Archive for December 28th, 2008
Remember back to the 2006 legislative session to extend the Tax Incremental Financing (TIF) funding for Rio Nuevo? The debate was whether or not to extend the TIF funding.
The idea behind TIF financing is to focus money from existing retail sales in a geographic area and use those funds to bolster tax collections in a new area. Tucson has spent $78 million so far and it’s questionable how much new economic activity has actually occurred. The City politicians point to ‘laying the groundwork for future development’. That story is starting to wear thin.
The state legislature is coming into some tough times and balancing budgets is becoming a very big issue. If you take a look at the the current make up of the AZ Senate, no one in the current Republican Caucus voted for the extension and only four or 5 Republicans actually voted for it.
Let me paint the picture for you;
1. Rio Nuevo was a grand idea thought up by City Manager Keene as a way to make Tucson more Berkley like.
2. A fat legislature lead by Southern Arizona golden boy, Tim Bee and a governor that wanted to reward Tucson for supporting her in to office, authorized the TIF funding to jump start downtown Tucson.
3. City mangers changed, elected officials changed, downtown business associations changed, Rio Nuevo offices were opened and closed. Downtown Alliance came and went Downtown Partnership came and went, Glenn Lyons was hired and a new Downtown Partnership was created.
4. Lots of money was spent on lots of consultants and plans that never came to fruition.
5. Enter the current City Manager, Mike Hein. He worked to get the TIF extension in 2006. The extension was a tough one to get and a few caveats were implemented regarding restrictions on eminent domain and using the funds to build police or fire facilities.
6. All total $78m has been spent and people question how much has actually been done. The officials in charge point to ‘infrastructure’ projects that ‘lay the groundwork’ for future Rio Nuevo growth.
7. 2009 will usher in a new slate of legislators that are under the gun to balance a huge budget deficit. The State will be looking high and low to capture all the dollars it can. Couple that with the fact that all but one of the state legislators taking office in this session were not involved in the 2006 extension negotiations and Rio Nuevo is looking at a tough, up hill battle.
From this weekend AZ Star: – HERE
A devastating blowLosing a half-billion dollars in Downtown redevelopment money would be a “devastating blow” for Tucson, said Si Schorr, a local lawyer and active Democrat. “One doesn’t have to hold an MBA from Harvard to figure out that,” he said.George Larsen, co-owner of Larsen Baker Commercial Realty, said losing the money would be a setback for Downtown, adding that the Legislature should be able to mandate changes like accounting reform, but should not be able to suspend or cancel Rio Nuevo.But Cotlow Co. President Dean Cotlow, a commercial real estate broker, said the city doesn’t deserve any more money for Rio Nuevo, given how badly it has misspent the first $100 million. It would be understandable for the Legislature to take the money, given how it has been spent so far, he said.Losing the money would be a blow to the community, Cotlow said, but it would force the city to own up to its mistakes and learn an important lesson.Tucson Mayor Bob Walkup said he’s concerned about the Legislature taking the money, but that he doesn’t think it will happen because the city will make a convincing argument to the Legislature for keeping it.“I think we’ve got a story to tell that a lot of good things are starting to happen,” Walkup said. “We owe them that story.”
Words of cautionSome Republicans are discussing a suspension of Rio Nuevo’s ability to draw on state taxes until the state’s budget crisis passes, said local businessman Bruce Ash, a party leader who has had a long-standing interest in Rio Nuevo.Ash said the city is “playing with fire” with its recent sale of $80 million in Rio Nuevo bonds, since the Legislature may suspend Rio Nuevo state sales-tax deliveries to Tucson. That would leave the city paying for the bonds out of its own general fund, meaning substantial cuts to other city services to pay off the bonds.Antenori also questioned the city floating Rio Nuevo bonds. “They’ve got to realize they could be on the hook for that,” he said.Hein downplayed the potential the Legislature would take the money pledged to the bonds. He said all of Rio Nuevo’s cash flow for the next several years is pledged to the $80 million in bonds sold in mid-December.If the Legislature were to repeal or suspend Rio Nuevo, Hein said it is likely to trigger complex legal action involving the city, the state and bondholders.It would also set precedent statewide that any specially dedicated funding source, such as water or sewer bonds, could be pulled by the Legislature, making it impossible for any Arizona jurisdiction to float those bonds because of that risk, Hein said.Assistant House Minority Leader Kyrsten Sinema, D-Phoenix, said she knows of no specific plans for Rio Nuevo this legislative session, but added that “you can bet on” someone trying to get rid of Rio Nuevo at some point.Sinema said the Tucson City Council asked the Democratic leadership to try to protect Rio Nuevo funding, something it will try to honor.“What kind of power we have to do that is another story,” she said.
A little history on the original set up of Rio Nuevo and the 2006 legislative extension from Blog for Arizona:
Rio Nuevo is a multi-use redevelopment district which diverts a portion of the tax revenues collected in the district, in this case Sales Taxes, and places them in a fund for redevelopement projects. A TIF district like Rio Nuevo must be authorized by a public vote. In 1999, voters approved Prop 400 which authorized the Rio Nuevo TIF for a period of 10 years.
Or did it?
Many in support of reauthorizing Rio Nuevo (disclosure: I personally support it), felt that it would be unwise to ask Tucson’s voters to reauthorize the Rio Nuevo TIF. The most honest accounting of that concern I have yet heard was from LD 28 state legislature candidate Steve Farley, who opined that if Rio Nuevo went back to the voters, it wouldn’t win. The dithering, incompetence, lack of visible progress, and repeated redrawing of the plan with new and better boondoggles, has left many Tucsonans with an impression, not entirely unjustified, that Rio Nuevo is a failed experiment.
So how could those who support it avoid sending it back to voters? Just have the legislature reauthorize it. There’s just one pesky little detail: the law. ARS 48-4237, which authorizes multi-use TIF districts has a requirement: Section D states “The board shall state on the ballot the purpose of the tax, the maximum rate of the tax and the maximum number of years for which the tax will be authorized.” Well, that’s a pickle; Rio Nuevo expired after 10 years.
Supporters of the ‘legislative only’ reauthorization approach found a solution. They proclaimed far and wide that Rio Nuevo could be extended without refering it to the voters because, though the voter pamphet distributed to voters, and all the press coverge leading up to the vote, specified a period of 10 years, that limit wasn’t actually on the ballot. Thus the Rio Nuevo TIF was not technically limited to 10 years and could be extended indefinitely. Only problem is, then that ballot violated state law.
Hair-spitting gone wild. But water under the bridge. But it leaves those advocating for the ‘legislative only’ approach without any real, good-faith basis for their argument. Well, actually, there isone. Back to Steve Farley’s honest assessment. We won’t have a vote, because it won’t pass. So, no vote. If you really think Rio Nuevo is nifty and you don’t care much about those pesky rules we call the law, there’s no problem.
Unfortunately for Downing, he did care about the law. And he cared about the right of taxpayers to decide how their money is spent.
You see, the hundreds of millions that ‘would just go to Phoenix’ if not devoted to Rio Nuevo is only half the story: literally, half. Every dollar of Sales Tax that get diverted to Rio Nuevo by the TIF, must be matched with revenues by the local government. So, reauthorizing Rio Nuevo wasn’t just keeping Tucson dollars in Tucson, it was also a decision to spend hundreds of millions of local tax dollars to match those funds, all of it tagged only for use on Rio Nuevo projects. So a handful of state legislators, no matter how well intentioned, took it upon themselves to decide how hundreds of millions of Tucsonans’ general fund tax dollars would be spent: on Rio Nuevo. And we don’t get any say about it.
Foraker ran a great timeline of events for Rio Nuevo on his blog – HERE. One of the highlights of the blog post worth a read;
November 26, 2007: Marketing Exec sees a lack of ‘wow’ factor in Rio Neuvo(Teya Vitu – Tucson Citizen) Margaret Pulles, deputy director of the Smithsonian’s Affiliations Program, looks at what is going on and declares, “You’re going to have a ghost town if you don’t change your frame of thinking.”
After landing the city contract to brand Rio Nuevo, Margaret declares that she didn’t see much to brand, i.e. where are the clothes on this emperor? (Remember Bablove Ridgewood Workgroup? Lack of clothing didn’t stop them from taking a quarter mill or so to make a yellow streak.) Margaret’s “Where’s the beef?” remark infuriated Rio Neuvo Director Greg Shelko. He declared, “I don’t think she knows what we’ve been doing the past two years.”
I’ve never met Greg or Hecker, but the cloth alarm is screaming. I have met Snell. I speak with confidence that if you asked these three to team up and bake a pizza, they’d drop fifty grand on an oven study, twelve grand to fly to Greece and watch them, $40 grand to consultants to study 1) dough, 2) sauce, 3) ingredients, 4) cheese, 5) baking temps, 6) pizza size, and 7) crust thickness policies. After extensive meetings and interviews, Snell would drop 75 grand for glossy pamphlets no one will read because everyone’s already left for Pizza Hut, where it takes 20 minutes and costs about twelve bucks.
January 10, 2008: Glen Lyons, the new director of the Downtown Tucson Partnership, arrives. Salary $100-$120K. Now things will really start to happen.
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