Gov. Katie Hobbs promised to veto any effort by the Republican-led state legislature to eliminate Tucson’s Rio Nuevo, a tax increment financing district working to revitalize the downtown.
Most Republican lawmakers have come to view Rio Nuevo as a money pit or crony capitalism, depending who you ask, since the legislature seized control in 2012. Residents critical of the district argue that its method of picking winners and losers, and subsidizing corporations over local businesses, has proved to be unfair to residents and more of a gamble than a stable pathway for success.
Sales tax dollars make up Rio Nuevo’s main source of revenue. With money tight under the Hobbs administration, Republican lawmakers are moving through their latest budget proposal to resume the long-suspended collections of the millions from taxes inside its district. The state anticipates resumed collections would yield $19 million to the state.
However, Rio Nuevo board chairman Fletcher McCusker offered an analysis that Rio Nuevo’s financial obligations would mean the legislature would only collect about $2 million annually.
McCusker said in this week’s Rio Nuevo board meeting that the legislature’s resolve represented a “huge misunderstanding” of how Rio Nuevo operates.
“I am convinced that this will all resolve because we’re just too important to the region, we actually generate a huge amount of sales leverage and sales tax proper,” said McCusker.
As of the end of March, Rio Nuevo reported total cash on hand at $5.5 million, with a projected monthly cash flow for the next year after debt and overhead amounting to $2.8 million. The district’s snapshot of estimated available cash for projects within one year amounted to $8.4 million.
On Friday, Hobbs released a response to the Republican’s budget, calling it “reckless and unbalanced.” Hobbs said the elimination of Rio Nuevo would kill jobs and drive away businesses, and put the state on the hook for $80 million in outstanding debt obligations by the district.
Tucson voters approved Rio Nuevo in 1999.
In the entirety of its history, from Tucson’s reign of control to the legislature’s, Rio Nuevo has a history of incurring new debt prior to paying off or addressing its hundreds of millions either in existing debts or disappeared through waste, fraud, or abuse.
Senate Majority Leader John Kavanaugh (R-LD03) also said the state’s tight budget has made it necessary to cut Rio Nuevo. Kavanaugh pointed to the rest of the budget cuts, which included all state agencies except public safety.
“The question is, who should fund it?” asked Kavanaugh in a statement. “And you know, the people all over the state funded a development district in Tucson, and did it for a long time, but now we need the money, so we’ve decided to terminate that.”
Rio Nuevo’s website promotes a turnout of $2 billion of economic impact over the last five years. Current projects include the Julia Drew Lofts, Leo Kent Hotel, Sunshine Mile, and Tucson Convention Center Hotel Doubletree by Hilton.
State Rep. Alma Hernandez (D-LD20) said it was “non-negotiable” to have Rio Nuevo touched, echoing Hobbs spokesman Christian Slater’s argument that the state’s cancellation of Rio Nuevo would mean the state would be liable for the district’s debt.
Rio Nuevo has approximately $80 million in debts and obligations. Commitments to projects amount to about $17 million. The district pays about $9 million toward debts annually.
RIO NUEVO SHOULD NOT BE TOUCHED. PERIOD. NON-NEGOTIABLE. https://t.co/L5yGtujO4j
— (((Rep.Alma Hernandez))) (@almaforarizona) May 2, 2026
Other Democrats argue that Republicans ought to eliminate tax incentives for data centers prior to targeting agencies and Rio Nuevo for cuts.
State Budget Battle (Part Three): Arizona House Democrats push back against this “data centers first, Arizona last” budget. Instead of cutting tax incentives for data centers, Arizona Republicans chose to cut funding for SNAP, AHCCCS, and Tucson developer Rio Nuevo. pic.twitter.com/WVgOCzfLrK
— Arizona House Democrats (@AZHouseDems) May 2, 2026
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