With deadline looming, deal could amend Gadsden westside development - Inside Tucson Business: News

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With deadline looming, deal could amend Gadsden westside development

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Posted: Friday, March 22, 2013 12:00 am

As the clock ticks down on the latest phase of the City of Tucson and Gadsden Company mixed-use development project on West Congress Street, questions have come up about where the venture stands.

“It’s clearly a question that nobody wants to answer,” said City Councilman Steve Kozachik.

Gadsden was granted “preferred developer” status as part of a 2008 development agreement with the city that gave it rights to develop four phases of the 14-acre city owned property south of Congress Street and west of Interstate 10. As part of the deal, the company agreed to meet certain deadlines that include contributing $3 million toward construction of the Sun Link modern streetcar project by the end of the second phase.

To date, Gadsden has not paid the $3 million, and the second phase is scheduled to end on May 16.

“Their first obligation is to pay for the streetcar by May 16th, and I don’t think they have the money,” Kozachik said.

The councilman said he’s asked city officials about the status of the development agreement and the streetcar-funding component for months but has not gotten any concrete answers.

The issue has been placed on a council study session for April 9 at the request of City Councilwoman Regina Romero. The project is within Ward 1, which Romero represents.

When the initial deal was finalized in 2008, the plan divided the property into four development phases, which included construction of retail, hotel, office and residential components.

The first phase of the development was the now-completed Sentinel Plaza affordable senior housing project at 795 W. Congress St.

The May 16 deadline for the second phase represents 24 months after the completion of the first phase. The time schedules were established in the 2008 agreement.

That second phase includes development of the two sections of the property that front Congress west of Sentinel Plaza. The section known as Block A, at the southeast corner of Congress and Avenida del Convento, was slated for a mix of residential units and retail and the other, known as Block F to the east of Block A.

Neither of those properties has been developed to date.

Gadsden partner Jerry Dixon said the company is confident it will meet its obligations and the development will move ahead on schedule.

“We plan to acquire the land from the city in May,” Dixon said.

He said the company has been working with the U.S. Department of Housing and Urban Development for about $20 million to build 236 units of “workforce housing” in Block A.

Closing conditions of the second phase include Gadsden conveying infrastructure improvements completed as part of phase 1 to the city, which Dixon said the company has done.

Other conditions include Gadsden closing on a construction loan sufficient to pay estimated costs of infrastructure improvements for all the subsequent phases and streetcar improvements.

The company also is required to put up a $500,000 performance bond as a guarantee against failure to meet its obligations under the terms of the deal.

Dixon said he anticipates all of the deadlines to be met.

As for its obligation to the streetcar infrastructure, Dixon said the company is not required to pay the entire $3 million in one sum. Rather, he said, it pays the city in installments at the closing of each phase.

For instance, Dixon said Gadsden intends to make a $525,000 payment to the city when phase 2 closes.

When the council meets in April to discuss the Gadsden development, Romero said there likely would be some changes to the time schedule and other amendments to the 2008 agreement.

Another possible change would remove Block F from phase 2 and include it in phase 3, which according to the original agreement would close within 3 years of phase 2 closing.

Dixon and Romero both said the city has not met some obligations it had under the development deal. That likely will come into play in negotiating with the city.

“There’s some things that the city is obliged to do that we might waive,” Dixon said.

One of the city’s commitments was to make site improvements to the so-called hole-in-the-ground property south of Cushing Street on the west bank of the Santa Cruz River.

Whatever the outcome, Kozachik said he doesn’t want to see the council delay a decision on the issue.

“This was supposed to be done back in December,” he said. “I’m not inclined to kick the can down the road.”

Contact reporter Patrick McNamara at pmcnamara@azbiz.com or (520) 295-4259.

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