Special Pals

When It Comes To Getting Work From The City, The Business Development Finance Corporation Has Friends In High Places.
By Dave Devine

SOME THINGS JUST naturally go together. Bogey and Bacall, peanut butter and chocolate, Wile E. Coyote and the Roadrunner.

Add to that list the Tucson City Manager's office and its offspring, the non-profit Business Development Finance Corporation. Founded in 1979 as the Tucson Local Development Corporation, BDFC was one of the creative financing mechanisms set up by then-city manager Joel Valdez.

He used these organizations to finance projects outside of the normal general obligation bond method for capital improvements. This allowed Valdez to get around the messy issues of needing voter approval for bond-funded projects and state limits on the city's debt ceiling.

In addition to its project-financing side, BDFC also operates a Small Business Administration 504 loan program and five business loan funds for the City of Tucson. Today, those revolving pools of city money are worth a total of $3.8 million.

But it was as part of Valdez's creative financing schemes that BDFC gained its notoriety. The group's 1982 agreement with the city to provide assistance with downtown projects stated the organization should do this "through the provision of financial incentives exclusive of active development and management."

Despite that, BDFC was the organization that both financed and managed the construction for a number of city projects. These included the Water and Information Services buildings downtown, the Rillito police substation, city courts, and the southside City Hall complex.

The group also provided the same service for the renovation of the Temple of Music and Art. In addition, it funded and oversaw the expansion of the Tucson Convention Center, even after the voters had overwhelmingly rejected that idea. The city's philosophy apparently was that if BDFC financed a project, the company would also be paid to manage its construction.

Complaints about BDFC have been sporadic. Several years ago it ran into a torrent of criticism for being involved with the proposal to build a private prison on city-owned land. But that issue quickly faded when the prison got built in Eloy.

Recently, complaints from some past clients have surfaced. These criticisms are symbolized by the decorative stone panels which once could be seen lining the front of the westside entrance on the new addition to the Convention Center.

Several months ago these heavy panels began to separate from the building and the city had to have them entombed in painted plywood to protect the public. As project manager for the expansion, BDFC's president Gary Molenda says he's working to fix the problem. But according to others, the agency's special relationship with the city manager's office will protect it from any liability in this case.

Many other problems with city buildings that were constructed under BDFC's management were also cited. Sources for these complaints requested anonymity for fear of reprisal from the city manager's office. But they indicated that cost-cutting measures and poor management by BDFC led to numerous deficiencies.

Again, the cloak of protection provided by the city manager's office was offered as an explanation for why these problems had not been attributed to the group. BDFC's Molenda said that if city staff had complaints with his agency's work, the City Council would have been told of them. That wouldn't happen, of course, if there was a special relationship between BDFC and the manager's office.

Other former clients, however, had only praise for the group's project-management work. They were pleased with the way BDFC handled their construction projects, stuck to a tight budget and implemented its work.

Even though it has mixed reviews, BDFC will arrange for financing and be the construction manager for the new tourism information complex to be built at Congress and I-10. This project will have facilities for both the U.S. Forest Service and the Metropolitan Tucson Convention and Visitors Bureau. In addition, a Regional Visitors Center will be built to promote tourism in southern Arizona and northern Mexico.

The total budget for the project is $5.4 million. BDFC will be paid almost $150,000 to manage the construction. Architectural and pre-construction contracting services were competitively bid for the project. But the City Council unanimously decided last August, on the recommendation of the city manager, to award the management contract to BDFC without the benefit of competitive bids.

That's not the way the city usually does business. In fact, Tucson law specifically requires bidding for similar types of service. But city staffers constantly refer to the 1982 agreement as the basis for the special treatment of BDFC. However, neither that agreement nor its amendments ever state the organization has to provide management supervision for a construction project.

Some potential stumbling blocks have already arisen with the current effort. These include the problem of soil contamination on the site, as well as the existence of a Southern Pacific Railroad track. The time required to address those issues has pushed the construction of the Regional Visitor Center building back into phase two of the overall project.

The first phase, the Forest Service/MTCVB building, is also facing some difficulties. When it authorized the project last year, the City Council was told the MTCVB's current lease expires on December 31, 1997 and the new building must be completed by that date. To meet that schedule, the Council was informed that construction bidding for the building had to be done in January.

The BDFC's Molenda now says bids won't be opened until April. He's still confident, however, that the new building can be finished by the end of the year. But the people at the Visitor's Bureau are so worried they're looking at moving to a temporary location in case the building isn't completed on time.

Coordinating this tourism project for the city is Economic Development director Kendall Bert. He not only oversees the effort, but he also sits on BDFC's board of directors. However, Bert says he declares a conflict of interest whenever the BDFC board discusses a city contract.

So the special relationship which has developed over the years between city government and BDFC has many facets. City Council members and city managers may come and go, but this special relationship just keeps rolling along. TW

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