How's the Dallas Police & Fire Pension Fund's $27-Mil Investment in Arizona Working Out?

Speaking of the Dallas Police & Fire Pension System, which is investing $200 million in the looooong-in-the-works Museum Tower in the Arts District, I was reminded that way back in '06, the system made another investment in Tucson, Arizona. As I noted in July of that year, the fund bought 285 acres in this part of the famous Painted Hills area 10 minutes out of downtown for $27 million, despite the fact that one year earlier, it had been valued at closer to $4 million, per the reporting of Mari Herreras in the Tucson Weekly.

Ever since then, the fund's been swept up in one hell of a sandstorm way out west: The fund hired Las Vegas-based Land Baron to develop the land, but that was as far as it got before development stalled for myriad reasons -- chief among 'em, Tucson and Pima County officials and residents don't want any development along the gateway to the Tucson Mountain Park. Matter of fact, in 1997 and again in '04, voters told the county to snatch up the land in order to preserve it -- but the landowner at the time refused to sell to the county. Eventually it changed hands myriad times before finally landing up with the Dallas Police & Fire Pension System.

Which is but a tip of the mountain range: Pima County had approved zoning that would allow Land Baron to build 260 homes out in the hills, but, according to an editorial in the Arizona Daily Star on Friday, "the development was blocked by lack of water service." And just last week, in front of some 200 vocal residents, the Tucson city council changed its mind and voted not to annex the land and extend water service out to Painted Hills, which Land Baron needs to build its development. That puts county and city officials on the clock: They've got under a month to settle a $46-million suit filed against the city by the developer.

And that $27-million investment? On paper, at least, it's worth close to zero now.

There's talk of using $4.5 million in so-called "open-space money" to settle the suit; or, maybe, some kind of a land swap. But Pima County Administrator Chuck Huckelberry tells the Arizona Daily Star, "We don't have a sizable piece of property to trade. ... There's just nothing to swap." To which Pima County Supervisor Richard Elias adds, "We're not sure the landowners understand the biological importance of Painted Hills, nor the fact that it's a signature piece of property ... with important cultural resources and habitat that we would like to preserve." (Elias's blog provides a handy recap of developments to date.)

As for the pension fund's $27 million investment, here's the relevant info:

The pension fund bought the property in 2006 for $27 million. Pima County valued the land at $12 million in 2008; the pension fund petitioned for it to be lowered in 2010, and the state did cut the valuation to $8 million. For next year, the developer has petitioned for it to be valued at only $2,500, the lowest it can be.
None of this is mentioned in any of the pension fund's most recent annual reports. Calls are out. Expect a follow-up. Or eight.

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Robert Wilonsky
Contact: Robert Wilonsky

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