On March 5, 2019, a majority of the Pima County Board of Supervisors voted to mortgage taxpayers’ property to fund a speculative deal with Rocking K Development Co. and Diamond Ventures, Inc.
As part of the deal, Pima County will issue up to $16,000,000 of tax-exempt certificates of participation (COPs) to cover the cost of the “Valencia Road extension, the spine infrastructure and the on-site infrastructure” of the controversial Diamond Ventures’ (DVI) project.
While Pima County residents beg for road repairs in their long-neglected neighborhoods, Pima County leadership approved the resolution that funds brand new roads for Rocking K home buyers.
The deal has raised eyebrows since it was first proposed years ago. From losing development partners, to budgeting issues, the project has had a rough road. And while Pima County residents are struggling to get around on the over 80 percent failing roads, the speculative deal is not sitting well with taxpayers or their representative on the Board, Supervisor Ally Miller.
According to a letter to the supervisors, David Goldstein, president of DVI, outlined the travails. He advised the supervisors that “two of the five national homebuilders backed out of their purchase contracts.” By August 2018, “The combination of the increased costs and loss of two builders meant the opening of the project was no longer viable.” According to the Goldstein letter to Pima County, the project is 10 to 15% higher than the original estimate of $16 million.
Goldstein advised the supervisors that the company “spent the next several months working to value engineer the project in order to make an opening feasible. Also, during that time, DVI was able to secure “interest” from an “active adult” developer to acquire 500 lots near the second entrance to the community. This combination of changes has, once again, put the opening of the project back on track, subject to final due diligence by our homebuilder partners.”
Supervisor Ally Miller was the only leader to reject the scheme. She shared her concerns before casting her lone no vote. “I am really concerned about using the credit of the county to improve the roads that any other developer would have to do themselves. This increased risk due to the developers backing out of the project is cause for great concern in my opinion. I know that they need the roads, but the taxpayers of this community, whose buildings are being mortgaged are tired of being put last in line yet again. It is always someone or something else that is the higher priority than the taxpayers, who have waited 20, 30, even 40 years for some maintenance on their roads.”
“In addition,” continued Miller, “I am very concerned about selling these bonds and turning the monies over to Diamond Ventures and allowing them to contract outside the county procurement process to ensure the roads are being built by the most competitive contractor to meet county standards.”
Memo from Pima County Administrator Chuck Huckelberry dated March 5, 2019 reads in part:
“The COPs are to be repaid from development fees generated by the development of the property, with DVI obligated to cover shortfalls, if any. The agreement provided that, if bonds are not issued within nine months, reauthorization of the issuance of bonds may be required. As explained in the attached letter from David Goldstein, President of Diamond Ventures, Inc., the project has been delayed and DVI is requesting the County to again take steps to authorize the future issuance of debt for this purpose.
The resolution for the COPs authorizes staff to sell additional debt not to exceed $16,000,000. The proceeds of the debt will be available to fund the Valencia Road Extension as needed. The debt will be repaid over a 15-year period from development fees from the DVI project.
Letter by David Goldstein, President Diamond Ventures, dated February 15, 2019:
On May 15, 2018, the Pima County Board of Supervisors approved that certain Second Amended and Restated Rocking K Development Agreement (the “Agreement”) by and between Pima County (the “County”), Rocking K Development Co. and Diamond Ventures, Inc. (collectively, “DVI”). The Agreement requires DVI to construct certain off-site roadway improvements, including the extension of Valencia Road approximately 2.6 miles east from Houghton Road to Old Spanish Trail and related bridge and bank-protection improvements (the “Valencia Road Extension”). The Agreement also provides for the County issuance of up to $16,000,000 of tax-exempt certificates of participation (the “Bonds”) to cover the cost of the Valencia Road Extension. The Bonds are to be repaid from development fees generated by the development of the property, with DVI obligated to cover shortfalls, if any. Finally, recital H of the Agreement states that if Bonds were not issued within nine months (i.e., February 15, 2019), reauthorization of the Bonds may be required.
At the time of entering into the Agreement, DVI was in escrow with five national homebuilders for the sale of approximately 811 lots, which was designed to be the first phase of the project. DVI spent several months working with the builders and finalizing the plans for Valencia Road, the spine infrastructure and the on-site infrastructure, all of which were bid out in August of 2018. Unfortunately, Valencia Road and the various other project bids came back 10-15% over budget. In addition, two of the five national homebuilders backed out of their purchase contracts. The combination of the increased costs and loss of two builders meant the opening of the project was no longer viable.
spent the next several months working to value engineer the project in order to make an opening feasible. Also, during that time, DVI was able to secure interest from an “active adult” developer to acquire 500 lots near the second entrance to the community. This combination of changes has, once again, put the opening of the project back on track, subject to final due diligence by our homebuilder partners. DVI is proceeding as expeditiously as possible to move forward, with the goal of breaking ground this summer.
During this temporary hiatus, DVI has continued to work with the Vail School District (whose use of the Valencia Road Extension is critical to their new high school). We also have found an operator for the vacant convenience store, bringing much needed goods to the area. Finally, we have brought in Heirloom Farmers Markets to professionally manage the farmers market, a major activity for the Rincon Valley area residents.
The purpose of this letter is to request Pima County take whatever steps it deems appropriate to authorize the future issuance of the Bonds to allow DVI time to close with the homebuilders and commence construction of the project as described above. Please let us know if you have any question or need any additional information in connection with this request. We appreciate the County’s continuing cooperation in bringing this important regional project to fruition.