(Steve Shadley/ KJZZ News)

An entrance to the Tucson Convention Center. The arena at the center has been upgraded with new seating, concessions, restrooms and a new high-definition scoreboard and video screen.

(Steve Shadley/ KJZZ News)

Rio Nuevo District Board Members Mark Irvin (left) and Fletcher McCusker outside of a ticket booth at the Tucson Convention Center.

(Steve Shadley/ KJZZ News)

Inside the newly remodeled arena at the Tucson Convention Center. Nearly $8-million dollars for the rehab project came from the Rio Nuevo Tax District Fund.

(Steve Shadley/ KJZZ News)

Byron Schlomach, Chief Economist with Phoenix-Based Goldwater Institute. He says Tucson's Rio Nuevo Project is a boondoggle that wastes taxpayer dollars.

The redevelopment of downtown Tucson is moving ahead despite criticism over how public money has been used for urban renewal projects. The Rio Nuevo District was formed in the central city to boost Tucson’s arts scene, develop new housing and preserve historic sites. But critics claim the district has wasted millions in tax dollars and mismanaged proposed developments that were never built. 

In 1999, Tucson voters approved a special tax district that allows the community to keep an incremental share of state sales tax revenues. The program generates about $11 million each year. Rio Nuevo board members said the money is being used to create a cityscape similar to what’s happening in historic parts of San Diego and Austin, Texas. But a decade after Tucson’s program started, an investigation by a newspaper found the district board spent $230 million.

“With little to show for it, and that kind of became the branding of Rio Nuevo,” said Fletcher McCusker, chairman of Rio Nuevo’s independent citizen’s board. He wasn’t appointed to the board until after reports surfaced about the district’s spending spree.

“$12 million spent on a hotel that was abandoned," McCusker said. "$18 million that was spent on a science center that was abandoned. This is state money, not city or county money, and it was used frivolously without any real accountability or without any real success."

He said about $30 million was used to improve two turn-of-the-century theaters in downtown Tucson. But McCusker said it was the district’s spending on other projects that got the attention of authorities.

“The FBI and the Attorney General were engaged," he said. "They seized records, they ran a three-year investigation."

But, he added last year, the FBI closed the investigation. It announced there’s no evidence Rio Nuevo board members were engaged in criminal activity. The state auditor general’s office agreed, but said the district “grossly misspent” the money.

"Nobody ever got indicted, nobody’s going to jail,” McCusker said.

Five years ago, state lawmakers passed a bill that took oversight of the district away from Tucson’s city manager and put the board under state control. In 2012, a legislative leader appointed McCusker as Rio Nuevo chairman. He joined Mark Irvin as a recent appointee in hopes they could clean up the financial problems. Now, they’re using Rio Nuevo funds to rehab Tucson’s aging convention center.

Irvin and McCusker recently toured the arena at the convention center where construction crews are working. Down below, an ice rink is currently set up for hockey games. They climb a flight of stairs and now they’re in a new breezeway at the arena, which will host concerts and sporting events. Irvin said there’s no structural work, it’s all cosmetic.

"This is a new ceiling system that you see up here, the chandeliers that hang down aren’t here yet, but those will be down in the middle," Irvin said. "We’ve obviously redone all of the floors. This area right here where I’ve just pointed is where the new bar is going."

Rio Nuevo has spent almost $8 million to upgrade the convention center, scheduled to open in January. The district is operating on a tight budget because it’s still paying off massive debts created by the previous board.

"They ought to have something to show for $230 million, I mean, it's simply ridiculous, outrageous and immoral,” said  Byron Schlomach, an economist with the conservative Phoenix-based Goldwater Institute. He wants Tucson’s special tax district abolished.

“If I were talking directly to the people of Tucson, I’d say cut your losses,"  Schlomach said. "You’ve lost money on this deal, it stinks, it’s clearly been a boondoggle up to now."

But current Rio Nuevo board members said they’re using the funds responsibly and now they’re working under more scrutiny than ever as they try to breathe new life into downtown Tucson. Republican governor-elect Doug Ducey will fill some vacancies on the Rio Nuevo Board after he’s sworn in in January.