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Friday, December 23, 2011
Politics / News Steve Kozachik on the Rialto-Rio Nuevo Dispute
Posted by Jimmy Boegle on Fri, Dec 23, 2011 at 3:48 PM
From City Councilman Steve Kozachik:
I’m on my honor with the City Attorney not to mess with our mediation effort with respect to the City and Rio (Nuevo). So I won’t mention that, except to say that some of the dynamics appear similar to what is happening over at the Rialto.
Should the Rialto get a free ride? No, and when you’re reading through this and start to feel as though I’m suggesting that, come back and re-read this paragraph. And, for the record, the Rialto Foundation is not asking for a free ride.
The Rialto lease began in 2004. The purchase was done using cash on hand. Rio Nuevo does not have any debt on the building and so any money it receives in lease, or other payments is simply cash flow to the District. The Rialto Foundation is paying lease money directly to Rio. It’s gravy to the Board. The deal is not at all like the County Bonds where there is debt being paid from taxpayer money. That transaction happened, and now the issue is how to earn a legitimate return on that investment for the taxpayers.
Small clubs are in a tough market. The Rialto is paying in the neighborhood of $3,600 per month to Rio. They’ve asked to have Rio take another look at that. The Rialto Foundation is a nonprofit. Rio is its landlord.
The way the lease reads is that starting in 2014, the Foundation can purchase the building. They won’t have the money. In addition, after 40 years, ownership of the building automatically reverts to the Foundation, or if it doesn’t exist at the time, to Rio — which will sunset well before that, so effectively, the City will own the theater if it is not purchased ahead of the end date. The current Rio Board wants to ensure that doesn’t occur — a curious goal for a group that won’t be around to see it play out.
The media has carried some surface level reports about this issue, leaving readers with the impression that the Rialto Foundation is asking for a free ride. The fact is that they requested a reduction in their current lease agreement (remember — cash flow to Rio, not the payment of any existing debt service) but increasing over time as the
theater recovers along with the economy.
Rio rejected that notion and sent this “Draft” of a counter proposal to the theater: Draft_Rialto_Ltr_Reponse_Rev_12_16_11_rev.pdf
Note that this was not sent to the Foundation, nor was it sent to the Foundation’s counsel, but to the G.M. of the theater — a person not empowered to cut a deal. And, the theater was given 2 days to reply.
(I was not given this Draft by the G.M. I do not want him to take any heat from Rio about my having, or sharing it. In my opinion, it’s a public document and you should have an opportunity to see how the District is dealing in your downtown area.)
Let me make a couple of points:
First, the statement that the District’s revenue stream has decreased is simply factually incorrect. TIF dollars are up, and increasing by several millions of dollars per year since this lease was first signed. Next, the District raises the red herring of it being locked in by the “Gift Clause.” That’s the State Constitutional issue of a governing body not giving away taxpayer money in excess of the value received. The truth is that Rio is exempt from the Gift Clause under the
Constitution. It’s a taxing district. The claim is bogus.
Looking at the terms of the Draft that they are calling “abatement” is also an interesting journey. In Orwell’s 1984, there were terms called “newspeak.” Some of this would qualify. (In case you never read the
book, “newspeak” is deliberately ambiguous and contradictory language used to mislead and manipulate the public.)
a) It is now ‘abatement’ to tell the Foundation to sign a lease for more space with the owner of other parts of the block.
b) It is now ‘abatement’ to tell the Foundation that Rio will take a percent of its gross bar receipts.
c) It is now ‘abatement’ to tell the Foundation that it must make a minimum amount of capital improvements.
d) It is now ‘abatement’ to tell the Foundation that it must relinquish its option to purchase the theater.
e) It is now ‘abatement’ to tell the Foundation that it must take out insurance naming Rio as additional insured.
f) It is now ‘abatement’ to tell the Foundation that it must fire one of its managers.
g) It is now ‘abatement’ to tell the Foundation that it must take out additional Liquor Licenses.
h) And it is now ‘abatement’ to tell the Foundation that it must pay Rio’s attorney’s fees.
Newspeak. Some of those items are perfectly legitimate. The insurance requirement is legit / the Liquor License is legit / if they agreed on personnel issues, so be it — but those are hardly “lease abatement” items. And to place the Draft in the hands of the GM two days before a response was due is bad faith.
I am not suggesting a free ride. The Rialto is not asking for one. What I am suggesting is that every penny Rio receives from the Rialto is free money to the District. To the extent that it suggests the Rialto is in the driver’s seat as it relates to going bankrupt, that’s false. Rio holds that trump card, and in the same manner as it appears
to have unclear motives with the City in mediation, the terms of this Draft struck me as being cut from that same bolt of cloth.
Rio can close the doors of the Rialto by forcing them into bankruptcy. Or, Rio can realize that every dime it gets from the facility is found money, and work with them to be successful. There are private sector supporters willing to assist. I would hope a rational solution is found so that corner doesn’t go dark, and we don't end up with a change on the marquee from “We love you Gabby” to the seal of the Great State of Arizona.
Comments (8)
Showing 1-8 of 8
The Rialto Foundation could get more revenue if they wanted to. Tucson is halfway between Austin and Los Angeles, two cities that bands on tour will go to. Rialto needs to attract more of these touring bands and host bigger events more nights a week.
Why don't they?
1. Because it's easier to get Joey Burns to play ten fundraisers a year than to find ten bands on tour to sell the place out.
1. Because they are a non-profit. No motivation to excel.
2. Because it's the Tucson way to strive for mediocrity and fail. The only thing Tucson likes more than an underpass grand-opening is a memorial for failed businesses. Let the blogging begin!
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Well, Cody, you don't have any idea what you're talking about.
Tucson is actually a less-than-tertiary market in the concert business, which means it sucks. The Rialto has ranked in the top tier of Pollstar's club venue rankings year after year in terms of ticket sales (you do know what Pollstar is, right?), which is amazing considering the shit-hole market that Tucson represents in the industry. You're correct that our fair city's proximity to I-10 is a help, but it's no guarantee. When artist management companies decide how to route a tour, Tucson is usually an afterthought, or a second-run date. Please provide your bona fides regarding the concert industry.
As far as the rest of your points, you further display your ignorance:
1) The talented and generous Joey Burns and Calexico generally play twice annually, including the Festival en el Barrio, which takes place off-site. Both events are fundraisers for other nonprofits (Many Mouths One Stomach, the organizers of the All Souls Procession, and Community Radio KXCI). The Rialto's booker for the last seven years, Curtis McCrary, could be working anywhere in the country he's so excellent. He forgot more about pop music than you'll ever know. His acumen and his reputation in the industry are stellar. The Rialto takes major risks all year long to bring Tucson outstanding artists. Even a cursory review of our past six and half years of bookings belies your stupid comment.
2) The Rialto operates like any other business and is absolutely driven to maximize its net earnings. Why wouldn't we be? We get no subsidies and we are mission-driven, which means we are always striving to do more. What a dumb remark.
3) As for your third comment, speak for yourself, "Cody." There are many of us in Tucson who are committed to our community and want to see it thrive and improve. Then there are people like you who offer nothing but uninformed negativity.
What is the advantage of having a Taxing Authority owning the Rialto? We can certainly see the disadvantage.
It seems like one sold out show per month would Cover the $3600 lease payment the Rialto has to come up with every month. What are the numbers for say a sold out show that is $35 x 700 tickets = $24,500? $3600 seems kinda low for rent for that size and type of space in Downtown, but you are right about touring band fan base, Tucson is a really small town and what was the figure 28% of Tucson's residents make bellow the poverty level?
And what about all the other fixed expenses, Atom? Insurance, all utilities, salaries, debt service ($6,000/month) for the Theatre's sound and light systems, maintenance (the Rialto Theatre Foundation pays for all maintenance to the 90-year-old building), other debt service, rent to a third party for office space, green room and storage ($3,000/month) since the Rio Nuevo-owned building is too small to provide these spaces, marketing expenses, the cost for our ticketing vendor, and the myriad other expenses it requires to run a major music venue.
Do you have any grasp of the intricacies that go into negotiating contracts with artist agencies for high quality (or even not so high quality) artists and what those fees typically entail? Do you have a sense of the risk assessment that occurs when negotiating these agreements? What happens when a "sure bet" turns out to be a big loser and the Rialto loses thousands of dollars in one night?
Running a successful venue such as the Rialto Theatre is complex, fraught with risk, and requires a lot of business acumen. The Rialto Theatre Foundation has done an amazing job.
Cody, you're clueless.
What's half way between Austin and LA is Phoenix. Tours look to maximize their show gate. If they need a date between two major cities, unless they're going to simply do a scaled down show while the rest of the tour keeps moving onto the next major venue, Tucson won't win that competition. And major acts are looking to book McKale or the TCC where they can draw from 8K - 10K ticket buyers. You clearly don't know the market.
Re your comment about non-profits striving for mediocrity - do you think that label means they don't have bills to pay? Why do you think they're always looking for revenue sources? What do you think the Foundation (Foundations for all non-profits) does, if not fund raise to keep their mission alive? Any excess over expenses should be poured back into the venue, not paid as rent to a State appointed group who is also busily suing the taxpayers of the City for $47M. The members of the Foundation serve in that capacity on a volunteer basis because they believe in what they're doing - and they believe making that a success will be to the greater good of the community.
You might consider getting involved with a non-profit - giving of yourself - and finding something you can support that will make this a more livable community. Who knows, if you did, your clear contempt for the place might even change as you rub shoulders with people who are driven to leave the place better for their having been involved. Stop sitting on the sidelines. You might learn something about the the people who are on the field. SteveK
It's people like the above Cody, a bunch of Phoenician politicians, Jonathan Payton and the rest of the Rio board, etc. that made me change my party affiliation from Repub to Libertarian. I thought it was difficult to understand some of Demo politician's actions but the Rio board and most Republicans at the capital do things that are just plain punative and hurtful towards us in so az. I think if Steve didn't have a family and real job (not to say that coucilman isn't a or shouldn't be a fulltime job) he would have made a great mayoral candidate.
It's worth chiming in that the standard contract for a touring band that would play a room like the Rialto is more often than not going to take 85% of the net ticket sales AFTER a guaranteed payment of $5000-$15000 dollars. As a professional tour manager (or, the guy that settles money with the Curtis's of the world on behalf of the bands), I'd be pleasantly surprised if the Rialto breaks even on ticket sales alone 50% of the time. Thank god for alcohol sales.
Ryan's assessment is spot on. It never ceases to amaze me how many people think that anything having to do with the entertainment business doesn't involve actual work. It is sad that the Rio Nuevo board harbors such an illusion - you would think they would know better. Color me Team Kozachik.
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