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How developers and businessmen cash in on Grand Canyon overflights

 

Tusayan, Arizona

In the lobby of Papillon Helicopters' terminal at Grand Canyon National Park Airport, Enrique Ochoa stared at his smart phone, searching for a WiFi signal.

Unlike the scores of late-April tourists, who were waiting to board one of Papillon's noisy helicopters for a $175, 30-minute Grand Canyon sightseeing flight, Ochoa was simply trying to get some work done. Just a few days into his new job as Tusayan's first town manager, he was clearly frustrated.

He'd abandoned his 100-square-foot windowless office, tucked into the heliport's basement, because it lacked WiFi reception. The signal in the lobby was iffy, too. "It's difficult to get much done without access to the Net," said Ochoa, a Stanford grad and the former city manager of Arvin, Calif.

He maintained a sense of humor about his strangely located office, but it indicates a problematic relationship. A powerful consortium of developers -- including Papillon Helicopters' owner, Elling Halvorson -- has apparently taken control of tiny Tusayan, Arizona's newest incorporated town. Their increasing influence could have huge impacts on the national park, whose main gate is just two miles away. Halvorson's Italian partners -- the Percassi Group and its real estate affiliate, Gruppo Stilo USA -- have been secretly negotiating a zoning and development agreement with a private consultant hired by the Tusayan Town Council. Even Ochoa -- the town's only staffer -- didn't know the details, but the outline made public by the developers would transform Tusayan, which currently has only about 500 residents, into a world-class destination resort.

Gruppo Stilo's website envisions high-end stores selling luxury goods, four- and five-star hotels, time-share condos, a European-style health spa, a Western dude ranch, an entertainment pavilion featuring Native American themes, and a wide price range of residential housing meant, in part, for people who work locally.

Tusayan, such as it is, is the closest gateway town for the nation's second-busiest national park. (Great Smoky Mountains back East is the busiest.) The looming mega-development here coincides with the Arizona Department of Transportation's plans to spend $28 million to expand the local airport over the next three to five years. The airport project, funded primarily through federal grants, is expected to attract regularly scheduled commercial jet traffic -- bringing another 600,000 visitors to the park each year, state officials say, on top of the 4.4 million that currently crowd it during the tourist season.

The park's roads, parking lots, hotels, restaurants and other services are already chronically overwhelmed; if the Halvorson/Gruppo Stilo development and the airport expansion are both completed, the stress will only get worse. "Our infrastructure is not going to be able to handle a huge increase in visitation with large jets coming into the airport," said Mary Killeen, Grand Canyon National Park's chief of planning and compliance. The demand for canyon air tours, which already exceed 48,000 flights a year, will also likely increase, adding to the revenues for several of Halvorson's tour companies, which provide about 80 percent of the canyon's total helicopter and airplane tour flights (including four-hour excursions that sell for about $400 per person).

The prospect of even more air traffic comes at the same time that Grand Canyon National Park has released a long-awaited draft environmental impact statement on limiting canyon flights to restore natural quiet to more of the park. The DEIS was set in motion by the 1987 National Parks Overflights Act; the public can comment through June 20.

There are many concerns about all this ramped-up development on the park's doorstep. For example, where will the water supply come from? The developers have not disclosed where they intend to get water, but one of their attorneys mentioned drilling wells 3,000 feet deep into the aquifer. Some worry that would threaten the tributaries that flow down to the Colorado River at the Grand Canyon's bottom. "I really don't think a major expansion of facilities can be supported by pumping groundwater without some effect on seeps and springs in the canyon," said Carl Taylor, a member of the Coconino County Board of Supervisors, whose district includes Tusayan.

But like Ochoa, park and county officials have been excluded from the development negotiations between Tusayan and the Halvorson/Gruppo Stilo team. Only after the negotiations are completed, which should be sometime this summer, will the plan be presented to Tusayan's town council. And the developers appear to have plenty of allies on the five-member council.

Halvorson's companies, which include the 250-room Best Western Grand Canyon Squire Inn and an IMAX theater, employ hundreds of people here. Mayor Greg Bryan manages the inn, and two other town council members also work for Halvorson companies. A fourth council member, Vice Mayor Cecily Maniaci, operates restaurants in buildings she leases from Halvorson.

Meanwhile, the developers -- directly or indirectly -- have been the primary financial backers of the campaigns of all five council members, who were swept into office last November following the first election for town council seats. That backing included free trips to Italy and cash "bonuses" for some council members. No one expects the council, which also serves as the town's planning and zoning commission, to do anything but approve the developers' schemes.

For most of its history, Tusayan was just an island of ragtag private enterprise surrounded by federal and state land, apparently named for the nearby ruins of a small Pueblo Indian settlement. White settlers began ranching in the area in the 1800s, and a retired forest ranger homesteaded here in 1920. There were also a few local mines, but eventually the land -- gentle terrain decorated by ponderosa pines -- became more valuable as real estate. Prominent rancher and businessman R.P. "Rob" Thurston, a Georgia native who got into Western rodeo competitions, bought into Tusayan during the 1930s, building the first gas station and steakhouse. He succeeded in getting a state highway routed through his land, built the first hotel (the Red Feather Lodge) and pushed for a new local airport in the 1960s, according to Patrick Whitehurst's 2010 book, Grand Canyon's Tusayan Village.

Halvorson, who showed up in the early 1960s, began selling canyon flights in 1965; he claims he was the first to do so, but the National Park Service reports that other entrepreneurs offered canyon flights as early as the 1920s.

Modern Tusayan took shape as a short strip of nondescript motels and restaurants strung along the four lanes of State Highway 64, with a few residences scattered behind the businesses. The Thurston family still owned about 80 percent of Tusayan's 144 acres in 2002, according to a Colorado College study of the community. Chris Thurston, a family spokesman, said in that study: "The properties were developed in a hodgepodge manner, with no real distinctive style."

These days, the highway bustles with traffic: Some 17,000 people drive it to and from the park on an average day. The airport -- the fourth-busiest in Arizona -- squats on the community's southern edge. The sounds of helicopters and airplanes envelop Tusayan all day long. Yet there is still no public school, medical clinic, library or cemetery in Tusayan; the locals have to visit the national park to find those services.

The Percassi Group -- which was founded by a former Italian soccer star, Antonio Percassi, and runs European developments such as high-end malls and Ferrari dealerships -- first focused on Tusayan in the early 1990s, acquiring 2,118 acres of private inholdings scattered in the Kaibab National Forest. The company sought to exchange those parcels for 272 acres of federal land adjacent to Tusayan's business strip, where it wanted to build a $250 million mixed-use project called Canyon Forest Village.

That proposal triggered years of debate. The U.S. Forest Service approved the land exchange and the Coconino County Board of Supervisors granted rezoning for the development. But opponents forced a countywide referendum, called Proposition 400, on the zoning change. They worried that Canyon Forest Village would dry up springs inside the park, despite the developer's pledge at the time to not rely on groundwater. They also warned that it would divert tourism dollars away from Flagstaff and another city, Williams, which are both about an hour's drive south and market themselves as gateways to the park. In 2000, county voters rejected the rezoning by a 64-36 percent margin.

So the Italian developers shifted their strategy: They decided to create a local democracy they could influence more easily. The Arizona Constitution says that communities must have a population of at least 3,500 to incorporate, but in 2003, the state Legislature passed a law allowing communities within 10 miles of a national park or monument to incorporate as long as they have at least 500 residents.

As the locals debated whether to form a town government, Gruppo Stilo worked on improving its relations with Halvorson, who had opposed Canyon Forest Village. In 2004, Gruppo Stilo and Halvorson became partners in a key 18-acre parcel that now houses an RV park called Camper Village, right on the highway.

A mix of business owners and residents created a six-member task force to study incorporation. The task force met for four years and never made a formal recommendation, but five of its six members later expressed their opposition to incorporation. The town had so few property owners that it would be impossible to avoid conflicts of interest, they said. Furthermore, many doubted that Tusayan even reached the 500-person threshold. Those doubts persist today, despite the U.S. Census' conclusion in 2000 that 567 people lived in the area.

The Halvorson/Gruppo Stilo team pushed for a local election on the question of incorporation in September 2008. Gruppo Stilo tapped the expertise of one of Arizona's oldest and most powerful political consulting firms, the Policy Development Group Inc., and used a Scottsdale entity called Grand Canyon Exchange, which lists the same address as Gruppo Stilo's U.S. spokesman, to funnel more than $133,000 into the pro-incorporation campaign. It also sought to win over the locals by donating $50,000 to the Grand Canyon public school district days before the election.

The opposition was led by the Thurston family, the other longtime local power, whose holdings still include the 216-room Red Feather Lodge. The Thurstons have long opposed major expansion of the community; they think commercial projects such as outlet malls would disrupt Tusayan's character and put additional stress on the already limited water supplies. They went so far as to hire Rose & Allyn Public Relations, a Phoenix firm, to represent their view. Sample rhetoric from that firm's Jason Rose: "This is an international issue about a political cartel that has been allowed to form and control the South Rim boundary to one of the world's natural wonders."

Local voters rejected incorporation in the 2008 election by a margin of 78 votes to 62 votes, amid allegations of voter fraud by both sides. Gruppo Stilo hardly missed a beat; it launched another incorporation effort, with its affiliate, Grand Canyon Exchange, funneling money into a campaign committee called United for Tusayan. In turn, United for Tusayan hired the same Phoenix consulting firm that worked on the first incorporation campaign -- Policy Development Group -- to manage the second campaign.

Longtime political operative Ron Ober manages the Policy Development Group. Ober has deep ties with Democratic Party leaders throughout the West. He served as former Arizona Sen. Dennis DeConcini's chief of staff from 1976 to 1983 and managed DeConcini's initial 1976 campaign and two subsequent successful campaigns in the 1980s, a period when he became embroiled in controversy.

In the 1980s, while Ober was one of DeConcini's top aides, he was also a partner in a home-building company that got more than $110 million in loans from savings-and-loan magnate Charles H. Keating Jr., who was eventually sent to prison for fraud. Keating backed DeConcini's campaigns and DeConcini sought to undermine banking regulations that Keating opposed. When the story broke, DeConcini and Ober denied any wrongdoing, but DeConcini was rebuked by the Senate Ethics Committee for his dealings with Keating and didn't run for re-election in 1994; Ober paid $200,000 to settle a lawsuit filed by investors who thought he'd helped Keating create fraudulent profits. Ober did not return phone calls and emails for this story.

In the second attempt to convince Tusayan voters it was in their best interest to incorporate, Ober's Policy Development Group shifted the debate away from the question of development on the park's doorstep. Instead, the pro-incorporation campaign said that oppressed workers in Tusayan needed to be liberated from the cruel dictatorship of greedy landowners -- particularly Clarinda Thurston Vail, manager of the Red Feather Inn and a grand-daughter of R.P. Thurston. Vail, her relatives and a few other families with longstanding holdings in Tusayan were the root cause of local inequity, PDG's campaign charged.

"They raped, pillaged and plundered this area," Cecily Maniaci told me in an April interview. She was chairwoman of the pro-incorporation United for Tusayan campaign committee.

Halvorson helped pump that message into the community; he started a weekly newspaper in 2009 called the Western Times, based in the Western Discovery Museum. (Halvorson briefly ran the museum, which has since closed.) The Western Times hired Joel Nilsson, a former top editor from the state's leading daily, the Arizona Republic. Nilsson wrote columns extolling the virtues of incorporation and promised that it would bring housing opportunities to Tusayan's workers. "Vote yes," he repeatedly urged readers in front-page editorials under banner headlines.

There is a constant demand for more housing units in Tusayan, but also great disagreement over whether incorporation would solve the problem. Only a handful of people own houses, and vacant land is expensive. Many of the local workers are foreign college students who rotate swiftly through the community, earning low wages at fast-food restaurants and motels. Most workers live in company-owned housing that ranges from modern, well-built apartments to college-style dormitories to rundown trailers. Employees who lose their jobs also lose their homes.

PDG's campaign produced a series of videos supporting incorporation, claiming that landowners like the Thurstons and Ann Wren, the manager of a motel called the Grand Canyon Plaza Resort, provided substandard housing. But when Clarinda Vail drove me around Tusayan in April, I saw some well-kept, heavily subsidized apartments offered by her camp.

Vail, who has lived in Tusayan for 38 years, is president of the Grand Canyon Unified School District's governing board and helps with the community's fire and sanitation districts. Her tour led us through residential areas tucked into the hills and trees behind the commercial strip. The housing ranged from ragged singlewide trailers to solid, two-story apartments, relatively modern doublewide mobile homes and a couple of custom-built homes, including a large house owned by the Halvorson family. Wren had begun construction of a new apartment complex behind her motel.

Among the worst living conditions I saw were some dilapidated two-story apartments owned by Halvorson, near a parcel that was recently cleared of mobile homes. Across the street, in the 18-acre RV park jointly owned by Halvorson/Gruppo Stilo, trailers were being used for year-round housing, according to a lawyer who works for the developers' opponents.

No one knows how many local workers want to purchase a home, or -- perhaps more relevant -- how many could afford to do so, given the wages in their service-industry jobs. But the developers promised to give 40 acres to the town that could be used to create subsidized housing if incorporation was approved. The offer of free land for "affordable" housing became the rallying cry for incorporation supporters.

"The only reason to incorporate this community was that the Stilo group stepped up and said they would donate 40 acres of land," Tusayan Mayor Bryan told me during an interview in his office in Halvorson's Squire Inn. "Without that opportunity, nothing will ever change."

Skeptics scoff at the 40-acre offer, claiming it won't be nearly enough to cover the needs of current employees, let alone future ones: The many-faceted massive development project would require hundreds of additional workers, greatly increasing demand for affordable housing.

"They are only providing housing for the needs they are creating," said Peter Shearer, who's lived here more than 35 years and has served in various community organizations, including the task force that studied incorporation. He works as Papillon Helicopters' maintenance manager but remained neutral on the incorporation campaign.

The second incorporation election took place on March 9, 2010. It was less than 18 months after the first incorporation election, and the number of Tusayan registered voters had skyrocketed to 244, a 43 percent increase, even though there had been no increase in local housing. More than 30 of the new voters listed their residence as the 18-acre RV campground, where Halvorson and Gruppo Stilo are partners. This election campaign became the most expensive in Coconino County's history.

According to United for Tusayan's campaign finance reports, the committee spent $640,000 -- much of it on defending legal challenges filed by the Thurston camp, which sought to prevent the election. PDG was paid more than $27,000 for its consulting role. The opponents only spent about $85,000, according to their campaign finance reports (although that doesn't include what the opponents spent out of their own pockets for lawyers, the incorporation backers say).

The opponents charged that the pro-incorporation campaigners were encouraging people with no ties to Tusayan to register to vote. Some of the newly registered voters were offered jobs and housing in exchange for a "yes" vote, they said.

PDG countered with a series of Daily Show knockoff videos called The Tusayan Report that were distributed throughout the community, alleging that the anti-incorporation forces were registering voters from outside Tusayan. (In March, those campaign videos won a 2011 national award from the American Association of Political Consultants for best use of humor.)

Less than one week before the second incorporation election, Arizona Attorney General Terry Goddard rejected a request by the anti-incorporation campaign committee to initiate a grand jury investigation into allegations of voter registration fraud; his office cited budget cutbacks as the reason for his decision.

This time, voters approved incorporation by a comfortable margin -- 121 in favor and 76 against. (The incorporation campaign rounded up 59 more votes than in the 2008 election.)

Shearer told me, "Definitely, there was voter fraud" in the second incorporation election. "Whether it was able to change the outcome of the election, no one was able to determine." Halvorson, in a phone interview from his home base in Kirkland, Wash., rejected the allegations. "That just isn't true," he said. "I wouldn't have had anything to do with that."

The incorporation dramatically increased the size of Tusayan, from 144 acres to about 5,140 acres, including 3,900 acres of the Kaibab National Forest, 860 acres of state land at the airport, and a 160-acre parcel of private land known as Kotzin Ranch, which is owned by Gruppo Stilo. The math reportedly works out so that the Halvorson/Gruppo Stilo team now owns more than half of the private land in the new town.

A month after the incorporation election, the Coconino County Board of Supervisors appointed an interim town council to hold office until Tusayan could stage its first election for council seats. The board appointed Shearer as mayor and split the remaining four council seats between incorporation supporters and opponents. Clarinda Vail and her anti-incorporation ally, Ann Wren, were appointed to the interim council, as were incorporation supporters Greg Bryan and Al Montoya, the treasurer for United for Tusayan's campaign.

The town council election was scheduled for August 2010. Again, the developers swung into action, supporting a slate of five candidates. Abiding by a longstanding community tradition -- candidates for the local school board, fire and sanitary district never spend money seeking office -- Shearer, Wren and Vail spent no money on their town council election campaigns, Shearer and Vail said in interviews. PDG's five candidates -- Bryan, Maniaci, Montoya, Robert Blasi and John Rueter -- raised and spent an average of about $1,800 each, including their personal contributions. PDG employees, Halvorson and his son, Lon, and a Halvorson business associate provided nearly all the contributions to the developers' slate.

PDG had many ties to these five candidates. All of the campaign money they raised was paid to PDG to cover campaign "consulting" fees, according to campaign finance reports. (They didn't report itemized expenses typically associated with campaigns, such as brochures and websites.) And all five reported spending even more money on PDG consulting than they raised in their campaigns; each one incurred more than $2,000 in "debts and obligations" to PDG, according to their campaign finance reports. Some of the debts were repaid from cash contributions, but according to the most recent reports, filed last December, Bryan, Maniaci, Blasi and Montoya each still owed PDG $1,000. John Rueter reported owing $317.

At the same time PDG was managing their campaigns, an independent campaign committee, called Tusayan Moving Forward, operated a website and released a video attacking Vail, Wren and Shearer. The video featured the same actor that PDG used in its campaign videos before the March 2010 incorporation election.

There were other links between Tusayan Moving Forward and the developers, including Halvorson. State records show that Tusayan Moving Forward was funded by Medallion Ventures Inc., a Scottsdale-based real estate company managed by Tom DePaolo, a Gruppo Stilo partner. Medallion Ventures is also a partner with a Kirkland, Wash., company owned by the Halvorson family, called Alana LLC. That partnership takes shape as Logan-Luca, LLC, the entity that directly owns the 18-acre Tusayan trailer park.

Perhaps not surprisingly, all five of PDG's candidates won council seats.

This past February, many in Tusayan were surprised to learn of yet more entanglements between the Italian developers, Halvorson and the new town council members.

The Arizona Daily Sun, a Flagstaff newspaper, reported that the pro-incorporation United for Tusayan campaign committee had unexpectedly filed amended financial disclosure reports with the Coconino County Recorder's Office.

United for Tusayan's revised report revealed that back in March 2010, it distributed $29,500 in "win bonuses" to 10 people who had supported incorporation in the election that month. At least eight work for companies owned by Halvorson, and two were candidates who won council seats in the August 2010 election: Montoya received an $8,500 bonus and Rueter received $2,000. They did not report the bonuses on the personal financial disclosure statements they filed prior to the August election. Montoya has since amended his personal financial disclosure to show he received the bonus. Montoya declined an interview request and Rueter did not return calls and emails seeking comment.

United for Tusayan's chairwoman, Vice Mayor Maniaci, said in an interview she couldn't explain why the bonus payments were made and who ordered them. "I don't know the answer to that," she said. "It's probably a very relevant question, but I did not (participate in granting or receiving the bonuses)."

Halvorson, in a phone interview, also denied any connection to the bonuses, saying he "didn't know anything about it," despite the fact that eight of the 10 people receiving bonuses, including the two who later won council seats, were his employees.

Meanwhile, there were other revelations: Gruppo Stilo paid for other council members to travel to Italy to see some of the company's developments the year before they were elected. Bryan said that he and Maniaci visited Italy in the spring of 2009; he said that Blasi went to Italy, too, but wasn't sure when. Blasi did not respond to emails and phone messages seeking comment. In his talk with me, Bryan estimated that the value of the trip he took was between $3,000 and $4,000.

"They wanted to show us who the Stilo group was and have us take a look at the kinds of development and quality and commitment to their projects," Bryan said. Both he and Maniaci said they're not biased in favor of the developers as they weigh the decision before them -- whether to transform Tusayan into a place where tourists might spend more time and money than they do in seeing the Grand Canyon itself. "The money didn't buy my vote," Bryan said. But, he added, he and his campaign contributors "agreed in some philosophies" and have "like goals in mind."

Halvorson also dismisses suggestions that he and his partners have seized control of Tusayan's town council through their employment ties and campaign contributions. "I didn't buy anyone. I gave each candidate $400," he said, referring to Tusayan's first town council election. "This is grassroots rule as far as I'm concerned."

Maniaci said that "everything is inflamed." The Thurstons' camp has a "plantation-style mentality that has existed for decades. There is nothing for the community. There is not a church, not a community center, not a park (to encourage) a sense of community," she said. "They have had years to develop these things. They are not really into progress -- they're very much into the status quo."

Others see it differently. When the developers unveil the details of their proposal later this summer, the fledgling town council will be faced with its first major conflict of interest, on perhaps the most important decision the town will make for decades to come. Gruppo Stilo not only wants the council to allow the development on its 160-acre Kotzin Ranch property, it also wants it to annex another of its properties, the 190-acre Ten-X Ranch. And Gruppo Stilo and Halvorson want the council to change the zoning on their RV park so it can become a centerpiece of the mega mixed-use development. The council's decisions could affect the thinking of the Forest Service, which would have to decide whether to allow road improvements across forest land, said Gruppo Stilo attorney Grady Gammage. The decisions would not only affect the nature of the national park's main gateway, they would also ripple into the park itself in many ways.

It's "obvious ... that a majority of the city council through their employment or affiliation with landowners are set up to have a conflict of interest on zoning cases that involve their employers," said County Supervisor Taylor. "I think it's their intention to recuse themselves from that, but it is going to be difficult for them because they will have to operate with a quorum (which requires three of the five council members to participate). It's a unique situation."

"It's like the old-time coal-mining company town, but now it's based on industrial tourism," Roger Clark told me in a phone interview. He's with the Grand Canyon Trust, a Flagstaff-based environmental group, and works on protecting the park's natural quiet.

Clarinda Vail told me, "This makes me crazy."

After our first meeting in the heliport lobby, Tusayan Town Manager Enrique Ochoa moved his "office" to the restaurant of Halvorson's motel, where he sipped coffee at a table by the window while working on his laptop. (The motel's WiFi connection is relatively accessible but painfully slow.) Friendly and unflappable, he waved me over to join him. He's not concerned about the political firestorm he's walked into, he said. One of his biggest worries, he explained, was just finding a place to live. He'd been commuting from Flagstaff every day -- 140 miles roundtrip. He was considering bringing an RV to Tusayan to live in the forest for while.

He acknowledged that he was in a rare position: He's the town manager, and yet he was entirely in the dark about the secret development negotiations between the town's private consultant and the Halvorson/Gruppo Stilo team.

None of this discouraged him. In fact, he appeared to relish the challenge. "As you go through life, you have to learn not to concentrate too much energy on the negative," he said. "You just have to forge ahead, and you have to do it in the right way."

John Dougherty is a Phoenix-based freelance investigative journalist, online at InvestigativeMedia.com. His work has appeared in a range of publications including The New York Times, the Washington Post and Phoenix New Times. His last HCN story, which ran in our Oct. 25, 2010, issue, was an essay headlined: "How I ran for a U.S. Senate seat, and what I learned."

The editor's note introducing this story is headlined "The Las Vegas Effect."

For more information, check the National Park Service's latest effort to regulate Grand Canyon air tourism.

This coverage is supported by contributors to the High Country News Enterprise Journalism Fund.