Rio Nuevo is spending from its reserves for the first time in years after a projected 25% drop in revenue, which district leaders are partly blaming on Amazon's exemption from paying tax increment financing taxes in exchange for building AI data centers in Arizona.

Rio Nuevo is a tax increment finance district funded by a share of state sales tax dollars generated downtown and held accountable to the Arizona Legislature.

Board members discussed new and ongoing projects and reviewed the annual budget during their June 23 meeting, where they said the district's projected revenue puts it in the red.

"Every other year we have enjoyed an increase in our revenue base," said Board Chair Fletcher McCusker, adding that some people have attributed the revenue drop to Amazon.

Tax revenue that would normally come from holiday shopping didn't materialize, as Amazon was recently exempted from paying TIF taxes under a deal with the state that cleared the way for the company to build AI data centers in Arizona.

"We've got $1.7 million for projects over the next year, which is significantly lower than we were seeing a year ago," said Chief Financial Officer Dan Meyers. "As far as the April TIF revenue, I got word that it was going to be $1.3 million. Again, we started the year with a budget of $1.6 and we backed off on that to $1.4."

Meyers said issues with the estimates have included erroneous filings, non-filings and delayed revenue filings.

"I'm expecting to pick up another $150,000, but I don't think we count on it until the money's in our pocket," Meyers said.

Still, the district's current and future commitments have put Rio Nuevo in a position it hasn't faced since McCusker was appointed chairman.

"We've committed more than we have, and more than we're going to earn," McCusker said. "We're spending our reserves."

But the revenue dip still isn't cause for alarm, McCusker said.

"We are not destitute," he said, adding that Rio Nuevo has a reserve of $21 million to continue funding projects. "There is no risk to our commitments. The risk is to new projects."

But Meyers said he's concerned that with the potential for reduced spending in June, the funding decrease will become more noticeable as the numbers roll in.

Meanwhile, Utah-based Oz Development is seeking funding from Rio Nuevo to construct what it calls "attainable" housing on the west side of Interstate 10, according to Rory Juneman of Lazarus & Silvin P.C.

The two planned projects, Fina Vista North and Fina Vista South, are located near the Mercado Annex, one at 701 W. Congress Street and the other at 115 S. Linda Avenue.

Construction has already begun, but the company is hoping to receive funding from Rio Nuevo.

Juneman said that while the units won't be "capital A affordable," the multifamily projects will remain attainable by focusing mainly on studio and one-bedroom apartments.

The average tenant in other Oz Development properties is around 29 years old and earns about $39,000 a year.

Due to the increasing cost of materials and labor, Oz is requesting a Government Property Lease Excise Tax agreement for each project, as well as construction sales tax reimbursements for the Linda Avenue project.

The only issue is that Fina Vista North is outside the Rio Nuevo District, meaning Rio Nuevo cannot spend taxpayer dollars supporting the project.

Juneman said Oz Development is content with whatever Rio Nuevo can provide, even if that means helping to fund just one of the properties.

Quentin Agnello is a University of Arizona alum and freelance journalist in Tucson. Contact him at qsagnello@gmail.com.

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