Tucson Weekly: Rio Loco (May 20

Can Downtown Redevelopment Get Any Crazier?
By Jim Nintzel
THE DUSTY 62 acres south of Congress Street, alongside the west bank of the Santa Cruz River, may finally be on the edge of a rebirth. But it's proving a difficult labor.
The city-owned land, known as Rio Nuevo South, is sometimes called the birthplace of Tucson. Long before Spanish settlers arrived in the 18th century, Pima Indians had a settlement called Chuk-shon at the base of Sentinel Peak (better known as A Mountain). But as Tucson has grown across the valley, the land's been abandoned to become, among other things, a dump and homeless camp.
Three proposals are now on the table to redevelop Rio Nuevo South. But rather than choosing one plan, the City Council has instead told City Manager Luis Guitierrez to find some way to combine the three.
Feature California-based Daystar Development has assembled the most ambitious plan. With a price tag of about $420 million, the Daystar proposal not only includes Rio Nuevo South, but jumps across to the east bank of the river, runs along the newly renovated I-10 Frontage Road, and even wraps around behind the federal courthouse being built on Congress Street and Granada Avenue. The project would include four hotels, four museums, more than 750,000 square feet of retail and restaurant space, 360,000 square feet of office space, a visitor's center, a 20-screen multiplex, an IMAX movie theatre and possibly even an amphitheater.
Under Daystar's proposal, about $105 million of the development costs would be publicly funded through bonds that would be paid off with sales taxes from the shops. Roughly $60 million would help support the development of four museums--a museum of western history, an expanded version of the UA Flandrau Planetarium serving as a science museum, a facility for the Arizona Historical Society, and an aquarium featuring sea life from the Gulf of California. Another $10 million would help restore the Convento site just south of Rio Nuevo, where Spanish missionaries once lived. The remainder would help improve infrastructure around the development.
It's a bold plan--and a crying shame Daystar doesn't actually intend to develop it, although the company thinks it would be a great opportunity for somebody to undertake. Daystar instead intends to focus on building 680,000 square feet of retail and restaurants and two museums on Rio Nuevo South. The rest of the project--and the risk--is up for grabs.
At the other end of the spectrum is Colonial Tucson, a "historical-themed attraction" by Bob Shelton, founder of Old Tucson. The plan features 60,000 square feet of import shops, restaurants, and food and historical exhibits arranged in a "quaint adobe village" of winding streets and narrow alleys. The ersatz settlement will feature a visitors' center, "colonial inn" destination resort, a Mexican bakery and food court, Native American cultural center, pioneer Mexican farm, and a tequila factory "manned by colorfully costumed workers" that will serve as a restaurant, lounge and private party facility.
"We call it a themed attraction," says Shelton, who's aiming primarily for the tourist market. "We'll have historical pageants, we want to build an outdoor drama year-round, (and) we want to have costumed people on the streets, in Spanish Colonial garb."
This project has been Shelton's dream for the last decade. He's made several attempts to purchase Rio Nuevo South, but the land has always remained beyond his grasp. The project gained a new life when the city requested development proposals for the parcel some months ago. Just about a month before his proposal was due, Shelton hooked up with real-estate broker Joe Cesare, who brought in Lowell and David Williamson, owners of Fairfield Homes, to help finance the $35 million plan (and that's not counting infrastructure improvements or the possibility of additional elements like museums).
The final proposal comes from Broadstone Commercial Real Estate, which teamed up with Benton-Ross Development of Phoenix in their bid for retail space, a restaurant, apartments, condominiums, a hotel, an office complex, a mesquite bosque along the river, a cultural park and possibly other projects. The proposal's details were sketchy, but Broadstone president Susan Ong describes it as "probably between the Colonial Tucson one and the Daystar one. But it's probably closer to $100 million than $400 million."
Ong abruptly dropped out of the process on May 5, but asked to be reconsidered last week.
REAL ESTATE BROKER Paul Lindsey, who represents the Santa Cruz Museum Authority, says that his group had talked about working with Shelton, but had ultimately decided to go with Daystar because he believed that project would generate enough sales taxes to make the four museum projects viable.
Lindsey's reasoning raises an important question: If you build all that retail and restaurant space, will they shop? Despite Tucson's many efforts to boost downtown, dozens of shops and restaurants have closed or moved from downtown in the last few years.
Daystar's own economic analysis notes that "the retail market is challenging because Tucson's most affluent and fastest growing population is well north of downtown in the (Catalina) Foothills, which includes northwest and northeast Tucson. These communities have access to good shopping with plans for further expansion."
Daystar hopes the museums will prove a powerful lure for local shoppers. In addition, they hope to capture consumers who work downtown, tourists who visit the downtown area, and a percentage of the estimated 18 million people who drive past the Congress exit on I-10 each year.
It's a big--and some might say crazy--gamble for Daystar, which is promising to invest $97 million up front. If the developer can't fill 680,000 square feet of retail on Rio Nuevo South--or if the shops go bust after the mall opens--then there won't be sales taxes available to pay off the bonds which will fund construction of the museums under the Tax-Increment Financing (TIF) scheme.
That TIF option nearly didn't survive the recently concluded legislative session. But a last-minute effort from Republican Councilman Fred Ronstadt, city lobbyists and the Tucson Downtown Alliance resulted in a law that gives Tucson until November to get a project underway.
That lobbying effort came under criticism in the press earlier this month, when the morning daily learned that attorney Thom Laursen, who represents Daystar and serves as co-chair of the board of the Tucson Downtown Alliance, had been one of the fiercest lobbyists on behalf of the TIF bill. As the bill finally emerged, it appeared only a project as high-priced as Daystar's would qualify for TIF funding, which led to accusations that the city was favoring the Daystar proposal.
Ronstadt disputes that account, saying he told lawmakers about all three plans. Given the Legislature's insane atmosphere, he says, the city was lucky to get any opportunity for TIF dollars at all. And city attorneys now believe any of the projects, if properly designed, may be eligible for TIF funding.
On Monday, May 10, under the impression that there were only two plans on the table, the City Council met to discuss the proposals and directed staff to meet with both developers to see if the projects could somehow be blended together, along with additional space for housing.
When Ong, who had dropped out of the running, heard the Council's suggestion that the plans be combined, she decided she wanted a piece of the action herself.
"The impression that we got, rightly or wrongly from what was going on at that time, was it looked like the city wanted Tax-Increment Financing," Ong says. "So rather than get in the middle of a big costly fight, we thought perhaps we should withdraw and just take a look at things. But last week the Council suggested that the city manager and the advisory group look at some sort of blend of the proposals, so we asked to be taken back into the project."
The day after the Council meeting, on Tuesday, May 11, the Santa Cruz Advisory Committee reviewed the three plans and, like the Council, recommended that City Manager Luis Gutierrez combine the best elements of each, with an emphasis on restoring the Convento.
Shelton is doubtful his project can mesh with the Daystar plan, although he's willing to discuss the idea. "I just don't know how that can happen," he says. "We're so diametrically different. They are a major shopping mega-mall with all kinds of department stores and theaters and things like that, and we're a Colonial Spanish village. It just seems that they're at such opposite ends that I don't know how that can happen. First of all, when they bid on the RFP, they had such a large-scale project they couldn't keep it on the property we were bidding on. That alone tells us the two together would be even bigger, and I don't know how that would work. But we're not opposed to anything in terms of discussion. We want to see this happen for the city, and I know the city seems very interested in seeing it happen."
Although he'd prefer the downtown location, Shelton says it's not his only option. "We've had other people approach us for different locations and that would be entirely possible. If we should get shut out downtown, we would have to just rethink it."
His partner Cesare calls the idea of combining the two projects "a little odd for an RFP." Cesare is similarly skeptical about the idea. "The projects are like night and day. I don't think they're compatible. Someone else might. They are two different types of projects, but that doesn't mean there can't be some compromising and maybe individual development or something like that."
Cesare is careful not to criticize Daystar, but he does find the process faulty: "When you only look at 62 acres and someone else looks at a much larger parcel, they're not even comparable. Typically, when you don't address what an RFP tells you, in most cases you are eliminated as a bidder."
"We spent a hell of a lot of money in putting a bunch of material together," adds Cesare, who would like an opportunity to enlarge his proposal. "If we're given the opportunity, I can tell you we will be looking at--in fact, we have our engineers looking at it (now)--going all the way down to 22nd Street, wrapping around on Mission Road. Taking a hell of a chunk in that could be in the $8 or $9 million range." He adds that it might be possible to design a stadium district that would stretch down Broadway as far as El Con Mall.
In the meantime, all three parties are now awaiting a call from the City Manager's office.
OTHER PROBLEMS STILL loom. A portion of Rio Nuevo South, which once served as a landfill, may still harbor environmental problems. Assistant City Manager John Nachbar says the city is currently doing an environmental assessment.
"The environmental costs are still not defined, but I'm also told that the type of development would influence it," says Nachbar. "If you were to just do parking lots there, then your remediation costs are a lot less than if you were to place a building. To some degree, you can't define it completely until you know what you're going to be placing on the site."
Ward 1 Councilman José Ibarra is concerned about the financial commitment of the three potential developers.
"The thing that's worrying me right now is the financial background of everybody," says Ibarra. "Do they have the money? Show me the cash flow. The reality is, it's always going to come down to money. In this case, we need to walk cautiously--in a hurry, but with caution--in terms of getting ourselves into a deal we won't want to be a part of in two years because the money ran out.
Nearby neighborhoods may also oppose Daystar's proposal over fears about increased traffic and noise, says Ward 5 Councilman Steve Leal, who has been working on restoring the Convento for a decade. The neighbors have a soft spot for Shelton, who has been courting them for years.
Some Council members express concern about the impact a retail project as large as Daystar's proposal will have on what few merchants remain downtown.
Can the city assemble a plan that combines the best elements of all three plans? Can all these developers work together on this project? Will they be able to pull it all together in time to use the TIF mechanism?
Ronstadt may sum it up best: "The Legislature has given us an opportunity to use this TIF funding. Now it's up to Tucson to screw it up."

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