Rio Nuevo weighs cuts after August revenue falls short, then backs two downtown retail projects

Rio Nuevo weighs cuts after August revenue falls short, then backs two downtown retail projects

TUCSON — The Rio Nuevo Multipurpose Facilities District board learned Tuesday, Oct. 27, 2026, that its August tax revenue came in far below budget, and board members called for spending cuts and a strategic reset. In the same meeting, the board approved help for two downtown retail projects, over objections from its two newest members.

At the meeting, held by video, District CFO Daniel Meyers said the state's estimate of August tax increment financing revenue first came in at $800,000. A final figure that arrived as the meeting began put it at about $870,000, against a budget of $1.4 million. Meyers called that "still, in my opinion, dismal." Meyers said the drop could not yet be explained.

August revenue was about $1.2 million last year and about $1.3 million the year before. The district has averaged just over $1 million for the month over the past five years.

Chairman Fletcher McCusker put the district's monthly break-even point at $1.1 million and said the district had fallen about $300,000 short in the most recent month.

Meyers said the district had about $3.7 million in its operating accounts at the end of September. About $700,000 of that was reserved for an Oct. 1 debt payment, leaving about $3 million. The district has $21 million in committed projects. A little more than $6 million has been paid, leaving almost $15 million outstanding. After those commitments, Meyers said, the district expects a little more than $1.7 million in cash flow over the next year to support new projects.

McCusker said the district carries about $90 million in debt left by earlier boards and pays roughly $712,000 a month on it. The chairman said the district had spent $12 million in cash on incentives for two hotel projects, the Moxy and Obie Companies' Tucson Inn and Marketplace. McCusker said officers might ask those developers for leniency or seek a payment holiday. McCusker also asked Meyers to recommend discretionary cuts, such as marketing sponsorships, to close the roughly $300,000 gap. McCusker said city sales tax revenue was down by about the same margin as the district's and partly blamed online shopping.

Meyers said the district already runs lean and that its largest expenses are marketing, downtown business improvement district taxes and downtown security.

A board member called for a public pullback lasting perhaps three to six months. "I feel like it's irresponsible of us to continue business as usual with numbers like this," the member said.

Members also questioned how much of the district's money goes to East Broadway projects compared with downtown, and several backed a strategic planning session to update the district's master plan.

The board later set that session for Jan. 26 at the Tucson Convention Center. Meyers recommended the later January date so the board would have another month of revenue data.

Board Member Hank Amos asked how much the district could borrow. McCusker said underwriters had earlier found capacity for a $10 million or $20 million loan. McCusker said bonds may now be difficult because they typically run 10 years and the district sunsets in nine, and suggested bank loans or lines of credit instead. McCusker also said the district would argue to the Legislature that the state should pay off the district's debt.

Clean audit

The board approved the fiscal 2026 audit by voice vote with no opposition, on the motion of Board Secretary Taunya Villicana. A principal from the district's auditing firm, BeachFleischman, said the firm would issue an unmodified, or clean, opinion and found no material weaknesses in internal controls.

The district's net position was $66 million, but only about $6.6 million of that was unrestricted. About $51 million is tied up in capital assets and $8 million in required debt service. Gross TIF revenue for the fiscal year was $16.4 million. After about $1 million in rebates, net revenue was $15.4 million, a dip from fiscal 2025. The district paid about $7.2 million in debt principal and took on no new debt.

Furniture showroom aid passes 6-2

The sharpest debate came over 141 South Stone, Suite 200. Fayth Hospitality Group, which owns the Home2 Suites hotel there, asked the district to split the cost of finishing a roughly 700-square-foot ground-floor space for a mesquite furniture showroom. The space has been vacant for five years.

The owner's representative said the company would put in about $120,000 and asked Rio Nuevo to match up to half the contractor's bid. The tenant would pay $30 per square foot on a five-year lease with options, with rent ramping up from near zero in the first year. The representative said the tenant projected about $100,000 in annual sales, growing to $200,000.

The board's two newest members, Hank Amos and Kam Norwood, objected. Both joined the board Oct. 13. Amos said "the TI cost on this is off the charts." Amos said a landlord collecting $30 a foot in rent should contribute to tenant improvements, suggested a much smaller district contribution and urged the tenant to seek an SBA loan, given the meeting's financial discussion. Norwood called the bid "outlandishly high" and said the owner should get more quotes and talk to banks.

The owner's representative defended the bid. "There's no gold in here," the representative said, adding that the deal would likely die without district help. McCusker said Rio Nuevo had required the retail space as part of the hotel project.

McCusker said the district's share of sales tax from the store would be about $2,600 a year, or about $9,000 counting the city and state, and that the deal was not about return on investment. Board Member Richard Oseran said downtown has 75 bars and restaurants and no retail.

Villicana's motion to fund up to 50% of the bid passed 6-2. Amos and Norwood voted no. Board Member Mike Levin had left the meeting before the vote.

McCusker acknowledged the tension in the board's actions, saying it was contradictory to ask the CFO to cut about $300,000 and then approve another $100,000.

Betty Gay Building

The board voted 7-1 to provide up to $106,750 to RealGood Concepts' Danny Cordova. Cordova plans to convert vacant ground-floor space at 125 E. Congress St., the Betty Gay Building, into six small retail spaces.

The figure is half of Cordova's original $224,700 bid, after district counsel removed $11,200 in architectural and permit fees. Under Villicana's motion, the money will be released proportionally as Cordova presents signed leases with terms of at least three years.

Cordova said revised quotes had pushed costs to about $266,000. The board had not seen those quotes, and Cordova accepted the lower amount. Cordova said RealGood Concepts would invest about $140,000 and named a flower shop, a matcha cafe and a print shop as prospective tenants, with projected sales of about $600,000 a year. No leases have been signed. Cordova said the plan is to break ground before year's end and open in summer 2027.

Amos voted no again. McCusker said the district "can't claim to have revitalized our downtown when there's the half a dozen vacant spaces on your main street."

AC Marriott lease amended

The board unanimously approved, on a roll-call vote, amending its 2017 government property lease excise tax agreement for the AC Marriott garage to add the hotel itself. The existing agreement has about 17 years remaining.

Oseran first moved to table the item to address public parking and rates in the garage, which Rio Nuevo helped fund. That motion failed when McCusker, told the chair's vote would decide it, voted no. McCusker had called a delay "an extremely risky proposition." District counsel warned that refusing the agreement could expose Rio Nuevo to a detrimental-reliance claim from the developer.

The approved motion directs district officers to keep discussing parking availability and rates with the developer. McCusker said city-owned garages charge $1.25 an hour and that a nearby private garage had raised its daily rate to $30.

Also discussed:

• The board granted Lucky Penny a 60-day extension after a plumbing redesign delayed construction. Its current certificate-of-occupancy deadline is Nov. 11.
• The board canceled its second meetings in November and December for the holidays.
• A $400,000 commitment for two Mercado annex projects, approved in 2025, remains unspent. McCusker said both projects were postponed but their developers intend to move forward. Meyers said staff would take a look at it.

This report was drafted by Claude Opus 5.5 from a live transcript produced by Deepgram Nova-2, then reviewed and edited by Nicholas De Leon with Claude Opus 5.5, and published at 5:25 PM MST on October 27, 2026. Read more about how this is made.