by Joe Sullivan
Mark Cawood is one of the most negative of county commissioners; but he's come up with a positive idea. How about the city participating with the county in any governmental backing of the Universe Knoxville planetarium proposal? That's what Cawood wrote Mayor Victor Ashe last week.
While Ashe's response was equivocal, and Cawood is unlikely to support Universe Knoxville funding under any circumstances, the concept of city/county collaboration on this promising undertaking should rise above all of the political posturing involved.
Of all the downtown revitalization proposals currently on the drawing board, Universe Knoxville is the single most promising. A virtual reality space theater coupled with a Smithsonian-affiliated museum and a new children's museum represents the distinctive sort of destination attraction the city needs to draw more visitors and increase the pulling power of its new convention center, among many benefits.
A feasibility study conducted by a renowned, California-based consultant, Harrison Price, projects that Universe Knoxville would draw 1.1 million visitors a year and generate $17.5 million in gross revenues. Projected net operating income of $8.5 million would be sufficient to cover the debt service on a $116 million revenue bond issue that developers Worsham Watkins International envision to finance the project. (Earl Worsham came up with the idea for Universe Knoxville in the first place.)
WW has lined up Merrill Lynch to underwrite the bonds, but its investment bankers insist there's got to be at least a $2 million revenue cushion (in excess of debt service) to make the bonds marketable. While other ways to come up with this cushion, or perhaps insure the bonds, are being explored, the primary path has been to seek governmental backing in the form of a pledge of revenues in the event of a shortfall. Up to now, this path has led exclusively to Knox County's doorstep. Since the city stands to be the prime beneficiary of Universe Knoxville, the question arises: Why should the county alone be asked to lend a helping hand?
The answer starts with the fact that the proposed State Street site is a county-owned tract where ill-fated, if not ill-conceived, plans for building a new jail have been aborted. But there's much more involved than that. The city is already on the hook for $162 million in convention center debt, and its financing capacity is further stretched by prospective commitments of $100 million or more for infrastructure to support the massive downtown redevelopment effort that may or may not still be known as Renaissance Knoxville.
The city's plate is already full—so the reasoning on the part of Universe Knoxville's boosters went. But it's time to ask the question: Full of what? The answer is, as matters stand, that most of the big-ticket items on the city's downtown redevelopment checklist look like vaporware. The quests for a new convention center headquarters hotel, a Scripps Cable Network Center, a cineplex and an office tower were all proving elusive even before the economic slowdown hit. And that downturn, along with byzantine twists and turns surrounding the status of downtown's Holiday Inn Select, have made them all the more so.
At the same time, the city stands to reap a huge windfall if Universe Knoxville comes to fruition. Without putting in a nickel, the city would collect millions of dollars in sales tax revenues. Because of its ability to recapture nearly all of the 6 percent state sales tax under a 1998 law intended to help finance the convention center, the take on $17.5 million in Universe Knoxville revenues alone would be more than $1 million. Harrison Price estimates that for every dollar visitors spend there, they will spend more than two dollars elsewhere in Knoxville while they're here. Assuming it's spent downtown, that pushes the total sales subject to recapture above $50 million and the total sales tax take to $3 million.
Those very sales could also be a key to the success of the one element of Renaissance Knoxville that appears to have firm city backing: namely, the revitalization of Market Square as the city's commercial hub. A commercialized Market Square that springs up in isolation isn't nearly as likely to achieve critical mass as one that has a nearby attraction to draw upon.
All of this is not to say that Knox County shouldn't continue to push ahead with Universe Knoxville plans as well. These plans hit a snag at Monday's County Commission meeting when that body shunted aside a recommendation to institute the board of directors of a not-for-profit entity that would oversee the undertaking. Commissioners were deeply divided over the composition of the board, among other things, and any attempt at resolution could have spiraled out of control.
Commission's wise old owl, Wanda Moody, averted such a spiral by getting near-unanimous approval of a resolution that essentially put everything on hold until Universe Knoxville's would-be developers, Worsham Watkins, can submit a fully fleshed-out set of plans for the undertaking. Moody is among several key commissioners who see a lot of merit in the concept but are skeptical of the financial projections furnished to date and fearful of the amount of governmental subsidy that might ultimately be required. Hence, her resolution also provided for an independent feasibility study to be conducted under county auspices. (The Price study was sponsored by the project's boosters.)
Within limits, collaborative county and city backing is compelling for a venture that has great potential for the community, culturally and educationally as well as entertainment-wise. The city could make a start in that direction by agreeing to commit sales tax revenues generated within the Universe Knoxville complex. That's exactly what the city of Memphis has just done as one of several revenue streams dedicated to house its nearly-acquired National Basketball Association franchise.
One has to look with envy at the way Memphis and Shelby County have collaborated on the arena. Each has dedicated revenue streams that will service about $65 million of an arena bond issue. (A $20 million state grant and the $100 million that Federal Express has agreed to pay for naming rights account for the rest of the financing.)
"I hadn't given a thought to what the city's and the county's respective shares were until you asked the question," Shelby County's director of public information, Tom Jones, told yours truly. "We just worked together to get the job done."
Can it ever be that way in Knoxdom?
June 28, 2001 * Vol. 11, No. 26
© 2001 Metro Pulse
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