The Rio Nuevo Board unanimously authorized its chairman and secretary last week to sign a lease with Caterpillar’s Surface Mining & Technologies division when it is complete. The Board also issued notices to proceed that will allow Sundt Construction to start on the $43 million SM&T division headquarters project being built at the base of A Mountain, along the Sun Link Tucson Streetcar line, just west of Interstate 10.

The Board convened a special meeting last Monday to review the Caterpillar lease, financing and construction costs. The board reviewed the lease revenue bonds financing proposal, and will prepare the required resolutions to allow Rio Nuevo to issue the bonds required to finance the project.

Under the draft 25-year lease, Rio Nuevo will issue the bonds for the construction project and Caterpillar will pay the principal, interest and costs. Interest will be capped at 3 percent for the first 10 years. In addition, Rio Nuevo has acquired title to the property for the building for $7 million and will remediate the landfill at the site at a cost of $4.8 million. The draft lease would require Rio Nuevo to reimburse Caterpillar if the project did not receive an eight-year abatement of the Government Property Lease Excise Tax.

Tucson architect Phil Swaim told the board that construction on the project needed to begin within a week to ensure Caterpillar would have a certificate of occupancy by March 1, 2019, a deadline set by Caterpillar in the draft lease.

Since property tax is not levied on government-owned property, the State of Arizona established the GPLET to replace the real property tax with an excise tax calculated on the square footage of the building. This excise tax can be abated for eight years, in the Caterpillar case, only if the Tucson City Council approves. 

The creation of the Rio Nuevo Multipurpose Facilities District was approved by Tucson voters in 1999, along with an appointed Board, to invest state tax dollars in public and public/private projects to create a vibrant Tucson core. For every dollar the Board invests, the community reaps $10 of construction activity with projects like the AC Hotel Tucson by Marriott, the Arena, Greyhound, the Mercado Annex, City Park, the Marist project and Caterpillar. For more information, visit