Rio Nuevo audit reveals $1.9M overpayment

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TUCSON, Ariz. -- An audit shows developer Garfield Traub was overpaid nearly $1.9 million in the past three years on two contracts it had with the City of Tucson and the Rio Nuevo district board.

The revelations came out this week after a law firm did an audit of the contract at the request of the "new" Rio Nuevo board.  The two contracts were canceled by Rio Nuevo at its meeting on July 21.

Garfield Traub has also been under fire for refusing to pay some $300,000 in funds to local subcontractors, hired by contractor Turner Sundt, for work done on the new east entrance of the Tucson Convention Center.  The developer said it was investigating irregularities in the billing. 

"It is unmitigated greed. It's the only thing I can say," said Rio Nuevo board member Jonathan Paton.  "It's either greed or icompetence."

Thursday, Turner Sundt said it has decided to pay the subcontractors rather than wait for funds from Garfield Traub.

The Rio Nuevo Board was reconstituted in 2010 after the State of Arizona questioned the lack of progress in the tax increment district authorized by voters in 1999 to revitalize downtown Tucson.  Millions of dollars had been collected and spent, but there was little to show for it.

"The Rio Nuevo name has a connection with a very murky past," said Rio Nuevo Board member Jodi Bain.

The audit, conducted by Rusing and Lopez, worked with forensic auditors R&A CPA.  It uncovered the amounts paid to Garfield Traub to date, when compared with the Project Budget approved by the city and the board, were $1,878,775.97 higher than they should be, according to a news release from Jodi Bain, chair of the Rio Nuevo Board.

The first agreement was signed by the City on July 30, 2008, and was called the, "pre-development agreement."  The second was signed by the City on May 12, 2009 and by the previous Rio Nuevo Board on May 15, 2009.  It was called the Master Development Agreement.  Both were focused on the construction of a convention center hotel in downtown Tucson.

The Federal Bureau of Investigation has acknowledged it is conducting an investigation into Rio Nuevo to determine if any laws have been broken.  FBI agents earlier this year raided a Rio Nuevo office at the Tucson Convention Center and hauled away boxes and files.

The controversy over the lack of payment to subcontractors has been a side show this year.  Many of the subcontractors are small Tucson businesses that are having difficulty dealing with their finances after they performed the work last year, but  have never been paid. 

In a letter to the subcontractors dated Wednesday, executives from Turner Sundt said their project team is, "in the process of revisiting the amounts due each subcontractor and will be contacting you shortly confirming actual amounts to be paid."  The total owed has been reported to be in the $300,000 range. 

"It is a long time coming.  These guys should have been paid a year and a half ago," said Councilman Steve Kozachik.

The letter went on to say, "In the interest of minimizing the breadth of this situation, Turner Sundt has made the decision to compensate all amounts due subcontractors."

The board says it's committed to finding out what happened to $230 million of Rio Nuevo money.

"The taxpayers will not be ripped off any longer," said Paton.

Board members are still waiting on boxes of information they expect will reveal many more uncomfortable facts about where all the money went.