Posts Tagged ‘Downtown’
Here’s another Player Report. The Player Reports are supporting stories detailing how a select few individuals or groups that know how to ‘play the game’ benefit above and beyond our standard business owners. The Players ultimately ruin the system for the rest of us. The Players thrive in our dysfunctional leaderless community. Read The Player opinion in the Inside Tucson Business.
Follow the bouncing ball…..
From Uhlich’s city web site:
Karin served as the Executive Director of Primavera Services (Primavera Foundation) for nine years, an affordable housing/job training and homeless services agency with an annual budget of $2 million and a staff of 50 people.
From yesterday’s AZ Star:
The Primavera Foundation is working with the Downtown Tucson Partnership to try to broker a deal with city officials to donate or sell for far below market value 1.6 acres the city owns southeast of West St. Mary’s Road and the westbound Interstate 10 frontage road, Primavera Executive Director Peggy Hutchison said.
This is as good as the “Beth Walkup – Children’s Museum” story we ran a few weeks ago….HERE.
Hello AZ Star are you out there?
In a mad rush to stave off elimination of the Rio Nuevo pot of money, the Tucson City Council has announced a redirection of the priorities for spending the $80 million they cashed in just before the New Year from bonds they sold, desperately, at a premium.
Now, rather than funding for more design of museums and for construction of the Convento (known by some as the mud hut), the city will spend what might be the last Rio Nuevo money it ever sees on an arena and convention hotel.
Do it Right or Don’t Do It at All!
To fans of the much-needed hotel, this is a very late, only-barely-better, better-late-than-never situation. It would be more persuasive if it weren’t such an obviously desperate maneuver to save the TIF and the Gem Shows at the same time.
I have yet to meet a fan of the arena as the city has proposed it.
From casual conversations with real people to reading the on-line comments and blogs, there seem to be two schools of thought on the arena that the city seems to want to build so desperately: either build it bigger or don’t build it at all.
It’s puzzling that the city would spend $130 million on a new arena that only gives Tucson 2,000 more seats than the crappy “Madhouse on Main”, as the Icecats coach calls the Tucson Arena. I know, I know; it’s not just the number of seats that makes the crappy arena uncompetitive. It’s the ceiling height, the lack of amenities, the lack of decent locker rooms and green rooms, the lack of luxury boxes for Rich Singer to feel important in, and the smell.
Nonetheless, with a growing city (albeit economically under-performing its population), wouldn’t the 12,000-seat arena be obsolete the day it opens?
Apparently the UA has made it clear that it is not moving the basketball Wildcats out of McKale Center, but even so, there are opportunities for national-level sporting events that would surely be out of reach of an arena so small. There are AAU events, NCAA events, Olympic qualifying events.
Sizing to the Sweet Spot
The city’s argument against a bigger arena is that it can’t afford the cost of construction. But if the operating revenue of a bigger arena justified the cost, the cost wouldn’t matter, would it? If you were in the private sector, and were trying to decide how big of a plant to build, would you limit yourself to building a smaller factory that could only produce enough output to serve a limited area if you could cost-effectively produce enough to serve a much larger market and make larger profits by building a bigger factory? Of course not. You would find the sweet spot.
There may be multiple equilibrium points here. It’s conceivable that 12,000 seats is more cost-effective than 15,000 seats. City officials seem to be making that argument, and they may be right. The new revenue brought in by a 15,000-seat building may not be enough to justify the additional cost of the 3,000 seats.
But, perhaps a 17,000-seat arena opens up a whole new set of revenue opportunities not available at 15,000 seats, and an arena of that size, while costing significantly more than $130 million, would pay the city back more handsomely than the Little 12,000-seat Arena That Couldn’t. Perhaps the additional revenue would be enough to justify the additional cost. Perhaps not. I don’t know. You probably don’t know. The point is, the city had better know what its options are, and it had better be able to explain why it has selected the option that it has.
Explain it to Us-Who Knows, We May Even Support It!
This would be called Leadership. Understanding the full implications of the various policy options open to you, evaluating the best deal for the current and future needs of the community, and then communicating to the citizens/taxpayers why the optimal option was selected over other alternatives.
Let’s say you’re the mayor of such a city that was considering building an arena. Go on TV. Write guest opinions in the newspaper. Hold a town hall meeting and televise it. Tell John C. Scott and his listeners about it. But don’t just do the cheerleading bit. Explain the logic and the thought process and what the implications of the alternative scenarios were and why you reached the conclusion that this alternative was best for us.
What’s the Real Reason We’re Doing This?
Also, while you are at it, tell us what we are getting out of the arena you are building for us. Minor-league hockey? Arena football? More and better concerts? Monster truck rallies? NCAA gymnastics championships? Sweet 16 basketball? Preventing the tribes from building an arena outside the city limits? Or perhaps, just more exhibit space for the expanded convention center you also seem hell-bent on building. Is the arena necessary in order to make the hotel work? (If that’s the case, then you’d better extend your presentation to tell us how and why the 525-room hotel is necessary and whether it is truly feasible.) Just tell us, we’re adults.
If the threat of losing the Gem Show will truly be abated by building the hotel, then tell us that. I just want to know. Use a flow chart if you have to. And don’t have Greg Shelko, Rich Singer, or Glenn Lyons explain it. You do it. You’re the mayor.
Whatever you do, don’t spend $130 million of our money just to prove a point. Or just to save a bunch of diverted state tax money you no longer seem entitled to spend based on your track record to this point.
The crazy meter is flashing again downtown Tucson. ArizonaEighth.com ran one of the best stories I’ve seen in a while – hilarious – HERE.
From Antiplanner.com. The notion that real cities have big downtowns is firmly ingrained in the minds of many urban planners and city officials. As Joel Garreau points out in Edge City, this ignores the fact that such downtowns were only built for about a century, from roughly 1820 to 1920.
Modern cities, which planners deride by calling them “sprawl,” have job centers spread out all over the place. San Jose, Phoenix, and Los Angeles are all typical examples. Planners and officials try to re-create obsolete downtowns by building pork-barrel projects such as convention centers and giving developers huge subsidies for hotels and office buildings. This enriches developers and contractors, but it never really creates a “real” downtown.
Downtown Los Angeles, for example, has less than 4 percent of the jobs in the region and does not even have as many jobs as Long Beach. Downtown San Jose is pathetic as a downtown: it has a few restaurants and a heavily subsidized hotel or two, but most of the real jobs are scattered around other parts of Santa Clara County. If you want a real “lively streets” experience, go to Santana Row.
Now Phoenix has succumbed to the downtown mania. As the Arizona Republic reports, this year the city will open a $1.4 billion light-rail line, an expanded convention center (because the existing one wasn’t losing enough money) costing $600 million, at least $350 million in subsidies to a new Sheraton Hotel, and hundreds of millions in subsidies for a downtown campus of Arizona State University.
Of course, Phoenix doesn’t limit its subsidies to downtown. The city is providing $100 milion in subsidies to a new, mixed-use development (another utopian planning scheme) on the edge of the city. This is part of a “border war between adjacent cities over who could give away the most to attract the best retailers.” The Goldwater Institute is suing the city to stop this subsidy.
The definition of insanity is doing the same thing and expecting a different result. These giveaways are nothing more than a way to satisfy political egos, transfer tax dollars to favored developers, and give urban planners a chance to try their insane theories.
(Editor’s Note: This was veteran newsman Steve Emerine’s first column for Inside Tucson Business. It appeared in the June 20, 2005, issue and dealt with an idea at the time to build a 27-story high-raise in downtown Tucson called the Century Tower. Estimates were that it would cost $60 million to $70 million. That week, the Tucson City Council decided against giving Bob McMahon, owner of Metro Restaurants, and Don Martin, owner of Competitive Engineering, their requested exclusive negotiating rights to buy the city-owned property for the tower. As a result McMahon and Martin never pursued the idea.
We reprint the column in tribute to Steve Emerine and as an example of the knowledge and institutional memory he brought to local issues.)
So where in the world did restaurant owner Bob McMahon and manufacturer Don Martin get that idea of building a 27-story high-rise next to the Joel Valdez Library in the middle of downtown Tucson? Are they crazy? Well, it wasn’t their idea. And no, they’re not crazy.
For 40-plus years, experts have told officials in cities whose downtowns have crumbled because of outlying shopping centers with plenty of free parking to do exactly what McMahon and Martin are proposing.
They told Tucson to do it. I wrote stories mentioning buildings like the McMahon-Martin proposal when I covered City Hall in the 1960s for the Tucson Daily Citizen (the afternoon paper’s official name when it was owned by the William A. Small family.)
In those days, urban experts were urging cities to let the private sector build tall structures with underground parking, retail stores at street level, several floors of office space, upscale residential units above the offices, and a restaurant or night-club on the top floor.
The last idea was the only one Tucson adopted then. We had the Skyroom, which later became the Tucson Press Club, at the top of the nine-story Arizona Land Title Building at the northwest corner of Stone Avenue and Alameda Street, and the posh Old Pueblo Club later took over the top two floors of the Tucson Federal Savings Tower south of Pennington Street on the east side of Stone.
Buildings at those locations are now owned by Pima County. The title building was gutted and rebuilt to house development services. The former savings tower is mostly occupied by county lawyers. And the night-clubs and restaurants in both buildings are gone.
Tucson finally jumped on the national urban renewal bandwagon, but it followed advice from other urban planners to pursue the tourism and convention business. Once historial neighborhoods that had been taken over by sleazy bars, flop houses, prostitutes, drug dealers and other frowned-upon uses were condemned.
They were replaced by the Tucson Convention Center Arena, Music Hall and Leo Rich Theatre, the hotel currently known as the Radisson City Center (Editor’s note: now the Hotel Arizona), and the rambling multi-colored La Placita complex. Recommendations to build a building like McMahon and Martin have suggested were put on hold.
City officials were told that the Diamonds department store chain would anchor La Placita. When Diamonds decided to go to shopping centers and not downtown, the promoters swore La Placita would thrive anyway with restaurants and lots of small shops and offices on all levels.
That didn’t work. In hindsight, it might have if they had let people live on upper floors of La Placita so the ground-floor businesses could have some customers within walking distance. When that idea was proposed later, the cost of adding adequate plumbing for residential uses was too high.
So La Placita joined the title building and the savings tower building to house more offices for government workers to hang out in from 8 to 5, five days a week.
That brings us back to McMahon and Martin, who want a six-month option to buy land next to the library at its appraised market value so they can study the feasibility of their tower idea. If it will work, they would buy the land and go ahead. If not, the city would keep the land.
Some opponents decry the loss of a grassy patch next to the library and say the tower would block their views of the mountains and the old Pima County Courthouse.
But the grass is relatively new, replacing what was an old green-colored office building and a parking garage. And some of the views have already been blocked by other things.
At least the tower would help hide that ugly red cockroach statue at the library.
X4mr weighs in on the the future of the gem show. Hey Tucson elected officials and bureaucrats, are you on this one? What’s our plan? Please don’t mess this one up too! – click HERE;
Rumors regarding the loss of the gem show are not new. Every year word spreads around that it may leave, and it doesn’t. However, each year the talk seems to have more substance, and new this year are the quotes from Gem Show Chief Douglas Hucker, “I would have never considered leaving the city of Tucson for somewhere else, but I am now.” Hucker goes on to comment about Rio Nuevo, “I’m not sure a bridge painting on Fourth Avenue, or some track being laid down for a (streetcar) … that doesn’t represent significant movement for me. There needs to be more. They (the city) better focus on revenue-producing things or they will lose their biggest revenue producer.”
The dissatisfaction has been growing for some time, and I am not talking about the lack of hotels or arenas. The undercurrent involves the taken for granted treatment the show has received over the years. Either last year or the year before that, when the show had a reception of sorts expecting to be greeted by dignitaries including the Mayor, perhaps a few more elected officials, and others (chamber employees, etc.), very few attended. Certain gem show officials were quite incensed, and I paraphrase the sentiment with, “You know, we really like Tucson, and the weather is great, but guess what?”
The city will conduct an “internal review” of payments to the University of Arizona for UA’s planned Science Center complex downtown, Tucson City Manager Mike Hein said Thursday.
Hein said the review was prompted in part by political pressure from the state Legislature, which has threatened to revoke the tax-increment financing district Tucson has relied on to fund downtown and Rio Nuevo redevelopment.
But some city accountants have been questioning UA’s invoices for months. In October, Rio Nuevo Finance Manager Stacie Bird asked Hein to sign a memo that said Hein approved “expenditures the City does not allow on other District projects.” If he didn’t sign, she wanted a meeting with him and UA officials to talk about the spending.
Hein signed it.
Then on Jan. 29, Tucson Finance Director Frank Abeyta ordered an audit of city payments to UA and of the outstanding bills for the Science Center, Rio Nuevo’s flagship project.
Hein, through Bird and Assistant to the City Manager Jaret Barr, put a stop to the audit that day, saying it wasn’t the city’s role to question UA’s expenditures.
On Jan. 30, Abeyta ordered Bird to stop all payments to UA, then abruptly quit. He had been head of the city’s finance department for only four months.
Neither Abeyta nor city officials will say whether the dispute over the audit was the reason for Abeyta’s resignation, but Abeyta, in an exchange of e-mails with Bird Jan. 29, questioned the appropriateness of some UA bills.
In an interview Thursday, Hein cited staffing concerns, the cooperative ideals of public partnerships and the terms of the contract between the city and UA as reasons for resisting an audit and for paying the full amount billed by the university.
He said the city is bound to pay its share of project expenses even though invoices show spending that the city and the Rio Nuevo district normally wouldn’t cover.
But last week members of a state legislative committee criticized Rio Nuevo’s lack of transparency and money management and also complained about a lack of tangible results.
UA’s bills may not help the Rio Nuevo projects’ reputation with legislators.
The charges Bird labeled “questionable” included $161,585 for salaries, $2,155 for food, $14,374 for new computers and a $2,289 trip to Pisa, Italy. The items in doubt accounted for more than $186,000 of the $692,000 the university spent on the project in June and July.
The most recent invoices reviewed by the Tucson Citizen show that spending patterns haven’t changed much, and documents supporting much of the billed amounts were missing.
Receipts lumped with the January invoice show another trip to Pisa, costing $1,188 in June, and requests for reimbursement for a $3,927 trip for two to attend a planetarium conference in Chicago and $1,784 for a university employee to learn about data mining and information storage at a resort near Las Vegas.
The slips showed meals for two in June and July in Tucson at Sullivan’s Steakhouse ($127.98), Barrio Food & Drink ($73.51) and the Arizona Inn ($49.92), and a $165 charge from a HoneyBaked Ham Store that included a $30 delivery fee.
January’s invoice lists a charge of $77,025.42 for “other specialty & design consultant fees.”
Abeyta wrote in an e-mail sent to Bird at 7:54 a.m. the day he resigned that “The City Manager said he would rather not know what discrepancies we find in the payments to U of A. . . . Also he indicated what you said, that as long as U of A approves the expenditures, we don’t have to. I obviously don’t agree with that.”
Abeyta said he was concerned that unless the project was slowed, the city would be spending money on the Science Center that had been allocated to other projects. “Since we have only $2 million from this bond issue, someone has to slow this project down,” he wrote.
UA has billed the city for about $1.3 million of the $2 million Rio Nuevo bond allocation already. The city has not paid the university any of that amount.
Bird, who reports directly to Hein but earlier also to Abeyta in his role as Rio Nuevo treasurer, said Thursday the delay in payments was because of work on the city’s sale of $80 million in Rio Nuevo bonds, not questions about the UA’s spending.
The city has agreed to pay half the cost of the Science Center, up to $130 million. UA has spent and approved more than $13.3 million so far, according to its expenditure summary.
The contract states that Tucson must reimburse the university for “one-half of the total design phase amounts expended to date at the end of the month.” There is no clause clarifying procurement policies.
The contract does, however, give the UA an out if its funding is cut by legislators, allowing it to renegotiate terms or cancel the deal.
University of Arizona President Robert N. Shelton said Saturday that the Vice President of Business Affairs Joel Valdez and Hein have been discussing a revised construction plan for budgetary reasons.
Councilwoman Nina Trasoff, who presides over the Rio Nuevo council subcommittee and whose ward covers much of the Rio Nuevo district, said Thursday, “This has been very difficult. . . . We are bound by the terms of the agreement.”
Councilwoman Karin Uhlich, who called for a city audit commission in June after a dispute with Hein and questions over budget figures, said a review of the UA Science Center invoices could be the commission’s first work.
“It’s true that we have to watch all costs at this time, but transparency and accountability remain priorities,” Uhlich wrote in a statement. “Mayor and Council amended the outside auditing firm contract to allow for ‘spot audits’ costing less than $50,000. That may be a way to contain the cost of any review needed.”
UA’s Valdez, a former Tucson city manager, declined to comment on specifics of the university’s spending Thursday. He did say, however, that “I’m not opposed to an audit.”
I’m a new author to this blog and appreciate the outlet to set some facts straight. I’m concerned that the local media is missing the mark on some of the Rio Nuevo issues and thought I would take a moment and bring the readers another viewpoint. There was a meeting last week at the State Legislature Finance Committee on the future of Rio Nuevo TIF funding. You can catch the video HERE.
Want to see how a real city has used TIF as a professional economic development tool, to leverage enormous commercial growth in its downtown? Let’s look to our nation’s capital, of all places, where Downtown D.C. has experienced a renaissance in recent years.
Check out this Power Point presentation that explains how a TIF has been used to stimulate significant investment of hotels, retail, and a museum that is part of a mixed-use development, in the District of Columbia.
Click on “TIF Case Studies_Washington D.C.ppt“.
With the recent acceleration in criticism of Rio Nuevo and its possible termination at the hands of the state legislature, I have heard and read many misconceptions about how the Rio Nuevo TIF works and what the City did wrong in creating this mess. The City did a lot of things wrong, strategically and tactically, with things done and not done, and unfortunately some of the things it did right have been too little, too late to save it from its likely fate at the state capital.
But the trouble started with how the district was drawn back in 1999, four years before the City even started collecting TIF revenues from the State of Arizona. Last week Rio Nuevo Director Greg Shelko was bothered that the Senate Finance Committee brought up how the district was drawn—again—but to bring this up is not just dredging up the past, or about revisiting outdated criticisms or old grudges. The way the boundaries were drawn is more than an inconvenient truth about Rio Nuevo. It is the fundamental truth about Rio Nuevo and why it hasn’t lived up to its enormous promise.
Rio Nuevo was handicapped before it even began by decisions that were made several months before the voters approved the project in November 1999. The City decided to draw up a district that included property from “A” Mountain all the way down Broadway to what was then called Park Mall.
Some Tucsonans have defended a downtown development district that takes in all of the TIF generated at El Con and Park Place as Tucson’s way of achieving payback for the State revenue-sharing inequities that Pima County suffers relative to other areas of the state. However satisfying this offset of a perceived injustice may be to Tucsonans, the reality is that the gerrymandered TIF district—drawn in the shape of a very long rifle—has been a hindrance to development, regardless of how much money it kicked back to Tucson.
It has been a hindrance because it has skewed the City’s incentive structure for how to plan and finance revitalization. The boundaries as they were drawn gave the City access to huge sums of state sales taxes from The Home Depot, Circuit City, Mervyns, Dillard’s, Macy’s, two Targets and many other stores and restaurants, but this largesse motivated the City to use TIF as a big piggy bank that replenished every month, rather than as an economic development tool that depended on their wise use of the opportunity to generate retail growth in Downtown. With so much money coming in from existing and new sources along Broadway, and a large wish list that included an aquarium, several new museums, a re-creation of the Mission San Agustin complex, a restored Fox Theatre, and several other projects, the City chose to view all that free money from the east end of Broadway as a piggy bank. It was as if any TIF generated in Downtown itself was a bonus. When you don’t have to work for something, you don’t value it. The TIF money was free, so Tucson didn’t make a commitment to generating more of TIF in the area that should have been producing it.
The fact that Downtown business was moribund in 1999 was actually a great thing from the tax-increment standpoint. The state sales taxes from any new development, any net new business activity, would have been 100% incremental compared to the base year of 1999. If Hotel Congress increases its sales by 10% over 1999, the corresponding 10% increase in state sales tax is the tax-increment for that property. But if the empty lot down the street (and some or all of the other 30 empty lots) gets filled in with new businesses (with offices, apartments or condos on top, of course), then whatever sales taxes are generated there are 100% “increment”. So the fact that downtown is/was dead is an advantage with the TIF scheme; it creates an opportunity to enjoy a huge windfall if you actually invest in projects that generate new sales tax in Downtown.
When the City issued its 1999 RFP for Rio Nuevo, a California developer responded to it with a proposal to build lots of retail on the west side of I-10, on the south side of Congress. It was this developer, NOT the City, that proposed using TIF to fund the construction of attractions and infrastructure. The developer envisioned a master-planned area with the Sonoran Sea Aquarium, Museum of the American West, and the Universe of Discovery (I’m not making these up; these were the names of the museums that were proposed in 1999), and a Regional Visitor Center serving as the anchors of a mixed-use development that would include 500,000 square feet of outlet stores. The new sales taxes from this retail center would have all come back to Tucson, as the 1999 sales tax base on the land where it would have been built was Zero.
That particular developer didn’t have its act together, and probably couldn’t have pulled the project off, but the City could certainly have found one that did, let’s say Forest City or General Growth. If the City had chosen to stand up to Menlo Park neighborhood, which didn’t want a lot of retail on that corner, OR, if the City had said, “okay, we’re not going to put the retail there where the neighborhood doesn’t want it, but we’ll put it on the east side of the freeway”, we could have created a TIF district that didn’t need to extend its boundaries beyond Downtown. A TIF district that was limited geographically to Downtown would have allowed the City to invest in the infrastructure to support that retail center with a repayment plan based on the new sales taxes generated there and that would not have been generated otherwise. Whatever sales taxes that retail center would have generated would have come back to Tucson, 100% OF IT.
Instead, the City Manager’s office, led by city manager Luis Gutierrez and assistant city manager John Nachbar (who left Tucson shortly thereafter for Kansas) put together the rifle-shaped TIF district with no public input in the summer of 1999. Nachbar knew that El Con and Park Mall were planning redevelopment and growth. It seemed like a clever way to get funding to build the museums while not forcing retail development on an unwilling neighborhood. Tucson had just a few months to get voter approval for a TIF district before the enabling legislation terminated. The City Council approved the plan 5-2, and then the voters of Tucson and South Tucson (the state law required a partner city to vote for the project, and Tucson promised South Tucson $1 million for its trouble) approved Proposition 400 in November 1999 with over 60% of the vote.
The City then spent $600,000 on a master plan that was subsequently revised at great cost; it created a governing board, a citizens advisory committee, and began essential environmental remediation work on the west side of the Santa Cruz. The TIF revenue stream did not begin until 2003, when the City decided the time was right to maximize the flow of sales taxes being generated in the district. Park Place’s renovation was nearly complete and El Con had opened a Home Depot store.
In order to fund the planning, consultant fees, land acquisition, staff costs, and other expenses prior to the time when the TIF funds started coming in, Rio Nuevo borrowed over $14 million from the City of Tucson. Unfortunately it did not pay any of this back, and now a significant part of the recent bond issue proceeds will be used to repay this loan to the City, which is reeling from huge shortfalls in projected sales tax revenue. In order to initiate the district, state law required an investment in the “primary component”, which was the Tucson Convention Center. Consequently, the first completed Rio Nuevo project was the new box office at the TCC, which cost about $700,000.
A TIF district is supposed to be revenue-neutral; in other words, the governmental entity that is losing the taxes should not miss them because it never would have received them anyway but for the project. Funds are supposed to be invested in “but for” projects; those that would never have been built “but for” the investment. The incremental sales taxes should come only from areas benefited by the public investments.
But Tucson grabbed sales tax increment that was generated outside of Downtown, and that would have absolutely gone to and stayed with the State of Arizona. The malls on Broadway were redeveloping regardless of what Tucson did with its downtown. The motivation for that redevelopment was totally unrelated to the destination of the sales taxes that would be generated there, and it certainly had nothing to do with Downtown. As such, the sales tax increment generated east of the Snake Bridge was 100% diversion of State money. It was an increment, yes, and therefore it was diverted back to Tucson for Rio Nuevo, but it was an increment that was the fruit of other investments made by private developers, and it should have stayed with the State of Arizona. Tucson did not invest TIF dollars earned at El Con back into infrastructure improvements at El Con Mall (and I’m not arguing that it should have); it spent them on studies, consultants, and plans for projects Downtown. (Some have seen this as a delicious irony as well, that the mall that signaled the demise of downtown’s department stores and retail base in the 1960s is now being used as an engine to restore Downtown.)
One can argue that that is a good thing because it helps balance out other revenue-sharing inequities that leave Tucson on the short end relative to Phoenix, but it cannot be argued with a straight face that it is a proper way to set up a TIF.
If Tucson had drawn a TIF district that was self-contained in Downtown, there would have been no diversion of extraneous State sales tax-increment that it wasn’t really entitled to. The City of Tucson has looked at the fairly predictable revenue stream coming down Broadway as a source of income that it is entitled to spend Downtown. With a real TIF, you wouldn’t have a budget of anticipated revenue unless you sold bonds to leverage development that created the sales taxes. In other words, you wouldn’t say, “we’ll have $600 million coming in over the next 20 years; how can we spend it?”
You would say, “what opportunities for development are out there that the City can invest infrastructure dollars to support? What fair and understandable process can we create that lets developers and retailers know what the rules are for applying for a share of this public investment?” Then, be ready for, or actively recruit, developers who see market potential to build projects that generate enough sales tax increment to cover the public investment. And since there is no initial money coming in, you have to bond to get the money to build the infrastructure to make these projects work.
Let’s say a developer wants to build 200,000 square feet of retail. (I picked that number because one of the City’s many studies—the 1995 City Center Strategic Vision Plan—stated that Downtown should be able to absorb 200,000 square feet of retail, and the City should try to achieve that.) The City evaluates the feasibility and risk of partnering on this deal, and if it decides to go forward, it might agree to pay for something like the construction of a public parking garage underground or above the street-level retail. Without it, the project doesn’t happen because other costs of doing development in Downtown give the developers incentive to continue building strip centers in the suburbs or on raw desert. With it, you generate jobs, sales taxes, vitality, and momentum for continued growth and investment.
200,000 square feet of retail kicks off a LOT of sales tax, and if Tucson had built such a center on an empty Downtown lot when the economy was growing, every penny of the new sales tax would have been increment that would have paid a large and ever-growing increment, year after year until the district expired. All of these sales taxes would have been rebated to Tucson, and used to repay the bonds that would have been sold to finance that parking garage. There would have been money left over to create a fund that you could use to stimulate new development. Or build a “world-class” museum.
More realistic than the notion that something so large as a 200,000 sq.ft. retail center would have been built in Downtown Tucson in, say, 2003, would be smaller mixed-use projects with 10,000 or 20,000 sq.ft. of retail, restaurant, or entertainment space. Incremental and sustainable development, creating 100% incremental sales tax growth. As an example, if Bourn Partners’ The Post had been built as planned, it would have created 10,000 square feet of new retail space. If you built several such projects with housing components and created some momentum, Downtown might be able to absorb a bigger retail project, especially one associated with an entertainment destination, hotel, and a thriving convention center. A new hotel would generate an enormous TIF because of its high sales and the fact that the sales taxes would be 100% incremental over 1999.
The sooner such developments could be completed, the sooner they would start paying the City back for its investment of TIF, and the more TIF could be earned over the course of a finite period.
Rather than giving public land away for free, which guarantees that there will not be comparable land values for banks and lenders to use to finance future projects, you would value the land appropriately and sell it at market value. Then, if you want to offer incentives to stimulate development, you do that another way. But you don’t give away land.
By simply budgeting the expenditure of free money that was generated at Park Place and rebated to Tucson courtesy of the taxpayers of the entire State of Arizona, there was no incentive on the City’s part to actually use the power of TIF to create new commercial development and new sales taxes in downtown. Since the money was going to flow in regardless, there wasn’t even any urgency about using it for the museums and other non-sales-tax generating projects.
The structure that the City created for the TIF district virtually GUARANTEED that little private investment or significant revitalization happened, or would do so in a timely manner. Actually there was no structure. There was no “program”. Rio Nuevo officials wondered, in the early years why no developers showed up. That was because there was no economic development program to respond to. The City’s plan was simply to build attractions that would draw visitors to Downtown, and to hope that developers would invest in housing or other development in Downtown in response to the increase in visitation to the area. Build a museum on the west side of the river, and hope that it would inspire a developer to build condos on Congress Street. That was basically the plan.
These foundational mistakes only doomed Rio Nuevo to failure because the City never fixed them—there was nothing stopping the City from changing its initial approach. In fact, had the City used the TIF generated at the malls as seed money for jump-starting its downtown TIF-generating plan, it would have been even more powerful. Combining the free money from the east end of Broadway with new TIF generated in Downtown would have been a tremendous advantage for Tucson. But the City chose to simply take the free money and spend it on projects that don’t generate sales tax in Downtown.
The Depot Plaza project is being developed in a manner that is close to the model that should have been used from the beginning. TIF is being used to build an underground parking garage, below two planned residential buildings with retail space along 5th Avenue and Congress Street. The problem is that there is no program that would inform another developer that such a model might be used on another Downtown project. The Rio Nuevo website gives no indication as to how a developer or investor might respond to the Rio Nuevo Economic Development Program, if there were such a thing.
Rio Nuevo has collected over $58.3 million in TIF between July 2003 and November 2008 (the last month for which Rio Nuevo has published its TIF revenue on its website), and it has spent much more than that.
But soon it won’t have any money to spend, other than what it generated in its December bond sale—the repayment of which is in question because of the state legislature’s interest in stopping the TIF payments. A February 15 article in the Arizona Daily Star claims that the bonds were backed by the General Fund, which if true, will certainly lead to more controversy. Not only is the hard-fought TIF extension (2013 to 2025) likely to be wiped out, but so will the last four years of the original ten-year Rio Nuevo District, triggered in 2003 and projected to generate over $120 million.
What A Pity!
PHOENIX — Funding for Tucson’s Rio Nuevo Downtown redevelopment project could be gone by July 1.
Skeptical members of the Senate Finance Committee said they didn’t get the answers they wanted from Rio Nuevo’s project director at a hearing Wednesday.
Some said not only did Rio Nuevo Director Greg Shelko fail to outline how the city has spent $60 million in state money, but they said the project seems to have drifted from its original purpose.
As the state faces a $2.4 billion shortfall next year, several committee members said they are interested in possibly cutting off the state dollars to avoid deeper cuts to K-12 education and state agencies when the new fiscal year begins July 1. An estimated $600 million in state money would flow to Rio Nuevo over the 22-year life of the project.
“When you come down here, you better have your ‘A’ game, because we are doing a lot of things we don’t want to do,” said Sen. Jim Waring, R-Phoenix, the committee chairman. “I just think we had to pull teeth to get answers.
“I thought that presentation hurt them a little bit today — I really do,” Waring added.
Some members said they’d like to see the funding cut off next year to help balance the state budget, especially after renewed concerns about a lack of accountability.
Shelko said pulling the state dollars would spell disaster for Rio Nuevo.
“If they want to sink Tucson, I suppose that’s a choice,” Shelko said. “Where would we have the ability to do these kinds of things? We wouldn’t.”
In his testimony, Shelko painted a bright picture of Downtown and argued that it just needs more time, pointing to projects in other cities that have taken 30 years to succeed.
“Downtown is not going to grow in five years; it’s not going to grow overnight,” Shelko said. “It’s going to take a long time.”
But senators were not impressed by the city’s list of Downtown accomplishments, which included a planned city-court complex and a Burger King. And Shelko had trouble citing specific dollar figures the committee requested.
“What we’ve done is allowed this entity to take state dollars at their will, and of course the people of Tucson are going to vote for it because it’s not their money,” said Sen. Ken Cheuvront, D-Phoenix.
The committee took no action, but city officials could find themselves in a position of having to better defend Rio Nuevo. The GOP committee members, in a position to negotiate the budget, are likely to discuss their impressions with colleagues in a Republican caucus meeting today.
“My concern with Rio Nuevo has been that’s it’s very difficult to get a straight answer on anything,” said Sen. Barbara Leff, R-Paradise Valley. “If the city of Tucson wants to use its own sales-tax revenue and put it into Downtown projects, they should be able to do that, but I think the state general fund money should be returned.”
Rio Nuevo is funded through a tax incentive financing district that redirects state sales tax dollars to Tucson for use in the district. Originally approved by voters in 1999, lawmakers extended it in 2006.
But the project and its organizers have faced criticism over the years for what’s been perceived as a lack of progress.
A Star investigation last October, referenced by several committee members, found that of the $63 million in taxpayer dollars spent over the past 10 years, much of the money has gone to plan projects that stalled, including studies, consultants and public relations.
Shelko questioned the “motives” of the Star for running that story and said the city has made all its expenses public, even though it stalled releasing documents to the Star for months.
At times sarcastic, lawmakers grilled Shelko on projects that never developed. In particular, they questioned studying the construction of a Rainbow Bridge over Interstate 10 that would house the University of Arizona science center.
“So, you were going to build a building that was a bridge that sat on top of the freeway?” said Sen. Ron Gould, R-Lake Havasu.
“It was a very unique concept,” Shelko responded. “Unfortunately it costs somewhere well over $300 million and it was an infeasible project.”
Laughing, Waring asked: “So, Mr. Shelko, just to be clear, you spent $9 million and have built nothing? It’s a yes or no.”
“Right,” Shelko replied. In actuality, $13 million was spent studying the science center.
Glenn Lyons, CEO of the Downtown Tucson Partnership, testified he was pleased legislators extended the district in 2006 and that continuing it is important to private-sector growth.
“I’m pleased you’re pleased,” Warring said. “You may be the only one in the state.”
Shelko said after the meeting that the mistake the city made was in “managing the public’s expectations.” And he said he was “proud” of progress so far.
“We’d all like a do-over on some things,” he said. “I don’t think, in a general sense, that the city has mismanaged Rio Nuevo.”
Contact reporter Daniel Scarpinato at 307-4339 or email@example.com.
56 Comments on this story
Doug Martin from KVOI uses the airways, print with Good News Tucson and now in the blogosphere to get his message out. Doug’s recent post on TucsonTownHall.com pointed to the fact that we aren’t hearing a lot from our community leaders about the Accenture Match Play. The event is a huge win for our region and national exposure for our tourism industry comes at a critical time.
Read Doug’s full post HERE. Below is a great observation;
We should show our appreciation to Accenture as the sponsor and Cottonwood Properties the developer of Ritz-Carlton in Dove Mountain. It would also be wonderful if our city and county elected officials recognized and applauded these folks for benefiting our community, instead of waiting until Accenture looks for another place to play.
I posted a few weeks back about Tucson’s 1st Annual, First Night – New Year’s Eve Celebration HERE. You know what struck me the day after the event? Where were our city council members? I did see Nina and her staff down town with volunteers and t-shirts, but where were the rest of our elected officials. If anyone saw a council person other than Nina leave a comment.
You would think with all the heat around Rio Nuevo we’d see all the elected kissing babies and shaking hands. The fact that a high profile event held in the heart of our downtown redevelopment would merit the “full court press” of support. I guess they were too busy.
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