Rio Nuevo wants to buy out the cityโs stake in an agreement to develop 14 acres on the west side of downtown.
Rio Nuevo, a special taxing district whose purpose is to develop downtown Tucson, proposes to pay the city about $1.2 million.
Thatโs the amount the city would receive if it decided developer Gadsden Co. has defaulted on a performance bond tied to the agreement.
Gadsden has been trying to develop the property since 2008, when the company agreed to buy and develop the land in phases. But many of its plans fell through in the recession, and last year the company lost out on low-income housing tax credits it said it needed to develop housing on the site. The city gave the developer several extensions.
Gadsden has done a lot in difficult economic times, Rio Nuevo board chairman Fletcher McCusker said.
Rio Nuevo is also investing $2.2 million in Gadsdenโs expansion of the Mercado San Agustรญn, a Mexican-style plaza with a central courtyard, shops and restaurants in the Menlo Park neighborhood.
The company has a lender and a strong tenant demand for retail space, โwhich weโre very interested in supporting,โ McCusker said.
โYes, weโre trying to move this project along,โ McCusker told the board Tuesday. โAre we trying to bail out friends of ours? No, no, emphatically no.โ
If the city agrees to Rio Nuevoโs proposal, Rio Nuevo would take ownership of the property and sign a new development agreement with the developer. Under the new agreement, Gadsden would be obligated โunforgivinglyโ to meet deadlines or face financial penalties or foreclosure, McCusker said.
Rio Nuevo would lease the property to Gadsden and receive sales tax revenue from the new retail stores.
The Tucson City Council, Rio Nuevo board, their attorneys and the bond underwriters all would have to agree to the proposal for Rio Nuevo to acquire the cityโs position in the development agreement.
McCusker said the proposal would move forward a development that has repeatedly stalled.
โIf we donโt engage, the chances of that property remaining dormant last long beyond the lifetime of this board,โ he said at a board meeting this week.
If the city were to call the bonds, the city would get its money, but the developer likely would be put out of business, McCusker said.
Right now โthe city is in an untenable position,โ McCusker said.
Councilwoman Regina Romero, a strong proponent of developing downtownโs west side, said itโs a win if Rio Nuevo partners in the development. โI donโt see where we could lose,โ she said Thursday.
No one wins when thereโs no development on the site, she said, so it would be a bad idea for the city to call the bonds. Rio Nuevo can help bring the housing and commercial projects to reality, and can build claw-backs into its agreement with Gadsden in case things go wrong.
Last summer, Mayor Jonathan Rothschild told the Star he wanted the city to take action, either by calling the bonds or coming up with a different solution. On Thursday, he said he wants to see the details of the Rio Nuevo proposal โ including whether the city would be fully compensated โ before deciding whether this is the right approach.
