City, Rio Nuevo end dispute, now begin to talk about hotel, TCC fixes - Inside Tucson Business: News

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City, Rio Nuevo end dispute, now begin to talk about hotel, TCC fixes

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Posted: Friday, February 15, 2013 8:00 am

Now that an accord has been reached in the feud between the City of Tucson and the Rio Nuevo Multipurpose Facilities District, the long-delayed tasks of fixing the Tucson Convention Center and building a downtown hotel can begin.

“We’re certainly encouraged by the news,” said Brent DeRaad, president and CEO of the Metropolitan Tucson Convention and Visitors Bureau.

On Feb. 7, city and Rio Nuevo leaders signed an agreement that puts an end to more than two years of disputes over ownership of property and a pair of lawsuits that Rio Nuevo had filed against the city seeking millions of dollars in repayment for years of wanton spending.

The agreement sets into motion efforts for Rio Nuevo to begin spending its sales tax proceeds on repairs to the aged Tucson Convention Center and pursue a public-private partnership on a downtown hotel project. Both were hallmarks of the original Rio Nuevo proposal that voters approved in 1999.

“In looking at downtown, ideally we should have a true convention center hotel,” DeRaad said.

That would be a facility with about 500 rooms and as much 50,000-square feet of meeting space, which could make the region more competitive with other cities in the region in competition for conventions and other events, he said.

Rio Nuevo Board Chairman Fletcher McCusker said the district has already been in communication with two or three hotel developers about possible partnerships.

“I think we can leverage the little money we have with private investment,” McCusker said.

For example, McCusker said, the board could agree to pay the costs of utility infrastructure for a hotel project in the downtown area. The Tucson City Council has to approve any Rio Nuevo expenditure larger than $50,000.

Tucson City Councilman Steve Kozachik said he was satisfied with the agreement the parties reached and the opportunity to move forward with real projects. But he cautioned against simply starting to spend money again on ill-conceived Rio Nuevo projects.

“I don’t subscribe to ‘build it and they will come,’” Kozachik said.

He said people should be mindful of the financial limitations and the size of the Tucson market.

“Let’s build for the events that we legitimately have an expectation of hosting,” he said. “We’re not San Diego or Los Angeles.”

Using the terminology of the hospitality industry, Kozachik said Tucson was a SMERF market, which is short for social, military, educational, religious and fraternal. In other words, Tucson is a smaller market and not likely to attract larger conventions common in major markets.

Kozachik said a proposal to build a hotel at the Depot Plaza, at Fifth and Toole avenues downtown, could meet the requirements of the new agreement and state law.

That plan, a proposal by downtown developer Scott Stiteler, was to build a 130-room boutique hotel.

“That’s exactly something that we could have a serious conversation about,” Kozachik said.

Another possibility for the city and Rio Nuevo would be to reopen talks with HSL Properties, owner of the closed 307-room Hotel Arizona, 181 W. Broadway.

Owner Humberto Lopez has tried on numerous occasions to get the city to partner with his company in refurbishing the 39 year-old hotel, which shares a property line with the TCC.

“We certainly think that this opens up a door,” said Omar Mireles, vice president of HSL Properties.

But given the previous thwarted attempts, Mireles said the company wasn’t holding out hope.

In the meantime, Mireles said they have looked at alternative uses for the closed hotel, including student housing, senior residences or multi-family housing.

Kozachik also said that whatever hotel project the city and Rio Nuevo decide to pursue it needs to be privately funded.

A proposal from 2010, which the council ultimately rejected, would have had the city assume much of the financial burden to build a $190 million, 500-room hotel in a public-private partnership.

“If it’s fully publicly funded,” Kozachik said, “that’s going to be a non-starter.”

Contact reporter Patrick McNamara at or (520) 295-4259.

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