Wednesday, September 1, 2010

Who writes Tucson's real estate development contracts? Cuz I don't think they know what they are doing (Part 2)

This downtown development saga begins back in December 2008, but it keeps on... well...developing...

The Cliff Notes version is that the City of Tucson was going to swap land for development services to be completed by Scott Stiteler (and his various other partners who have come and gone in the past year and a half).

The Tucson Citizen (December 17, 2008) made a rosy announcement of the downtown "predevelopment plans" and the land/cash swaps.

Later in the Spring of 2009, the Tucson Weekly (April 9, 2009) published an extensive article on multiple downtown deals.

Quoting from the Weekly:
"The concept is the city has no money," explains Jaret Barr, of the city manager's office. "What if the DTDC [Downtown Tucson Development Company, Stiteler's business] could do the work, and our compensation (to the DTDC) would be properties?"

Under the terms of the predevelopment agreement, the developers would be given options to acquire numerous parcels of valuable property for $1 each. This land was to be transferred when the DTDC finished specific tasks.

This is not a new idea. Cash-strapped municipalities have used this redevelopment tactic for many years: Give a developer some vacant land (or sell it for a token amount of money) and allow the developer to build on it, in a specified way. In the end, everyone is happy, theoretically. The developer owns a money-making property, and the city benefits from sales taxes and the value of having gleaming new construction where there once was a blighted property or a vacant lot.

During the spring of last year, several trial balloons were floated regarding which properties would be traded to Stiteler in exchange for his services. At one point, he was asking for the the Historic Train Depot and the Congress Street frontage of Ronstadt Center (which would have made it unusable as a bus station). This is when I started to pay attention. As I mentioned, these land-for-services swaps are common, but generally the municipality doesn't trade property that the city has spent millions developing. (In fact, last spring I even wrote letters to all of the City Council members asking, "The Ronstadt Center? The Train Depot? Really? What are you thinking???")

To add to the ongoing drama downtown last spring, there were two other city government/development stories also brewing in the local media. In April, the City Council fired Tucson City Manager Mike Hein. Was Hein scapegoated because of the city's problems and Rio Nuevo's ... well... sluggish progress? I don't know, but for a variety of opinions on this high-profile political action, check out these links 1,2,3,4, 5.

And, of course, who could forget the landlord-tenant food fight that sprang up between Stiteler and the the Rialto Theater Foundation, reported in the Weekly in late May 2009. The Rialto eventually lost this battle. (Note to self: never fight publicly with your landlord.)

On June 11, 2009, the Tucson Weekly reported that the Train Depot had been removed from the land swap, but the specific deal between Stiteler and the city seemed to be evolving-- just days before the June 16 deadline for a City Council decision. Furthermore, the Weekly reported that "the city could owe Stiteler and Martin [one of his partners] more than $900,000 if the document isn't ratified by June 16, due to language that was included in an earlier agreement."

Why did the city apparently sign a contract that had a deadline for their decision but not a deadline for submission of the plan? In the June 11 story, the Weekly reported several different possible multi-million-dollar scenarios-- just days before the final decision was to be made. In fact, Stiteler delivered the final plan to the City Council on the Friday before the Tuesday City Council meeting. Three days over a weekend was obviously not enough time for them to make an informed decision.

Ultimately, the City Council did what they do best; they delayed making a decision. This-- among many other Rio Nuevo snafus-- caused City Councilwoman Nina Trasoff to lose her City Council seat to Republican Steve Kozachik in the November 2009 election and gave Councilwoman Karin Ulich a very tight race. In October 2009, the Tucson Choices blog published a series of "Player Reports" with tidbits of information on several downtown deals.

Now let's fast forward to this summer 2010.

Remember the fee that the city "could owe" Stiteler? Well, the city did owe him a settlement because the 2009 deal fell through. On June 17, 2010 (a year and a day after the historic non-decision) the Tucson Weekly reported the city's settlement with Stiteler.

But, wait, there's more!

In the past year, the Arizona Legislature and Governor Jan Brewer created the Rio Nuevo Multipurpose Facilities District Board to oversee future development in downtown and to manage the Rio Nuevo funds.

On June 18, 2010 Inside Tucson Business reported that the Rio Nuevo Board (now in charge of spending the Rio Nuevo funds) doesn't approve of the city's lawsuit settlement with Stiteler. According the Inside Tucson Business, the Stiteler settlement includes a shared asset-- parking spaces in a downtown parking garage-- and the City Council didn't clear the deal with the Rio Nuevo Board. Sigh.

Again, I ask, "Who writes Tucson's real estate development contracts?"

1 comment:

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