[kaneui]

Senate panel would ax future Rio Nuevo funds
GOP lawmaker demands that for his budget vote

By Daniel Scarpinato
ARIZONA DAILY STAR
07.31.2009

PHOENIX — A Senate committee voted to gut future funding for Rio Nuevo on Thursday to win support from a Maricopa County lawmaker on a controversial sales-tax ballot referral. State Sen. Jack Harper, R-Surprise, said he wouldn't vote to send a sales-tax increase to the November ballot — an agreement between Gov. Jan Brewer and GOP lawmakers — only to see state revenue continue to be redirected to downtown Tucson's stalled redevelopment efforts. "These are other people's spending habits that I am not raising revenues to support," Harper said, referring to Tucson Republican lawmakers who support the project. Specifically, Harper's amendment — introduced and passed in the Senate Appropriations Committee — would cut off any future funding that wouldn't pay for outstanding bonds for projects in downtown Tucson.

The budget and tax-cut package, as a whole, still needs to pass the Legislature and garner the governor's signature. As of Thursday evening, legislative leaders were still working to line up votes. In the short term, the change wouldn't mean much for Tucson or the state. Rio Nuevo redirects state sales taxes collected in its footprint back to the district — that's money that would otherwise end up in the state treasury. Right now, those revenues barely cover the city's debt-services obligations with sales down in the sluggish economy. But over the 16 years remaining in the life of the district, there's a potential for $400 million in revenue to pay for planned facilities that would be lost under Harper's change. And even Harper admitted that taking those future funds may run afoul — as some have suggested — of a constitutional provision requiring a super- majority vote for anything that increases state revenues. "I think we're probably going to discuss it more; there may be litigation," he said.

Formed by Tucson voters in 1999 and extended by the Legislature in 2006, Rio Nuevo is estimated to receive $600 million in state sales taxes by the time it expires in 2025. About $200 million has either been spent, is in the bank or is earmarked to pay off the interest from a December bond sale. Until now, Rio Nuevo has been spared cuts to its revenue for two prime reasons — there's little financial benefit to the state in the short term, and Southern Arizona Republicans have refused to vote for a budget that tinkers with the funding scheme. But that coalition appeared to be unraveling Thursday. Sen. Al Melvin, R-Tucson, voted for the Harper amendment in committee. In an interview, Melvin said he agreed to the language but intends to try to restore the funding next year. "For some reason he's got a hang-up about Rio Nuevo," Melvin said. "He agreed to protect the money for the debt service, and that's what we want."

But Sen. Paula Aboud, D-Tucson, said Harper was unjustly targeting Tucson. Aboud said she took "personal offense" at the notion that a Maricopa County lawmaker was setting policy in a place he knew nothing about — and as part of an exchange for his vote on a sales-tax referral. Aboud said it would be unlikely for the money to be restored at a later point. "Next year there's not going to be any money to fix anything," she said. "We've got Republican legislators that don't have an affinity to Tucson … taking away dollars that are going to provide jobs and build an infrastructure in downtown." Harper had previously said he wouldn't vote for the sales-tax referral — a demand of the governor. He still doesn't support the tax itself.

Sen. Jonathan Paton, R-Tucson, who has been most vocal about Rio Nuevo's lack of progress, said he had not yet seen the language proposed by Harper. The Rio Nuevo change was actually one of three changes Harper passed through the Senate Appropriations Committee. Harper also wanted a 5 percent cut in state employment by next June, cuts in staff at the Auditor General's Office and a $1 million cut from the Arizona Automobile Theft Authority. Senate Republican leaders would not say whether they had agreed to Harper's requests to garner his support for the sales-tax referral, but all his amendments then sped through committee on party-line votes. The same budget package — without Harper's amendments — passed the House Appropriations Committee on Wednesday night.

It was unclear whether Harper's proposals would be acceptable to a majority of lawmakers and to Brewer, given the tenuous nature of the deal between the governor and GOP leaders. Under the sales-tax plan, voters would be asked this November to approve a three-year state sales-tax hike. The increase would be a penny for two years and half a penny for the third year, dropping back to the current 5.6 percent rate after that. It would also be coupled with a spending cap, preventing lawmakers from spending more than $10.2 billion a year for three years. And lawmakers want to refer another measure that would ask the public to allow them to dip into earmarked funding for programs voters have previously protected, like publicly financed elections and early childhood development. The budget package also includes other changes to Rio Nuevo, part of a compromise reached months ago between city lobbyists and lawmakers. If the package is signed by the governor, the Tucson City Council would no longer be in control of the project. An already existing oversight board would have jurisdiction instead. That board would be totally restructured. The governor, the speaker of the House and the Senate president — rather than the City Council — would appoint its members.