Where your Rio Nuevo taxes went

Nine years in, biggest expense is Clark Street underpass at I-10
2008-10-26T00:00:00Z 2013-09-10T16:36:14Z Where your Rio Nuevo taxes wentBy Rob O'Dell Arizona Daily Star Arizona Daily Star
October 26, 2008 12:00 am  • 

They promised buildings — hotels, an aquarium and museums.

Nine years later, Downtown Tucson has two refurbished movie theaters, a re-creation of the Presidio wall and a wider freeway underpass.

A comprehensive Star analysis of the $63 million in taxpayer dollars paid to outside vendors since voters approved Rio Nuevo in 1999 shows that much of the money has been spent to plan projects that stalled.

It also went to pay for things that while not prohibited, are not what excited voters about Rio Nuevo. That includes paying to sponsor events with loose ties to Downtown development and on public relations to promote Rio Nuevo to an increasingly impatient population.

Among spending the Star investigation identified:

● $4.6 million for the planned Downtown University of Arizona science center, most paid to the university despite a lack of receipts or supporting documents. The city agreed to pay half the UA's bills partly so the university would drop its notion of building a massive Rainbow Bridge over Interstate 10 and the Santa Cruz River.

● $625,000 to Annapolis, Md.-based Hunter Interests Inc. for a Rio Nuevo master plan that was then discarded.

● Nearly $1.2 million on public relations to promote Rio Nuevo.

● $15,000 for a title sponsorship for El Tour Downtown Fiesta.

● Nearly $9,000 for barricades and security for two annual All Souls Processions.

● Nearly $6,000 for two plaques to honor U.S. congressmen, one of which has yet to be installed because the development where it was to be posted remains an empty lot.

● $5,000 to sponsor an Homage to Father Kino art exhibit Downtown.

The Star shared its analysis with 15 people involved in Downtown redevelopment in various ways, as well as government accounting experts.

Some were surprised that several of the Rio Nuevo's biggest-ticket items are invisible to residents eager to see progress Downtown. Among them:

● $7.45 million to the Arizona Department of Transportation to rebuild the Clark Street underpass at I-10, and another $1.55 million for traffic mitigation there.

● $3.6 million for environmental services to remediate a landfill south of Congress Street on the west side of I-10.

● $3 million for studies and planning.

● $2.5 million for consulting.

"The thing has so clearly floundered, unfortunately," said architect Bob Vint, a historic preservationist involved in a number of Downtown projects. "It's sobering to see how easily they went through the money. They certainly spent freely in an unfocused way."

But that view isn't shared by Rio Nuevo boosters like Jeff DiGregorio, Rio Nuevo District board member and owner of Downtown's Royal Elizabeth Bed and Breakfast Inn. He said he sees Downtown progressing well, and "absolutely" meeting goals to be right where it should be.

"When I look at progress, I see exactly what I want to see," DiGregorio said. "Half of it has been built or is in some reasonable state of predevelopment."

How much was spent

Because of difficulty tracking expenses through the city's accounting system, the Star analysis includes $63.4 million in payments to outside vendors but not more than $10 million in payments between city departments.

Through June 30, the city has spent $16.4 million for new construction, the paper's analysis shows. That doesn't include $4.4 million to design five Rio Nuevo structures like a parking garage and the Presidio wall that are under way or completed. Another $2 million has been spent designing future projects and $8.5 million for improvements such as widening streets.

The rest of the $89 million spent on Rio Nuevo through June 30 went for personnel, debt service, equipment and other expenses.

The Rio Nuevo fund is now $10.2 million in the red because the district took in only $78.7 million in revenue through June 30. And Rio Nuevo owes the city's general fund another $6.8 million that needs to be repaid this year to help bridge the city's budget deficit.

That means Rio Nuevo has $17 million more in commitments than it has taken in. Jaret Barr, assistant to the city manager, said that money will be repaid through bond sales this year, adding there are backup plans in case it can't sell the bonds. That includes a short-term bank loan or raising money in the commercial paper market.

Community reaction

The Star's analysis elicited reactions ranging from strong statements of support for Rio Nuevo to exasperation at how slowly the effort is progressing.

Several people singled out the $1.2 million spent on public relations.

Infill developer Richard Studwell said the money didn't go to attract developers or businesses Downtown, but instead was used to "cheerlead for themselves" and "convince anyone who's listening that they have done something."

"Why did we have to spend so much on PR?" asked David Tang, a member of the now-defunct Rio Nuevo's Citizens Advisory Committee. "Is it because we wanted to show something was happening?"

Others questioned the $5,800 for two plaques made to honor U.S. congressmen. The city spent about half that money on a plaque for U.S. Rep. Ed Pastor that was installed at the city's Historic Train Depot, which is not a Rio Nuevo project.

A second plaque was created for then-U.S. Rep. Jim Kolbe to be posted on the Thrifty Block, on East Congress Street just east of South Stone Avenue, once a project there is completed. After the city tore down a 100-year-old building there in 2004, the lot remains vacant.

Also singled out for criticism was the $4.6 million paid to the UA for the science center.

The UA's receipts sometimes contained only an invoice for hundreds of thousands of dollars with no backup material.

Included is $585,000 in payments to New York-based architect Rafael Viñoly. Bob Smith, the UA's director of facilities, design and construction, said late last week that the UA actually has paid Viñoly $4.86 million.

Other receipts include the rental of office space in New York City for UA consultants, and $7,500 that was wired to a Russian company for software development. Smith said the UA intends to submit all its backup receipts to the city. He said the New York office is a small temporary office, and that the Russian contractor has specialized expertise.

Hein said he signed off on the UA receipts: "We made the decision that the UA was paying 50 percent and we wanted to be a good partner."

Tang questioned how the science center went from a joint venture with the city putting up $20 million, to the city footing the entire $130 million bill. "It's all on Rio Nuevo's back. It doesn't make any sense," he said.

A fight about numbers

The city objected to categories the Star used to break down Rio Nuevo spending, calling them arbitrary and manipulated.

City Manager Mike Hein said the way the Star categorized payments was not how "industry professionals" would do it. "A journalist is going to categorize expenses different than a finance person," he said.

However, there are no set accounting standards for governments, the state auditor general said.

Charlie Francis, a government accounting expert who helped negotiate Iraq's agreement with the International Monetary Fund, said the Star's analysis goes beyond an audit, but it "does not go beyond what a government body should be receiving annually." Francis, who spent 16 years as a finance director, said city leaders should want such a report regularly.

Hein said new construction was "grossly mischaracterized" in the Star analysis because it didn't take into account money spent on design and construction documents. Instead the Star listed them in the design category.

The Star analysis found that $16.4 million has been spent on construction; the city says that figure should be $29.3 million plus another $7.7 million for design.

Greg Shelko, Rio Nuevo's director, said he considers every expenditure involving a project "bricks and mortar." That includes feasibility studies for museums, land purchases, archaeology work and money spent to clean up the landfill on the west side of Rio Nuevo. That's because the city wouldn't build museums without first studying whether they would work financially, and then preparing the site for construction, he said.

The city's investment hasn't yielded immediate results, Shelko said, but that will happen over the long term once the private sector starts building.

Lee Schiffel, assistant professor of accounting at Valparaiso University, called the city's Rio Nuevo accounting "sloppy" because it is missing the names of vendors paid between 2001 and 2005.

"What's costing the city is chasing pipe dreams that aren't being fulfilled," she said. "The money is being spent on upfront planning that isn't materializing," she said.

Of the Star's analysis, Schiffel said, "While it's not the way the government would account for it, it's done in a way that's easy for the public to understand. That's the kind of stuff I'd like to see government doing more of."

Fate in Legislature's hands?

In response to criticism over Rio Nuevo's $77 million price tag and fears that the Legislature may take away the tax money financing the project, the City Council in August unanimously approved $454 million in bonds to fund its planned major projects.

City officials said the bond approval shows it has acted in good faith and that state lawmakers shouldn't take the money back to feed a sagging state budget. Rio Nuevo is a special tax-increment financing district funded by state sales tax diverted to the city.

Tucson Republican Rep. Jonathan Paton said the Legislature could pull the funding if Republicans retain control after the November elections.

Rio Nuevo's chronic public problems convinced Paton to introduce two bills next January. One bill would make Rio Nuevo financial information more understandable and accessible to residents. It could include requiring searchable databases to be posted online.

The other would make the city's election system non-partisan like the rest of the state. He said partisan elections contribute to the "politization" of Rio Nuevo.

While frustration in some corners builds about Rio Nuevo's pace and potential for success, the effort has strong supporters.

The "money we've spent so far has been well spent," Tucson Mayor Bob Walkup said.

"I think all of it has been justified and approved and is moving us forward to where we are today," Walkup said. "I'm very comfortable it has been spent wisely."

● Star Director of Administration Renee Weatherless contributed database analysis to this report. ● Contact reporter Rob O'Dell at 573-4346 or rodell@azstarnet.com.

Copyright 2014 Arizona Daily Star. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.

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