The Latest on The State Budget Negotiations

In an exclusive interview with Representative David Bradley (D District 28) The Data Port has learned the current state of progress on balancing Arizona’s budget. The first action to be taken was to correct one of the consequences of Governor Brewer’s vetoing of the education budget. She vetoed all of it, which would have left the schools with no money at all and unable to open in the fall.

According to Bradley the legislators “fixed the eduction budget” and corrected another consequence of the veto that would have made it impossible for Arizona to receive Federal stimulus funds.

Bradley reports that the Democrats are sitting at the negotiating table with the Republicans and the Governor is closeted with Republican leaders. She continues to refuse to talk to anyone in the Democratic leadership.

According to Bradley a sales tax deal is in the works under which the state sales tax would be extended to all services except medicine and food, but reduced from 5% to 3.4%. This would greatly increase income but would save the average family $275 a year.

Bradley wryly commented that progress is slow but that “We should have a state budget by August.”

The Long Republican Nose and Tucson City Elections

As the Republican-dominated legislature rushed toward adjournment it decided it didn’t like the way we elect our council members.

In Tucson each ward decides in a primary who its Democratic and Republican candidates will be. However, in the general election the vote is city-wide. A consequence of this may be that even though a ward is predominantly Republican it may find itself with a Democratic council person, or vice-versa.

The legislature decided that “first ward and then city-wide” was out. Also out were  partisan elections. All candidates for the council would run as no-party-declared candidates. No one The Data Port contacted, including Democratic and Republican Party  headquarters in Tucson, knew whether Governor Brewer had actually signed the bill. It probably won’t matter if she does, since Tucson is organized by a City Charter, and the state Supreme Court decided in 1951 that the Lege has no power to alter or control a city charter.

Meanwhile, Back at The Rialto

Rob O’Dell, writing in today’s Arizona Daily Star, reports that the City Council and developers Martin and Stiteler yet again failed to reach agreement on a plan to preserve Rialto Theater access to its Green Room and office space. The theater has been using that space rent free.

“Martin and Stiteler were rebuffed last month for a development agreement that would have given them $4 million in city land for $1.7 million worth of developer improvements downtown,” O’Dell reports.

What followed was a spitting match in which the developers threatened to collect back rent, then threatened eviction, and the city threatened to start proceedings to condemn the property.

Some of us thought this was a truly bad deal from the get-go, since many of the developments that were promised would be in the developers’ own property…the building that’s next the Rialto.

Based on quotes in today’s O’Dell article, council members Trasoff and Glassman think this is a great deal, swapping $4 million worth of property for $1.7 million worth of improvements, gifts and develpment, most of it in the developers’ own property. As a bonus gob of icing on the cake there was no guarantee that the $4 million worth of property would  ever be developed. 

Councilwoman Nina Trasoff has forwarded The Data Port a copy of the letter she sent to constituents explaining why she supports the Stiteler development plan. As you see the focus of her concerns was the Rialto Theatre.

I am posting the letter (slightly edited for length) so that readers may make their own judgements abut Trasoff’s arguments. I invite your comments, and have invited the councilwoman to join us. Trasoff writes:

“I am concerned about the future of the Rialto Theatre.

“Tuesday, we had an opportunity to support a Development Agreement [DA] that’s been in the works for 6 months.  It is important to note this was an Incentives agreement.  The Developers already own the entire Rialto block except for the Theatre itself, which is owned by the City of Tucson through the Rio Nuevo Facilities District.  This agreement was designed to get redevelopment of this block under way NOW, despite the dismal state of the economy, setting the stage for other developers to want to invest in the area without future incentives.

“The Development Agreement included several important ‘gives’ on behalf of the Rialto:

“§         The Developers would have given the Rialto Theatre a 1,000 sq. foot bay for new bathrooms;

“§         The Developers would have given the Rialto Theatre 450 sq. feet at the northeast corner of the building to provide adequate space and a great entrance for the Theatre’s own bar, downstairs.

“§         The Developers would have provided $400,000 to the Foundation for development of the bathrooms and the bar. [This was NOT a loan! No repayment was required.]

“§         The Developers would have installed an elevator that would have made the balcony of the Theatre handicap accessible for the first time. In exchange, the Foundation would have provided access so balcony patrons could go to the Developers’ bar upstairs before and after shows, with appropriate protections both to assure they’ve paid to enter the Theatre and that liquor law provisos are met.

“There was intense pressure from the Rialto board that the Developers also had to give them the 2,500 square foot Green Room/Office space.  The problem is the Developers have other plans for that building.  But, I believe that issue was taken care of with this additional concession:

“§         The Theatre would be given use of the Green Room rent-free guaranteed for 5 years. After that, a series of 5-year leases would be negotiated at market rate.  When the Developers were ready to raze the Broadway building for redevelopment, Green Room facilities would always be made available to the Theatre on the Rialto Block at market rate rent.

“There were many other elements in the DA, including incentives to move forward NOW with renovating the ground floor of the Rialto Block, bringing in a major art gallery and JANOS, in his important return to Downtown.  Several small nonprofits would have received important funding support, including WAMO, Skrappy’s youth program and the new artist in residence program called ‘Distributor’, creating an important upgrade of one of the gateways to Downtown.

“My motion to express strong support for the Development Agreement, just working to retool a couple of language points to clarify the deal, failed to gain support.  Yes, there were a few changes needed, but I believe the basic framework was in place and felt we needed to confirm it since the deadline to which we agreed was June 17^th (the next day). I believe we had a deal that would greatly benefit Downtown’s East End, the Rialto Theatre and Downtown revitalization as a whole.  The developers would also reap benefits in the form of City property earned in exchange for their risking their cash redeveloping before the economy turned around.  Instead, Council voted to delay the decision for three weeks so the parties could continue to talk and work out details.

“Bottom line: I believe this multi-faceted development agreement was in the best interest of our community as a whole: it protected and strengthened an important City asset, the Rialto Theatre; it provided a necessary ‘push’ or incentive to getting this project moving quickly, providing a boost to other local restaurants, retail, commercial business, neighborhoods; and it gave the business community the confidence that the City would be a partner in getting our economy moving again.

“I’ll keep you posted.

“Nina J. Trasoff

Councilmember - Ward VI”

Comments? Criticisms? Objections?

There is an issue with the Stiteler development that has gone unreported. I suspect that’s because, like so many economic issues, it hasn’t been understood. It surely hasn’t been understood by the City Council.

I will now perform the death-defying feat of trying to explain it. Before I do, let me remind you that a great deal of development and improvement has gone on downtown fueled by purely private investment. I.E: with little or no public support.

Mr. Private Developer, henceforth PD, sees a downtown property he thinks is ripe for re-development. He buys it, and does all the preparatory and clean-up work to start building his lofts, or studios, or restaurant space–whatever his plan is. Let’s say that he invests a million bucks in all that, in buying the property and in development preparation. Now PD goes to the bank. He needs a two million dollar loan for his project.

Mr Banker, henceforth MB, takes a look at the projections, PD’s pro-formas and so forth.

MB: See here, PD, you have a cost basis of a million dollars in this project and now you want a two million dollar loan. That means you’ll be into the project for a total of three million bucks. In order for it to cash flow you’ll have to charge rent at so-and-so many dollars a square foot.

MB: Now here’s my problem. There’s another developer in the neighborhood who has been given his land by the City. His cost basis is zero, zip, nada. He’s come to me for a loan, too. Like you he wants 2 million. In order to cash flow he could charge fewer dollars per square foot than you. But even if he charges what you plan to charge, he is a better risk because he’ll be into the project for only two million.

He’s a better risk and I have limited resources so if I make your loan at all it will have to be for a higher interest rate.

Hence it is at least arguable that giving away City property makes it harder for private developers, not easier. In the attempt to spur development the City Council has placed all other development at a disadvantage.