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A small cash-strapped arts organization was hours away from signing a deal that would have quietly given it a $600,000 city subsidy over three years.

The lease for ArtFare was put together by the city's real estate division at the behest of Councilwoman Nina Trasoff. Although it had never been discussed or presented in public, it was included on a list of supposedly routine items voted on en masse, without debate.

It was pulled off the City Council agenda shortly before Tuesday's meeting, after the Arizona Daily Star and several council members started asking questions.

The size of the subsidy, which would have been financed by selling two city buildings, isn't the only reason the council backed away. If the whole thing went bad, city taxpayers could have owed up to $1.23 million.

The deal called for the city to lease the building at 55 N. Sixth Ave., where ArtFare now operates, for $650,000 over three years. It would then sublease to ArtFare for $308,000 — or $114,000 a year less than taxpayers were putting out.

ArtFare would also be allowed to keep $86,000 a year in rents now being paid by two other building tenants, giving it a total subsidy of $200,000 a year.

Rents would escalate over the final two years of the lease, bringing the total cost to $1.23 million, with ArtFare only required to pay the full amount the last two years.

But if ArtFare could not come up with its lease payment, "The city would be on the hook for the lease," said Lou Ginsberg, city real estate special-projects manager — a condition other council members said is unacceptable.

ArtFare is so cash-strapped it has stopped paying its $10,000-a-month rent to its landlord Richard Melikian, who is carrying it until a deal with the city can be worked out, said Fletcher McCusker, chairman of the nonprofit corporation's board.

McCusker, who is also the chief executive officer of Providence Service Corp., said the company gave ArtFare $400,000 to pay rent, run programs and fix up the building, which the group moved into in the summer of 2005. That money is gone, and McCusker said he can't give more until ArtFare has a semi-permanent home.

Councilwoman Carol West questioned the record of ArtFare, formerly known as the Muse Community Arts Center. "The track record there is not good," West said.

The $200,000 subsidy would be larger than any other arts or cultural organization gets from the city. The Tucson Museum of Art receives $86,0000 annually, the Children's Museum $47,000 and the Botanical Gardens $54,000 a year.

The Tucson-Pima Arts Council receives $500,000 a year that it distributes to 80 organizations, an average of $6,250 a year, said David Johnson, the arts council's deputy director.

All of those arts allocations are made during a public process, as part of the budget.

Tig Collins, ArtFare's director, said ArtFare could receive more than others because "perhaps we're offering more in exchange than any other arts group."

ArtFare provides classes and programs, and rents studio and gallery space to artists and rehearsal and performance space to smaller arts organizations.

A city memo on the deal said one goal of the subsidy was to allow ArtFare to accumulate enough money to buy the buildings at 51 and 55 N. Sixth Ave., across the street from the Ronstadt Transit Center Downtown.

That bothered Councilwoman Shirley Scott, who questioned how you could sell two taxpayer-owned assets to pay for the deal, and then potentially have nothing to show for it. The plan was to sell two residential properties near Broadway and Alvernon Way, Ginsberg said.

Scott "was curious" why the lease didn't go through the city's Rio Nuevo subcommittee and "just sort of appeared" on the consent agenda. "How did we get to this place with so little information?" she questioned.

Trasoff said she pulled the deal off the agenda Tuesday because the agreement "didn't meet our intentions," which was to create a singular space for artists if they are evicted from their studios in the Warehouse Arts District in northern Downtown. "The figures in the agreement are not what we thought they were," Trasoff said.

Although Trasoff often lauds the work of the Rio Nuevo subcommittee she chairs and talks about the need for council actions to be "transparent," her staff confirmed the agreement was never discussed in public before being placed on the council's consent agenda.

Trasoff said she pushed for the quick vote because the artists were originally scheduled to be evicted from the warehouses on March 31. However, that eviction order was put on hold in mid-March, more than a month before Trasoff scheduled the lease for a consent agenda vote.

She has put it back on the council agenda for May 15.

The five-year lease starts out with ArtFare paying just $1,230 in the first year, while the city pays nearly $204,000 to Melikian. With the rents from existing tenants Comda Calendar and Curley's, ArtFare would come out nearly $85,000 ahead.

ArtFare's share of the rent would increase each year. It would be expected to pay all of the fourth and fifth year rents of $288,766 and $383,671.

The evicted Warehouse District artists Trasoff envisioned moving into ArtFare would also be expected to pay rent to ArtFare, just as existing tenants do.

That would allow ArtFare to save the money to buy the building, McCusker said, adding that the long-term lease would help it start a capital campaign to raise money toward the purchase.

Collins said she doesn't know anyone else who provides as much space and services for artists as ArtFare. "Why is this justified and why are we unique? Because we are," Collins said.

Councilman Steve Leal said ArtFare was "willing to get the baby in the basket put on their doorstep … It's just wrong," he said.

West also said selling city properties to help someone else buy a building is "strange," a little like a young adult who goes home to live with his parents to save money to buy a house. "It's leeching off someone else: the taxpayer," West said.

Dwight Metzger, who runs the Independent Media Center in the Warehouse Arts District, said the $600,000 subsidy going to ArtFare could save the warehouses in the arts district and pay for them to be fixed up. "That money should be used to keep those buildings alive," he said.

Metzger said he was also disturbed because the Warehouse artists "who are being juggled in this aren't aware they're being juggled."

Leal said he is more interested in saving the warehouses than subsidizing a lease for ArtFare. He added he's concerned that Warehouse District artists who move to ArtFare could be "left in the lurch" in three years, when the city subsidy stops and they have to start paying high rents to Collins.

Scott said the lease would set a precedent all other artists would want, which is "not something we can sustain."

She also questioned why the city would sell properties to finance a five-year lease for $1.23 million when the city real estate office said it could buy the building for $1.4 million.

Ginsberg, in the real estate office, said the building hasn't been appraised so he doesn't know the value.

Melikian, the building's owner, said he thinks the value is $3.1 million, although an option with ArtFare allows the group to purchase it for $2.7 million. He said he is doing the community a service by leasing to ArtFare for below-market rates rather than selling the building to a for-profit developer.

West said the whole deal looks like it was hastily slapped together and makes the city look like it doesn't know what it's doing.

"It's just not very transparent," she said. "It's not an appropriate way to go."