Rio Nuevo Board claims exemption from Gift Clause

In October 2012, Judge Jan Kearny ruled in favor of the Rio Nuevo District on its Motion to Dismiss a lawsuit brought by taxpayer advocate John Kromko. The Kromko lawsuit had argued that Rio Nuevo is subject to Arizona’s gift clause.

The court ruled that Rio Nuevo is exempt from the gift clause statute, paving the way for Rio Nuevo to resolve the stalled development of the Thrifty Block, purchased by Don Bourne.

The motion was initiated by District Chair Fletcher McCusker after he identified the Kromko suit as one the most significant barriers to Rio Nuevo “progress.”

In 2014, the Arizona Legislature passed SB 1351. The bill, pushed by Rio Nuevo Board’s lobbyist, Jonathan Paton, lifted many of the spending specific restrictions Paton himself and his former colleagues put in place in 2009, after the District had squandered $265 million dollars intended for downtown development.

The bill lifted more barriers to Rio Nuevo progress that had been in the planning stages for years by McCusker and Pima County administrator Chuck Huckelberry after Huckelberry was left holding the bag when the City of Tucson declined to lease space in Huckelberry’s new multi-million dollar courthouse.

According to one expert, it appears back in the late 1980’s Phoenix wanted the stadium district, and those statues passed with them being exempt from the gift clause. In 2014, the Legislature did nothing to change that.

So, at its October 17, 2014 meeting, the Rio Nuevo District Board voted to contribute $75,000 to the January 8th Memorial project, to be housed in the County’s old courthouse complex. The vote was conditioned on the Board obtaining third-party confirmation that the District is exempt from the Gift Clause of the Arizona Constitution.

On February 24, 2015, the Board voted to remove the Gift Clause qualification.

The move stunned many. According to transcripts of the February 24 meeting, Rio Nuevo attorney Mark Collins advised the Board: “It remains my opinion that while you were subject to several limitations on how you expend money, the Arizona Gift Clause is not one of them.”

Collins claimed that he asked the Goldwater Institute to comment on his “analysis that this District is not subject to the gift clause,” but they declined to comment. The Goldwater Institute confirmed to the ADI that they did decline to offer an opinion.

Collins then advised the Board that he had contacted the Arizona Attorney General’s office and it “responded by saying the District doesn’t qualify under the statutes to be able to ask for an Attorney General’s opinion. I can take issue with that, but they are the ones that make that decision. They have said that if a legislator were to make that inquiry, then they could render an opinion.”

Of course, Rio Nuevo did not ask for any assistance from a legislator to secure an opinion.

The transcript reads:

CHAIRMAN McCUSKER: So it seems to me it would require a whole new action, right, if we wanted to pursue this investment?

MR. COLLINS: Correct. And it was third-party confirmation, as I read the motion, reread the motion. The Attorney General was the one specifically mentioned, told you what they said, went ahead and did Goldwater as well, and they declined. So it would require, yes.

CHAIRMAN McCUSKER: All right. What’s your pleasure?

MR. COLLINS: Generally speaking, this Board, the District, is authorized to spend money on two things. The primary component, which is the TCC. You are also authorized to expend money on secondary components. The secondary components are structures or property that is within the District and that this Board determines are necessary or beneficial to the primary component and that they are on site.”

“You can spend money on property or structures in the District if you make the determination that they are beneficial to the primary component. The closer to the TCC the more beneficial, one would say. So you can spend money that way. You have two sources of income principally. The State’s funds, the State TIF revenues, you have to spend on publicly-owned property; others you aren’t so limited. So the presentation that the January 8th Memorial did back when the Board authorized 75,000 subject to third-party confirmation about the gift clause, what they are building is on public property. I believe it’s on County property. It’s properties maintained by the City of Tucson. So that’s where you are.”

“After having said that, let me add one more thing. Since the January 8 Memorial presented to this Board, I’ve had communications with them, and the process that they are following is a procurement process. They are seeking to get ideas and architects to design the memorial, and they are going about it just like you folks did with the arena parcel. So to the extent they are spending public money, they are doing it through a procurement process, much like you folks are used to.”

CHAIRMAN McCUSKER: Stay there for a minute vis-a-vis the motion. So the motion we made was to approve this funding subject to the opinion of the AG and consultation with Goldwater. We’ve really not received either.


CHAIRMAN McCUSKER: It would require a whole new action, right, if we wanted to pursue this investment?

MR. COLLINS: Correct. And it was third-party confirmation, as I read the motion, reread the motion. The Attorney General was the one specifically mentioned, told you what they said, went ahead and did Goldwater as well, and they declined. So it would require, yes.

CHAIRMAN McCUSKER: All right. What’s your pleasure?

MR. SHEAFE: Mr. Chairman, given that nobody wants to tell us for sure, and our own counsel is telling us we are not in violation of the gift clause and we already made a decision to make that investment, it seems to me only appropriate that a motion be put forth, which I am currently doing, that the 75,000 be authorized without the restriction of the gift clause review.

MR. IRVIN: I’ll second.

CHAIRMAN McCUSKER: Is that clear?


CHAIRMAN McCUSKER: Any questions, comments? Sir.

MR. COLLINS: My only thought would be, during the questions and comments, I don’t know whether you want to authorize that immediately, whether you want appropriate documentation or what. But that motion gives me the direction that I need short of that.

MR. IRVIN: I might add, I’m pretty sure that they’ve already started spending that money.

MR. COLLINS: They have.

MR. IRVIN: They’re probably been waiting on us to clear up. So I didn’t make the motion, but I would hope we didn’t have that those kinds of timing restrictions on it.

CHAIRMAN McCUSKER: Do you see the need for an agreement between us and them as to what they intend to do with these funds?

MR. COLLINS: Michelle, you’ve received invoices, yes?


MR. COLLINS: Oh, you haven’t?


CHAIRMAN McCUSKER: My suggestion would be that there be something very simple that requires January 8 Memorial to submit invoices and the District then to pay them up to the $75,000. Given their use of the money, it’s in the procurement process, I think that give us some protection about public funds. So if your motion is to instruct me to —

MR. SHEAFE: The motion is so amended.


CHAIRMAN McCUSKER: That would need to be seconded.


CHAIRMAN McCUSKER: The amendment would be to authorize you to draft an agreement as to how this money will be used and invoiced?



MR. HILL: Mr. Chairman, in discussion on other areas, I would hope, once again, we would confine ourselves to brick and mortar; that we’re not going to be funding some boondoggle party or something that’s not brick and mortar.

MR. COLLINS: Mr. Hill, the presentation that the January 8 Memorial made some time ago is that this would be seed money to get the architect on Board to do the brick and mortar. It’s not for a party. But it is — the RFP or RFQ — forgive me, I don’t recall which it was — went out nationally for firms to do the design, there were some limits on travel expenses. And as I recall, and I may be off by a few bucks, but it’s, like, five — or 5000, $7500 total travel expenses for the various people. And then the people that are winnowed by the evaluation committee, they come back again, there may be another 5000. It’s that kind of expense, Mr. Hill, that they are going to be using.

MR. HILL: Okay.

CHAIRMAN McCUSKER: Michelle, call the roll.

MS. BETTINI: Jeff Hill.


MS. BETTINI: Chris Sheafe.


MS. BETTINI: Mark Irvin.


MS. BETTINI: Jannie Cox.

MS. COX: Yes.

MS. BETTINI: Cody Ritchie.


MS. BETTINI: Fletcher McCusker.


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