Dec. 09, 2010--The owner of downtown's Hotel Arizona is threatening to shut down after next year's gem show if he doesn't receive a taxpayer-funded improvement package.

General Manager Todd Lavigne said Wednesday the hotel laid off 30 employees this week and closed its restaurant and gift shop indefinitely. Most of the layoffs were in the restaurant and the sales staff, because Lavigne said the hotel is no longer actively soliciting new business as there's no guarantee it will be open for more than two to three months.

Lavigne said the hotel's owner, Humberto Lopez, wants to see plans for an improvement to the Tucson Convention Center in addition to the improvements to the hotel.

"Without the convention center there is no point in having a hotel here," Lavigne said. "Our future is in imminent danger without the city's commitment to come up with some sort of plan downtown."

Given that the hotel is looking at only 6 percent occupancy for the month of December, Lavigne said the hotel will try to hang on until the Tucson Gem, Mineral & Fossil Showcase begins next month but can't make it past then without a deal from the city. Nearly 70 of the hotel's approximately 200 rooms are out of service.

"We had seven rooms sold last night," Lavigne said. "The sales force is closed down. We're not actively pursuing any future business."

He said the staff has been pared to the bare minimum cleaning and front desk personnel. With the 30 layoffs this week, the hotel has only about 40 employees, Lavigne said.

The latest version of the deal Lopez is pitching to the city has the city selling $17 million in bonds to upgrade his hotel into a 274-room Doubletree. In addition, a new 428-space parking garage needs to be built by the city, or Tucson needs to lease property to him so he can build the garage.

The city would then lease the Hotel Arizona from Lopez for $1.6 million a year for 99 years, or a total of $158.4 million. After the parking garage is built, Lopez would demolish his parking garage at West Congress Street and North Granada Avenue and build an Embassy Suites there.

The annual lease payments would allow Lopez to pay down the $22 million in debt he has on the Hotel Arizona property without having to pay taxes on the sale of the property. If he sold just to clear his debt, Lopez, who didn't return phone calls Wednesday, said previously he would lose $8 million in taxes.

Lavigne said Lopez's deal would be "almost free" for the taxpayers.

If Lopez decides to shut the hotel, Lavigne said he would decide what to convert it into, which could include UA student housing, condominiums or office space. But he said the city's convention business could be "crippled" because there would be no downtown convention hotel.

"He's going to try to hang on until the gem show," Lavigne said of Lopez. "After which he will decide what to turn the building into or just outright close it."

Neither members of the City Council nor the new Rio Nuevo Board seemed primed to take up Lopez's offer.

"I'm not going to allow the city to be backed into a corner," Councilman Paul Cunningham said. "It's his hotel, he owns it, he can do what he wants."

Councilwoman Karin Uhlich said, "Any person who think the city is in position to save their business is not thinking very clearly." She said the city's focus is on signing agreements with Rio Nuevo, after which the issue should be brought up with the Rio Nuevo Board.

"It's more gamesmanship from Mr. Lopez," Uhlich said.

Rio Nuevo Board members said they think there is a role for Rio Nuevo to play with the hotel, but said no negotiations or deal with Lopez are imminent. Board Chairwoman Jodi Bain said the latest version of the deal she's seen called for very little Rio Nuevo involvement.

Councilman Steve Kozachik said Lopez's deal has to make sense on paper and "threatening us is not going to get the deal to be all of a sudden good. If it makes sense, it makes sense with or without the threat," Kozachik said.

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

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