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Millions at stake in Scottsdale land case
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A court ruling is expected this month or shortly after the holidays on the validity of a lease that would obligate Scottsdale to pay private investors up to $10 million on land the city has condemned for a water treatment plant.
Bruce Washburn, deputy city attorney, said lawyers for Scottsdale and investment firm Hualapai LLC faced off in Maricopa County Superior Court Friday to argue whether a lease signed by Mayor Mary Manross is valid.
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If the court decides to enforce the lease, it could mean millions more in expenses for the city, said Dale Zeitlin, Hualapai's lawyer.
"It's likely substantial. The lease payments were roughly $1 million a year for 10 years," Zeitlin said.
In 2005, Manross signed a 10-year lease with the State Land Department on a 7-acre parcel between Hayden and Pima roads north of Loop 101. The first year's rent was $2,400, which increased to close to $1 million a year in years two through 10.
The city needed the land to expand its Scottsdale Water Campus treatment plant and planned to buy the land when it came up for auction in 2006. However, Hualapai outbid Scottsdale at the auction, paying $6.3 million for the site.
The investors' purchase threw a wrench into Scottsdale's plans. City officials had anticipated not having to make lease payments for those subsequent years after the city bought the land.
Hualapai, on the other hand, insisted that the lease be enforced and that the city pay rent to the investors. The investors are seeking up to $8 million in damages on top of the $5.2 million the city has already paid to take possession of the land through eminent domain.
A decision on whether the lease is valid would affect the value of the property, Washburn said. The two sides are waiting for that decision before proceeding with appraisals, he said.
"We're condemning the land, so we owe them the fair market value," Washburn said.
He said the lease is not valid because it was never approved in conformance with city law.
But Zeitlin said Manross was authorized to sign the lease, making it enforceable. Also, the city previously made payments to the state under the lease and has begun building on the land.
"The city has no right to be on that land unless they leased it," he said.
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