INCLINE VILLAGE’S EARLY YEARS; HOW AND WHY A GENERAL IMPROVEMENT DISTRICT

Yes we all know about the Washoe Indians who populated the Lake Tahoe region for ten thousand (10,000) or more years before the arrival of the white man. And the tens of thousands of emigrants who stopped at the Lake during the 1849 rush on their way to the gold fields of California¹. And the massive harvesting of lumber transported nearly 1,400 vertical feet by Incline Railroad² to the northeastern crest of the mountains above what would eventually become Incline Village³ where  it was deposited into a giant V-flume filled with water where it floated nearly 4,000 feet to a tunnel and then traveled another seven (7) or more miles to Washoe Valley and Virginia City⁴. And Mark Twain⁵, of course, who described Lake Tahoe as “surely the fairest picture the whole world affords…the masterpiece of the universe.” But no history of Incline Village is complete without discussing legendary “Captain”⁶ George Whittel, Jr.⁷ and the McDonald Carano law firm. Let’s begin with the Captain.

It would be easy to dismiss Whittel as no more than an historical footnote were it not for the tremendous effect, albeit inadvertent, he had on the North Shore of Lake Tahoe⁸. “The Captain” was born on September 28, 1881 to San Franciscan “economic elites”⁹. His life long ambition was to live an unproductive life committed to the notion of never having to work. When his father died in 1922, the Captain became one of the richest forty-two (42) year olds in America¹⁰. In 1929, primarily because of the lure of no income nor estate taxes, Whittell chose to make Northern Nevada his second home forming the Nevada-based business “George Whittell and Company Investments.” And in what may have been his only act of business acumen, just weeks before the crash of 1929, Whittell pulled $50 million¹¹ out of the stock market¹².

In 1936, at the age of fifty-four (54), George partnered with friend Norman Blitz¹³ (a Nevada entrepreneur and real estate agent) to acquire twenty-seven (27) miles of Lake Tahoe shoreline on the Nevada side¹⁴ for roughly $2 million. And between 1935 and 1969 Whittell continued to amass a vast majority of the acreage on the Nevada side of Lake Tahoe, in Washoe, Carson, and Douglas Counties, all the way from Kings Beach to Stateline. Although his original intention was to augment his own estate with large-scale development (he had plans for large casino and hotel resorts in Zephyr Cove and Sand Harbor), after his remote stone mansion was completed in 1936 (see discussion below), his appetite for large scale development waned (he decided he “liked not having neighbors”).

Soon after creating his Nevada investment company, Whittell engaged Nevada architect Frederick DeLongchamps to design an isolated complex of buildings on Lake Tahoe’s northeastern shore (at a cost reputed to total about $300,000) perched on a rocky promontory formerly known as Observation Point¹⁵. Having a profound interest in poker, alcohol and women¹⁶, Whittell, the eccentric playboy, became known for his wild parties at “Whittell’s Play Pen” for actors, politicians, former presidents, baseball legend Ty Cobb, and a fellow notoriously reclusive billionaire, Howard Hughes.

Notwithstanding his aversion for large scale development, beginning in 1938 the Captain began selling small parcels of property along the northern shoreline of the Lake. Over the next twenty (20) years he sold over sixty (60) lakefront lots¹⁷ along the former route of State Highway 28¹⁸ (the current route of Lakeshore Blvd). Then in 1959 he sold 9,000 acres [fourteen and one-half (14-1/2) square miles] on the northeastern rim of Lake Tahoe to the Nevada Lake Tahoe Investment Company¹⁹ for $5 million²⁰. And so began the story of newly created “Incline Village,” and the Incline Village General Improvement District (“IVGID”).

Folklore has it that in 1958 Whittel was “tricked” into granting an option to purchase these approximately 9,000 acres of pristine, undeveloped, forest land to John Maloney. Maloney peddled the option (for $300,000) to two CPAs from Oklahoma; Eugene Jordan and Arthur Wood. On September 24, 1959, on the eve of the option’s expiration, the option was exercised and the $5 million purchase price paid²¹ paid²². The land was deeded to Jordan (the holder of the option) and within a week (October 1, 1959), it was conveyed to Art Wood’s Nevada Lake Tahoe Investment Company.

With the intent of developing Incline Village into “a complete recreational area (consisting of)…two great golf courses; the finest tennis facilities in the world…a major ski development; riding stables (and)…trails to the very crest of the (Sierra) mountains…gaming and related night club entertainment…a cultural center with related youth programs…(and) use of Lake Tahoe, the most important and actually the very heart of a complete recreational base…(complete with) family parks for picnics and swimming and…boating access to the Lake for fishing and water skiing,”²³ Wood and others (primarily his CPA colleague Harold Tiller) were successful in lobbying the Nevada State Legislature to adopt legislation which allowed creation of General Improvement Districts (“GIDs”). Enter the McDonald Carano law firm²⁴.

Because “there were no criteria to guide county commissioners as to whether…a (GID) should be created, residential real estate developers like CBDC were free to use the artifice of a GID to transfer the financial obligations of constructing public infrastructure improvements associated with development (such as streets, gutters, storm drains, sewerage and water services) onto persons other than themselves. And that’s exactly what happened here. Effective June 1, 1961 the Incline Village GID was created by Washoe County.

Initially IVGID’s boundaries encompassed “the unincorporated rural areas of Incline Village, Washoe County, Nevada.”²⁵ Its first trustees²⁶ were: Raymond Plunkett²⁷, Raymond Smith²⁸, Robert McDonald²⁹, Harold Tiller³⁰ and John M. Uhald³¹. All were either principals in CBDC, or closely aligned with its interests. Thus armed with effective control of a “governmental” unit, CBDC was free to sell Incline Village real property³² and use IVGID as its conduit to issue bonds³³ to construct the public infrastructure improvements any other real estate developer would typically have been required to finance/construct, and to assess local property owners for the servicing costs associated with those bonds.

Within days of IVGID’s creation the IVGID Board declared the public infrastructure improvements to be constructed [water {project 61-1 (Resolution No. 6)}, sewer {project 61-2 (Resolution No. 7)}, roads {project 61-3 (Resolution No. 8)}], as well as the source for their payment [i.e., the issuance of bonds³⁴ (Resolution Nos. 21-23) whose premiums would be paid by way of special assessment levied against those properties specially benefited³⁵]. And within two (2) months, the IVGID Board had approved the issuance and sale of the equivalent (in today’s dollars) of over $45 million in infrastructure bonds: $1,881,744³⁶ of water bonds (Resolution No. 24), $1,631,890³⁷ of sewer bonds (Resolution No. 25), and $1,881,744³⁸ of road bonds (Resolution No. 26). In fact within seven (7) short years of IVGID’s creation, the District had amassed over an unbelievable $16 million of bonded and other public indebtedness³⁹! This means of spending and financing, augmented by the District’s subsequent Beach (“BFF”) and Recreation (“RFF”) Facility Fee(s)⁴⁰, became the playbook for CBDC’s development and sale of Incline Village property.

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1. Reportedly, hundreds of thousands of gold seekers streamed to the Pacific Coast hoping to strike it rich.
2. Built in 1880 and operational until 1894, four small railcars were lifted 1,400 feet vertically up the mountain with 8,000 feet of cable (the rail line was 4,000 feet long) pulled by two 12 foot diameter bullwheels powered by a steam engine located at the top of the mountain crest (https://www.truckeehistory.org/sierra-nevada-wood-and-lumber-company.html).
3. “In 1884, the remote settlement of ‘Incline,’ was declared both an election precinct and fourth (4th) class post office (http://www.alpinerealtytahoe.com/area-resources).
4. Walter Hobart (Nevada State Controller) and Seneca “Sam” Marlette (Nevada and California Surveyor) founded the Virginia & Gold Hill Water Company (later incorporated into the Sierra Nevada Wood & Lumber Company) which constructed the V-flume. The flume carried water from above Incline Village and Marlette Lake through the Carson Range via tunnel. From the top of the Washoe Valley, the water went into seven (7) miles of 12” wrought iron pipe (the Virginia & Gold Hill water tunnel), down 1720 feet and back up again in an inverted siphon (https://www.truckeehistory.org/sierra-nevada-wood-and-lumber-company.html). Timber was needed to shore up the many underground silver mines in Virginia City.
5. After failing to find riches in the rough 1860s mining camps of the Nevada Territory, Samuel Langhorne Clemens found his true calling in John Piper’s Corner Saloon in Virginia City as a raucous newspaper writer who adopted the pen name Mark Twain (see https://www.tahoemagazine.com/mark-twain-at-lake-tahoe/.
6. George liked to be called “the Captain” inasmuch as he “served as an ambulance driver and a U.S. Army captain in WWI” (go to https://www.onlinenevada.org/articles/george-whittell-jr#:~:text=George%20Whittell%20used%20the%20title,the%20rest%20of%20his%20life).
7. Much of the history which follows comes from the 2002 book “Castle in the Sky” written by Ronald M. and Susan A. James (go to https://www.amazon.com/Castle-sky-George-Whittell-Thunderbird/dp/0971804702).
8. By and large, Whittell refused to develop the majority of his massive Lake Tahoe holdings leaving them pristine for the generations to come. Thus he is remembered as the “accidental conservationist” (https://tahoequarterly.com/best-of-tahoe-2016/george-whittell-jr-the-accidental-conservationist).
9. His father was the founder of the San Francisco Water Co., the precursor to the founder of Pacific Gas & Electric Co. (PG&E).
10. His father left an estate valued at $29 million.
11. Valued at over $60 billion in 2015 dollars.
12. His rationale was that “when men stop boozing, womanizing and gambling, the bloom is off the rose“
13. George was the money guy.
14. Encompassing essentially 95% of the Nevada shoreline of Lake Tahoe — all of the land from Crystal Bay, Incline Village, Sand Harbor, Glenbrook, Cave Rock and Zephyr Cove to Round Hill (go to https://en.wikipedia.org/wiki/Thunderbird_Lodge_(Lake_Tahoe,_Nevada).
15. This complex eventually became the Thunderbird Lodge.
16. Notwithstanding he was married to French debutante Elia Pascal.
17. Most of the buyers were individuals who built lakeside homes.
18. See https://www.clubtahoe.com/history-of-incline-village/.
19. A handful of investors from Oklahoma, Kansas, and Hawaii led by Art Wood.
20. On June 1, 1960 the property passed to the Crystal Bay Development Company (“CBDC”) for a whopping $25 million! CBDC was made up of close to fifty (50) of Art Wood’s investors. And he was its president [https://www.yourtahoeplace.com/ivgid/about-ivgid/history-of-ivgid [Whiston v. McDonald, 85 Nev. 508, 458 P.2d 107, 109 (1969)].
21. Meaning a total of “$5.3 Million (was paid) for (the) 9,000 acres” (go to http://tahoequarterly.com/summer-2016/a-castle-in-the-pines).
22. In fact folklore has it that the $5 million was paid in cash and left in shopping bags on Whittel’s front doorstep due to his remorse over the option he had granted.
23. See Harold Tiller’s October 25, 1965 letter testimony to the Washoe County Board of Commissioners (“County Board”) in support of the IVGID Board’s request IVGID be granted the supplemental basic power of public recreation (see pages 159-160 of the packet of materials prepared by staff in anticipation of the Board’s May 27, 2020 meeting).

24. The principals of CBDC were successful because they had friends in high places. One of those principals was attorney Robert McDonald; a founding partner in the firm of Bible, McDonald, Carano and Wilson of Reno, NV. “Bob McDonald and former United States Senator Alan Bible created the firm in 1949. Prior to launching the firm, Alan Bible served as United States Senator for the State of Nevada (1954-1974). Prior to that (1942-1950), he served as Attorney General for the State of Nevada with Bob McDonald acting as his Deputy Attorney General” (see https://www.mcdonaldcarano.com/news/nevada-law-firm-mcdonald-carano-celebrates-70-years/).

25. See ¶1(A) at page 35 of IVGID’s 2019 Comprehensive Annual Financial Report [https://www.yourtahoeplace.com/uploads/pdf-ivgid/2019-IVGID-CAFReport.pdf (“the 2019 CAFR”)].
26. See https://www.yourtahoeplace.com/ivgid/about-ivgid/history-of-ivgid.
27. Former GM of the Crystal Bay Club, and owner of the Tahoe Mariner hotel/casino (both located in Crystal Bay).
28. A master land planner from Gardnerville who was recruited by Robert McDonald to design Incline Village.
29. CBDC’s attorney.
30. One of Art Wood’s Oklahoma CPA colleagues and known as “the father of Incline Village.”
31. “The project manager for CBDC.”
32. In 1960 CBDC accomplished its initial subdivision of the acreage purchased from Whittell into 1700 lots. And by 1968, over three thousand (3,000) homes had been built.
33. NRS 318.275(1)(c)  authorizes GIDs to issue revenue bonds.
34. NRS 318.325(1) as originally enacted authorized “a district…upon the affirmative vote of four trustees…to borrow money without an election in anticipation of the collection of taxes or other revenues and to issue…the following securities to evidence such borrowing…revenue bonds (and) special assessment bonds” (see SB20, Chapter 319, sections 54-55, pages 469-470, 1959 Statutes of Nevada).
35. NRS 318.350(1) as originally enacted permitted “such part of the expenses of making any public improvement (authorized, in a general way, in the ordinance creating any district authorized by this chapter) as the board determine(d to)…be defrayed by special assessments upon…such…lands as in the opinion of the board may be benefited by the improvement.”
36. $16,387,410 in today’s dollars.
37. $14,211,524 in today’s dollars.
38. $16,387,410 in today’s dollars.
39. Nearly $140,000,000 in today’s dollars.
40. See NRS 318.197(1) and 318.201.