Price of power: McCain action helped Arizona land developer
— -- This story is part of USA TODAY's series, "The Price of Power," which tracks the political and business relationships between public officials and donors.
WASHINGTON — Sen. John McCain secured millions in federal funds for a land acquisition program that provided a windfall for an Arizona developer whose executives were major campaign donors, public records show.
McCain, who has made fighting special-interest projects a centerpiece of his presidential campaign, inserted $14.3 million in a 2003 defense bill to buy land around Luke Air Force Base in a provision sought by SunCor Development, the largest of about 50 landowners near the base. SunCor representatives, upset with a state law that restricted development around Luke, met with McCain's staff to lobby for funding, according to John Ogden, SunCor's president at the time.
The Air Force later paid SunCor $3 million for 122 acres near the base. It was the highest single land transaction of the private lots purchased by the government — three times the county's assessed value and twice the military's estimated value. SunCor also donated another 122 acres. Alan Bunnell, a spokesman for SunCor's parent company, Pinnacle West Capital, said the donation was meant to minimize the company's tax bill and enhance the value of adjacent property it owns.
McCain has long-standing ties to SunCor and Pinnacle West:
• McCain's campaigns have received $224,000 since 1998 from donors connected to Pinnacle West, including $104,100 for his current presidential run, according to a USA TODAY analysis of campaign-finance data compiled by the non-partisan CQ MoneyLine. Donors include employees of Pinnacle West and its subsidiaries, employees' spouses and the company's lobbyists and political committees.
• Pinnacle West's Chief Executive Officer Bill Post, vice president and lobbyist Robert Aiken and former president Jack Davis, who retired in March, are fundraisers for McCain's current presidential campaign. SunCor President Steve Betts, who joined the company weeks after the military land deal, is a former campaign lawyer for McCain and has raised more than $100,000 for his current campaign.
McCain campaign spokesman Brian Rogers said the senator's ties to SunCor had nothing to do with his support for the project. The Air Force had a legitimate need for the land and asked for money to buy it in a March 2002 budget planning document, Rogers said in an e-mail.
Rogers said McCain, who took credit for the funding in a floor speech in 2003, wanted to prevent the Pentagon from closing Luke. The military had cited encroaching development in deciding to close another Phoenix-area installation, Williams Air Force Base, in 1993.
"Sen. McCain's interest in this matter was only to support the formal requirements of the Air Force in a way that furthered the interests of the taxpayer," he said.
Bunnell said the company's ties to McCain were not a factor in the land deal. "This was done without any political intentions or anything other than to preserve Luke Air Force Base," Bunnell said.
Craig Holman, a lobbyist for the government watchdog group Public Citizen, said McCain appeared to be helping campaign donors.
"Any time the executives of a corporation work hard at raising funds for any candidate, they almost always want something in return," Holman said. "When it comes to SunCor … they were asking for a specific earmark. And McCain delivered."
SunCor seeks help
Executives from SunCor, which owned more than 3 square miles' worth of land near Luke Air Force Base, had complained for years about state and municipal restrictions on development there.
The issue came to a head in 2001, when the state Legislature expanded the area where development was restricted but rejected a $15 million plan to compensate landowners, Ogden said.
Ogden said SunCor developed the idea for the Air Force to buy land around the base and lobbied McCain and other members of Arizona's congressional delegation to put the money in the Pentagon's budget. Rogers and Ogden said SunCor representatives met with McCain's staff, but not the senator himself, to discuss the proposal.
"Sen. McCain was probably the last one to come on board," said Ogden, who retired from SunCor in 2005. "He's not big on anything that would help only one state, but I think he certainly saw the need to do something to help Luke."
Republican Rep. Bob Stump, whose district included Luke, got $13 million approved for the plan in 2002, when he was chairman of the House Armed Services Committee during his last year in Congress. McCain secured an additional $14.3 million for the Luke land program the next year.
Rogers refused to say whether McCain knew that SunCor owned land likely to be purchased.
Market value disputed
Once it got the money, the Air Force bought land surrounding a munitions storage area to create a buffer zone. First, the military bought 143 acres from hospital operator Sun Health Properties for $950,000, or $6,646 an acre, in July 2004. Five months later, the military paid SunCor far more for fewer adjacent acres: $3 million for a 122-acre parcel, or $25,000 an acre. The company then donated an adjacent 122 acres to the Air Force.
Bunnell said SunCor structured the transaction that way to maximize its proceeds and to help preserve the value of nearby property it owns, since the sale price would be used by appraisers to value comparable properties. Records show three SunCor-owned parcels next to the base are assessed at $24,000 to $43,500 per acre.
Donating property provides a company with a tax deduction based on the fair market value of the land, said David Cameron, associate director of the tax program at Northwestern University's law school. A company's profit in a land sale to the government, on the other hand, can be taxable, he said.
Bunnell said the company's appraisal of the land put its value at about $25,000 per acre. That is precisely the per-acre rate the Air Force paid SunCor. If the donated land is included, the Air Force paid "well below market value" — half of the company's appraised cost — for the entire 244 acres, he added.
The U.S. Army Corps of Engineers, which acted as the Air Force's real estate agent in the deal, had appraisals of the land supporting the $3 million price based on the total 244-acre package, spokeswoman Jennie Ayala said in an e-mail. That would be about $12,500 an acre, or half the value cited by Pinnacle West. Ayala said she could not disclose details of the military's appraisals because they were "privileged information."
The Maricopa County Assessor's Office calculated the 2005 value of the 244 acres at $1.9 million, or about $7,900 per acre, spokesman Paul Petersen said in an e-mail. Petersen said in a telephone interview that the county tries to accurately reflect market value, but often comes up with assessments that are lower than actual sales prices.
County records say the former Sun Health property was assessed in 2005 at $290,000, or $2,029 per acre, less than a third of the per-acre price the Air Force paid.
The Air Force has made offers to buy or purchase development rights for other parcels of SunCor land near Luke, Bunnell said, but no agreements have been reached.