Meet Me Downtown

With the polls closing less than 48 hours from now, here are seventeen suggestions—in no particular order—I have for the Tucson City Council, with respect to Downtown Tucson:

1. Do an audit of Rio Nuevo.  Don’t wait for the State to do it.  Get all the skeletons out of the closet. 

2. Stop tolerating the insider favoritism that’s run rampant.

3. Put more funding into the Façade Program.  A relatively small investment in fixing up old buildings makes a big difference in downtown’s image and in facilitating vibrant downtown activity.  Façade improvements provide a big bang for the buck.  Allocate some TIF funding to the Façade Program.  The lawyers have said it’s okay, I know they have!

4. Support the existing businesses that have toughed it out through the hard times.  A well-known community leader said to me, when the Downtown Tucson Partnership was forming in 2007, that he didn’t want anyone involved in Downtown up until that time, including businesses, to be part of the new regime.  That is so wrong-headed on so many levels.  Existing businesses should not be displaced to make room for new businesses if at all possible (especially not seven of them at a time!).

5. Get out of the entertainment business.  Stop messing with the Rialto Theatre and running the Fox Theatre.  The Rialto is doing just fine, and stop pretending that everything is headed in the right direction at the Fox.  Renegotiate the Fox’s loan and insist the Fox Theatre Foundation board add some new members dedicated to fundraising, and encourage the board to operate independently.  Let the Foundation hire its own director and other staff.

6. Discourage the further demolition of historically significant buildings and older buildings with character.  Encourage new construction on empty lots and surface parking.

7. Focus energy and resources on saving the Gem Shows.  Suck up to the Gem organizations as much as needed, although the time for sucking up without action has passed. Which leads right into . . .

8. Build a more affordable, more realistically-scaled convention hotel that won’t put the City’s finances at risk. 

9. Hit the reset button on a master plan.  What can still be done with the remaining 15 years of TIF? What projects do Tucson citizens consider important? What projects from the original master plan are critical and must be given top priority, and which ones should only be done if there is an unexpected windfall?  Communicate this plan to the public.  Don’t spend additional money on the planning process, just engage the public, use the available information, and show leadership.  Tell us why you’ve decided to establish the priorities you have.

10. Support the development of some student housing—especially along Broadway (on empty lots!).  This will create demand for downtown businesses.  Perhaps the UA will elect to locate some academic programs downtown as well, once the Streetcar is operational.  Everyone says they are in favor of more downtown housing, and this is the most ready source of demand for residential space—college students.  This would also take pressure off the neighborhoods experiencing mini-dorm development.

11. Keep pushing forward on the Modern Streetcar.

12. Wash the sidewalks.  The BID maintenance crews are doing a good job of picking up litter and sweeping, but the sidewalks need to be power-washed too—badly. An entertainment district needs good security and attentive maintenance.

13. Stop blaming the Legislature for problems that we’ve created for ourselves here.

14. Stop acting out of desperation.

15. Get out of the real estate business, but have a fair and open process for disposing of city-owned property.  This is where there is great risk of approving insider deals.  Don’t give land away.  Downtown development requires that the banks see some comps.

16. Take positive action to implement prior commitments.  The Warehouse Arts District is one of those commitments.

17. Think and act “Urban”!  Be guided by urban principles, not suburban principles.

The Rialto Theatre Foundation and Rialto Block Project LLC (Don Martin and Scott Stiteler) have reached an agreement that will allow the Foundation to continue to occupy the so-called “Green Room” and office building at 211-215 E. Broadway Blvd., as well as the storefront bay at 316 E. Congress St., adjacent to the theatre lobby, until September 1, 2009. 

A release dated August 16 quotes Scott Stiteler, expressing hope that the two parties can come to an agreement “regarding a permanent resolution of matters related to the Theatre’s needs for space.”

The announcement gives the Rialto Theatre Foundation two weeks beyond an August 18 deadline to use the properties while it continues to negotiate for a longer term lease.  A judge had given the Foundation until August 18 at a July hearing that was held to determine if Stiteler and Martin could evict the Foundation from the spaces then.

While the spaces in question are owned by Rialto Block Project LLC, the theatre itself is owned by the Rio Nuevo Multipurpose Facilities District, whose board of directors has been involved in the negotiations.   The Rialto Theatre Foundation operates the theatre on behalf of Rio Nuevo. 

The Foundation has used the spaces for free but has expressed willingness to pay rent.   The two parties have not yet agreed on a lease term, and there does not seem to be a shared vision of the long-term space needs of the theatre or the relationship between the theatre and the rest of the block.  Nor does there seem to be a shared vision of the relationship between the Foundation and its landlord, the City of Tucson/Rio Nuevo, a circumstance that is very puzzling.

Rio Nuevo and the City of Tucson, for which Rio Nuevo is a proxy, have an inherent interest in protecting their asset, one of the few completed projects in Rio Nuevo.  Rio Nuevo and the City also have an interest in fostering private-sector investment and development in Downtown, which means they don’t want to chase off Stiteler and Martin.   This apparent dilemma need not play out as if Rio Nuevo had to choose sides.  

Nonetheless, the theatre itself is a unique National Register asset, and Rio Nuevo has a compelling rational interest in seeing this asset protected and enhanced.  From an outside perspective, however, there appears to be a reluctance to demonstrate leadership in protecting one of Rio Nuevo’s four completed projects.

As negotiations continue for the lease of the green room on Broadway and two small storefront bays on Congress Street, the Rialto Theatre has been recognized by Pollstar, a concert industry trade publication, as having sold more tickets than all but 41 nightclubs the world over in 2009.

Pollstar ranks the Top 100 Worldwide Club Venues by tickets sold, and for the first six months of 2009, Tucson’s Rialto Theatre is in 42nd place, with 36,828 tickets sold.  That’s more tickets than the Vic Theatre or Park West in Chicago sold in the same time period, more than the Palladium Ballroom in Dallas, Las Vegas’ House of Blues, Portland’s Aladdin Theater, and the McMenamins Crystal Ballroom of Portland.

The Rialto moved up from a prior ranking of 58.  The rankings were published in the July 20 issue of Pollstar.   Number one on the Pollstar ranking is the 9:30 Club of Washington D.C., which sold 135,386 tickets.  A large gap separates #1 from #2, as the second-ranked club, Brussels, Belgium’s Ancienne Belgique, sold 98,215 billets. The club ranked #100, Birmingham, UK’s 02 Academy Birmingham, sold 15,177.

Rialto Foundation Executive Director Doug Biggers credits GM and booker Curtis McCrary for bringing in quality artists that have attracted strong ticket sales.  “(McCrary) continues to amaze me,” said Biggers.  And, he offers a shout-out to the Rialto’s strong sound quality and its “fabulous audiences”. 

The Rialto is managed by the non-profit Rialto Theatre Foundation, operating in a 1919 theatre building that is on the National Register of Historic Places.   The theatre building is owned by the Rio Nuevo Multipurpose Facilities District.

Tuesday’s council discussion about the fate of privately-owned spaces the Rialto Theatre needs to operate was strange, to say the least.  It involved an executive session, two failed motions, anecdotes about threats and intimidation, and two failed requests by Council Member Rodney Glassman to learn if the negotiations at the table were acceptable to the other two parties involved–the Rialto Foundation and the Downtown Tucson Development Company (DTDC), both of which had attorneys present.

The council–minus Mayor Bob Walkup, and with Vice Mayor Regina Romero chairing the meeting in Walkup’s absence–finally voted 5-1 (Glassman against) in favor of a three-month lease for the theatre to use the buildings on Broadway for a greeen room and storage, and two bays on Congress next to its entrance.  The motion also supported an appraisal of the properties, to be paid for by the Foundation, that may be used later for a purchase offer or condemnation.  Glassman and Council Member Trasoff both expressed concern that such a short lease would not prevent the potential eviction of the theatre.

An earlier motion had failed partly due to Council Member Shirley Scott’s opposition to the provision that the city share the cost of the rent with the foundation and bear the full $7,500 cost of the appraisal.

Council Member Karin Uhlich and others expressed a desire to see the city’s action “de-escalate” rather than escalate the growing tensions between the foundation and developers Don Martin and Scott Stiteler.   The Foundation has asked the city to condemn the properties, while the developers have threatened the Foundation with eviction as soon as next Monday.

The discussion began with a motion from Council Member Steve Leal asking staff to pursue condemnation actions and the council going into Executive Session to hear legal advice on its condemnation options.

Glassman had asked if the council could ask the attorneys for the Foundation and DTDC if the deal points being discussed were amenable to them, but Romero and city attorney Mike Rankin indicated their position that it was inappropriate.

After the final motion’s approval, Council Member Trasoff stated that she had been threatened that if she didn’t vote a certain way on this issue, there would be an independent campaign mounted against her to fight her re-election bid.   Trasoff said she would not be intimidated.

The Tucson City Council is set to adopt a new Downtown Development Management Plan, establishing three teams with interlocking spheres of responsibility:  Planning, to be headed by Downtown Tucson Partnership CEO Glenn Lyons;  Operations, to be headed by the City’s General Services Department Director Ron Lewis;  and Financial, to be headed by the City’s Interim Finance Director Silvia Amparano.

According to a memo from city manager Mike Letcher to the Mayor and Council in advance of Tuesday’s Study Session, the city manager “will continue to manage downtown development”, but as the Mayor and Council “make decisions to proceed with defined projects and processes, the implementation of direction from Mayor and Council will move to a team approach.” 

Each of the three teams will be populated by various City staff from a variety of departments, and two project coordinators—Jesse Sanders and Hector Martinez—“will coordinate communications between team members and will be responsible for publishing activities and reports on a regular basis”. 

The City Council will consider the recommendation at 2:00pm at Tuesday’s Study Session, and based on discussion and feedback, Letcher will return to the Council in August with a proposed contract with the Downtown Tucson Partnership. 

Such reorganizations are cyclical in nature, as the consolidated approach succeeds the decentralized approach and vice versa.  Of course, sometimes consolidation can be disguised as decentralization, but that is a topic for another time. 

Under city manager Luis Gutierrez, it was thought that Rio Nuevo needed to be a separate department of city government, and so the initial Rio Nuevo Director, John Jones and Project Manager John Updike, functioned as an autonomous mini-department of the City.  When city manager Jim Keene appointed Karen Thoreson to be assistant city manager in charge of economic development, the TCC, and Rio Nuevo, the Rio Nuevo office grew in budget and staff, and established its own physical space.  To support the core Rio Nuevo staff, Thoreson put together a larger “team” of City staff from other departments, such as Parks and Recreation, Urban Planning and Design, and Transportation.   As Rio Nuevo’s “roommate” at the time, when I was with the Tucson Downtown Alliance, I attended the Rio Nuevo team meetings, and along with their PR consultant, was the only non-City staffer there.

There seemed to be a buzz of interest inside city government at the time, and an excitement of those from other departments who were invited to be part of this ambitious effort. 

The team approach was not what undermined the effort, but some very poor decisions of a strategic nature at the top.  This was the era of the $100 million UA Science Center that morphed into the $350 million Rainbow Bridge.

Mike Hein succeeded Jim Keene, and Hein saw the Rio Nuevo office, with its comfortable green digs above Enoteca Pizzeria, as a symbol of an effort that had become as bloated as it was underperforming.  He disbanded the physical office, reduced the expenditure on personnel, and sent Greg Shelko and his two remaining staff to the TCC.  “Rio Nuevo” became “Downtown Development” in an effort to distance it from its already tarnished brand. 

In the process of taking the Rio Nuevo office down a peg or two, the team spirit was broken down, and the effort became paradoxically fragmented at the same time that decision-making was consolidated in the city manager’s office.  In particular, the Dept. of Transportation seemed to be removed from the process, which was awkward and unfortunate, given the many important transportation and infrastructure projects that were planned as foundations for downtown development. 

So now that that era has run its course, we are back to a team approach. 

Decentralization has its advantages, but also some potential pitfalls, as responsibility is diffused. 

Ultimately the power continues to reside with the Mayor and Council and the city manager, and so I hope that those parties do not become complacent by relying too much on their teams.  The Council is still responsible for providing the policy direction for the teams and for maintaining oversight of development progress and financial management. 

The Council discussion can be viewed, as always, live and taped later in the week, on City Channel 12, and on-line, at
http://www.tucson12.tv/programs/MayorandCouncil/index.php.

Desperation. It’s not the proper mindset from which to make sound public policy, yet desperation seems to be the dynamic that is leading the Tucson City Council down a path that it may regret for years to come.

The City is desperate to make positive things happen in Downtown with Rio Nuevo. How much of that desperation is about concern for the upcoming election and how much is a desire to hold onto the TIF funding, I do not know.

The City Council seems set to approve a Development Agreement with the Downtown Tucson Development Company (DTDC), a partnership between Scott Stiteler and Don Martin. In exchange for free land, the City expects DTDC to make contributions to the Rialto Theatre, Warehouse Arts Management Organization, Skrappy’s, and possibly the Facade Improvement Program.

(My disclosure: As the former executive director of the Tucson Downtown Alliance and Downtown Tucson Partnership for several years, I know the properties and most of the characters very well. I don’t know Scott Stiteler, but I have been friendly with Don Martin for about five years. The Rialto Theatre Foundation’s executive director Doug Biggers and board president Michael Crawford are friends of mine. I used to be an active board member of WAMO, and more recently, an inactive board member of WAMO. I support the missions of both the Rialto and WAMO, and I support the City’s efforts to improve Tucson’s downtown.   I also wish Stiteler and Martin the best with the development of their properties, and I hope they make lots of money doing it.  Just not at taxpayer expense.)

The main element of this agreement is the giveaway of $4 million or more in City-owned real estate to DTDC, with contributions from DTDC to the Rialto Theatre, WAMO, and Skrappy’s that add up to far less than $4 million in real value. DTDC is a new company, formed after Martin bought out the interest of Doug Biggers in the 50/50 partnership of Biggers and Martin in the Rialto Block. Stiteler has been the man behind Williams and Dame Development, which left Tucson several months ago, just after their presence helped sell the first part of this deal to the City Council.

Last December, desperation led the City Council to approve the Pre-development Agreement for this deal, without proper due diligence, without proper consideration of the consequences, without proper public vetting. People were warned that they had to fall in line behind it, or else.

It was the same month when desperation led the Council to sell $80 million in Rio Nuevo bonds at the worst time imaginable in terms of financing costs, so they could tie up the TIF revenue stream before the state legislature could take the funding away. That act of desperation will cost the taxpayers of Tucson millions of dollars in excess interest.

Now, six months later, the City Council is up against a deadline it never should have faced; make a deal now with DTDC or pay up. Around $950,000 to reimburse DTDC for costs they’ve incurred. Wow, I know of developers who were induced to spend a lot more than that on projects they thought they were being awarded in Downtown Tucson, and they didn’t get reimbursed a nickel.

What happens if the deal goes through? Well, the City must pay DTDC $800,000 for the completion of the Concept Plan. The City pays (overpays) for that work either way. For perspective on that, consider that the entire Rio Nuevo Master Plan, adopted in 2001 with multiple consultants and lots of public outreach, cost the City $600,000!

The idea of giving away valuable real estate that fronts on Speedway, on Congress, and on Broadway should give all Tucson citizens pause. But when you consider how little is being required of the developer to provide, it is truly disturbing.

When you break it down, the developer is promising to invest in his own property, and to invest a little more in the theater, which obviously enhances the value of DTDC’s property. The developer is throwing a little money ($300,000) at Skrappy’s, the Downtown Façade Program, and the Warehouse Arts Management Organization (WAMO), and it has until 2014 to make all those payments.

In exchange, they get credits for $4 million in City real estate, which may be paid with the conveyance of the old Broadway Volvo site, the Congress frontage to the Ronstadt Transit Center, and part of the corner of Speedway and Stone. This after the same developer got a gonga deal on the Martin Luther King Apartments ($350,000) and also has air rights over the Depot Plaza garage to construct another residential building. And, the Rialto Block (the developer’s property) has been awarded one of four façade improvement grants from the City, for six figures. (More disclosure: I supported the Rialto Block’s façade grant award when I was on the selection committee at the Downtown Tucson Partnership last summer.)

Some property is being conveyed to the theater, but it holds nowhere near the value that makes this deal fair to both the City and the developer. And the developer is counting the construction of an elevator that the foundation does not want or need as a contribution to the theatre, in order to earn part of its credit.

Why is the City not protecting the viability of its own asset, the historic Rialto Theatre? This is the time to ensure its future, by requiring the developer to whom it is giving valuable downtown real estate, to convey all of the portions of property the developer already owns and that the theater needs, to the Rialto Theatre Foundation, which manages the theatre on behalf of Rio Nuevo.

The Rialto is one of a very short list of Rio Nuevo successes, yet the City acts as if it were a nuisance, and as if the City/Rio Nuevo doesn’t in fact own the building.

And of course, the City needs to get true dollar-for-dollar value on the deal overall. The contributions made by the developer need to have the same real value as the properties that the City is promising to give up.

Five years ago, desperation led the City Council to approve an ill-advised deal on the former Thrifty Block. Whoever won the competition for the rights to build on that site would get the land, cleared of the old buildings, and the Indian Village Trading Post building next door, for $100. Bourn Partners won that competition, and they worked diligently to make The Post condo project work. Whatever combination of factors (mostly the housing bubble bursting) led to that development not getting off the ground, the City failed to include a reversion clause in its sale and development agreement. Once the deed was transferred to Bourn, there was nothing the City could do. So now it sits, the empty land, and the empty building. Even the Indian Village shop has long since relocated to La Placita in expectation that the Hotel Arizona was going to be redeveloped next door—two years ago!

Ask a General Manager from a pro sports franchise: Sometimes the best deal you can make is the one you don’t make. Two years from now, we should be out of the recession and the modern streetcar will be almost ready to roll into Downtown. Developers will be lining up, looking to pay the City market value for those properties, especially the one in front of the Ronstadt Center.

The developer should already be properly incentivized to lease out his own space at One North Fifth and in the 200 E. Congress block. But with this deal, fully 40%, or $1.6 million in credits, is “earned” by the developer simply for leasing out space that he already owns.

Why let desperation to make something happen lead us to giving away the store?

Donovan Durband