By Alan Willenbrock
Recently there has been much discussion of a ‘global settlement’ between Rio Nuevo and the City of Tucson regarding property disputes. There has also been talk about $6 million of unspent proceeds from the sale of a 2008 bond issue. What are we to make of all this – here is a quick background and roadmap to evaluate some of this.
I desperately want to see tangible progress from Rio Nuevo and the City and I have been on record supporting Rio Nuevo funds to support renovation of the TCC. Rio Nuevo is sitting on tons of cash that could be used for tangible progress.
I was appointed to the Rio Nuevo Board in 2010 by Governor Brewer and was elected Treasurer. I quickly discovered about $50 million of assets that Rio Nuevo paid for, but others claimed ownership of these assets. What would you do if you paid for a new car but it is in someone else’s driveway?
Just so you understand some of these assets:
The parking lots near Church and Stone: The Performance Audit identified 3 parking lots that clearly belong to Rio Nuevo, yet the City has retained ownership and has been collecting parking revenue.
Depot Parking Garage: This is the underground parking garage near the MLK Apartment Building. Rio Nuevo paid over $14 million of this project which represents over 90% of the total project cost, yet the City claims ownership. The garage is likely to lose a significant amount of money each year – so what is this worth now? In a private market transaction, it would be worth substantially less that the approximately $16 million cost of construction. How would you settle this dispute? Would you ask for return of the $14 million investment? Or something less? The point I want to make is that there is a need, and an ability, to settle this – there is a range of values that should be acceptable to all sides. Most importantly, the garage is open and is a vital infrastructure supporting the amazing revitalization of the eastern part of Downtown.
City of Tucson loan to Rio Nuevo: The City lent money to Rio Nuevo to allow it to begin operating. This was done in anticipation that the TIF revenue would be flowing soon and would be used to pay it back, with interest. Unfortunately the City used a rate of interest that was much higher than that called for in the promissory note. The Performance Audit indicated that Rio Nuevo has paid at least $400,000 too much interest. My calculations suggest the figure is north of $1.5 million.
$30 million accounting ‘adjustment’: The ‘new’ Rio Nuevo board discovered that $30 million of capital assets had been removed from their balance sheet and ‘contributed/donated’ to other entities or were simply written off. (see attached memo). I believe some of these transactions are appropriate. However, it was curious to me that there was no discussion with the Rio Nuevo board about these transactions. Many of these capital assets remain among some of the disputed properties.
Unspent proceeds from the 2008 bond issue. Recent reports suggest that approximately $6 million remains unspent from this issue. The legal documents clearly state that any amounts that are not spent by November 2011, WILL be used to pay debt service. There is some suggestion that these funds might be used differently. I completely understand the desire to use these funds to renovate or develop projects. I just ask that the legal documents be followed. The strongly encourage Rio Nuevo to seek approval of the Bond Trustee.
The time to settle these issues is now. All sides have to work through all the disputed properties which include:
Depot Garage
Parking lots at behind Church and Stone
Mission Site, Origins Park
Mission Gardens
Origins Infrastructure
Mercado Avenue
Cushing Street Bridge
Arena site
UofA Science Center
Promissory note
There is a clear valuation range within which this can be solved and this needs to be done now. It should be noted that under current legislation, all these assets eventually revert to the City of Tucson. Ultimately, someone will attempt to determine who gave up how much and who took too much. It could be the City of Tucson taxpayers who will look closely. It could be the Legislature. I implore all sides to offer good faith offers to settle. We owe it to our city.
These represent the views of Alan Willenbrock as a private citizen. Mr. Willenbrock is the former Treasurer of the ‘new’ Rio Nuevo Board.