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Rio Nuevo Board Cancels Contract with Developer Garfield Traub for Downtown
Convention Hotel Following a Forensic Audit Questioning Legitimacy of Bills

By Rob O'Dell, The Arizona Daily Star, TucsonMcClatchy-Tribune Regional News

July 22, 2011--The new Rio Nuevo Board canceled its contract Thursday with Texas developer Garfield Traub for a downtown convention hotel after a forensic audit questioned the legitimacy of the company's bills.

Rio Nuevo officials contend the redevelopment district has overpaid by a couple of hundred thousand dollars to a couple of million dollars for the hotel project. Plans for the hotel were shelved previously.

Given the audit findings, the board also voted to conduct a similar audit of three other Rio Nuevo projects -- the Mission Gardens project and Tucson Origins Heritage Park on the west side of the Santa Cruz River and the new parking garage built under the new Martin Luther King Jr. housing project on the east side of downtown.

Rio Nuevo lawyer Mark Collins said about $13 million in Rio Nuevo money was spent on the west side after a contract between the city, Rio Nuevo and Pima County expired. He also said there were billing and budget concerns about the $17 million parking garage.

The move to cut off Garfield Traub virtually guarantees the dispute over how much the developer has been or should be paid will be settled in court, said attorney Sean Brearcliffe of Rusing and Lopez, who is representing the board.

Garfield Traub requested mediation to get the final payments it contends it is owed for nearly $14 million worth of design work and $4.3 million in construction on the new east entrance to the Tucson Convention Center.

Brearcliffe said there are substantial questions about Garfield Traub's bills and the management of the construction contract, and the board will attempt to recover any overpayments.

The documentation is inadequate and fails to support the numbers reported, he said. The cost of litigation and going through mediation are likely about the same, Brearcliffe said.

Representatives from Garfield Traub could not be reached for comment late Thursday.

The contract with Garfield Traub was managed by the city of Tucson until the Rio Nuevo District was stripped away from the city by the Legislature because of the lack of progress despite $230 million spent.

While Rio Nuevo officials have previously questioned whether they were double-billed by Garfield Traub, city officials said they agree with the bills from the developer.

Phillip Dalrymple, of R&A CPAs, conducted a forensic audit of the bills the city gave the district.

He said the original budget approved for the project differed from the final price for which Garfield Traub is seeking payment, and there's no documentation of change orders or budget modifications to justify the higher charges.

"This is not typical. It's very unusual to not see a paper trail of budget changes," Dalrymple said.

Brearcliffe said Garfield Traub has refused to show Rio Nuevo its copies of the contract documents, which per the agreement were required to be kept on-site in Tucson.

Instead, Dalrymple said Garfield Traub told the Rio Nuevo District it can have the documents if it wants to pick them up or review them in an office in Henderson, Nev.

Rio Nuevo Board member Jonathan Paton said he was incredulous that the only access to the documents is to drive a semi-trailer to Nevada.

Getting to the bottom of the bills is key to restoring the public trust, Paton said.

Garfield Traub also took some of the documents to Texas, Brearcliffe said.

After the project was terminated, Garfield Traub submitted $951,000 in change orders that both city and Rio Nuevo officials said they had never seen or discussed. Both rejected the bills.

Garfield Traub and its contractor Turner Sundt have also not paid nearly two dozen subcontractors because of the money they say Rio Nuevo owes them.

The subcontractors are owed more than $300,000 for work that was done as long as 18 months ago.

On another issue, the board also voted to extend a six-month contract to Larry Lewis, a branch manager for Guardsmark LLC, to become its first executive director. The board had offered it to City Council aide Donovan Durband before withdrawing the offer because the board said he had a conflict of interest because he worked for the city.

Contact reporter Rob O'Dell at 573-4346 or rodell@azstarnet.com

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Copyright (c) 2011, The Arizona Daily Star, Tucson

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