Tusayan becomes Arizona's newest and smallest town

TUSAYAN - This gateway to the Grand Canyon established its first Town Council on Tuesday, the result of a vote a month earlier to incorporate so residents could choose their own leaders, plan how their land is used and control public services.

On Wednesday, a process server crashed its inaugural meeting, handing out subpoenas from a lawsuit filed to overturn the public vote and dissolve the council.

In Tusayan, "fighting city hall" has reached a new degree. A 20-year battle between the town's most prominent landowners has escalated into a challenge to Arizona's newest town itself. At stake is control of tourism development and the dollars that come with it.

Nestled in pine forest 1 mile south of Grand Canyon National Park, the tourist stopover covers 144 acres. It is, as Fire Chief Robert Evans noted, "a wide spot on Highway 64 with a lot of hotels."

Nothing iconic or memorable here. Just the relentless throbbing of tourist-filled helicopters and a life-size elk sculpture on the sidewalk bearing a sign that says, "Keep off the elk!"

About 17,000 visitors pass through daily, but only 500 or so people call Tusayan home.

Tusayan is the tiniest town in Arizona by size and third-smallest by population. Yet when it comes to political turmoil, this place looms as deep and divided as the Canyon itself.

Put simply, Tusayan is a company town controlled by opposing land barons who have spent millions of dollars planning their own projects and trying to thwart the other's.

On one side is the Thurston family, which for three generations has owned nearly half of Tusayan's real estate, including a water company and the Red Feather Lodge.

On the other side is the Stilo Group, which also controls nearly half of the property. The partnership includes Italian investors and a local family headed by Elling Halvorson, who operates a water company, the Squire Inn, Papillon Helicopters and other businesses.

Over the years, those two groups hired some of Arizona's most aggressive legal guns, persuaded the state Legislature to pass special laws, filed lawsuits, pressed for criminal investigations and used hotshot public-relations firms from Phoenix to assail and insult each other.

The latest skirmish, last month's vote on incorporation, was the second such election in as many years.

The Thurstons sued in an unsuccessful effort to stop the balloting. After voters approved the measure, the Thurstons sued again to overturn the results.

Their civil complaint in Coconino County Superior Court says the election was unconstitutional and fraudulent. A judge is scheduled to hear arguments Wednesday.

Roller coaster 'nightmare'

It would take a book to recount the turbulent history of this former potato patch.

By most accounts, trouble began in the early 1990s when investors from Italy proposed an outlet mall in Tusayan. Later, another Italian group began buying ranch properties near the South Rim of the Grand Canyon. Their idea was to swap more than 2,000 acres of private land for 270 acres of federal property and build a $250 million project known as Canyon Forest Village. It would include thousands of hotel rooms and visitor attractions. There was even talk of a roller coaster.

"That was my worst nightmare - roller coasters at the Grand Canyon," said Clarinda Thurston Vail, who manages the family's properties and just got named to the Town Council.

In the 1990s, the Thurstons and Halvorsons worked with environmentalists to block Canyon Forest Village and launched a movement to incorporate Tusayan so that residents could stop the development.

At the time, Arizona law required at least 1,500 residents before a town could form. Special legislation was adopted to exempt Tusayan. The Italians sued, and the law was ruled unconstitutional. But in 2000, Coconino County voters overwhelmingly rejected the project, and it was never built.

But the Italian investors did not give up on their goal for development in Tusayan.

In 2004, they acquired half interest with Halvorson in an 18-acre campground, one of the largest undeveloped parcels in the community. Suddenly, Tusayan's leading entrepreneur was aligned with the Italian developers, who adopted a new name: the Stilo Group.

Their joint venture began pushing for incorporation, hoping that a small town council would allow development. The Legislature had revised the incorporation law in 2003. Tusayan voters rejected that idea in a 2008 election marred by allegations of bribery and fraud.

The Stilo Group persisted, scheduling another ballot last month. As the election neared, voter rolls grew 39 percent, with many registrants listing addresses in the campground.

Attorneys for the Thurstons sought a grand-jury investigation of election fraud. They filed suit to block the election, but the case was dismissed.

PR battleground

With fewer than 200 voters to influence, the campaign grew nasty and expensive as rival PR firms transformed Tusayan into a personal battleground.

One of the companies, Rose & Allyn Public Relations, represents the Thurstons. The other, Policy Development Group headed by Ron Ober, works for Halvorson and Stilo Group.

Tusayan residents were inundated with campaign fliers, videos and Internet messages. A mock news broadcast by Ober's team ridiculed Vail of the Thurston family as "queen ruler of Tusayan" and described PR company President Jason Rose as "leader of the long-haired freaky people."

Rose answered with ads warning of a Tusayan takeover by "the Italians" and painting Ober as "a former friend and ally of convicted banker Charlie Keating."

The campaign's big issue was housing. There are fewer than a dozen single-family homes in Tusayan. Employees reside in company-owned dormitories and trailers or commute more than 20 miles to work.

Stilo Group said incorporation would allow the construction of houses for workers as well as hotels or restaurants. Opponents scoffed, noting that Tusayan land is valued at $500,000 per acre, hardly accessible to waitresses earning $9 an hour.

Bob Blasi, a Forest Service employee who sought a council seat, said the dispute became so hateful that friendships were severed and Tusayan's social network shredded. "There are places I won't dare walk into because I probably wouldn't be served," Blasi said. "And, if I was served, I wouldn't dare eat the food for fear of what might be in it."

Voters approved incorporation, with more than 60 percent in support. Coconino County supervisors last week appointed the first Town Council, selecting five names, until a new Town Council can be elected later.

Two of the appointees, Vail and Ann Wren, led the anti-incorporation campaign. Vail had previously sued to block the election.

The appointment of two people to sit on the Town Council who opposed the establishment of the town itself didn't sit well with some.

"That just doesn't pass the smell test," complained Troy Corder, a public-relations representative for Stilo. "It tells the people of Tusayan, 'Your opinion doesn't matter.' "

Two other appointees, Greg Bryan and Al Montoya, are employed by the Halvorson family and favored incorporation.

The fifth council member, Pete Shearer, also works for Halvorson but is married to one of the anti-incorporation leaders. Shearer assumed a poker face when asked which side he's on: "I'm for the majority of the voters," he said. "We need to come together and start the healing process."

Glaring conflicts likely

There is scant evidence of a cure, however.

The Thurston family is suing to unincorporate Tusayan, using the same arguments and lawyers that Vail employed in her unsuccessful civil complaint.

Vail said she is not out to sabotage the new town, but she refused to take a position on the lawsuit, declaring, "I'm not involved."

If Tusayan survives challenges to incorporation, the vested interests of leadership loom as problematic.

All five council appointees are likely to have glaring conflicts when it comes to approving or rejecting land-use plans: They either own competing properties or are beholden to an owner who pays their salaries.

Tom Belshe, deputy director with the League of Arizona Cities and Towns, told council members during their first meeting that they must submit financial disclosure statements and recuse themselves where there are entanglements.

"Conflicts can be a significant problem in small communities," Belshe later said. "There could be some tricky issues."

Meanwhile, the town's laborers can only watch and wonder.

Juan Calderon, a housekeeper at one of the hotels, said he'd like to see more housing but fears a tax increase. Otherwise, he has no real stake in the feud.

"My life is go to work, go to my place, go to sleep," Calderon said. "Then I go to work again."