Riverwood project remains dormant
November 29, 2011
It has been three years since work began on a site along the northern border of Douglas County that moved more than 220,000 cubic yards of earth into a big pile.
It hasn’t been quite three years since work on the site of the Riverwood project halted, and in the interim, the project has been the subject of a grand jury investigation, three citations for errant dust by the Nevada Department of Environmental Protection and a lawsuit trying to break the contract.
The irony is not lost on neighbor Jerry Vaccaro that the project’s stated purpose to reduce blight has increased it, without providing a nickel’s worth of sales tax revenue it was designed to.
“If redevelopment was created to prevent blight, I blame them for creating blight,” Vaccaro said. “I want to know who’s going to step up to the plate and take responsibility of this.”
Douglas County commissioners are scheduled to hear a two-year review of redevelopment agreements including Riverwood’s on Thursday.
“I want the county to address past and present actions and who’s going to be responsible for this fiasco, that’s what I want put before the board,” he said.
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The county is in litigation against Riverwood, which Vaccaro said shouldn’t prevent them from discussing the project’s future.
County Manager Steve Mokrohisky said the county is in negotiations with the company to settle the lawsuit filed Nov. 1, 2010.
“The subject of those conversations is confidential under Nevada State law,” Mokrohisky said. “We are attempting to move forward with settlement negotiations to resolve the issues in the case. As I’m sure you are aware, this is a very complicated issue, but we are hopeful that we will be able to make some progress this year.”
The subject of that lawsuit, Riverwood developer Jay Timon feels no such constraint, saying the county’s lawsuit has created a major roadblock for the project.
“The Douglas County lawsuit will have a significantly negative impact on the county’s real estate industry well beyond Riverwood,” he said. “It has sent a very strong message to all real estate investors considering an investment in Douglas County.”
• • •
In an e-mail to The Record-Courier, Timon said it is his intention to continue work at the Riverwood site at some point in the future.
“We all wish the initial phases of Riverwood could have been completed as planned in 2009,” he
said. “However, I don’t believe it is fair to blame us for not being able to move forward given the catastrophic economic events that began in the late summer of 2008. We have had no choice but to adjust our plans as these economic events and the subsequent Douglas County lawsuit have played out. We are doing the best we can given the cards we have been dealt.”
While the county’s lawsuit makes it pretty clear that here people consider Riverwood a failure, Timon placed the project on his resume, posted to the Samuel Zell and Robert Lurie Real Estate Center at the Wharton School of the University of Pennsylvania, where Timon is pursuing a masters degree in adaptive reuse and redevelopment.
• • •
Douglas County looked to the hill on the Carson City line as a source of sales tax after learning that about 40 percent of county residents were making purchasers outside of Douglas.
Nevada’s tax structure limits the amount of property tax local governments can collect, and relies on sales tax to make up the difference.
For counties like Douglas, larger tax generators, such as Clark and Washoe counties, subsidize the county’s general fund. Fear that those subsidies might be taken away drove Douglas to search for new sources of sales tax revenue.
The county’s first effort to develop the north side of Indian Hills occurred by creating a redevelopment zone that encompassed a small portion of what would be the Carson Valley and Clear Creek Plazas.
In that agreement, the county offered a cash incentive based on maintaining a certain percentage of occupation. The money came from the increased property value of the land that had once been storage units, a printer and a number of other small businesses.
Redevelopment districts raise money by keeping increased property tax based on their value in the district.
Douglas County formed its redevelopment agency in 1997 with a deal that required the developer to build 100,000 square feet of retail space by 1999 in exchange for $3.5 million. That deal brought Home Depot and Target to the land south of Jacks Valley Road in northern Douglas County.
Having won big with its first foray into redevelopment, Douglas tried again offering the developer of Clear Creek and Carson Valley plazas $3 million to build a minimum of 12,000 square feet by 2004.
By that time, the county started requiring smaller commercial space, recognizing that the infrastructure required to serve 12,000 square feet could also serve much larger commercial projects. The company ended up building 14,000 square feet of retail space, which filled up quickly.
But just like any gambler on a streak, the ante kept going up.
• • •
The land that was to have been Riverwood was covered in sagebrush and managed by the federal government. But a desire to preserve the Valley’s green space resulted in an effort to find a source for money to purchase agricultural easements.
An effort to get federal legislation that would allow money raised through the sale of federal land to private interests was approved, and the county established a plan for that region to help improve its value.
In 2005, county commissioners approved paying AIG Baker, the developer of Carson Valley and Clear Creek plazas, $11 million to develop 4.67 acres of land. The proposal was similar to the one the county had with AIG Baker for the plazas, though the amount of redevelopment money increased.
AIG Baker spokesman Jay Timon told commissioners the company would build an 850,000-square-foot development between Topsy Lane and North Sunridge Drive east of Highway 395.
But AIG Baker never followed through on the purchase, saying they never found a major tenant for the property and by September 2005 the deal was declared dead.
Douglas County made its final $275,000 payment to AIG Baker for Carson Valley Plaza on Jan. 31, 2011.
• • •
While AIG Baker’s deal with the county was off the plate, its then spokesman Timon thought he could handle the development. Timon incorporated Riverwood Properties July 27, 2006.
By December 2006, Timon was standing before Douglas County commissioners seeking a $24.7 million deal to build 30,000 square feet of commercial space on property adjoining that owned by Carson City auto dealers Dink Cryer and Michael Hohl.
Timon did not own the property he purchased after the approval, something Vaccaro said should void the deal.
“When Jay Timon applied for $24.7 million he did not physically own one inch of real estate,” Vaccaro said. “When they awarded him the money, he was under contract with Jim McCallan to purchase less than three acres. How could Douglas County award a $24.7 million contract when the person didn’t own the property.”
However, county commissioners were aware that Timon had not yet purchased the property. The first paragraph of the resolution approving the deal said the property “is to be acquired by Riverwood.” Commissioners had previously approved the AIG Baker deal before the company purchased the property.
Commissioners voted 4-1 to approve the development on Dec. 21, 2006, with only David Brady voting against.
County Manager Dan Holler said at the time that the approval should serve as a catalyst to develop the surrounding property.
“The majority of the risk is placed on the property owner, there are no up front costs to the agency, if the private party does not perform there are no costs or obligations for the agency and the private sector investment creates the new tax increment to meet the agency’s future commitment,” he said in his report to commissioners.
Timon purchased three parcels of land in the north county consisting of 7.4 acres for $3.35 million in January 2007.
The agreement between Riverwood and Douglas County was advertised as a win-win for the county. Holler said that the worst that could happen was that Timon would build the commercial space he was required to and then stop.
Under the agreement, if there was a more than 51 percent change in management or control prior to the issuance of a certificate of occupancy by the county it could be terminated. It could also be terminated if a site improvement permit wasn’t issued by Dec. 31, 2009.
• • •
Announcing his plans to build a 240-room hotel in the May 4, 2007, edition of The Record-Courier, Max Baer Jr. came on the scene like the flaming oil derrick he wanted to serve as the calling card for his Beverly Hillbillies Mansion & Casino.
Baer purchased property along the east side of the Riverwood property after selling property he’d purchased in Carson City.
The struggle to approve Baer’s sign finally came to an end on the former actor’s 71st birthday on Dec. 4, 2008, nearly 18 months after the casino was first proposed. Work had also begun on the Riverwood development. But the dirt piling that started in November came to a screeching halt a month later on Dec. 9, 2008.
• • •
In the summer of 2008, the Douglas County grand jury released findings that the county had rushed into the agreement with Riverwood because County Manager Dan Holler feared a bidding war with Carson City.
The grand jury concluded that county commissioners were presented with outdated and “overly optimistic” research that did not allow for the current economic slowdown.
“With the downturn in the economy today and a general reduction in tax revenue, the Redevelopment Agency’s financial viability could be in jeopardy,” the jury said.
However, the grand jury determined that Holler and the county commissioners acted legally and in good faith.
“The grand jury also recommends that Douglas County not enter into future owner participation or similar agreements with any organization that does not agree to release financial statements to the public for the duration of the agreement,” jurors said.
As a private corporation, Riverwood LLC is not required to release financial data; however, jurors pointed out such information could have been required by the county in the redevelopment agreement.
That point was made again before county commissioners in March 2009, when they sought information about the project.
Commissioners were told that as a private company, Riverwood had no obligation under the agreement to reveal its status. The company had also complied with the agreement by beginning work before Dec. 31, 2009.
. . .
What did happen before Dec. 31, 2009, is that the Riverwood site began to make a nuisance of itself. The first of three notices of alleged air quality violations was issued to Timon when a 32 mph windstorm picked dust up from the property on April 28, 2009. As a result, Riverwood applied a chemical stabilizer to the site in May 2009.
Nearly four years after county commissioners approved the redevelopment deal with Riverwood, the county filed suit against the developer seeking to void the contract.
The county is basing its lawsuit on the assertion that the company failed to disclose it had sold part of its property to Max Baer between the time the development agreement was approved and when it went into effect.
According to court documents, Riverwood was the sole owner of the property on Oct. 18, 2007, when the county approved a development agreement. On Oct. 29, 2007, Riverwood sold a portion of the property to Max Baer, two days before the effective date of the agreement.
• • •
Vaccaro has been a vocal opponent of the project that sits across from his home from the beginning.
“Everyone wants to turn a deaf ear on what I’m protesting against, and what we have today is a result of not listening to my protests,” Vaccaro said. “Who is going to take responsibility for this disaster? Who is going to accept responsibility for this fraudulent contract they should have reviewed in the first place?”
Vaccaro believes that the contract was fraudulent from the start.
“I think if people put this under the microscope, they will find bonafide, certified proof that it was fraudulently handled by Dan Holler and Douglas County and that’s how this got passed,” he said.
“Under the present circumstances what have they come up with as a solution, the nuisance, eyesore and public health hazard?” he asked.
Vaccaro said he believes that the county is hiding behind the pending litigation.
“I’m asking them to put it on the agenda,” he said. “They are not proud of their record. There’s no defense for the mistakes they’ve made. Are they better off today than in 2004? They’ve created a fiasco.”
Unless the county can break the contract, there appears to be only three ways out: If Timon tries to transfer his ownership of the project or in September 2027 when the redevelopment agency expires. Or Timon could do what he said he hopes to do and find the backers to build Riverwood.