Cut Rio Nuevo?

by David Safier

I'm out of my area of whatever-expertise-I-may-have here, but the idea of cutting funding of Rio Nuevo as a state cost cutting measure seems both wrong and harmful to the greater Tucson area.

From what I've seen, the first years of Rio Nuevo planning were a joke, courtesy of the Republican majority on the Council. Their idea was to create some kind of a downtown theme park instead of a viable business/commercial/residential/entertainment area. Millions were wasted on foolish plans and an incompetent bureaucracy.

An aquarium in the desert?

Once Trasoff and Uhlich were elected and the majority shifted, the council made a genuine, good faith effort to get things moving. Unfortunately, their plans for building condos and other residential facilities ran into the housing slowdown, and companies pulled out of projects they had signed up for. Meanwhile, lots of the work that has been done has been preparatory stuff that tears up streets but doesn't put new buildings in place. So things look like a mess, and lots of people think the whole thing is a boondoggle.

I lived through the creation of light rail in Portland, Oregon. For years, I didn't hear a single good word about the project, just people complaining about torn up streets with businesses going under and cost overruns and delays. But when it was finished, it became the crown jewel of the city and has put Portland on the international map. It keeps expanding into new areas of the city and the suburbs, revitalizing the whole area.

Current Rio Nuevo efforts are getting a bad rap, both for the early years of incompetence and for the growing pains that are part of any project of this sort. I'm sure there are a thousand legitimate complaints about the way the thing has been planned and run, but I've never heard of a major project like this that has run smoothly.

Bottom line, Maricopa is overjoyed that they have an excuse to yank funding away from the People's Republic of Tucson, and they'll use every problem Rio Nuevo ever had to make their point. I'll bet you'll never hear the project talked about by Republicans without hearing the phrase, Rainbow Bridge. They want that one spectacularly bad idea to stand for the whole project.

Antenori has said he's against Rio Nuevo. I say, let's get all the Southern Arizona legislators on record about whether they want to cut a project from the budget that creates jobs and will reinvigorate Tucson's core. The voters should know where they stand.

4 responses to “Cut Rio Nuevo?

  1. Yep, I read it this morning, Kenneth. Who knows, bad bonds may replace the Rainbow Bridge as the major talking point against Rio Nuevo.

    It’s a powerful accusation, but it doesn’t say anything about the value or direction of Rio Nuevo. If there is value in the project, it needs to be watched to make sure this kind of mistake doesn’t happen over and over. If it’s a bad project, it’s all money wasted, so this isn’t the issue, it’s the fact that every dollar plowed into Rio Nuevo is a dollar wasted.

  2. Today’s article in the Arizona Daily Star http://www.azstarnet.com/metro/280328

    Tucson issued $78 million in bonds for its Downtown redevelopment district Dec. 15-17, as state lawmakers were openly threatening to take back the state sales taxes that go to Rio Nuevo because of the project’s perceived lack of progress.
    Several experts said interest rates now would be about 1.2 percentage points lower than the nearly 6.5 percent the city sold its bonds at in December. Dralle estimates the rate difference would be only 0.25 percent to 0.5 percentage points lower.
    Several Tucson officials said no one could predict future interest rates, and added that the city sold the bonds to get Rio Nuevo projects moving. The legislative threats weren’t a factor, they said.
    But numerous communities across the country delayed their bond sales in December. A January report from JP Morgan Asset Management said many issuers were postponing year-end bond sales because they were unwilling to pay the high yields required to attract buyers.
    Just three days before Tucson’s sale, New-York based municipal bond adviser Freda Johnson told Bloomberg News it was recommending “borrowers delay their sales if at all possible” because of high yields and weak demands.
    Mayor Bob Walkup said the bonds were sold to get Rio Nuevo moving in response to criticism from the public and the media about a lack of progress. He said the legislative threat to take the money back “wasn’t even a discussion.”
    “I think we still did the right thing at that moment,” Walkup said, adding the city can’t predict interest rates. “If you find the guy with that crystal ball, let me know because we can make a lot of money.”
    Action delayed elsewhere
    Deven Mitchell, executive director of the Alaska Municipal Bond Bank Authority, said the bank pulled back two bond issues in early to mid-December, one for a prison and the other for money that would be loaned to municipalities. The Alaskan bonds had similar ratings to Rio Nuevo’s, although Tucson spent $750,000 on bond insurance to boost its rating several levels.
    The bond bank waited for the markets to calm down and then sold its bonds “as soon as possible” at rates under 6 percent just before Christmas and again in January.
    It’s a difficult decision, Mitchell said, because if you need the money to start construction, it can be better to issue the bonds than wait.
    But the amount of construction to be done with the $78 million in Rio Nuevo bonds is limited, with $58 million split between design and construction for 13 projects Downtown and on the West Side. One expert questioned the amount of “soft costs” for design in the bonds.
    A total of $20 million went to pay back a loan to the city, into a reserve fund or for bond insurance.
    Issuers as disparate as the state of Minnesota, the District of Columbia and Oklahoma City delayed bond sales at the end of 2008 because of market conditions.
    In Florida, top state officials questioned the state bond director in January over a bond sale for universities on Dec. 14 with an interest rate of 6.16 percent, pointing out that another Florida issue a month later fetched a rate of 4.7 percent. The director blamed volatile credit markets.
    Higher interest costs
    Michael Stanton, publisher of the Bond Buyer newspaper, looked at the difference in market rates — calculated from municipal market data or MMD — between December and the second week in February.
    He said the average rates today are about 1.2 percentage points lower than rates were in December, resulting in roughly $10 million more in interest costs for the December bonds.
    Stanton made a second calculation of only $4.3 million in savings using an index of revenue bonds — which are paid off with revenuelike sales taxes. But the Rio Nuevo bonds are backed not just by sales taxes, but by the city’s general fund as well.
    Alvin Boutte Jr., managing director and head of the Midwest region for Chicago-based investment banking firm Grigsby & Associates Inc., estimated the difference in interest rates cost the city $18 million in interest over the life of the bonds. He estimated the city would pay 5.2 percent on the bond issue today.
    In a larger issue by the city of Chicago on Jan. 20, Boutte said, the interest rate for 15-year bonds was 4.81 percent. By contrast, the yield for Tucson’s 15-year bonds is 6.79 percent.
    The companies that underwrote Tucson’s bonds declined to estimate what the difference in interest rates cost Tucson. Stone & Youngberg said there were too many variables to calculate. Piper Jaffray referred calls to the city’s bond adviser, Dralle at RBC Capital Markets.
    In a statement, Dralle said the rates did drop in January but that much of the drop was “on paper” because there were few sales, and many issuers had higher credit ratings — although the city paid $750,000 for bond insurance to boost its credit rating equivalent to AAA.
    Dralle said the bonds got the best rates they could at the time they were sold, and estimated that Rio Nuevo bonds today would sell with interest rates between 6 percent and 6.25 percent because of “a worsening economy and with Legislative threats to the revenue.”
    Jaret Barr, assistant to City Manager Mike Hein, said interest rates have dropped, but estimated the impact was more like $5 million.
    He added the city talked about waiting but decided to move forward to keep projects going. He challenged those who criticize the city’s decision to tell him what the interest rates will be in March, since they think the city should have been able to see the future.
    Deliberately hurried
    State Rep. Frank Antenori, R-Tucson, has railed against the city bond sale for months, contending the city knew it was getting a bad deal but went out to market anyway to commit the money so the Legislature wouldn’t be able to take it away.
    “It was deliberately done in a hurry to use it as a bargaining chip,” Antenori said. “Because it was somebody else’s money, they just did it.”
    Councilwoman Nina Trasoff countered that Tucson proceeded in order to jump-start important projects, acting on the advice of its bond attorney.
    “You can always second-guess these things,” Trasoff said. “It’s always easy in 20/20 hindsight to say, ‘gee, if.’ ”
    Contact reporter Rob O’Dell at 573-4346 or rodell@azstarnet.com.

  3. Perhaps if you asked Mr. Antenori why he took his position, you might find out that he did his homework and research. He also had conversation and meetings with key Tucson elected and appointed officials. He knows of what he speaks. He has learned that Rio Nuevo is currently poorly managed, poorly planned (almost an absense of planning), and is a sink hole for City and State funds. This is why he took his position. If you were to check with other Representatives from Souther Arizona, and you should, you will find that Mr. Antenori is not alone. If you have seen or reviewed the myriad of comments on the Arizona Daily Star web site when Mr. Antenori’s position became public, you would have seem overwhelming comment to dump Rio Nuevo – it was about 119 to dump against 4 to keep it. Apparently this is out-of-what-area-of-expertise-you-may-have.

  4. Francine Shacter

    You say “I say, let’s get all the Southern Arizona legislators on record about whether they want to cut a project from the budget that creates jobs and will reinvigorate Tucson’s core. The voters should know where they stand.” and I totally agree. Lead the charge, David, I and many others will join you. We must not let these yo-yos get away with claiming the high moral ground on these issues.