Rio Nuevo's cash reserves are nearly depleted after a 25% drop in monthly revenue, leaving the tax district with roughly $1 million to invest in new projects next year even as it weighs financial support for a downtown Ethiopian entertainment complex and a proposed hotel expected to bring 163 jobs.

The board took stock of its financial situation and projects during a July 14 study session, discussing the planned Tucson Inn and Marketplace, several restaurants in the process of construction and a funding request from Z-Street International Marketplace to build permanent shade structures.

Rio Nuevo is a tax increment finance district that uses tax money generated downtown to subsidize businesses and urban renewal projects that generate sales tax revenue, with excess revenue going to the state treasury.

Chief Financial Officer Dan Meyers told board members that projected monthly revenue has dipped 25%, from $1.6 million to $1.4 million, forcing the district to dip into its reserves last month.

Rio Nuevo's monthly spending is projected at $1.16 million, leaving only $240,000 a month in cash flow. If the monthly cash flow doesn't increase, Rio Nuevo will have a little over $1 million to invest in projects for the next fiscal year.

"For all intents and purposes, our reserves are pretty much shot now, and we really depended on what we bring in on a monthly basis," Meyers said.

But he remained optimistic about the downturn, saying large producers of tip revenue often file and pay their taxes late in the month, which may have resulted in an artificially low number in April's report.

"I'm hoping that's the excuse and I'm hoping that our May revenue will be much stronger," Meyers added.

Board Chair Fletcher McCusker said the city is facing a similar dip in sales tax revenue but has other ways to recover the loss.

"We don't control our revenue," McCusker said. "So we have to manage (with) whatever they provide us."

Tim Medcoff, Rio Nuevo's attorney, pointed to a report that shows potential economic benefits from the developing Tucson Inn and Marketplace.

The Oregon-based Obie Properties group plans to build the hotel at 75 E. Broadway Blvd. The report, written by a third-party consultant, said the proposed hotel would provide significant taxpayer benefit by creating 163 new jobs.

"This land has been vacant for 40-plus years. It's been generating zero tax benefits at all," Medcoff said. "The public benefit generated from those new jobs … will far exceed the benefits that the developer would obtain through the excise tax versus property taxes."

Medcoff recommended the board vote to publish the notice to taxing authorities, who will have 30 days to review the report and raise any objections. The published report would also be available to the general public. All five board members in attendance approved posting the report.

Restaurateur Favin Gebremariam spoke on behalf of her family, who own and operate Ethiopian entertainment complex Z-Street on the Sunshine Mile, asking for assistance to build permanent shade structures.

The complex includes Zemam's Ethiopian restaurant, Zerai International Bar and Ethiopian coffee shop Zedamo.

"We are dealing with shade sails that are not sustainable," Gebremariam said. "They can't withhold the type of rain and wind we've been getting and they potentially cause a risk if they snap while people are on the property."

Gebremariam said the location has already received a construction bid of roughly $55,000 for a permanent playground-type shade structure from American Play Systems. She requested $65,000 from the board, saying the bid from APS was for a structure slightly smaller than what the family thought was necessary.

Gebremariam said her family had already invested $90,000 of its own money toward backyard and front yard renovation.

"We added in 187 plants. Some trees, some succulents, some cacti — in order to bring the space to life," she said.

Several board members expressed enthusiasm for the proposal.

Board member Corky Poster said he looked at the construction with Gebremariam three weeks ago and was impressed.

"Those basins on the north side of Z-Street have completely transformed the way that looks," he said. "The last missing piece was turning that landscape into an oasis. … And I agree that the very last piece would be these shade structures."

Board member Jannie Cox echoed Poster's sentiments.

"I was there last week myself and had a tour, and it's just amazing, the transformation of that space," Cox said. "It's warm, it's welcoming, and it's warm in ways we don't want it to be, so I really think shade is the answer."

Poster and Cox said they intended to vote in favor of the proposal at the next board meeting, scheduled for July 28.

McCusker noted that the Freddy's Frozen Custard & Steakburgers location across the street from Z Street had gone out of business, calling the contrast between the two businesses an example of "the value of a destination."

"That was a vacant parcel. They built that chain restaurant from scratch," he said. "Across the street, you've built a hub, a community destination, a place that everybody wants to go to. And we're really proud to have been part of that."

Other projects discussed included converting the former Indian Trading Post space downtown into the Cornish Pasty Co. restaurant and the construction of Herbert's Deli, both of which have been running behind schedule. McCusker said both items would be put on the agenda for the next meeting.

A sale-leaseback deal with Oz Development, which is building "attainable" apartment complexes on Tucson's west side, was in the works but has been put on hold.

Benjamin DePue is a University of Arizona student and Tucson Spotlight intern. Contact him at bdepue@arizona.edu.

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