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Downtown Dreams

The idea folks have come, but Knoxville's future depends on people with capital to invest

by Joe Sullivan

Ever since Schriver's landmark men's clothing store shut down in 1993, the moribund Gay Street storefront has been one more reminder of the ghost-town aura that hangs over much of the city's core.

This week, though, the premises have temporarily become a beehive buzzing with grand designs for bringing new vitality to the downtown. If a three-day assemblage of planners can provide the stimulus to overcome three decades of stagnation, the group that's convening here is well-prepared for the task.

Joining a local contingent of downtown boosters, architects and city officials is an imposing array of consultants from across the land. The head of Harvard University's urban design program is leading a team of four urban planning gurus from New Orleans, Washington, New Haven and Cambridge, Mass. A representative of a Chicago-based economic research firm is on hand to assess the feasibility of development plans. A meeting facilitator from Nashville has been retained to preside over the group's deliberations. The city is picking up the $80,000-plus tab.

The group is looking at the recommendations of three committees that have been meeting since last fall as part of a process labeled "Downtown, the Next BIG Steps." Under the aegis of the Downtown Organization, these committees have been charged with "creating a short list of projects which will realize the vision for downtown--making downtown a beautiful place to live, work, shop and play." Looking beyond the city's waterfront development project already underway, the committees' priority list includes:

One thing missing from all the visionary undertakings on the BIG Steps list is any notion of who will pay for them. In the absence of investors who are prepared to put big bucks behind them, the grand designs of our illustrious assemblage of urban planners may prove illusory. The public discussion--and attendant promotion--could spur investor interest that might not otherwise be forthcoming. But local developers are skeptical as to the effectiveness of a master planning process.

"You just can't force-feed these things," says former mayor Kyle Testerman. "When the time is ripe for a development, people will start coming forward with their own ideas for how to make it work." (Testerman and his wife Gloria have just finished renovating three warehouses in the Old City as office buildings with ground floor retail tenants.)

Are there any private developers coming forward to start taking any of the BIG Steps? To what extent is local government prepared to help them, or to fund a public facility like a convention center? Beyond that, are there other developments that hold promise of bringing vitality to the downtown?

You All Come

Attracting more visitors, especially from afar, may be downtown's most appealing elixir The community as a whole could benefit via tax revenues from the dollars they would spend here, along with the establishments they would patronize. Established drawing cards range from the Dogwood Arts Festival to exhibitions at the existing convention center to the enhanced offerings of our museums and historic sites. But Knoxville as a tourist destination pales compared to Sevier County, and most of those who come here are on day trips and thus don't fill many hotel rooms or nightspots.

At downtown's four major hotels, occupancy rates, at just over 60 percent, have been languishing well below the national average of 67 percent for the past several years, says Patrick Donelly, manager of the Hyatt Regency. In his view and that of leading restaurateurs, the pulling power of a state-of-the-art convention center would give the city its most needed boost.

"You're not going to revitalize downtown without bringing in bodies that stay long enough to spend some money," Donelly asserts. As soon as a new convention center starts going up, he predicts, a new 400-room hotel will almost certainly spring up nearby, and other new business and employment opportunities will follow.

But convention center plans have been stalled for several years over the issue of how to pay for them. City and county elected officials are not prepared to hit property tax payers with the debt service on an $80 million bond issue. And as much as the city's hotels and restaurants would stand to benefit, they are dug in against new taxes that would rifle-shot their businesses. Any increase in the county's five percent hotel/motel tax would make Knoxville uncompetitive with surrounding cities, Donelly insists. Rerouting a big chunk of its $3 million annual proceeds is the way to go, he says. But this would draw fierce opposition from a host of more or less tourism-related organizations who've become dependent on annual stipends from the hotel/motel tax take.

If anyone can devise a way to break the deadlock, it's the ubiquitous James Haslam II, who was recently name co-chairman of a convention-center steering committee under the auspices of the Downtown Organization. But don't look for a breakthrough anytime soon.

"Haslam is going to lie low on anything that involves more taxes, at least until after next November's referendum on city-county unification," says a well-placed source.

Meanwhile, there's also considerable jockeying over a site for the convention center. The World's Fair Park, once a primary candidate, has virtually been ruled out. That leaves the expansive environs of the Civic Auditorium and Coliseum as the only other site deemed feasible by a consulting firm that evaluated a variety of possibilities. But the president of the Downtown Organization, Richard Cate, is reportedly striving to steer it toward a two-block stretch that slopes eastward from the most barren part of Gay Street down to Central Avenue. While this site entails acquisition, demolition and roadway access costs that could be avoided on the city-owned land around the coliseum, it would also give a lot more impetus to downtown revitalization.

"It would be very shortsighted to let the selection process be driven by site cost differentials," says Bill Rukeyser, chairman of the BIG Steps committee focused on downtown destinations. "If it contributed to the resurgence of a distressed part of downtown, a few million dollars of additional site cost would pay for itself many times over in any longer run."

Park Possibilities

The other destination to which Rukeyser's committee hopes to encourage a lot more travel is the World's Fair Park. This 70-acre legacy from Knoxville's 1982 event is already drawing 10,000 or more to many of the bookings at its exhibition hall, as well as to cookouts and rock concerts on its spacious lawn. But even though much of the land is earmarked for new developments, the only noteworthy opening on the site since the World's Fair closed has been the Knoxville Museum of Art. With plans for a new convention center now pointed in a different direction, the hold it had placed on other developments appears to have been removed. But what sort of developments, undertaken by whom and with what sources of financing?

While his plans are highly tentative, one participant in the BIG Steps process has a concept for World's Fair Park development. He is Earl Worsham, a 62-year-old Knoxville native who made his start as a developer here with projects that included a Sequoyah Hills apartment complex and the Hyatt Regency Hotel. After moving to Atlanta in the 1970s he began operating on a global scale, with increasing emphasis in recent years on Eastern Europe. With a Russian partner, he owns 16 office buildings in Moscow, as well as properties in Estonia and Romania. Now he once again considers Knoxville home, even though he actually resides on a 3,400 acre mountain-rimmed estate near Gatlinburg.

Worsham's concept for a World's Fair Park attraction is based on the Tivoli Gardens in Copenhagen (his wife is Danish). Tivoli combines the scenic and the festive with an array of entertainment including an amusement park. For a 21st-century-minded Knoxville, roller coasters and the like would give way to the latest in high-tech entertainment, including virtual this and simulated that.

Worsham concurs with the $50-60 million cost estimate of such an undertaking made for the city by Economic Research Associates, its Chicago-based consulting firm. He also shares ERA's assessment that there's money to be made. But he says he's not nearly far enough along to start lining up an investor group or bank financing. It's known, however, that he got two of Knoxville's leading money men, Jim Clayton and the retired chairman of First American Bank, Jim Smith, to accompany him on a trip to Copenhagen last August.

Skeptics minimize the likelihood of any Tivoli-like development here. For one, they don't believe that any of Knoxville's deeper pockets fit the profile of investors in or lenders to such a costly, risky undertaking. Moreover, they stress that any new attractions that start drawing throngs to the World's Fair Park would require a massive investment from the city for roads and parking. And having just sunk $8 million into its waterfront, the city isn't showing a disposition to spend more on downtown development. Indeed, its five-year capital spending plan submitted to City Council on February 13 makes no provision for supporting any BIG Steps, even though the city's Department of Community Development initiated the planning process.

Fortunately, other projects that will enhance downtown's attractiveness (and the entire community's quality of life) appear to be moving forward without as much dependence on a fickle city government. To wit:

An amphitheater, or at least a permanent stage and bandshell is needed that would provide up to 12,000 seats for summer outdoor concerts in the World's Fair Park. Permanent covered seating for 5,000 would allow Knoxville to match amphitheaters in other cities, such as Starwood outside of Nashville, that have proven successful on a privately owned and operated basis. But such seating would impinge on turf that the Dogwood Arts Festival has already staked out for several of its events. So lawn seating may have to suffice. All concerned, including the World's Fair Park's overseer, Paul Sherbakoff, agree that the lawn in question needs to be recontoured. Sherbakoff predicts that funding will be forthcoming for this work, as well as for a stage and bandshell.

Not to be overlooked is the one new downtown attraction on which work is already under way. It's debatable whether the $8 million that the city is pouring into its waterfront project represents an optimum use of its evidently scarce resources. But one element of the project that may prove highly appealing is a Gateway Pavilion that's due to be built on a slope just east of First Creek. City officials are unwilling or as yet unable to specify what sort of exhibits and other features will go into this $3.6 million pavilion--except to say that its theme will be "Where Nature Meets Technology."

Of all the contemplated BIG Steps, the one least likely to get on track any time soon is a rail line for destination-hopping.

"That's not going to become feasible until you've got a convention center and a World's Fair Park destination site to generate enough traffic to support it," says Laurens Tullock, the city's director of community development.

Jobs Wanted

The Butcher brothers and Chris Whittle bestowed good-looking buildings and a sense of vitality on the southern part of downtown that might be called its sun belt. But since the collapse of their errant empires, the outlook for job growth and office occupancy even in the sun belt has turned cloudy. And to the north lies downtown's rust belt, where commercial activity, until one approaches the Old City, ranges from slim to none.

Inability to attract a corporate tenant to the Whittle Building despite a national search and a fire-sale price epitomizes the difficulties Knoxville faces in increasing its downtown work force. The building's conversion to a federal courthouse will create big vacancies in both the downtown Post Office and the Plaza Tower, where judicial and prosecutorial offices now reside.

Additional vacancies--and actual job losses--are almost sure to follow when downtown loses the one new corporate headquarters it had managed to attract in recent years: namely, Clayton Homes. When Jim Clayton bought what's now the Bank First Building three years ago to house the bank he also owns, he moved 100 Clayton homes personnel in with him. But he has since concluded that they need to be brought back under the same roof with the 300 other Claytonites who were left behind on Alcoa Highway. Anticipating further growth as well, he is now looking for a campus-like facility in either West Knoxville or Blount County that will accommodate up to 600 workers. "I would have preferred to remain downtown," he says, "but I couldn't get the kind of space I needed at a competitive price."

These negatives are don't indicate mass migration out of downtown's 4.6 million square feet of office space. To the contrary, according to a recent survey by the Metropolitan Planning Commission, downtown's 1995 vacancy rate of 9.5 percent is well below the national average. And its work force, according to Cate, is at least holding its own at just under 20,000. But there hasn't been an increase in downtown office space over the past five years, during which time suburban space has grown by more than 40 percent to a total of 7 million square feet that's 95 percent occupied.

"The downtown office market is stagnant," says Tom Weiss, president of FMP/Weissco, a commercial real estate company. "If civic-minded people like Jim Clayton and Jim Haslam don't see fit to put their headquarters downtown, how can we expect others to do so?" (Haslam's Pilot Corp. recently moved into a new headquarters building on Lonas Road out west.)

Playing Monopoly

The BIG Steps committee on downtown as a place to work isn't touting any grand designs for spurring its rapid resurgence as a commercial hub. Perhaps in part because the committee's chairman, Tom Ingram, is a partner in a venture capital firm that invests in fledgling enterprises, its principal focus has been on nurturing just such firms, which could become large employers in the future. Creating incubator space for them in a building with low rent and high-tech support services is a committee recommendation. It isn't clear who would provide the subsidies to do so.

Perplexingly, the man who has been manifesting the greatest faith in downtown's prospects (as measured by multimillion dollar property investments) wasn't even invited to participate in the BIG Steps process. He is Mike Conley, whose Regal Corp. has become a hugely successful distributor of heavy equipment parts. Over the last few years, he has acquired four of the downtown's landmark office buildings, along with the prime block of Gay Street real estate where a new federal courthouse was to be built. His much younger brother Brian manages the Conley properties and is known to be on the lookout for still more acquisitions.

"The Conleys appear to be playing monopoly using downtown Knoxville as their playing board," says Weiss.

The brothers are almost sphinx-like about their game plan. But when it's suggested that some of their older, semi-vacant properties (such as the former Charter Federal and Valley Fidelity bank buildings) look like Mediterranean and Baltic, Brian Conley retorts, "We want Boardwalk and Park Place, too, assuming the price is right."

The Conleys are reliably reported to believe the block that was to house the federal court house will become the site of the city's next big office tower. Sooner or later, it's postulated, a major bank or other financial institution will want to move into Knoxville with a high profile presence and will provide an anchor tenant for such an edifice. In the meantime, don't be surprised if the first new office building in the downtown area since Whittle starts going up on the Conley-owned Gay Street frontage between two other Conley properties: the First American Bank Center and the former Charter Federal building. And don't look for any urban planning gurus from afar to be involved in shaping the steps the Conleys take.

Living Quarters

If the big money is not there for tourist and convention development, the best hope for restoring downtown vitality, especially in its rust belt, is to get more people to live there.

Restoration of a few older buildings has already drawn a hardy breed of upscale urban dwellers to condominiums and apartments in the Old City and at developments such as the Pembroke, Kendrick Place and Willingham Garret. According to Ann Marie Tugwell, executive director of the Central Business Improvement District, there are now 231 privately owned dwelling units within its definition of downtown, which excludes a public housing high-rise and the historically residential Maplehurst enclave near the riverfront. While this number has been creeping up, some developers are convinced of the potential for faster growth.

"There are a lot of people in Knoxville who savor an urban lifestyle and want to be a part of a vibrant downtown scene," says Kristopher Kendrick, who's made restoration of the city's vintage buildings his life's work.

The BIG Steps committee on downtown as a place to live, which Kendrick chairs, has targeted one of the largest of these buildings as a catalyst. The Sterchi Building towers above the rest of the old rooftops along Gay Street's 100 block, while that block's proximity to the Old City has already made it the site of several smaller-scale renovations.

Together with architects Buzz Goss and Jennifer Martella, Kendrick proposes to develop plans for converting the Sterchi Building into 50 or more condominium units. He believes these plans, including all attendant costs and projected revenues, will demonstrate the feasibility of such an undertaking to the satisfaction of equity investors and bank lenders who would be needed to finance it. However, Kendrick says he's already got too many other projects under way to get involved in taking a Sterchi BIG Step beyond the planning stage.

A well-credentialed developer who, perhaps unbeknownst to Kendrick, has already made an intensive analysis of a Sterchi Building residential transformation isn't prepared to go forward with it either.

"I don't believe the demand is there for a project of this scale at this point in time," says Steve Mosadegh, who has just completed a fully sold 13-unit condominium development in the nearby Commerce Building. Mosadegh believes the 100 block will transform itself--but more gradually, through renovations on the same or a smaller scale than the one he's just completed. He also foresees a trend away from the $75,000 to $100,000 condos that have been the mainstay of downtown development and toward more affordable rental units. "That's going against the grain of present residents who want the area to be upscale, but I believe the greatest growth potential is to provide housing that's within the reach of younger downtown workers."

Achieving a critical mass of residents, all agree, is the key to any augmentation of downtown's depleted ranks of merchants. Heading a list of stimulants to residential growth noted at a meeting of the committee Kendrick chairs is "Need a grocery store." But Kendrick is clear that "the people have to come first, and the goods and services will follow."

Meanwhile, the CBID is devoting a large part of the $330,000 it collects annually from downtown property owners to sprucing up target areas. The 100 block of Gay Street just got a $150,000 grant for everything from face-lifting shabby facades to installing awnings, banners and planters. All of the property owners on the block have banded together to contribute an additional $50,000 of their own to the cosmetic common cause.

At the same time, on downtown's southern flank, construction work is starting on the first 16 of 80 prospective condominium units that represent the residential component of Volunteer Landing Associates' ambitious $32 million waterfront development project. It remains to be seen how much demand there will be for these units, which are priced at $160,000 or higher.

Instead of looking to committees or consultants to conjure up grandiose master plans, downtown's best hope for progress may well rest with enterprising developers like the Testermans and Mosadegh taking small steps on their own. But the one local design consultant involved in the BIG Steps process, Charlie Smith of Bullock Smith and Partners, defends it as a way to balance and prioritize competing claims on limited community resources.

"There are a lot of gooey ideas out there, and we're going to get stuck unless we look at them as parts of a big picture," Smith warns.