Kaibab Journal - CFV - A Chronology

Fall 1996 - Summer 1997
Forces Organize

The Kaibab National Forest Service considers a proposal to swap some 2,000 acres of privately held land scattered throughout the forest (inholdings) in exchange for 600 acres at the Grand Canyon National Park boundary, which will be used to develop a project called Canyon Forest Village (CFV). The Forest Service actually considers many different alternatives, as is mandated by the National Environmental Policy Act (NEPA). However, the CFV developers have championed Alternative B, which would build some 3,600 hotel rooms. Also part of the proposal is a host of community-related construction - schools, housing, churches, a grocery store, and more.

The Forest Service is engaged in analyzing these alternatives in the context of an Environmental Impact Statement (EIS). It has partnered up with representatives from the National Park Service, the Northern Arizona Council of Governments, the Coconino County government and various environmental groups.

However, excluded from this process are groups with a strong economic interest in the outcome - the city governments of Flagstaff and Williams (some 75 miles and 50 miles, respectively, from the park), business owners in Tusayan (located right next to the proposed CFV) and northern Arizona hoteliers. To get a sense for the dimensions here, while the proposed CFV Alternative B has 3,600 hotel rooms, there are about 1,000 rooms in Tusayan, 1,300 rooms in Williams and 4,500 rooms in Flagstaff.

Summer 1997 - Fall 1997
The Draft EIS

The first official document to be released was called "The Draft Environmental Impact Statement for Tusayan Growth." Rather wordy, and with an emphasis on the growth of Tusayan, even though most folks in Tusayan thought of CFV as being the death-knell of their businesses. There were five alternatives spelled out in the Draft EIS, none of which were made public prior to the release of this report. There were two volumes here (besides the shorter summary volume) - the report itself and an appendix, which contained extended analysis of water issues, land use issues and economic impact issues.

The public was invited to some "open house" meetings to learn about the proposals, and given 90 days to respond to the Draft EIS. It was a daunting task. As I was hired to help analyze these proposals, by a consortium of interests not included in the process of putting together the EIS, it consumed me full-time for the rest of the summer.

In a nutshell, the Draft EIS concluded that demand for hotel rooms in northern Arizona would continue to grow, despite the presence of CFV's additional 3,600 rooms. In a market that has about 7,800 rooms in Grand Canyon National Park, in Tusayan, in Williams and in Flagstaff, it seems quite astonishing that a more-than-50% increase in rooms will not leave someone out in the cold.

I helped assess a critique prepared by BBC Consulting, on behalf of the consortium (well, that's how this group started referring to themselves). I also helped prepare a critique of the Draft EIS, along with my colleague John Eastwood, that was issued from the Bureau of Business and Economic Research (BBER) at NAU. Both BBC and BBER focused their critiques on the following points:

-- The Draft EIS uses 4% as the only growth rate in annual Grand Canyon visitation that is fully worked out in the models they developed and that this outcome is called the "moderate" growth outcome. Given that annual visitation from 1992 to 1996 was growing at only 1.7% [and, virtually no growth from 1992 to 2000], this characterization is unjustified, and other scenarios need to be fully shown. Indeed, in the Grand Canyon National Park's own management planning, they use a 2.5% average annual growth rate in visitation.

-- The Draft EIS assumes that CFV will displace the demand for hotel rooms, but that most of that displacement (58%) will come from far away places, like Phoenix and Las Vegas. These results stem from surveys administered to visitors, but the BBC analysis contended that this conclusion was unjustified - asking people where they stayed before and after visiting the Grand Canyon is not the same as asking whether they would have given up those nights in return for a night at the Grand Canyon. Indeed, BBC argued that northern Arizona would receive the bulk of the displacement - from 70% to 90% of the rooms sold at CFV.

The consequence of these shortcomings is that the Draft EIS seriously underestimates the negative impact that CFV might have on other businesses in northern Arizona, as well as reducing tax revenue to the cities of Williams and Flagstaff.

That having been said, would CFV actually have a negative impact on the rest of northern Arizona? I really don't know the answer to that question, and, when I first heard of the CFV proposal, my first impressions were that everyone would be better off. That may, in fact, be the case. But, the Draft EIS process was constrained in a very peculiar way. The National Park Service was unyielding in its opposition to any development that would, in and of itself, attract more visitors to the Grand Canyon. I know that is bizarre, but that's the way it was. So, while I thought CFV could attract more visitors, and, probably, any reasonably clear-headed individual would think likewise, it couldn't be written into the script of the Draft EIS. All of their models had to presume that visitation was not going to be affected by this project. Perhaps, this was a major reason why the Sierra Club opposed the CFV proposal, even though many other environmental groups supported it.

So, if we must wear blinders, and presume that CFV will not encourage more visitation, then the conclusions of the Draft EIS are absurd, and the conclusions of BBC and BBER are much more logically consistent.

What did the Forest Service really get from all this? That is a good question. While the EIS seemed rather high-minded in its concern for the quality of life in Tusayan, arguing for more infrastructure, community services and housing, the folks in Tusayan were mostly opposed to CFV. The Park Service gained housing outside the park, and CFV was to serve as the hub for the park's planned transit center, where visitors would have to park their cars and board a train to get to the rim. All the Forest Service really got out of this deal was the consolidation of scattered inholdings, a value (from a social perspective) that nobody ever really tried to assess.

Fall 1997 to Fall 1998
The Supplemental Draft EIS

Following the public comment period, the Forest Service, and its partners, went back to work on a revised EIS. None of the outsiders were privy to this process, and none of the results were known, with certainty, until the release, in June, 1998, of the "Supplement to the Draft Environmental Impact Statement for Tusayan Growth." This report consisted of three volumes - a report, an appendix and a volume of comments and responses. In this report, three new alternatives were considered. The Forest Service "preferred" Alternative G, which had a CFV of only 900 rooms (on 260 acres), while the developers of CFV were pushing for Alternative H, a version with 1,200 rooms. Unlike the Draft EIS, the park service's transit center is made a part of all alternatives, so its development doesn't hang in the balance of the CFV decision. The public has 60 days to read, absorb and respond to the Supplemental Draft EIS.

The results of the Supplement were quite a contrast from the Draft. Now, even though CFV is only a third the size (or less), they conclude that northern Arizona businesses will be worse off, but not by much.

This time, BBC and BBER worked together to produce a single critique. Immediately upon review of the Supplement, an error was detected. Figures that were described as cumulative over the study period of 1998-2010, were, in fact, only the figures for 2010. For example, the EIS model generated displaced spending (incomes lost to other northern Arizona hotels due to the presence of CFV) that rose, in equal increments, throughout the study period. For Alternative G, this displacement rose to $6.6 million in 2010. Yet, the report (see Table 4.22, page 104) shows this as the amount displaced "1998-2010." In fact, the actual accumulation of spending displaced should have read $36.3 million. This error was brought to the attention of Forest Service officials. They published, and circulated, an errata sheet dated August 26, 1998 and extended the public comment period through October 9, 1998.

Still, the BBC/BBER critique concluded that the Supplemental Draft EIS had underestimated the true impacts of CFV. Indeed, the current model being used in the Supplement didn't actually ascribe any impact to the construction of CFV. Instead, the modeling team presumed that the portion of Grand Canyon visitors staying overnight would rise from 31% to 35%, due to the transit improvements. This conclusion is quite odd. On the one hand, raising this "capture rate" of visitors displaces them from elsewhere, so reducing incomes in northern Arizona. But, the capture rate has nothing to do with CFV, so, even if there was no CFV, northern Arizona would be worse off!

Once again, we are dealing with the unfathomable constraint that CFV cannot be a factor in actually boosting visitation. But, why the capture rate should rise at all is mere speculation. Indeed, I have argued that this transit center may well discourage future visitation, so maybe the capture rate will fall!

The actual impact of CFV can easily be calculated. If it is successful (and, pretty much, everyone assumed that it would be), then, over a ten year time period, they should earn about $420 million in revenue. [Except, a study commissioned by CFV actually put this at closer to $1 billion!] So, where does this $420 million come from? Well, if 90% is displaced from the rest of northern Arizona, the impact is about $380 million. It really isn't rocket science, even though we crank out lots of spreadsheet models. This is a far cry from the $36 million estimated by the Supplemental Draft EIS.

By the end of this second round, there are some lessons to be learned. Besides the points already raised, what didn't the Forest Service do in trying to evaluate this proposal? There are six errors of omission that would seem to be crucial parts of the evaluation of the CFV development:

1. There really was no "cost-benefit" analysis done by the Forest Service. Even as speculative as such an analysis might be, it would better help frame the entire debate.

2. What is the value of consolidating the inholdings? No mention of this exists. In the Final EIS, there is a market valuation for the land, but that is not the same as the value of this outcome. If we don't know what this is worth, how can we assess this benefit?

3. There is no risk assessment in the Forest Service models. While the EIS did contain some sensitivity testing - growth rates in visitation and displacement shares to northern Arizona - there is much more to do here. What if the impacts are not uniformly spread and are, instead, concentrated in Tusayan? What if Tusayan can counter the effects of CFV, but the hoteliers in Williams can't?

4. There is no estimate of the impact on hotel room rates. Clearly, the market can't overbuild hotel rooms without rates plunging. This will contribute to falling incomes and falling tax revenues.

5. There is no consideration of rolling bankruptcies, perhaps even to the detriment of CFV. That is, if CFV triggers a price war, those who can least afford it will go out of business. The new owners will now be able to better price rooms, because they've lowered costs (because the old owner had to take a loss). This likely will ripple across the landscape as hotel after hotel fails, is bought up at a discount, and brought back on line with lower rates. Eventually, it may well be that CFV is the one that can't compete, and what are the consequences of the Forest Service expending all this effort to facilitate this deal if that is the result?

6. What level of impacts are too much? The Forest Service never drew a line in the sand. Was $20 million too much? $200 million? $2 billion? We just don't know.

Fall 1998 to Fall 1999
The Final EIS

Following the public comment period, the Forest Service went back to work on its analysis. While initially supporting Alternative G (CFV of 900 rooms), there was a concentrated and sustained push by the developers to make Alternative H (1,200 rooms) adopted. In the spring of 1999, the Williams Chamber of Commerce asked BBER to write a specific critique of Alternative H, which they would make available to the Forest Service. [Our work in the summer of 1998 really was focused on Alt. G.]

In August of 1999, the Regional Forester made her announcement for which alternative was accepted, and released the "Final Environmental Impact Statement for Tusayan Growth." She picked Alternative H. Addressing the differing economic analyses, she dismissed them altogether by saying that they were "conflicting," as if that meant that one couldn't decide what was best here! We did find out the results of the valuations for the land swapped, which is secret until the end of the process. The Forest Service concluded that the 274 acres to be given to CFV were worth $5.4 million! And, CFV believes that they can do $1 billion worth of business there over a ten year period. Absolutely incredible.

Fall 1999 - Spring 2000
The County Hearings

Once the Forest Service had made its decision, events continued on two tracks. On one, lawsuits were filed on behalf of aggrieved parties, seeking to overturn the decision. On the other, the county (Coconino) had to begin consideration of rezoning these 274 acres so that the development could take place. The land swap was contingent upon the rezoning.

The county's Planning and Zoning commission held hearings on the matter (over several nights), approved the rezoning request and sent it on to the Board of Supervisors for consideration. The Board of Supervisors held hearings in NAU's Cline Library Auditorium, over several nights, and heard from vested, as well as interested, parties. Supervisor Babbitt withdrew himself from the deliberations, due to a financial interest in one of the inholdings that CFV was going to use for the exchange. It seemed a moot point, as there are only five supervisors and a tie vote (i.e., 2-2) would have upheld the rezoning request. The Board sent the proposal back to Planning and Zoning for some tweaking, but was otherwise in favor of the proposal. One change they did make was to scale the project back down to 900 rooms, although if two lodges inside the park (Thunderbird and Kachina) get torn down, they would let CFV add 240 rooms to their total. In the end, the Board voted 4-0 to allow for the rezoning.

Spring 2000 - Fall 2000
The Election

Following the county's decision on rezoning, opponents circulated petitions to have the decision placed on the ballot in November of 2000. They easily got the signatures needed and for about three months residents were deluged with mailers and advertisements for and against Canyon Forest Village. On the ballot, this measure was Proposition 400. Unlike other ballot propositions, the vote on this one made sense relative to one's opinion of the issue - "yes" meant you wanted to allow for the rezoning and were in favor of CFV, while "no" meant you wanted to overturn the rezoning and were opposed to CFV. In the month before the election, the local NPR affiliate, KNAU, did an interesting series on the radio about CFV. Despite the flurry of campaigning, the vote wasn't really close - the proposition was handily defeated.