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Tucson rushes to jump-start Rio Nuevo: Legislative threats to yank funding spur costly action(Arizona Daily Star, The (Tucson) (KRT) Via Acquire Media NewsEdge) Aug. 3--Tucson is hurriedly assembling plans to construct several of Rio Nuevo's centerpiece projects -- but at a previously unexpected cost of as much as $300 million in debt and $180 million in interest. The extra cost means the city would have to postpone one of the signature Downtown projects for at least several years. The new plans to bond against future Rio Nuevo sales-tax funding came just days after the Arizona Daily Star revealed the city has already spent $77 million on Rio Nuevo, had nearly zero in the bank for it as of June 1, and state lawmakers are threatening to pull the project's funding. Although one council member said the change in course is unrelated, several Downtown leaders said the Legislature's threat is behind city officials' sudden urgency. Tucson must move quickly to show the Legislature it is making progress so the state doesn't consider yanking the money, said Steve Lynn, board member of the Downtown Tucson Partnership. "The clock is ticking," Lynn said. "The threat of losing the funding mechanism is a real threat." Before the Star's audit of the Rio Nuevo spending, the city had been considering a smaller bond package of $72 million that would have been backed by the city's general fund budget. Instead the city began pushing plans last week to incur debt against the future revenues of the project's tax-increment financing, or TIF, district, which is funded by sales taxes diverted from the state budget. The maximum bonding plans could pay for several -- but not all -- of Rio Nuevo's major projects, giving the City Council a difficult political decision to determine which projects will move forward now and which will have to wait. The major Rio Nuevo projects planned are: --$102 million for a new arena, hotel and convention center. --$130 million for a University of Arizona science center and state museum. --$100 million for infrastructure and streetscape. --$45 million for an Arizona Historical Society museum. --$70 million for parking. --$27.5 million to re-create the Mission San Agustin, built here by Spaniards in the late 1700s. Several financing options will be presented to the council on Wednesday. It's also possible the city could do a smaller bond now and a larger one in 2009, several city officials said. If the council opts against bonding, it would fund projects as the sales tax money comes in from the state. But the Star's audit revealed the city only had $29,000 left in the bank on June 1, meaning it would be waiting for years to fund major construction. The Rio Nuevo district is expected to generate a total of $800 million in sales taxes before it expires in 2025. Inflation will eat up a chunk, however, making the district actually worth $575 million in today's dollars. That means the maximum bonding package would take up the lion's share of Rio Nuevo money available for the next 10 years -- unless the city makes smart investments that dramatically increase sales taxes over that time. As financing costs run about $60 million per $100 million bonded, City Manager Mike Hein said "the more you bond upfront the less you have for the future." The key is to bond for projects ready for construction right now and wait for others, Hein said. It is unclear whether he plans to give recommendations on specific projects Wednesday. Because it is a special taxing district, voters do not have to approve the bonds, which are likely to run for 15 years, or until the district expires in 2025, said Jaret Barr, Hein's assistant. Reversing course Tucson Republican state Rep. Jonathan Paton said two recent events have momentum going against the city: the failed push by some council members in late June to fire Hein and the Star's audit of Rio Nuevo. "Those are two huge issues," Paton said. He warned that legislators "keep saying we could have used that $77 million to balance the (state) budget," which could face another deficit next year. "It's not a joke." Paton said Hein was a large factor in persuading the Legislature to expand Rio Nuevo funding in 2006. "A lot of people in Phoenix signed onto this because they believed in him," Paton said. "He's very credible. The attitude about some of the council members is not the same." But Councilwoman Nina Trasoff said the council has planned to get options from its staff for two months. "It's not in response to anything," Trasoff said, referring to the state's threats and the Star's audit. Broad support There's broad support on the council and among Downtown boosters to bond against the district's revenues to start paying for major projects. The questions are how much and for which projects. Trasoff has said for months that August's council meeting would show voters Rio Nuevo "is real and is actually happening." She said she won't make any decisions until Wednesday. Larry Hecker, a Downtown Partnership board member, said bonding "makes good financial sense and good community sense." "By bonding you can accelerate the availability of the benefits," Hecker said of Downtown progress. "You'll have money available sooner." The decision to go with revenue bonds was a "last-minute reversal," said Councilwoman Regina Romero, who said she supported it. "We should definitely go out for as much money as we can," Romero added. Councilman Rodney Glassman, though, contends a plan to bond $300 million as soon as possible is tantamount to a "Ready, Fire, Aim" plan to revitalize Downtown. He said he's not against bonding per se, but wants a clear plan for what the money would accomplish. "I want to see a complete picture of what we're planning to do Downtown," Glassman said. "I'm not prepared to check out of the grocery store before we finish packing the cart." East vs. west The fact that some projects will be pushed back could lead to a revival of a long-standing Rio Nuevo debate: Should the city spend more money on the east side arena, hotel and refurbished convention center Downtown, or on a museum and cultural district on the west side? Glassman said he favors such projects as the arena and the hotel. "We have to put a greater focus on revenue-generating projects. That has been noticeably absent so far," he said. The city should try to build the projects that are ready now, said Glenn Lyons, chief executive officer of the Downtown Partnership. He said that could include the arena, the UA Science Center and the Mission San Agustin. "That's $300 million right there," he said. The projects that will generate the most sales tax for the district are the arena, the hotel and the convention center, Lyons said, adding, "That package is the real economic driver." Romero agreed the city should fund "what's ready to go," and said that includes the UA Science Center on the West Side. Construction could start next year if the city gives the UA $130 million, she said, adding the city needs to be equitable between Downtown and the West Side. "We need to be shovel-ready," Romero said. Rio Nuevo Audit On StarNet: Visit go.azstarnet.com/rionuevodb to see a collection of the Rio Nuevo projects and past stories about the issue. --Reporter Rob O'Dell: 573-4346 or [email protected]. To see more of The Arizona Daily Star, or to subscribe to the newspaper, go to http://www.azstarnet.com. Copyright (c) 2008, The Arizona Daily Star, Tucson Distributed by McClatchy-Tribune Information Services. For reprints, email [email protected], call 800-374-7985 or 847-635-6550, send a fax to 847-635-6968, or write to The Permissions Group Inc., 1247 Milwaukee Ave., Suite 303, Glenview, IL 60025, USA. |