Incentive Issues

While new restaurants downtown get government subsidies, competitors fume

Optimists see downtown development as really starting to cook. But that doesn't mean the city of Tucson isn't still providing financial incentives to attract restaurants to locate in buildings it owns in the area.

"In other words," criticizes Dick Basye, who has been involved with downtown issues for many years and is also a board member of the Pima Association of Taxpayers, "they're subsidizing restaurants to get more people downtown so the subsidies can end."

John Updike, director of the city's real estate division, takes a different perspective on the incentive practice. "It's no different than what other landlords are doing," he says. "The city needs to follow the market and look at other downtown deals and follow them as best we can. We have the same motivation as other landlords--get the space occupied."

Commercial real estate businessman Buzz Isaacson concurs. "I've brokered over 30 restaurants downtown," he says, "and when you take the locations into account, the city's incentive packages are not incredibly different than private-sector leases."

The city recently reduced the rent to a nominal amount for the Little Poca Cosa restaurant after its forced move to Stone Avenue and Alameda Street, until planned construction work on its new location is completed sometime in the future. City Hall also provided economic incentives to attract the more famous Café Poca Cosa to the new parking garage at Pennington Street and Scott Avenue, with the government picking up $450,000 of an estimated $1 million in necessary tenant improvements.

The most controversial use of incentives was the City Council's unanimous approval in June of a series of financial breaks to bring the new restaurant Central to the city-owned train station on Toole Avenue. In that case, 18 months of free rent were given, followed by reduced rent, which increases to market level after five years, resulting in a savings of more than $260,000.

In addition, using funds generated from depot tenants, the city will pay for $225,000 worth of improvements needed by the business. It will also install a handicap-accessible bathroom, cover the cost of air-conditioning the restaurant, reduce the monthly building maintenance fee and provide 20 spaces of limited on-site parking.

Updike points out the utility costs and maintenance charges are reductions given to other depot tenants. As a landlord, he adds, the city was responsible for installing the bathroom.

Acknowledging the 4,031-square foot space probably could have been rented out for office use without any incentives, Updike emphasizes why that wasn't done. "There would be less pedestrian traffic, not as much public exposure, nor evening traffic," he says. "We want to extend the life of downtown beyond 8 to 5. Central will serve dinner, and that's good for downtown."

Updike also believes that economic incentives should be limited in their application. "They're more for riskier ventures like restaurants," he says, "where nationally, 80 percent of them fail in their first year. We have to provide some assistance."

(For the record, Updike's claim is not true; recent studies have indicated that about a quarter or less of restaurants fail in their first year.)

Updike's conclusion is refuted by David Castleberry, who manages the Cup Café in the Hotel Congress, across the street from the train station. His restaurant is open for breakfast, lunch and dinner, and he doesn't endorse what the city is doing.

Labeling the incentives provided to his future competitor as not fair, Castleberry believes the downtown marketplace is strong enough now to support more restaurants. "The incentives will just hurt businesses which are already here," he says.

For her part, Central co-owner Sonia Economou points out the incentive package played a role in the decision to open the restaurant at the depot. Even though she and her husband will be spending hundreds of thousands of dollars of their own money to establish the business, Economou says of the incentives: "Without them, the cost would have been too high."

"We were looking at other locations farther north," she recalls of their quest for a suitable spot, "but as a native of Tucson, I've always loved that building. When my husband and I saw the 'For Lease' sign, I said, 'No Way!'" But the long vacant space was still available. The restaurant is scheduled to open in early December.

Basye believes taxpayer money could be saved by investing in some relatively inexpensive improvements which would bring more people to the area, instead of being used to attract additional restaurants. "With proper amenities, downtown shouldn't need government incentives."

Basye lists making several currently one-way streets into two-way thoroughfares as a method to attract more people to the area. He also blasts the idea of the proposed light-rail line between downtown and the University Medical Center, supporting instead the much-less-expensive alternative of increased bus service.

"Generating more activity in downtown is the most cost-effective approach," Basye says. "Improve public amenities to bring people there. You won't have to subsidize businesses, because they will want to be there."

Isaacson, who was involved with both the Café Poca Cosa and Central negotiations, sees things differently. Calling their locations difficult for restaurants, he says, "In both cases, the city had a vision that it would be great to have restaurants there. ... If they wanted restaurants, they had to do enough for them to get through some steep curves, like construction work on the Fourth Avenue underpass."

Believing the restaurants will improve downtown, Isaacson concludes: "People will be pleased with the results."

Comments (0)

Add a comment

Add a Comment

Tucson Weekly

Best of Tucson Weekly

Tucson Weekly