Rio Nuevo Extension to 2035 Moves through #AZLeg

AC Marriott in Tucson
A Rio Nuevo sales tax deal contributed to the construction of the AC Marriott Hotel in downtown Tucson.
AC Marriott in Tucson
The new AC Marriott in downtown Tucson was built with a Rio Nuevo sales tax deal.

Backers of the Rio Nuevo Tax Increment Financing District have been intensely lobbying the Arizona Legislature for months in hopes of extending the life of Rio Nuevo beyond its current end date of 2025.

Reps. Mark Finchem and Todd Clodfelter have proposed HB2456 which would extend Rio Nuevo to 2035. In its current form, Rio Nuevo and development in the downtown district are controlled by the Arizona Legislature. The Rio Nuevo Board is appointed by the Governor, the Speaker of the House and the President of the Senate, and all Rio Nuevo deals are approved by those three.

What’s wrong with this picture? The people of Tucson created Rio Nuevo with our vote back in 1999, but under the control of the Legislature, the people have no voice in Rio Nuevo and no say in what is built in our city’s core. That’s a problem. Our town does not belong to the Arizona Legislature. Where is our local control?

Last week the Arizona Daily Star published my guest commentary on Rio Nuevo: Is It Time for the Sun to Set on Rio Nuevo? The article gives some historical background on Rio Nuevo and raises questions about the financing behind the deals. At the end are some suggestions.

Is It Time for the Sun to Set on Rio Nuevo?

Rio Nuevo’s history is as rocky as the Santa Cruz riverbed. Its unkept promises and over-reliance on sales tax are the primary reasons why I oppose carte blanche extension of the Rio Nuevo Tax Increment Financing District in its current form.

Rio Nuevo was created by voters in 1999. I was one of those voters. I remember promise of Rio Nuevo… the New River… the rebirth of Tucson’s birthplace on the banks of the Santa Cruz. Rio Nuevo would develop vacant land and recreate elements of Tucson’s early history. The concept was to build the Tucson Origins Heritage Park, including the Mission Gardens, Convento, San Agustin Mission Chapel, Carrillo House, Granary, and village of S-cuk Son. Like the Desert Museum, Tucsonans envisioned the Origins Park to be an educational and cultural experience, a destination for family vacations, and a source for tourist dollars.

As Rio Nuevo evolved, other proposals were touted—like building an arena football stadium and constructing the now infamous rainbow bridge.

Under city control, inaction was Rio Nuevo’s legacy. The Origins Park was never completed. After 10 years, all we had were plans, debt, and some infrastructure. In 2009, the Arizona Legislature took control of Rio Nuevo and development in Tucson’s core.

Under state oversight, the newly reconstituted Rio Nuevo Board parlayed multiple real estate development deals to increase sales tax revenue by building hotels, office buildings, and restaurants downtown.

Rio Nuevo boosters point to the gleaming new structures and say, “Look at how Tucson has been transformed!”

Yes, downtown is spiffier and more corporate, but is subsidizing luxury hotels the best use of tax dollars in a city with a 25% poverty rate?

The basic premise behind Rio Nuevo is that if government gives away sales tax to foster commercial construction, that will generate more sales tax in the future. After nearly 20 years, what is our actual return on investment? In a recent Tucson talk, author and historian John Nichols said that economic development should focus on building the economy of the future and not focus on perpetuating the economy of today. Focusing solely on retail sales tax revenue as an economic development driver is living in the past. It’s so 1999.

In 1999, consumers clipped coupons, drove to the store, and fought the crowds for bargains. Today, bricks and mortar retail is faltering. As online shopping increases, it is clear that Rio Nuevo is banking its future on a dwindling revenue source.

State and city tax and land incentives are at work in downtown Tucson. Rio Nuevo’s City Park project is estimated to create 120 construction jobs, 90 restaurent/entertainment jobs, and 105 office jobs once tenants fill the upper floors. City Park is getting funds from Rio Nuevo and from the city’s GPLET tax-abatement program. How much are we paying for these jobs?

Economic development in Tucson is not on a sustainable path. Instead of subsidizing developers, Tucson should focus on growing our local small businesses. Luring big corporations away from other cities by giving away taxes and/or land is a race to the bottom for cities.

Tucson could be the Athens of the West, instead of the Dusty Pueblo, if we played to our strengths as a center for the arts, music, culture, food, and science.

If the Legislature renews Rio Nuevo to 2035, as proposed in HB2456, it shouldn’t be allowed to continue with business as usual. Tucsonans deserve a voice in our town’s future, and in my opinion, Rio Nuevo should commit to building what we voted for in 1999.

How Can Rio Nuevo Be Improved?

1- Rio Nuevo should be truly transparent. Rio Nuevo lobbyists claim that everything is transparent and freely available on their website. Well, sort of. There are a couple of lists of projects, and under each list is a mishmash of PDF documents. It’s even hard to tell what has been built and what hasn’t. There are no comparable data across all projects.  PDF tables like this are online with no narrative.

2- How much are we paying for all of this and what are we getting in return? Beyond projections based upon trickle down economics, it is nearly impossible to determine what the city, county and the state are contributing to each of these economic development deals and what our return on investment is. For example, how much state tax and city tax revenue was contributed to build the AC Marriott pictured above? Is it built on land that is owned by the government? (Government land is not subject to property tax. Projects built on land that is leased from the government do not pay property taxes.  Property taxes pay for our schools.) How many jobs will be created? Under each project, the Rio Nuevo website should list the dollar amount contributed by Rio Nuevo and the City of Tucson, any ongoing sales tax giveaways, who owns the land, who owns the debt, who is building the project, a description of the project, and projected and actual economic and job creation benefit of the project.

3- Rio Nuevo Board meetings should be more accessible. When I asked Rio Nuevo lobbyist Jonathan Paton about accessibility of the board’s meetings. He said they were all online and open to the public, but “Nobody cares. Nobody comes.”  That doesn’t sound like Tucson; people show up when they know about something. The Rio Nuevo Board meetings are held in early afternoon on a weekday at the state office building downtown. That sets a pretty high bar for attendance. Except for what happened during executive session, the minutes from the February 2018 meeting are here. In the minutes, you can see the board discuss the hotel and office building projects, while audience members talked about community projects.

4- The people should have a voice in what is built. The Rio Nuevo Board has two vacancies. Those slots should be filled by regular citizens who live in the Rio Nuevo District and who have no financial stake in the projects– other than a desire to see our city thrive.

5- We must move beyond sales tax as an economic development driver. It’s time for public banking. As mentioned above, banking our entire state government and local development efforts on giving away sales tax to raise more sales tax is not sustainable, and giving tax breaks to multinational corporations does little to grow local businesses. Helping entrepreneurs and growing local businesses with low-cost loans through a public bank would do more to grow and diversity our economy. Rio Nuevo and the Arizona Commerce Authority are using tax giveaways to grow the economy. Why not put a portion of those taxpayer monies into a public bank to lend money at affordable rates to local businesses, entrepreneurs, and college students? Tucson has one of the highest rates of patents in the country. Why aren’t we helping these entrepreneurs? Instead of promises built on trickle down economics, the state public bank would get a modest return on its investment, small businesses could expand, and our college students wouldn’t be saddled with crushing debt. Having more money circulating in our local economy helps us all. Giving revenue away– as we are doing now– starves our economy and leaves the people with austerity, debt, crumbling roads, and a faltering school system. We deserve better.

What’s next? HB2456 will be heard in the Senate Democratic and Republican Caucuses today and will be voted on in the coming days. If you have an opinion, contact your Senators and contact the bill sponsors, Finchem and Clodfelter.