Posts Tagged ‘Rio Nuevo’
By Joe Higgins and Chris DeSimone, Inside Tucson Business | 0 comments
Has Tucson’s Democratic machine overplayed it’s hand? Are moderate Democrats and the growing number of independents ready to make some changes in this year’s Tucson City Council races or next year’s Pima County Board of Supervisors races?
Will the business community show up with their dollars and their support? Have we hit the tipping point?
Here are the facts:
1. Rio Nuevo gets new board to wrest control away from the Tucson City Council.
State Attorney General and FBI investigations have been launched find out what happened to $230 million of taxpayers money spent on downtown redevelopment with little to show.
2. Buses and light rail priorities.
The city council panics over 10-cent low-income bus fare while at the same time prepares to build a $196 million streetcar system that will cost millions per year to run and will need dense development in old neighborhoods to sustain any ridership. To build a much-needed student housing project in the hole that was an old YMCA at Fourth Avenue and Sixth Street, the developer pays $15,000 and monthly payments of $2,500 for 15 years to the surrounding neighborhood in order to get the council’s approval. How much longer will developers pay to play to invest with uncertainty or skip by Tucson?
3. The City Council refers a half cent sales tax to voters only to be defeated by 20 percent margin.
Voters have lost confidence in city government and the Mayor and Council. Did the council get the message that it’s time to tighten belts and reprioritize? Tucson moved $13 million in federal money for pothole repairs to build a bridge over the Santa Cruz River to qualify for other federal money for the four-mile streetcar. Priorities?
4. University of Arizona versus University Medical Center.
The UA makes a public power play to bring UMC back under its control. The hospital was spun off in 1984 to keep if from folding. Today, UMC generates $90 million per year to support future nurses, doctors and pharmacists. Follow the money. And yet just two weeks ago, Inside Tucson Business’ 2011 List of Largest Employers showed the UA surpassing Raytheon Missile Systems for No 1. This despite state budget cuts, tuition increases and a hiring freeze.
5. Where are the jobs?
A 300-acre solar farm in an old cotton field near Marana gets caught in the political buzzsaw of neighbors and paybacks for old political scores. Supposedly, Tucson is a top 25 Solar City in the United States yet we continue to delay and politicize an investment in green technology? County Supervisor Sharon Bronson and her colleagues are delaying the project by Fotowatio Renewable Ventures, the Spanish firm that is one of the world’s leading solar power operators, may look to go elsewhere. We already know about the supervisors trying to block the Rosemont Copper mine. And now a solar farm?
6. U.S. Rep. Raúl Grijalva.
The five-term congressman’s call for a boycott of Arizona over passage of SB 1070 almost cost him re-election from previously unknown Ruth McClung. Are voters tired of the rhetoric?
7. Back-room deals.
The city council votes on a land deal to sell downtown redevelopment property in Rio Nuevo to the Gadsden Company for $250,000, which resells the property to a low-income housing project for $1.43 million, according to the Arizona Daily Star’s Rob O’Dell (March 22). Councilwoman Shirley Scott joined the majority after she received a letter from Gadsden’s attorney, Larry Hecker, detailing the $1.5 million Gadsden said it put into the project. “I think that speaks well for this group,” Scott said, adding Gadsden is not asking for any special treatment. And, it just so happens, Hecker is Scott’s campaign chair for re-election. He was also campaign chair for City Councilwoman Nina Trasoff’s unsuccessful 2009 campaign and Bronson’s 2008 campaign. When will Tucsonans say enough is enough?
8. Marana wastewater fight.
Pima County’s heavy-handed clout using its wastewater management system as awakened Marana and now the town’s voters may be ready to change find a supervisor in 2012 that is more in turned with their goal of becoming a world-class municipality.
9. Pima County property taxes keep going up.
The Pima County Assessor’s office actually increased the values of most of the commercial property in the county, despite three years of the most depressed real estate market in generations. Now, the supervisors are looking at raising the county’s property tax rate by 17 cents per $100 of assessed valuation. Pima County government had 8,396 full-time equivalent employees in 2008 and has 8,132 today. Take out a loss of 450 positions through a contract shift at Pima Health Systems and the number of Pima County employees actually grew.
10. Democratic party primary endorsements.
Typically, political parties don’t weigh picking favorites until after their electorates choose candidates in the primary election. But Pima County’s Democratic Party already has picked its slate for the Tucson City Council and the primary isn’t until Aug. 30. The endorsements brought a sharp letter of rebuke from six Democratic state representatives, including Tucsonans Sally Ann Gonzales, Matt Heinz, Bruce Wheeler and Macario Saldate.
11. All mail elections.
Under the guise of trying to “save money,” the Tucson council changed the rules of the election game just as its Democratic incumbents face tough re-election campaigns. An investigation is underway over irregularly marked mail-in ballots in South Tucson and now mail ballots have gone missing in this month’s Sahuarita council elections. The “save money” argument is a smokescreen.
12. Tourism in the toilet.
As reported in Inside Tucson Business, passenger traffic at Tucson International Airport for March, normally the busiest month of the year, is at 16-year lows. Tucson didn’t have Major League Baseball Spring Training this year for the first time since 1947. Now the economy is beginning to feel the negative impact of mismanagement of the tourist assets that have been taken for granted. Last month Travel+Leisure called Tucson one of their top 25 “most under-rated cities in the world” – not just the United States, the world. That’s not a good thing for the Metropolitan Tucson Convention and Visitors Bureau whose job it is to get the word out.
13. Arizona is projected to add jobs, but not Tucson.
State economic development officials are projecting Arizona will add more than 17,300 jobs in the next year but the Tucson region won’t see any of them. To accentuate the point, tourism is expected to grow by 3.1 percent statewide but will drop 0.2 percent in the Tucson region.
14. More low-wage jobs.
When Intel announced earlier this year it was spending $5 billion to expand and build in Chandler, it included a projection of 1,000 high-paid new jobs. Within days of that announcement Tucson, landed its expansion that will be bring us another 400 call center jobs. This on top of the announcement that Tucson-based Raytheon Missile division decided to build its newest plant in Huntsville, Ala., not here.
15. Mexican-American Studies.
A student demonstration prevented the Tucson Unified School District governing board meeting from taking place April 26 because the board was due to vote on moving the program to an elective instead of allowing it as a substitute for the core subject of American History.
Moving Mexican-American Studies to an elective would put it in line with African American Studies, Native American Studies and Pan Asian Studies as well as art, music and some foreign languages among other important options students can choose. Mexican-American Studies serves 5 percent of the district’s approximately 53,000 students, yet it has taken an inordinate amount of the attention.
Meanwhile, there are issues with procurement irregularities, school closures and students’ low achievement scores on standardized tests.
Tucson is not a shiny liberal city on the hill. The so-called political progressives like to look up to cities like San Francisco or Portland, Ore. They admire the environmental commitment of Boulder, Colo., and dream of being the Berkeley, Calif., of the desert.
But Tucson’s city core crumbles while suburbs flourish. This region’s vision and planning is taking place in Marana, Oro Valley and Sahuarita.
Lately, people including Comedy Central’s “The Daily Show” have had some fun over Democratic leaders’ idea of Southern Arizona becoming a 51st state. It’s just a diversionary tactic from Democrats trying to gloss over the facts we’ve presented here.
Tucson may be the butt of jokes but those who are struggling to run businesses and earn a living here aren’t laughing. It’s time for a change starting with this year’s city elections.
Contact Joe Higgins and Chris DeSimone at email@example.com. They host “Wake Up Tucson,” 6-8 a.m. weekdays on The Voice KVOI 1030-AM. Their blog is at www.TucsonChoices.com.
Greg Shelko was the golden boy under Mike Hein and Jared Barr the prior City of Tucson management dream team. The heat started to get turned up on the trio near the end of City Manager Mike Hein’s final days. After blowing $225 million with very little to show for their efforts beyond a $820k movie without a museum to play it in and a entire set of plans for a rainbow bridge the State Legislature moved in a new over sight board to supplant the rubber stamp board the City of Tucson was running. Since the new board has been in place we’ve seen contracts being challenged, financing plans being scrutinized and brakes being put on all over the Rio Nuevo districts. All I can say is that it’s about time.
When the Rio Nuevo TIF district is fully analyzed my prediction is someone is going to be indicted.
Shelko says job is done at Rio Nuevo
Former Rio Nuevo Director Greg Shelko has quit the $100-an-hour Rio Nuevo consulting job he was given last year amid a sea of controversy. He gave the district notice he will end his consulting contract within the next few months.
Shelko, who actually submitted a 90-day contract-termination notice to the Rio Nuevo board two to three weeks ago, wrote that his tasks under the contract – to oversee construction of the $4.3 million new entrance to the Tucson Convention Center and the planning of a new convention center hotel – were nearly complete.
Shelko could not be reached for comment on Wednesday.
The new entrance to the TCC is complete. There are only two items that need to be resolved: a column in the entrance that is off-line by inches and part of the flooring of the entrance, which the Rio Nuevo board said is unacceptable.
The planning of the convention center hotel is nearly complete as well, as Shelko helped oversee the process to get a guaranteed maximum price for the district. The hotel is designed and ready to be constructed if the Rio Nuevo board and the city can agree on some kind of financing package.
Rio Nuevo board Chairwoman Jodi Bain said she’s pleased that Shelko recognized his contract was at an end. “I’m pleased that he recognized that in 90 days there’s nothing for him to do,” she said.
As a city employee, Shelko headed Rio Nuevo during the most critical years of its existence, from 2004 through 2009, a time when the city spent $250 million in tax-increment financing money downtown with little actual development to show for it.
The Legislature seized control of Rio Nuevo last year and appointed a new board to oversee the district.
Shelko’s position was written out of the city budget, and he left the city June 30.
The Rio Nuevo board subsequently gave him a $100-an-hour, no-bid consulting contract that wasn’t publicly approved until September 2009, but was backdated to pay him starting July 1, the day after he left the city. The former Rio Nuevo board later struck the backdated payments.
Shelko was hired at the request of hotel developer Garfield Traub, who said the project was “in chaos” without him. He was hired mainly because of construction of the new $4.3 million entrance to the Tucson Convention Center, with board members contending the new entrance was urgently needed because it had to be done in time for the Tucson Gem, Mineral & Fossil Showcase in early 2010.
But missing pieces of the building’s foundation discovered during construction stalled completion of the new entrance until June. Mayor Bob Walkup later said the new entrance wasn’t crucial, despite an earlier full-court press for immediate approval, including the hiring of Shelko.
In other Rio Nuevo business, the board heard a proposal by Don Bourn to turn his vacant downtown lot into a 123-room Hampton Inn. The five-story hotel would feature first-floor retail and conference-room space, and would have no on-site parking.
Bourn said the total cost of the project is $15 million, but he still needs $3.5 million from another source to make the deal happen.
Rio Nuevo lawyer Bob Gugino said Rio Nuevo had spent nearly $900,000 tearing down a nearly 100-year-old building and remediating environmental issues to make way for Bourn’s development that never happened.
Contact reporter Rob O’Dell at 573-4346 or firstname.lastname@example.org
Hucker told the council he is pleased with the progress he’s seen downtown. The progress has been the result of Democratic Council Member Nina Trasoff’s leadership and hard work and the results are increasingly evident.
Kozachik proposes a step backward into the Republican miasma, when Fred Ronstadt and Kathleen Dunbar bungled Rio Nuevo’s early days. Worse, Kozachik would actively send $100 million packing to another city, like Phoenix.
“The Republican challenger doesn’t understand how to save jobs or improve the local economy,” said Pima County Democratic Party Chairman Jeff Rogers. “He should spend less time at Tea Parties, ranting against health care for all Americans and more time studying the issues facing Tucson. Then maybe he’d realize the kind of leadership we need. He could start by watching Nina Trasoff.”
From Pima County Democratic Party press release.
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.
Museum Politics: Red-headed Stepchild Tucson Museum of Art Might Leave Downtown, while Mayor’s Wife Delivers The Bacon for Tucson Children’s Museum
The way the City of Tucson has handled the Tucson Museum of Art during the “Rio Nuevo Era” is a great example of what happens when you pay undue attention to going after what you DON’T have, rather than paying enough attention to save or retain what you DO have.
Once the Rio Nuevo funds started rolling in-the first check arrived on Halloween of 2003, according to the Rio Nuevo website-it soon became apparent that the growth in retail activity at El Con and Park Place would yield two times or more what the city had projected. Good thing, because the Rio Nuevo master plan had already expanded the original vision of the project, and it was clearly going to take much more than $60 million to realize it.
By the time the State of Arizona had granted a 12-year extension of the TIF funding to the City of Tucson in 2006, the vision and its associated costs had already spiraled out-of-control.
- The Sonoran Sea Aquarium lost its place in the plan, replaced by a much more expensive new arena.
- The “Civic Plaza” west of the Tucson Convention Center was over-designed to the tune of several tens of millions of dollars, with a proposed 1,000-space garage underneath a grand plaza, between the arena and the TCC complex.
- And of course, the science center had gone from a $100 million project to something like $350 million, with the concept design of a rainbow bridge that would be a quarter-mile long and 350 feet tall.
Whatever extra money was expected to come in from the extension of Rio Nuevo was surely going to be eaten up by these new projects.
The allocation to the Tucson Museum of Art both before and after the TIF extension was still $2 million. With projections of $600 million or more from the extension, that $2 million was now just 0.33% of the TIF, compared to 3.5% of the original pool.
The Presidio Terrace Factor
New, modern, hip housing is a necessary component of a revitalized downtown; without an active population to live and thrive the entire project would be a tough sell. By this time, Thoreson had embarked on an ambitious plan to build new housing in downtown, but the goal of 1,200 new units by 2006 that she talked the council into projecting was clearly beyond the city’s grasp. By about 1,000 units, as it turned out.
One of the sites that was identified for housing development was Lot 7, adjacent to the Tucson Water building and across Main Avenue from the Tucson Museum of Art. Definitely a no-brainer as an attractive site for a mid-rise, upscale residential development.
This project became known as “Presidio Terrace” and it could be the topic of its own post, but it’s important here because the parking lot at the Presidio Terrace site was leased to the museum for its employees and visitors. In order to build Presidio Terrace, the city and the developer would have to satisfy the museum’s need for parking. During the planning for PT, it was decided that the promised $2 million Rio Nuevo contribution to TMA would be for a public parking garage underneath the housing development, with some number of spaces allocated for the museum’s use.
TMA was always adamant about maintaining parking there, but you have to wonder why that $2 million replacement of parking was all TMA would ever get out of Rio Nuevo.
Meanwhile, Other Museums Felt the Rio Nuevo Love
Why were TMA’s own ambitious plans for expansion met with a deaf ear, when the Arizona Historical Society’s new museum, the UA’s new museums, and the Tucson Children’s Museum’s new building, all got huge allocations in the revised, post-TIF extension Rio Nuevo plan?
- Joining the Arizona State Museum, Arizona History Museum, and UA Science Center would be a new home for the Tucson Children’s Museum.
- In a May 22, 2007 memo to the City Council. city manager Mike Hein outlined a plan for allocating the half-billion or so in projected Rio Nuevo funds, and, in addition to $130 million for the science center and Arizona State Museum, it had $60 million for “Other Museums”, which included $10 million for a new Tucson Children’s Museum building.
Co-locating the Children’s Museum on a museum campus certainly has the potential to create synergies, particularly with the science center. However, the original allocation of funds for the Children’s Museum from Rio Nuevo was intended to renovate the museum in its Carnegie Library location, not to relocate it out of downtown to a new building.
How did the Children’s Museum get added to the plan, and get promised a hefty allocation of TIF money? Could Mayor Walkup’s wife Beth’s long-time involvement with the TCM have played a role?
Tucson Museum of Art – Rio Nuevo’s Red Headed Step-Child
City officials and their emissaries have reportedly told museum staff that:
- There is another available parcel of land near the Cultural Plaza that could be held for the TMA, but TMA would have to pay all the costs of a new building there itself.
- If the museum leaves for a better arrangement in Marana, Oro Valley, or the Foothills, “we’ll just get someone else in there” (in the TMA’s existing building). (Who, exactly? The fledgling Museum of Contemporary Art?)
Council Member Nina Trasoff, whose Ward 6 does not include the museum and Historic Block, but whose council subcommittee oversees arts, culture, and history in addition to Rio Nuevo and downtown, has done little to combat the perception that she’s not a fan of the museum, or of the western art that it exhibits (along with many other genres). Cowboy art is not everyone’s bag, but in a place like Tucson, it obviously has to be part of the mix.
Pima County obviously doesn’t care much for the museum or its growth, or at least for its vision of expanding TMA into an iconic downtown landmark owned by the county. When the museum revived a decades-old vision of using portions of the Old Pima County Courthouse for additional exhibit space, Chuck and the Chuckettes underwhelmed TMA board and staff with their response.
The City pays the museum something like $80,000 a year to maintain the historic properties on the museum campus, the “Historic Block”. This likely does not cover the costs of maintaining the Casa Cordova, the Romero House, the J. Knox Corbett House, and the rest. This is hardly a grand gesture of support.
Sometime in 2007, it apparently dawned on the Tucson Museum of Art that it really wasn’t part of anyone’s plan for downtown. The Presidio Terrace deal had fallen apart; the expansion to the courthouse wasn’t going to happen; and Rio Nuevo had increased its funding for all of the other museums, while allocating nothing for TMA. Without feeling the love, TMA went looking for greener pastures.
So when developer Mike Hansen came a-courtin’, TMA listened. Hansen dangled the prospect of several acres of prime Foothills real estate near La Encantada for a new TMA campus. Later, there were overtures, or rumors of overtures, from Oro Valley and Marana.
The Tucson Museum of Art is one project that won’t lose much if Rio Nuevo falls apart-it wasn’t getting much anyway. Still, with the air let out of the Rio Nuevo bubble, it’s hard to imagine that those overtures from Tucson’s neighbors to the north are going to do anything but gain strength and momentum, bad economy or not.
‘A bird in the hand is worth two in the bush’
If Rio Nuevo’s bubble does, in fact, collapse, there won’t be new museums on the west side of the downtown area. But you can’t really lose what you never had. If Tucson Museum of Art leaves downtown of its own accord, because another Pima County town wanted it more than Tucson wanted it, downtown WOULD lose something that it already had.
Does it even need to be said what a pitiful shame that would be? Is Tucson prepared to lose the TMA, just like it is losing Triple A baseball, spring training, Rio Nuevo, and god forbid, the Gem Shows? At some point, you have to stop the bleeding and decide what is important to protect.
Maybe the Tucson Museum of Art just needs some better-connected board members – that might be one way to get things going.
The City has been asking private investors for years to consider building a convention center hotel. Private investors have said NO! Their message is that the hotel does not make financial sense. (1)
That doesn’t work – so now what?
If the hotel is owned by the Rio Nuevo, the hotel won’t have to pay property taxes and many other taxes. Plus, Rio Nuevo can borrow money at lower rates than private business because they can issue tax-exempt bonds; this is very helpful because we have to borrow almost $200 million to build the hotel. This should make the hotel profitable…but NO, the hotel would not be able to make the debt service payments of $16 million/year. (2)
That doesn’t work – so now what?
Special site-specific taxes
How can we make the debt service payments? Here’s an idea, let’s impose a bunch of special taxes if you stay at the hotel or hold an event at the convention center. Over the life of the bonds, these taxes will be over $100 million. This money could go to the general fund to help pay for core services. Instead, the money is needed to pay for debt service. You would think that a $100 million subsidy, no property taxes, and lower interest rates would be work… but NO, the debt service coverage is still not sufficient. (3) (4)
That doesn’t work – so now what?
Direct cash subsidy from the City
What if we have the City make a direct cash subsidy of $1.1 million/year for the life of the bonds? This will provide over $30 million. So now we have over $130 million of cash subsidies and you would think we should be able to finance the hotel…but NO! (5)
That doesn’t work – so now what?
What if the City of Tucson (i.e. Taxpayers) guarantees the loan if the hotel turns out to be a bust? This has to work because the city is in such great financial shape that investors should be chomping at the bit to loan $200 million for the hotel. Well guess what…we now learn that investors still are not interested. (6)
That doesn’t work – so now what?
Hoping and praying
Several City officials have stated that the new plan is to: Let’s wait until next spring and hope investors change their mind.
No property taxes, lower interest rates, $130 million subsidy, City guarantee – at some point you have to come to the conclusion that the hotel is not a good idea. Let me ask you: is owning a hotel a ‘core service’ for the City?
(1) Page 45: “…the Public/Private model is not available…”
(2) Page 45: “…bonds secured solely by project revenues cannot be issues…” Pages 57-61 show debt service of $11.5 to $16.2 million/year.
(3) Page 45: “…even if project revenues are used, there would be a financing gap… site-specific transient rental tax (6%), site-specific city sales tax (2%), new convention center surcharge (2%)…”
(4) Page 58: $3.12 million in 2019; $3.72 million in 2025
(5) Page 45: “…to create an acceptable risk profile…, it is recommended that additional revenue be pledged…”
(6) Page 45: “…government credit support is required…”
Read the report HERE.
Published on Friday, July 10, 2009
Think about it: The Tucson City Council’s inability to make tough decisions on big issues actually results in better solutions — by someone else.
Take Rio Nuevo downtown redevelopment. Slow action by the city forced state lawmakers to come up with new controls over the city. It was part of the budget package that Gov. Jan Brewer vetoed but legislators are still hopeful of getting something approved. But the bottom line, is that after all these years, downtown may finally get its much-needed convention hotel. More HERE.
Our fellow blogger over at Blog For Arizona took aim at the Republican legislators for using end around to take control of Rio Nuevo from the City of Tucson and to institute non-partisan elections. Safier even goes as far as to rally the democrats in Southern Arizona over these issues in the 2010 elections;
Target every Republican who votes to allow Maricopa to dictate to Southern Arizona about local matters. Let them defend turning us into a colony of our imperial Maricopa overlords, or a wholly owned subsidiary of Maricopa, Inc.
News flash, Maricopa doesn’t care. We aren’t taken serious. We are tolerated and thrown a bone once in a while to keep us happy. Just like cousin Eddy from Vacation. We show up, drink all the beer, empty the sewer tanks on the RV and act like we own the place.
How about taking aim at the complete incompetence surrounding Rio Nuevo from the ruling city council (all Democrats – I did say ALL because we aren’t claiming the Mayor anymore). The miss steps, inside deals, starts and stops and choice in people to run the various programs are absolutely, unequivocally a direct sign of TERRIBLE leadership. Blame Maricopa, blame Republicans, blame their mothers for not cuddling them enough but don’t ever take personal responsibility.
As for non-partisan elections; Tucson has been Democratically controlled for decades – take a look around……how’s that working out for us? Take the politics out of the equation (we all know it’s not possible but maybe, just maybe this is a step in the positive direction) and focus on the basics of local government.
Thanks for doing what you do Blog For Arizona. The different views are always appreciated.
I have reviewed the Capital Plan options as prepared by Garfield Traub (April 2009). Here are the major points.
Four options are reviewed and 2 are immediately dismissed as not feasible at this point in time.
It is important to note that Garfield Traub indicates that private investors are not interested at this point in time.
Here is a review of the 2 most likely financing options:
The hotel would be owned by a “Public Entity”; for all practical purposes the owner would be the City of Tucson.
The City would be required to contribute $17.7 million; $12.7 million cash would be needed during the design phase (June ‘09 – Dec ‘09 according to Development Schedule) with $5 million from sales tax, building permits and impact fees.
“Substantial City financial participation” would be required. This would include:
1) Site specific transient rental tax (6%) + site specific city sales tax (2%) + a new convention center surcharge (2%)
2) Additional pledged revenue: $1 to $4.5 million/year
3) Credit support from City
The City of Tucson would sell $189 million of Certificate of Participation (COP) bonds backed by the credit profile of the City. Under different scenarios the City might need to make annual contributions to ensure there are sufficient funds to pay debt service: this could be zero or it could be $1 million or more if the projections end up being optimistic.
The financial projections are based on various assumptions that could turn out to be optimistic or pessimistic. Also, please realize that the negative cash flows are quite large during the first few years. It costs $200 million to build and loses money for several years before it breaks even.
Potential benefits to City:
City receives net profits when hotel begins to produce profits
City may realize residual value of hotel
Ancillary benefits of visitors on lodging, retail, entertainment…
I want to be optimistic where possible as the rebirth of downtown would enhance my family’s quality of life and indirectly enhance the business interest of my family. However, the financial hurdles are many and high. To build the hotel, the City needs to invest $12 million cash in the next few months, commit to fill any cash flow gap for several years, and sell almost $200 million of bonds in the next 7 months.
This is on top of many existing cash flow needs: balance the ‘structurally imbalanced budget’ (Standard and Poor’s); AND build the unreserved general fund balance by an additional $20 – $50 million ‘promptly’ or face a downgrade from Fitch and Moody’s.
The financial feasibility of the hotel is very sensitive to Tucson’s credit rating. If the rating were to deteriorate, the annual cash contribution from the City increases. In fact, the financial scenarios from Garfield Traub are based on Tucson’s credit rating before the recent downgrade from Standard and Poor’s (dated 5/18/2009).
The City’s ‘debt burden’ is already higher than other cities with the current credit rating (Moody’s). Issuing another $200 million of new bonds would seem to aggravate this factor.
It is possible that the City could accomplish all this. However, it would require rather significant spending cuts &/or revenue increases – significantly larger than currently being considered.
Please note that this is an analysis of the options presented by Garfield Traub. There may be other options not discussed. The figures presented by Garfield Traub are assumed to be accurate.
Capital Plan begins on page 45:
In another apparent attempt to show the Legislature in Phoenix that there is some positive movement in Rio Nuevo, the Tucson City Council has voted to approve the development agreement presented by Garfield Traub. The Counsel has a history of taking precipitous steps which unnecessarily cost taxpayers money. The bond sale last year that took an extra $18 million in interest debt from citizens’ pocketbooks is a prime example. Now they have voted to guarantee a $240 million debt without a final guaranteed maximum price (GMP) or a funding model that will be in effect once that GMP has been determined. Fiscal prudence, especially while wrestling with a significant budget shortfall, would indicate the wisdom in deferring this decision until Garfield Traub was in a position to better identify the true cost of the project, identify a specific funding model and allow the City to assess whether gambling on the proposal with taxpayer guaranteed debt made sense.
In April 2007 the City Council received completed studies and endorsed a redevelopment plan as a new energy for a new place. Greg Shelko (downtown development director) described the committment. “The mayor and council have bought into building these buildings (the arena, hotel and TCC expansion). The issue now is not revisiting the projects, but how to finance them.” (May 2008)
That plan involved a process that included prestigious consultants, local business input and neighborhood involvement. It clearly laid out a concrete vision and method to achieve the “Big Three” – hotel, arena and convention center. Years (and millions of taxpayer dollars) later that plan has been pushed aside in favor of a new idea. No new energy and no new place.
What makes this vote even more curious is that it is taken while there is a “shovel ready” project sitting, ready to go, that would put the taxpayers at no financial risk. That is the remodeling of the Hotel Arizona. It is anticipated that that project would be profitable to the City nearly immediately, would not force the City to guarantee long term debt on behalf of the taxpayers, would provide remodeled rooms under a major hotel name brand at approximately 1/2 the room rate the Garfield Traub project is requiring, and would have those rooms remodeled in time for next spring’s Gem & Mineral show.
The Garfield Traub proposal admits to the need for “additional revenues” in order to make their own projected debt service (the comfort of a 1 1/2x debt service level of support). Those additional revenues will come from a 6% transient tax and a 2% surcharge on guests at the Sheraton. That money would otherwise be available to the City to fund core priorities such as public safety, road maintenance and transit needs. In a time of tight fiscal constraints, giving away general fund money on a real estate deal that is based on uncertain final costs is unsound financial management. This proposal may make sense in the future but with current market conditions it is doomed to failure.
Unlike the plan presented three years ago, the Council is now relying on quick, one-shot successes. To revitalize downtown the leadership of Tucson needs the entire downtown region needs to be viewed in a holistic plan going forward. We sit atop ancient water and sewer lines. We have no plan upon which to base the eventual capacity requirements. We have no plan upon which to determine where and to what extent we will need power, telephone service, fiber optic, water, sewer – where will there exist aesthetic water elements that will call upon more capacity, where will we build the wide, well-lit walkways with drought resistant foliage to provide shade and to support artisans, and families who will visit such a well thought out entertainment district? Will we install the modern street car tracks on top of our present infrastructure and later be required to tear out those tracks in order to upgrade the systems now in place?
If presented with such an holistic plan, the Legislature in Phoenix would see that the City is finally moving forward with a plan, phased appropriately, has taken the mid-stream step of remodeling a moderately sized hotel to anchor further business development in the downtown area, and on that basis provide sales tax revenue to fund the cultural elements of Rio Nuevo going forward.
It is not too late to rebuild downtown Tucson. Now more than ever Tucson needs Leadership. The Council vote to embrace a risky, poorly-financed hotel deal is a step in the wrong direction.
Steve Kozachik, Ward 6 City Council candidate.
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