$77 million spent on Rio Nuevo, and here is what we have so far…

2008-07-27T00:00:00Z 2013-09-10T16:36:14Z $77 million spent on Rio Nuevo, and here is what we have so far…By Rob O'Dell Arizona Daily Star Arizona Daily Star
July 27, 2008 12:00 am  • 

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."


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.

Copyright 2015 Arizona Daily Star. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.