in an area known as Superstition Vistas.

Johnson hopes to develop a master-planned community east of Ironwood Road near Baseline Road that would include "commercial, residential and resort hotel uses," according to the application.

Superstition Vistas comprises an area of nearly 400 square miles, including 275 square miles of state trust land, which local leaders say will be the East Valley’s next hot growth area.

But Johnson’s proposal covers the northern portion of the Maricopa County Flood Control District’s 19,072 acre Powerline Floodway corridor, which forms a protective barrier against severe flooding in Mesa.

Michael Wilson, property management branch manager for the flood control district, advised the land department in a September 2000 memo that building so close to the district’s 22 flood control dams would pose a danger to homes in the area and the dams themselves.

"The District has obvious concerns to not only the immediate area affected by this proposal, but also the overall effect that this proposal would have to the total flood control capability for this structure, related project features and the watershed it serves," Wilson wrote.

The East Valley Partnership, Maricopa and Pinal counties and Arizona State University’s Morrison Institute for Public Policy are conducting a $750,000 study to determine how the Superstition Vistas area should be developed. In the meantime, the land department has yet to resolve a legal dispute with Maricopa County as to whether the county should have been paying a fee for its flood control easement, which is on state trust land in Pinal County but managed by Maricopa County.

Still, the department plans to begin auctioning off a 1,650-acre portion of the area known as Lost Dutchman Heights within the next year, and officials say the property will go to the developer who commits to acting as primary planner for a much larger region.

State land officials met with more than two dozen real estate professionals in mid-July to explain their proposal, which includes selling Lost Dutchman Heights to the highest bidder, provided that the winner agrees to also pay for planning the 6,650 acres that surround it.

Last month, an Australian company called Lend Lease Communities was hired by the land department to help study geological conditions that will influence development. That company did not obtain any preference when the land is auctioned.

Johnson did not submit a bid for the project, but that doesn’t mean he plans to stop building lower-priced homes on the East Valley’s fringes for working-class people, with whom the developer said he identifies.

"I consider myself middle America," he said. "I may have a few more dollars than most, but I still have those values."

  • Discuss

Local Guitar Group Meets in Downtown Mesa

A local guitar group based in Mesa, Ariz. meets every other sunday for musical fun, community,...

Your Az Jobs