Tucson will find out in early May if it can afford to buy the Hotel Arizona and a parking lot behind the federal courthouse to begin a comprehensive revamp around the Tucson Convention Center.

Appraisals should wrap up in the coming weeks, followed by negotiations with hotel owner Humberto S. Lopez and Allan Norville, who owns a 7-acre parking lot behind the Evo A. DeConcini U.S. Courthouse, City Manager Mike Hein said.

Hein hinted the city offer will be lower than the $28 million for the hotel or the $17 million for Norville’s land proposed in November by the public-private selection committee that cobbled together three proposals for a new TCC hotel.

The committee at that time proposed first renovating the Hotel Arizona as a Hilton and after that, if demand warrants, building a 30-story Sheraton a few steps northwest of the TCC. The hotel projects would come in conjunction with TCC expansion and construction of a 12,500-seat arena.

The economy took a bite out of January’s Tax Increment Financing dollars, Rio Nuevo’s primary revenue source, which is expected to fall as much as 5 percent this year, University of Arizona economist Marshall Vest said.

Hein said $28 million “probably doesn’t” work any more to buy the hotel with the continually tightening bond market in the economic downturn.

“Either we will say we can’t afford it or Bert will say he won’t sell, or the deal will be done,” Hein said.

More upfront money will likely be needed than was expected last year, Hein said. That could mean pledging more Rio Nuevo funds to guarantee a bond or asking private developers to advance more money.

“There’s no question that securing financing has gotten more difficult,” Hein said, “but that has not exacerbated financing the project downtown.”

Rio Nuevo tax increment financing revenue took a tumble during the holiday season. TIF sales tax receipts from the Rio Nuevo district recorded in January fell to $1.2 million, a huge drop from the $2.7 million in January 2007 but higher than the $936,000 in January 2006, according to city statistics.

“That picture is colored by the idea that consumers are coming less to the mall,” Vest said. “Retail sales at best are declining. I would think the special district mirrors that.”

Two thirds of TIF comes from new sales taxes above 1999 totals generated at Park Place and the rest from businesses along Broadway from Park Place to downtown and from downtown itself.

Vest said the 2006 holiday shopping season was especially strong, so he is encouraged that this January’s TIF is higher than January two years ago. He believes TIF revenues will balance out in the coming months but still be down from 2007.

TIF revenue has fluctuated wildly from month to month for the past two years, bringing in from $554,000 to $2.6 million in one month.

“You are probably going to see a figure down slightly, down 2 to 4 percent, maybe 5,” Vest said.

TIF brought in $15.3 million in 2007, a 9.6 percent increase from the $13.8 million in 2006. Through January, tax increment financing has brought Rio Nuevo $50.1 million since designated sales tax revenue was diverted to Rio Nuevo in 2003.

The five-year sum falls far short of the pace needed to reach the projected $550 million for the full run of the Rio Nuevo TIF district through 2025. Hein believes sales tax revenue will grow substantially in the next decade, especially once freeway construction is done and once something happens with the “languishing El Con Mall.”

“It’s easy to say within the next 15 years we’ll see a regenerated El Con and downtown,” Hein said.

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