In the nine years since voters approved the Rio Nuevo Downtown redevelopment district, the city has taken in — and spent — more than $77 million in taxpayer money.

That almost matches the $80 million voters were told to expect the city to put toward an array of museums, a re-creation of Tucson's birthplace and a Downtown hotel.

But with that much money spent — and just $28,000 in the bank as of June 1 — none of those jewels of the Rio Nuevo plan is even close to starting construction.

Instead, the money has gone to restore two old movie theaters, re-create a small piece of the adobe Presidio Wall, build infrastructure for a new Downtown subdivision and plan how to spend even more money.

Fortunately for Rio Nuevo, in 2006 City Manager Mike Hein was able to get the Legislature to extend the life of the tax increment financing district from 10 to 22 years and up its anticipated haul to $600 million.

Over the years, as Rio Nuevo's slow progress came under fire from frustrated citizens, city officials were careful to avoid saying specifically how much money the special taxing district had brought in, and where it went.

But in the first public audit of Rio Nuevo, a series of Arizona Daily Star public-records requests was able to pin down those financial details — although it was not information the city gave up easily, as many of the records were incomplete, unorganized and lacking in detail.

The city's lack of progress hasn't gone unnoticed in the Legislature, which is poised to pull the redevelopment district's funding next session to fill expected holes in the state's budget.

"That's definitely possible," said Tucson Republican Rep. Jonathan Paton, who said efforts this year were blocked by Senate President Tim Bee of Tucson, now running for Congress. "I heard it mentioned this session, but they couldn't do it because of Tim Bee. They hate these special taxing districts."

The news that Rio Nuevo has spent $77 million caught even those who have watched the project closely by surprise.

"I'm flabbergasted," said Republican businessman and Downtown landowner Bruce Ash. "It's incredible they have blown through this money and there's nothing to show for it. Usually I'm not at a loss for words, and I am at a loss for words. It's shocking."

Commercial real estate broker Mike Ebert said disbelief was his first reaction when hearing Rio Nuevo's price tag.

"Where is it, what did (the city) do?" he said. "I have no idea what they spent that money on."

But Mayor Bob Walkup, the city official whose legacy is most closely linked with the project as voters elected him mayor the same year they approved the district, said the money has been wisely spent.

"A lot is going on, and it's all positive," Walkup said. "Everybody is waiting on the arena and convention center hotel. The private sector really wants to see these under way. They are right around the corner."

The $77 million has accomplished some things. More than $11.5 million went to refurbish the Fox Theatre, which is open and hosting shows and movies. Nearly $4.3 million went to re-create a portion of the 18th-century Presidio Wall, which encircled and protected the Spanish fort of Tucson.

Several public/private partnerships have also been done, or appear to be on track. The Rialto Theatre, a former movie house transformed into one of the area's most active concert venues, got $2.3 million. Another $5.5 million went to the Mercado commercial and housing project going up on the West Side, and $735,000 went to refurbish the Martin Luther King Jr. housing project.

But Eric Abrams, a local developer and active Democrat, said that's not much to show for 10 years.

"A movie theater that's not open much, a fake wall and a bunch of plans that are never going to happen is not much for $77 million," Abrams said.

Sunny rhetoric amid dark clouds

Walkup is not alone in his optimism. Many city officials, including Hein, Rio Nuevo Director Greg Shelko and some City Council members still say progress is right around the corner.

That case gets harder to make, however, when several of Rio Nuevo's highest profile projects still have no construction timetable after undergoing years of public planning and evolution.

● The arena, proposed as an $80 million public/private partnership by Walkup five years ago, grew into a $200 million city undertaking before shrinking back to the $100 million range. And depending on how the re-creation of Tucson's birthplace and the convention hotel are financed, there may not be enough money to build it.

● The science center started out as a modest replacement for the Flandrau Planetarium, ballooned into a $350 million Rainbow Bridge, then shrank back down to a $130 million project. But even at that price it's still in doubt because the city and UA can't agree on how to split the funding, even after spending a combined $15.5 million on planning.

Getting the records

Financial records for Rio Nuevo can be difficult to get, and to decipher.

The city's response to the Star's first request was to lump Rio Nuevo revenue and spending in with debt service and revenue from the nearly 40-year-old Tucson Convention Center, with little way to tell which was which.

A subsequent request identified spending on each project, but not specifically what the money went for.

A series of additional requests produced illegible and incomplete documents and money accounted for in illogical categories that made it hard to track. For example:

● A $1.4 million repayment by the Fox Theatre was put under the miscellaneous category, and no one in the city's Rio Nuevo, budget or accounting offices could say what the miscellaneous revenues were until pushed by the Star to figure it out.

● The price tag of a new Downtown arena was listed at $52,000, even though the city had already spent $1.5 million on planning, consultants and minimal infrastructure work for the arena and adjacent civic plaza.

● Much of the $10.47 million the city spent on contractual services since 2000 cannot be broken down by project, a problem Interim Finance Director David Cormier said the city is working to fix. He said the data should have been listed by project from the start, but wasn't.

● Because of the way files are kept, details about spending before 2005 are available only if you already know what you're looking for. Backup receipts for spending since then are on microfiche, and copies provided to the Star were nearly illegible.

Deputy City Manager Mike Letcher said the city followed all proper accounting practices and got the required signatures for each expenditure. "We can get the information folks need," Letcher said. "The question is putting it in a format that's easily understandable."

Rio Nuevo Director Greg Shelko said whenever an expense occurred, someone at the city always knew what it was for. It's just that someone from the outside — like the Star — has a hard time comprehending the data and getting detailed information. He said the receipts are there even if they aren't easy to find.

Ash, the Republican businessman, said he has been requesting an accounting for Rio Nuevo for years and has heard nothing.

"Who was watching this; how does this happen?" Ash said. "It's someone else's money. It's an open checkbook, and they don't want the public to see because there's nothing to show for it."

Progress hype

Criticism of Rio Nuevo's snail's pace is nothing new.

The district originally had a 10-year limit on its ability to claim an extra share of state sales taxes. To maximize revenues by waiting for the economy to improve, and buy time to replan what should be built, the city didn't start collecting the tax until 2003.

By then, with impatient citizens clamoring, Walkup called for approval of a $100 million University of Arizona science center as "the cornerstone project for Rio Nuevo; this is where we really get things going."

Over the next three years, the project morphed into a $350 million "Rainbow Bridge" across Interstate 10 that Tucson architect and activist Jody Gibbs called "one of the dumbest projects or suggestions in the history of the city."

Gibbs said the project came to symbolize what a "gigantic boondoggle" Rio Nuevo had become.

Despite the false starts, city officials said they hope the public hasn't given up hope.

"We need to get the public to share our belief that yes, it is happening," Councilwoman Nina Trasoff said. "We built the foundation for Rio Nuevo. Not literally, but figuratively we have established the footings for Rio Nuevo with that $77 million."

But City Hall watcher Gerald Juliani said Rio Nuevo has been about "lots of ambitious talk and no action on almost anything." He says the city has spent "like a drunken sailor" to the tune of more than $7 million a year, and "they don't have much to show for it."

"It's always just around the corner," Juliani said. "Rio Nuevo has been a bonanza for consultants. There's no bricks and mortar for people to see."

Hein said he understands the public anger, adding the city has consistently "overpromised and underdelivered" by giving overly ambitious timelines and hyping projects that were never going to happen.

But he contends that Rio Nuevo didn't really start in 1999, because there wasn't enough money to build all the projects. Progress should be judged from June 2006, when the Legislature approved the $600 million, he said.

Although the city has spent the money as it came in thus far, officials are now moving to quickly to sell bonds that would be repaid with future Rio Nuevo taxes, obligating the money before the Legislature can take it back.

Paton said any progress is helpful, but warned the die may have already been cast as far as losing the money is concerned.

"It could help," Paton said. "But it's getting to the point where it's a day late and a dollar short."

STATUS OF RIO NUEVO PROJECTS

Don Bourn's The Post

Project type: Private, with public help

Original concept: The city bought the Downtown block that included a more than 100-year-old storefront built by pioneer rancher George Pusch from the federal government for $1 in 2003, planning to demolish the Pusch building and other structures on the block. Developer Don Bourn won a competitive process to buy the site for $100 and develop it.

What happened: After originally saying it would try to save the Pusch building, the city quickly tore it down in August 2004 over protests from community members, who unsuccessfully sought an injunction to stop the demolition. Bourn changed his plans numerous times over the next three years, proposing a 14-story tower, then changing his project back to his original five-story design, then proposing "condotel" units and then quickly killing that proposal. Bourn said construction would start in April 2007 and then later said July 2007. He told the City Council in March that he would begin construction by May 2008.

Status: Failed unless Bourn can start construction soon. He said he will start any day now, but has said that for years.

Taxpayer bill: $690,836. More than $500,000 went toward tearing down the Pusch building and cleaning up the debris.


Downtown Arena

Project type: Public

Original concept: The original plan submitted to voters in 1999 for Rio Nuevo didn't include an arena. It was added in 2003 at the behest of Mayor Bob Walkup. The City Council voted 4-3 in early 2004 to solicit developers to submit proposals to build an arena on the southeast corner of West Congress Street at Interstate 10.

What happened: The City Council selected a Texas-based developer who proposed an arena shaped like the shell of a desert tortoise. While discussing a separate Downtown project in the area, the council unexpectedly voted unanimously to back a $130 million, 12,500-seat arena shaped like a tortoise in April 2007. In April 2008, the Arizona Daily Star uncovered new cost estimates that pushed the price tag to nearly $200 million. The council quickly abandoned that plan and is seeking to build a smaller 10,000- or 11,000-seat arena.

Status: In flux. Could still go either way. The city will solicit proposals from at least four arena developers in the coming months.

Taxpayer bill: $1.45 million for studies and concept plans, including studies on whether to just upgrade the Tucson Convention Center.


UA Science Center

Project type: Public

Original concept: A nearly $100 million science center to replace the current Flandrau Center on the University of Arizona campus was approved by the Arizona Board of Regents and the City Council in 2003. The council committed $20 million, and the university was to pay much of the estimated $73 million construction cost.

What happened: The idea somehow ballooned into a $350 million "Rainbow Bridge" that would span Interstate 10 and the Santa Cruz River and hold exhibit space on the bridge. UA officials hired a highly touted New York architect known for cost overruns and were adamant the city pay the entire cost, which didn't sit well with taxpayers. The city finally said no to the Rainbow Bridge. A $100 million science center combined with a $30 million Arizona State Museum is now planned.

Status: In flux and could go either way. The UA wants the city to pay the full cost upfront. The city is willing to cover the full cost, but not in advance. It wants staggered payments.

Taxpayer bill: $15.56 million. Includes $4.86 million from Rio Nuevo and $10.7 million from the University of Arizona.


Santa Rita Hotel

Project type: Private

Original concept: A $40 million complex proposed in 2004 consisted of a high-end, 66-room boutique hotel, 148 condos, 15,000 square feet of retail and restaurant space, and elevated parking.

What happened: Developers Michael Teufel of Pathway Developments and Humberto S. Lopez of HSL Properties decided to quickly move the highly regarded Downtown restaurant Cafe Poca Cosa to make way for the revitalization of the hotel. Cafe Poca Cosa was given a city subsidy in order to keep the business Downtown. The Santa Rita got bogged down with negotiations with the city because developers didn't want to take responsibility for a public alleyway on the site, but wanted to build over the top of it.

Status: Failed. Teufel walked away from the project in mid-2007 and defaulted on about $6.5 million in loans and is facing the possibility of losing control of his businesses. Lopez said he now wants to build a 160-room, first-class hotel with a spa, a bar and a music venue. The hotel is vacant and unused except for parking.

Taxpayer bill: $556,000, including $500,000 in improvements at Cafe Poca Cosa's new location, and $56,000 in free rent. Paid out of budget for Pennington Street parking garage.


West Side Convento and Museums

Project Type: Public

Original concept: The re-creation of the San Agustín Mission on the West Side was the signature project approved by voters in 1999. Along with several museums, the project would rebuild the cultural birthplace of Tucson, which had been made into a landfill. It would include pit houses from an ancestral Hohokam village, the Carrillo House and features of the mission, which had the first buildings in modern Tucson. The Arizona Historical Society and Tucson Children's Museum are also planned nearby.

What happened: The city has spent millions in environmental remediation for cleaning up the landfill site in order to get the West Side project ready for development. The City Council voted unanimously to spend nearly $54 million to re-create the convento and mission gardens along with roads, landfill remediation, a bridge over the Santa Cruz River, and design and construction management.

Status: Likely to happen, but unpredictable when or exactly what. Plans for a parking garage, cultural plaza and convento are nearly done, and construction could start in months if the council votes to move forward.

Taxpayer bill: $21.68 million. Money went to cleaning up the landfill, buying property, and infrastructure and design work.


MLK Revitalization

Project Type: Public-private partnership

Original concept: The city wanted to sell the 39-year-old public housing project, but then developed a public-private partnership for retail and housing in the MLK building, along with a new public housing project nearby.

What happened: The city's Community Services Department changed course in mid-2006 and was pushing to demolish the building and replace it with a four-story public housing project, preventing any retail or market-rate housing there. After a Star story about the change and the fact that the city was misusing nearly $1 million in Rio Nuevo funding that was supposed to go to a public plaza on the site, the city switched back to the public-private partnership idea and sold the property to Portland, Ore., developer Williams & Dame Development.

Status: Making good progress. Williams & Dame Development is turning the housing project into rentals and building retail along Congress Street for the project called One North Fifth.

Taxpayer bill: $735,327 in Rio Nuevo funds. Plans also call for Rio Nuevo to spend $1 million for a public plaza there, $1 million for street improvements and $5 million for a parking garage beneath the site.

 

● Contact reporter Rob O'Dell at 573-4346 or rodell@azstarnet.com.

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How Rio Nuevo spent $77 million

The director of the city's Rio Nuevo project, Greg Shelko, will answer your questions about the project's track record so far and its next steps in a live chat from noon to 1 p.m. MST Monday, July 28, 2008.

Chat Archived Transcripts

Greg S (Rio Nuevo director): Hello, this is Greg Shelko and I'm looking forward to chatting about what is happening in Downtown Tucson.


Bill L (Yankee54): Why doesn't the city take a role from San Diego where they built Petco park and cleaned up a downtrodden area by building a sports complex--then came the restaurants, hotels, attractions, etc.. Has anyone considered building a 50,000 seat dome arena somewhat like Glendale has that can attract top attractions--i.e. NCAA West Region Finals and Final 4, maybe get the UA to move their football games to downtown,(UA then can knock down the current stadium and use it for valuable academia space)upgrade in concerts, larger convention possibilities, etc...all bring in immediate big time economic impact---you build this as your center piece and then build around it, i.e.hotels, attractions, etc., that will be built at a faster pace because you have a anchor in place.

Greg S (Rio Nuevo director): In one sense Tucson is taking a cue from San Diego and other cities that have experienced revitalization. Our underlying vision is to create larger attractions that will become catalysts for related private redevelopment. Our market can support a 12,500 arena, around which we expect the types of major shopping, dining and commercial uses you describe. That arena will be a multipurpose facility, and the foot traffic from it becomes part of the economic development formula.


Kyle P (kp116): Hello Greg, have you considered adding an IMAX theatre at the Fox and maybe show some current movies that people like to watch? Also, I think that the projects in the west side will be a failure financially. Maybe, the city should reconsider focusing more on the area around Hotel Congress/4th Ave underpass given the proximity close to the UA.

Greg S (Rio Nuevo director): Kyle - the plans for the UA science center / state museum facility presently include an IMAX. In order for downtown to be truly successful in the long run, the City and the private sector must create multiple, diverse destinations. The activity areas downtown - arts/warehouse, congress, convention and museums districts will create such diversity, all walkable and eventually linked by the modern streetcar system to the UA area. As for the west side, I believe the cultural complex has the ability to be successful. It will be an experience that can't be found elsewhere, and the visitation potential (750,000 people) will be catalysts for private development. The museums also celebrate our past and explore our future, they are educational features for the community, and support quality of life. The important thing for the City is to devise financing strategies to get as much of this as we can done. And we must do projects (timing) in ways that maximize the tax district revenue.


Robert G (Bobby G): Is the City of Tucson confident that there will be market support for the 700-room Sheraton Hotel once construction is completed? Is there going to be enough demand for such a drastic increase in hotel rooms, and can the market sustain the room rates that would yield the revenue stream that project requires? What is the status of that project? Hasn't the city council directed staff to move forward on that project at least twice? Didn't the city package the hotel with the arena, saying that profits from the hotel will pay the debt service on the arena? Is that still a valid assumption?

Greg S (Rio Nuevo director): The City is very confident that we need many more hotel rooms. Early-on study pegged the market needs in Tucson, and that was the basis for soliciting proposals to develop approx 700 rooms. The Sheraton number at present is 700 rooms, and that will be confirmed by independent market analyses to get it right. We'll know soon, as that market research ius underway. The hotel is critically important to downtown growth and to maximize the convention business (in our appropriate niche). The Sheraton is advancing into predevelopment stage very soon; the council recently approved the contract. The hotel is actually advancing rapidly. The Council directed staff to solicit hotel proposals April 07, and just over a year later we have the predevelopment work ready to go. Yes, the hotel (publicly financed, privately developed and operated) is expected generate significant net revenue that can be used toward other project debt service and other cost.


Robert G (Bobby G): Is there an appraisal for Alan Norville's property that justifies the purchase of his 7 acres for $17 million? If so, will you release it to Rob O'Dell? How does the value of this particular land compare to the value of land elsewhere in downtown at this time?

Greg S (Rio Nuevo director): There will of course be full dislsoure of the Norville transaction once negotaitiosn are complete.


m g (citystar): Why would people want to go downtown? No parking, no stores, can't drive, two lanes of travel. What a waste of money, and time. Don't forget about the hobos and crime!!!!!

Greg S (Rio Nuevo director): Downtown busiensses, proeprty owners and resdients suffer terribly from perceptions about things you list. Parking inventories show there are many and varied parking opportunities downtown. People complain there is none when there isn't a space in front of the merchant or business they visit. Granted, better directional signage to it will help. Statistically, the downtown neighborhood is one of the safer in our community. Those who frequent the downtown talk in in terms of quite a few shops (But certainly not enough) and restaurants, together with diverse visual and performance art offerings, film festivals, unique events, and diverse housing opportunities in a rich mix of neighborhoods.


L C (L109): Have you looked at the online comments on Sunday's story? If not, why not? If so, how do you feel about the overwhelmingly negative view of RN?

Greg S (Rio Nuevo director): Yes, I looked. It disappoints me greatly that downtown does not get the treatment it deserves. Those who are trying to make a go of it (largely the private sector property owners and businesses, not me personally or the government) are undermined. For our part, we need to communicate the vision and the progress better.


A W (air91): If the State were to end the allocation of this portion of their tax revenue to the Rio Nuevo District, would these funds then be available for other Tucson projects, or would they be just as likely to be spent, at the State’s discretion, on development in other parts of Arizona, such as Mesa, Gilbert or Chandler?

Greg S (Rio Nuevo director): The Rio Nuevo tax dollars can only be spent within the defined district. The City and its partners, since the revenue extension was only approved in May 06, and a long range funding allocation guide was only established in May 07, have made some demonstrable progress. Without that extension (ie, much more money), the City simply would not be in a position fund museums, arenas, hotels, etc., and perhaps most importantly, infrastructure to attract and serve private sector redevelopment over the years. Thats a very real assessment, and not offered as excuse for anything. We can continue to look back at failed promises over the many years, or we can start to look forward with hope and optimism from a reasonable starting point.


A W (air91): Do you believe someone without a governmental accounting background, or qualified certification, could mislead the general public by trying to interpret and report on complex financial statements, such as Rio Nuevo’s?

Greg S (Rio Nuevo director): yes


A W (air91): Have other Cities spent this much on downtown revitalization? Is Tucson spending on a comparable level?

Greg S (Rio Nuevo director): Every revitalization program is different, but cities in general have spent enormous amounts of money over many years, if not decades, on downtown revitalization projects. Ours is however unique and I think quite a few cities would like to have the problems we have in terms planning for and making such extraordinary investments.


Demitri d (dirtdogdiddy): Did anyone consider the fact that having a museum district might bring residents of our community downtown once every five years while focusing on entertainment restaurants etc. would bring them down regularly? This seems to be very misguided. Who is responsible for this decision?

Greg S (Rio Nuevo director): I don't agree with your assessment. The museums will be geared for locals and for visitors. And visitors look for authenticity. In an earlier response, I highlighted the importance of multiple and diverse destinations. Most every city that relied upon any one or few things to be successful, failed.


R k (rickardo): Greg, you came from Milwaukee, right? How has that city redeveloped its downtown and how long did it take?

Greg S (Rio Nuevo director): It took decades, from the failed promise of a single mall in the early 80s. Revitalization, on any level, is an organic process - you can't force it or wish it. Its a game of inches early on, and every success, no matter how large or small, is so very important. Once a market is tested and demonstrated, cities go from begging for investment to keeping up with the planning and permitting for it. Its extremely important for us to deliver on the pubic projects, and, to create a positive investment climate.


Ed E (newsreporter): Do you believe that the current slowdown in real estate development and the tightening of credit has had an impact on the Rio Nuevo project? Would more have happened if this slowdown hadn't occurred?

Greg S (Rio Nuevo director): Absolutely. The housing market is very poor, and downtown is an untested market. At the same time, access to capital for busiensses, investors and developers is extraordinarily difficult. Thats why its timely now for the City to focus on the public projects, get what we can going, be ready. The impact of the markets is rarely mentioned in conversations about what's happening downtown.


Roger K (Albert E): Is it true that Bourn didn't just get vacant land for the $100 it paid the city, but they also got the free and clear deed to the Indian Trading Post building worth $2,000,000? How can the city justify giving away that much money to a developer under any condition?

Greg S (Rio Nuevo director): The city acquired the property from the feds for $1, and Bourn got title to the vacant land and the trading post for $100 because - the smaller site is irregular and presents development challenges that increase cost, the market was and still is unproven, the trading property is in very poor condition and requires substantial rehab to historic standards as part of the deal (doubt anyone will pay the kind of money you reference). I believe it was a fair deal for everybody, including the city's site clearance investment to enable future development.


Earl G (Earl): Why did it take so long to reject the rainbow bridge?

Greg S (Rio Nuevo director): I believe the city and the community made it pretty clear all along how they felt about the bridge concept and cost. It took time for the university to come to other terms with the city


John B (StarNet online editor): This concludes today's chat. I want to thank Greg Shelko for participating. I also want to thank the StarNet readers - who sent in many more questions than could be accommodated in a one-hour chat.