TUCSON, Ariz. (June 16, 2026) — The state budget passed by the Arizona Legislature and signed by Gov. Katie Hobbs on Saturday preserves the Rio Nuevo economic development program, ensuring the continuation of a critical initiative that utilizes a share of sales tax revenue to incentivize private development within Tucson’s urban core.
While lawmakers ultimately abandoned a $19 million repeal effort included in the original majority budget, the final bill adds new accountability language to ARS § 48-4202, the statute governing tax districts:
From the total budgeted income remaining after operating expenses and debt service are paid, at least 80% of the grants and financial support provided by the district in a fiscal year must be allocated to projects that directly generate transaction privilege tax (sales tax) revenues.
“Rio Nuevo already complies with this mandate,” said Fletcher McCusker, Chairman of the Rio Nuevo Board. “We understand the legislature's intent is to ensure Rio Nuevo remains focused on projects that actively expand the sales tax base. Our current leverage ratio is roughly 7-to-1, meaning that for every single dollar of state revenue we invest, the private sector chips in seven.”
Gov. Hobbs demonstrated strong stewardship of Rio Nuevo throughout the budget process, rejecting initial legislative proposals to dismantle the program. Following a subsequent site visit to Tucson by several legislative leaders, lawmakers, and the Governor's office, lawmakers and the Governor's office successfully reached the compromise codified in the final budget.
“We are incredibly grateful to Governor Hobbs for her steadfast support and for standing firmly by Rio Nuevo to ensure we can continue our charge,” McCusker added. “Her leadership, coupled with a bipartisan commitment to downtown development, allows us to keep this economic momentum moving forward.”
Vice Chairman Edmund Marquez, a Republican appointee by the Speaker of the House, also praised the bipartisan achievement. “We appreciate the Legislature and the Governor's Office coming together on a budget that protects Rio Nuevo. Our local Tax Increment Financing (TIF) district has been an absolute powerhouse for our regional economy, and it remains vital to the growth of our community.”
Since 2012, Rio Nuevo has committed $116 million, attracting $833 million in private sector investment and generating 66 new restaurants and retail establishments, 8 new hotels, and a fully renovated Tucson Convention Center and grounds. The district's sales tax base has grown from $27 million to $57 million annually, with 20 new projects still in the pipeline. Travel + Leisure magazine ranked Tucson the No. 2 food city in America, second only to New York City.
The 2025 Arizona Audit Report found that Rio Nuevo's capital investment activity continues to produce meaningful economic and fiscal benefits for the Tucson region. Benchmarking against 10 comparable facilities nationwide, the Tucson Convention Center posted the highest attendance increase of any benchmarked market since 2022 — with 1,044 events, compared to Long Beach (513), Austin (476), Albuquerque (307), and Fort Worth (247).