Aug. 16, 2009--The city's Rio Nuevo redevelopment district is being forced to take money from the taxpayer-subsidized Tucson Convention Center to pay for the design of a new convention center hotel.

The fund shift is necessary because all the money from the city's $80 million bond sale last December is gone.

The city sold the TCC to its Rio Nuevo redevelopment district in 2002, and leases the facility back from the district for $3.7 million a year. Rio Nuevo uses the lease payments to pay off the debt issued to buy the center.

Money to underwrite the hotel design will come from those lease payments.

The City Council, which has final authority over Rio Nuevo, has approved using the $3.7 million lease payment to refinance $11 million in existing bonds and add another $9 million in money to pay for the final design of the hotel and for a new entrance to the TCC. The entrance is needed so the hotel can be built next to it.

The city also hopes to use the lease revenues to eventually finance a $33.5 million expansion of the TCC later.

The final design for the hotel is estimated at $12 million, while the new entrance to the TCC is estimated to cost $4 million.

About $7 million needed for the hotel will come from a December bond sale that came under fire because the bonds were put on the market when interest rates were high, partly to forestall the state Legislature taking the money back. But the money from the sale is all but gone once that $7 million is used, said Finance Director Sylvia Amparano.

"There isn't any money left from the bond proceeds for a master developer (for the TCC) or a new TCC entrance," Amparano said.

The city pays an annual subsidy of $1.3 million from the taxpayer-supported general fund to supplement TCC-generated revenues used to pay for the operation. Now, instead of financing Rio Nuevo's purchase of the TCC, a portion of the money will go to the new convention center hotel, as well as the TCC expansion.

Council members said they support jump-starting the convention center hotel, and added that they either didn't know or weren't concerned about the general-fund subsidy going toward Rio Nuevo projects.

Mayor Bob Walkup said the city is "moving ahead smartly" with the hotel, and the TCC leases payments are a "revenue stream that is already in the budget."

Although Rio Nuevo is out of bond money, Walkup said the bond sale was "absolutely a success" and the expenditure of the money was "exactly why we went out and bonded."

Councilwoman Nina Trasoff said the city had intended to use all the money from this bond and then issue several more. But she said the economy crashed and the Legislature threatened to end the Rio Nuevo district or reform it substantially.

Trasoff said she didn't know about the subsidy, but said the "bottom line is we have to find a way to move forward with the seminal project downtown."

Councilwoman Regina Romero said she was concerned about the long-term impact of the hotel project on the city's general fund, but added that she wasn't concerned about the TCC subsidy from the general fund because it was an existing revenue stream.

"The money has been budgeted for the TCC," Romero said of the subsidy. "We're not using any more money than what has been budgeted."

Contact reporter Rob O'Dell at 573-4346 or [email protected]

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