Few Gains Seen From Land Fight

Legal battle has cost taxpayers millions, delayed compensation to Pappas family

By Michael Squires

Carol Pappas sat in her living room on a recent morning and contemplated what might have been.

These were to be golden years for the 74-year-old woman who left Athens a young bride half a century ago for a dusty gambling town. The man who brought her to Las Vegas promised her that.

John Pappas returned to his native Greece to marry young Carol and bring her to Las Vegas, where he had become a successful businessman.

John believed in Las Vegas' future. He believed, in particular, in the future value of property near the intersection of the city's most famous streets.

"My husband (who passed away in 1981) told me many times, 'When I die, you'll have this property to support you,' " Carol said. "He told me, 'This is going to be your retirement.' "

Instead, the 7,000-square-foot property at Carson Avenue and Las Vegas Boulevard is "the worst thing that happened" to her.

Las Vegas took possession of the land in 1993 in a controversial use of eminent domain and turned it over to a consortium of downtown casinos for a parking garage. Carol would peer through a chain-link fence as the businesses, which provided her with more than $60,000 a year in income, were bulldozed for the Fremont Street Experience garage.

With it went her golden years, she said. The ensuing 11-year legal battle has delayed any compensation for the land. It has depleted her savings, substituted depositions and hearings for vacations, and brought untold stress, she said.

"They took away from me the income I could have enjoyed to do some things. They did a lot of damage to myself. I don't know what else to say. We've been through such hard times all these years."

This week, the Las Vegas City Council will consider settling with Carol and her sons, Harry and John, for $4.5 million. The property's value has been estimated anywhere from $450,000 to $7 million. If the proposed settlement fails, as a similar effort did four years ago, a District Court trial to set the land's value is scheduled for Sept. 21.

More people than the Pappases have felt repercussions from the city's decision.

So far taxpayers have shelled out more than $12 million to acquire the land and mount a legal defense.

The two law firms Las Vegas hired to defend eminent domain cases associated with the garage property have received $1.6 million. More than $400,000 was spent on the Pappas case alone. And the costs, which don't include the time of city staff attorneys, continue to mount.

Many wonder to what end. City officials have called the block inhabited by the garage and neighboring Neonopolis a "dead zone." Justified as a way to end blight and stop downtown's decline, the small businesses driven out have been slow to return.

And Neonopolis, the beneficiary of $32 million in taxpayer largesse, has become synonymous with failed redevelopment in the minds of many Las Vegans.

"It's more blighted now," said former Las Vegas City Councilman Steve Miller, who recently was deposed by the city's attorneys on his role in the downtown redevelopment agency in the early 1990s. "There were no vacancies before. There was no boarded up property. The Pappases owned an immaculate little strip center where I used to go have lunch. Now it's a mainly empty parking garage with a defunct restaurant."

And the longer it's empty the longer taxpayers wait to be repaid the millions spent on it.

Fremont Street Experience repays its $5.7 million debt with revenue from the garage's retail space. To date, retail leases have generated $8,275 for city coffers.

Race Rock, the motorsports-themed restaurant, closed in 2001. Joe Schillaci, president and chief executive of the Fremont Street Experience, is still looking for "the right kind of tenant" to fill the empty storefront.

Walgreens opened in another space but has yet to generate enough revenue to trigger payment to the city.

And the droves of tourists for whom the garage was built, despite the 48 casino-owned garages and parking lots in the area, have yet to appear in the anticipated numbers.

"That thing sat 90 percent empty for years," said Harry Pappas, standing on the garage's empty top floor one recent afternoon. "They didn't need parking. That's just the B.S. they fed the public."

Some of the spaces are filled through agreements with businesses and the courts. The garage is busiest weekday afternoons, not at night when the lighted canopy, the attraction seen as key to downtown's redevelopment, is in motion.

"There is a need for the garage," Schillaci said. "It's important for future growth."

Downtown Las Vegas in the early 1990s didn't have the optimism and expectations of today.

Fremont Street had long ago been eclipsed by the Strip, which is outside city limits.

"The entire city tax base is the downtown; the whole economy was about gaming and you had one attraction after another being built on the Strip," said former Las Vegas Mayor Jan Jones. "Why would anybody come downtown?"

The Strip succeeded, in part, because it had more of what downtown lacked: land.

Sold off by the railroad in 300-foot-by-400-foot lots and subdivided over the years, downtown had a patchwork of owners. "You have to hold the equivalent of Middle East peace talks to buy land down there," said local historian Michael Green.

The solution for downtown's decline, Jones recalled, was to create an attraction to compete with the Strip's volcanos and pirate duels.

Officials thought a lighted canopy over Fremont Street would draw tourists back and, in effect, make the street into a megaresort. The city agreed to spend $6.4 million and use eminent domain to acquire land for a Fremont Street Experience parking garage on the block bordered by Fremont Street and Carson Avenue, and Fourth Street and Las Vegas Boulevard.

Armed with the Legislature's assurance that redevelopment is a "public use," the city began acquiring property. Until they ran into the Pappases, the city had used eminent domain for redevelopment 143 times without a lawsuit, recalled City Attorney Brad Jerbic.

The courts' interpretation of "public use" had grown beyond roads, utilities, government buildings and the like as local governments sought to clear slums with eminent domain.

The U.S. Supreme Court ruled in 1954 that a Washington, D.C., slum-clearing effort was constitutional even though the land was given to private developers. The Michigan Supreme Court in its 1981 Poletown decision backed Detroit's use of eminent domain to seize homes and businesses for a General Motors plant. Economic revitalization to root out the social and economic blight of high unemployment justified it.

The Pappases, however, failed to see the lawfulness of the city's taking. Nor did they see blight anywhere on the tidy block.

The city offered $380,000. They later boosted it to $480,000. As a potential casino site, the family, which owns nearly two dozen land parcels in Clark County, insisted it was worth $7 million and sued. The family rejected a $4.5 million settlement offer four years ago but now is willing to settle for that amount.

"They want to steal your property and tell you what they're going to give you for it," Harry Pappas said. "If you don't like our price? Then get your hands off our property."

In a 1996 ruling he thinks hurt his career, then-District Judge Don Chairez bucked the judicial trend and ruled the city's taking was unlawful. The city hadn't bargained in good faith.

"You have to go with your heart and say, `What is the right thing to do?' " Chairez said.

On appeal, a divided Nevada Supreme Court reversed the Chairez decision and upheld the city's use of eminent domain against the Pappases.

The court cited the Poletown case in Michigan in its ruling. But last month, the Michigan Supreme Court overturned its previous decision, calling it a "radical departure from fundamental constitutional principles."

Finally, in March the U.S. Supreme Court declined to hear the Pappas case.

"We've gone from using eminent domain against a place with no plumbing to using it, in the Pappas case, against a place with not enough parking," observes Dana Berliner, a senior attorney with the Institute for Justice. "That's a pretty significant change."

The libertarian public interest firm in Washington, D.C., filed a brief supporting the Pappases and declared the case among the top 10 abuses of eminent domain nationwide.

"Our founders certainly weren't thinking of casinos when they wrote the words `public use,' " said Berliner. "It's wrong for government to play favorites among its residents and its businesses. When cities use eminent domain in this way in effect they're saying `I like this guy better than this other guy.' "

Constitutional or not, the bad publicity generated by the Pappas case forced Las Vegas to abandon eminent domain in situations in which land is transferred from one private party to another, even in the name of redevelopment. Members of the City Council, all of whom were elected after the Pappas case began, say they have no appetite for it.

On a recent morning, Harry Pappas searched for a piece of paper in his Las Vegas apartment.

He dug through file cabinets filled with documents, crates stuffed with folders, boxes bulging with newspaper clippings. He apologized that the reams of paper, rubble from the fight with the city, leave little room for a visitor to sit.

Harry, the family's most vocal critic of the city's actions, said he was preparing to build a home before the case engulfed his life.

"We're the ones doing without," he said, his voice edged with bitterness. But the city officials and casino owners who brought the hardship on him and his family, "they go home to their gated communities every night. Their lifestyle didn't decrease."

© Las Vegas Review Journal www.reviewjournal.com

Since the publication of the above news item, the situation has been resolved.

The Las Vegas City Council approved a $4.5 million settlement to end the dispute. Council, acting as the Redevelopment Agency, approved the settlement with the Pappas family over the 1993 seizure. The money will be paid from redevelopment funds and will eventually be reimbursed to the city from leases on retail space in the garage.

Mayor Oscar Goodman says the city was ready to "put this unfortunate time behind us."

The seizure of the property, which allegedly cost the family over $60,000 a year in income, was declared a lawful public use by a divided Nevada Supreme Court. The Pappas family agreed to settle after the US Supreme Court declined to hear the appeal.