The demise of the $190 million downtown convention center hotel has resurrected a proposal for taxpayer backing by Humberto Lopez, owner of Hotel Arizona.
Lopez needs the city to sell bonds and enter into a complicated transaction that would allow him to lease the Hotel Arizona to the city for 99 years so it could be converted into a Doubletree and so that an Embassy Suites could be built next door, according to the plan he's presenting to the city and Rio Nuevo.
Like the recently rejected proposal, Tucson taxpayers would be on the hook for the losses if the hotel plan did not meet projections.
The proposal is being resubmitted because Lopez wants to use Build America Bonds, a type of bond that carries a lower interest rate because a portion of the interest is rebated by the federal government, said Roger Karber, a consultant involved with Hotel Arizona. The federal rebate would drop after Dec. 31, so the transaction should occur this year, Karber said.
"It's the right time for the city of Tucson and Rio Nuevo to look at a hotel project," Karber said.
Lopez needs the city to sell $17 million in bonds to upgrade his hotel into a 274-room Doubletree. In addition, a new 428-space parking garage needs to be built by the city, or Tucson needs to lease property to him so he can build the garage.
The city would then lease the Hotel Arizona from Lopez for $1.6 million a year for 99 years. The annual lease payments would allow Lopez to pay down the more than $20 million in debt he has on the Hotel Arizona property without having to pay taxes on the sale of the property.
Lopez has said he wouldn't simply sell the hotel to the city rather than lease it, because the sale would trigger a large tax bill, even though all the proceeds of the sale would go to pay his debt on the hotel.
He said the cash flow from the Doubletree would pay back the city's bond money and, even with the lease payments, the city still would make a profit of $1.4 million annually.
Karber said Lopez wants the additional sales taxes and the Rio Nuevo tax-increment-financing money from the site to be used to help backstop the bonds.
There seems to be little immediate interest from either the Rio Nuevo Board or the city to jump in feet-first.
Lopez would have to meet the same standards that hotel developer Garfield Traub was required to meet, Councilman Steve Kozachik said. The 99-year lease made no sense to him, Kozachik added.
"Any proposal no matter who it comes from is going to have to meet same standards we were holding Garfield Traub to," Kozachik said. "He is no different than anyone else."
The Rio Nuevo Board can't consider Lopez's proposal until it terminates the contract with Garfield Traub, board member Rick Grinnell said.
The contract is still in effect because there are still a few outstanding issues, mainly involving the new east entrance to the Tucson Convention Center, Grinnell said.
Contact reporter Rob O'Dell at 573-4346 or email@example.com