On Friday, Arizona Rep. Mark Finchem praised Governor Doug Ducey for signing HB2456, which extends funding for the Rio Nuevo Multipurpose Facilities District until its scheduled dissolution in 2035.
Finchem claimed in his press release that his bill “prohibits future bonding, authorizes money paid to Rio Nuevo to be used for debt service on existing bonds and contractual obligations, requires proceeds from the sale of property to be used to cover unfunded pension liabilities, and escheats any unsold property to the State Land Trust for the benefit of K12 education funding beneficiaries.
However, the bill reads:
From the taxes and charges levied or identified pursuant to section 48-4237 for use with respect to multipurpose facilities and from other monies lawfully available to the district, the district may acquire land and construct, finance, furnish, maintain, improve, operate, market and promote the use of multipurpose facilities and other structures, utilities, roads, parking areas or buildings necessary for full use of the multipurpose facilities and do all things necessary or convenient to accomplish those purposes. Public monies identified in section 48-4237, including monies distributed pursuant to section 42-5031, may only be used for the components for a multipurpose facility that are owned by the district or that are publicly owned or for the following purposes:
1. Debt service for bonds issued by the district before January 1, 2025.
2. Contractual obligations incurred by the district before June 1, 2025.
3. Fiduciary, reasonable legal and administrative expenses of the district.
4. The design and construction of the hotel and convention center located on the multipurpose facility site.
Finchem’s bill passed the Legislature with 38 votes in the House and 21 votes in the Senate. The unpopular bill created a public relations nightmare for its sponsors.
Finchem failed to mention in his press release that a bill which will essentially guts Rio Nuevo was passed in the House on Thursday. The bill, SB1382, sponsored by Sen. John Kavanagh, “Prohibits the Rio Nuevo Multipurpose Facilities District from using TPT revenues to pay off debt service for bonds or contractual obligations incurred after certain dates in 2009.”
Rep. Todd Clodfelter, who cosponsored Finchem’s HB2456, offered an amendment to SB1382 that prohibits Rio “from incurring any new debt through bonds or contractual obligations.”
Kavanagh’s bill passed in the House on 58-0-2 vote. Finchem had no choice but to reluctantly offer his support for that amendment.
Legislators were thrown off-guard and confused by the actions of both Finchem and Clodfelter in supporting Kavanagh’s bill and the amendment, which limits the district’s bonding authority and ability to enter into new contractual obligations. Some members feel that this is nothing more than a smoke screen. They say the devil is always in the details. There is speculation that the governor was going to veto Finchem’s bill, and the duo needed to find a way to save the district.
It is unclear if Rio Nuevo has plans to borrow monies to fund projects prior to 2025. We do know that Rio’s life has been extended, and the Board is free to continue cutting crony deals. The only thing that is unclear as yet, is who is held responsible should Caterpillar default on lease payments to the district. The Caterpillar lease payments are being used to cover Rio’s costs.
On Friday, Rio’s lobbyist, Jonathan Paton, who has been paid over $200,000 for his services to the district, tweeted out congrats to Ducey and Finchem. He failed also to acknowledge Clodfelter’s amendment. Lea Marquez, candidate for Congress and sister of Rio Board member, Edmund Marquez, retweeted her congrats:
“This extension of Rio Nuevo is a rescue mission for the City of Tucson, which some call ‘the Detroit of the Desert,’” said Representative Finchem. “It’s not good enough to stand by and watch the city decline into a state of urban blight. As evidenced by the actions of the City of Tucson from 1999-2009, a tax increment financing district like Rio Nuevo is a state government tool unsuited for municipal control.”
However, in an email to Rep. Sally Gonzales, Rio Nuevo Board chair Fletcher McCusker admitted that the district does not have money to address blighted west side areas or honor promises made to voters.
Senate Fact Sheet for HB2456 – Provisions
1. Extends the state’s GF contribution to the District until 2035.
2. Extends the allowable period for the District to use the state’s GF contribution for:
a) debt service for bonds issued by the District incurred before 2025, rather than 2009;
b) contractual obligations incurred by the District incurred before 2025, rather than 2009.
3. Requires the Board, on the termination of the District, to dispose of real property and improvements as follows:
a) If the District leases property to a single lessee, the lessee has the first right to acquire title to the property at appraised value. The Board shall transmit all proceeds from the transaction to the State Treasurer for deposit in the Public Safety Personnel Retirement Fund for the purpose of paying the unfunded accrued liability.
b) If the District leases property to multiple lessees, each lessee has the right to offer a bid to purchase the entire property at fair market value, and the Board shall accept the bid that will transfer and terminate the District’s title to the property.
c) If neither of the above options occurs within six months after the Board offers it for disposal, but not later than the termination of the District, whichever occurs first, the property escheats to the State Land Trust for the benefit of the Permanent State School Fund.
4. Requires the Board to present to the Joint Legislative Committee on Capital Review each project for the construction or reconstruction of any facility, structure, infrastructure or other improvement to real property in an amount exceeding $500,000.
The provisions that “transmit all proceeds from the transaction to the State Treasurer for deposit in the Public Safety Personnel Retirement (PSPRS) Fund,” and escheats assets to the “State Land Trust for the benefit of the Permanent State School Fund,” were added to make the bill palatable. However, the properties will most likely be purchased for pennies on the dollar by multiple insider investors. Critics note that the provisions only apply to limited scenarios. It is clear that the bill’s sponsors never intended to support PSPRS, or they would have made that provision apply to all scenarios not just one that will typically not apply.
Lawmakers say that no one should accept Finchem’s bill and Clodfelter’s amendment at face value. They warn taxpayers that the sausage-making is ugly and no one ever really knows what goes into it. There is still a chance that the district will be given new life in the budget or through other government schemes such as the new Opportunity Zones. One Capitol observer said the machinations reminded them of a quote by Governor Lepetomane in Blazing Saddles, “Holy underwear! We have to protect our phoney baloney jobs here, gentlemen! We must do something about this immediately! Immediately! Harrumph! Harrumph!”