News Column

Credit rating for Rio Nuevo downgraded

June 13, 2014

By Darren DaRonco, The Arizona Daily Star, Tucson



June 13--Rio Nuevo's credit rating took a hit this week when Fitch dropped it from A to BBB.

The rating agency cited volatile sales tax collections and Rio Nuevo's inability to track businesses that aren't paying into the district as the primary reasons for the drop.

Fitch's report also said the city's persistent financial problems also contributed to the downgrade.

Although a lower credit rating means higher interest rates on future bonds, the change won't likely affect Rio Nuevo's finances. That's because the district hasn't taken out a bond since 2008 and doesn't plan on issuing any in the foreseeable future, said Rio Nuevo Chairman Fletcher McCusker.

While Rio Nuevo and the city will always be linked, McCusker said the district could solve its tax compliance problem through an agreement with the Arizona Department of Revenue.

Currently, each business that lies within the district's boundaries must fill in a code on their tax forms in order for Rio Nuevo to collect all of its tax dollars.

But the district isn't allowed to view the forms to see who is and who isn't filling them out properly. Adding the code doesn't increase a business's tax. It just means tax dollars intended for Rio Nuevo end up in the state's coffers.

Not having access to the forms might explain why the district's tax revenue fluctuates so often, McCusker said.

Over the past few years, Rio Nuevo's annual tax revenue has wavered between $9 million and $15 million.

The new agreement being worked out between the district and the Arizona Department of Revenue would allow district employees to identify which businesses fail to fill out the paperwork correctly, McCusker said.

While sales tax always ebbs and flows with the economy, McCusker hoped the change would result in more predictable sales tax receipts.

Contact reporter Darren DaRonco at 573-4243 or ddaronco@azstarnet.com. Follow on Twitter @DarrenDaRonco

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(c)2014 The Arizona Daily Star (Tucson, Ariz.)

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Source: Arizona Daily Star (Tucson)


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