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The new mayor is climbing a steep learning curve

by Joe Sullivan

The days leading up to Mayor Bill Haslam’s April 29 budget presentation were frenetic, but he still managed to maintain a schedule characteristically full of diverse mayoral engagements.

On Tuesday, April 27, for example, he started his day by presiding over an 8 a.m. breakfast meeting of the board of Project GRAD, whose inner-city school enrichment effort Haslam continues to chair. The rest of the morning included extending a farewell to a long-time city employee who’s departing, a budget discussion with representatives of the City Employees Association and a meeting with the owner of the downtown Hilton Hotel who was in town from Seattle for its reopening following extensive renovations.

At a mid-day meeting with the owner of the pre-Civil War York house on Middlebrook Pike, Haslam, along with City Councilwoman Barbara Pelot, helped persuade her to accept Historic Overlay zoning on her property. Then came one-on-one budget briefings with Council members Marilyn Roddy and Bob Becker—two of nine such sessions Haslam would hold prior to delivering his budget message at noon on Thursday. Mid-afternoon was reserved for putting the final touches on that message, followed by doing the ribbon-cutting honors at the Hilton’s reopening ceremony. There was barely enough time left for a late-afternoon run through downtown to the Fourth and Gill traffic circle and back and then to shower and dress before presiding over the City Council meeting that started at 7 p.m. Dinner would have to wait until he got home at 9:30 p.m.

Over the course of his first five months in office, a succession of days like this have made Haslam seem almost omnipresent on the Knoxville scene. In meetings with neighborhood groups, economic development boosters and citizens concerned with a panoply of issues, he’s gained rapport with all of them. The lengths to which he’s gone to participate in ceremonial functions large and small, his engaging style and his empathetic grasp of issues of concern have also contributed to a reservoir of goodwill. Indeed, despite the fact that he barely got elected last September in a fiercely contested race with Madeline Rogero, it’s hard to find anyone who has anything bad to say about Bill Haslam.

“Bill Haslam has been doing fine,” says David Patterson, the former head of UT’s school of planning who served as Rogero’s campaign treasurer. “He spends time getting out with the public, and he made a big thing about looking at 6 percent budget cuts before proposing a tax increase, which is something Madeline thought would probably be needed. I’d say he’s handling things just right.”

Still, winning approval of the whopping 13 percent increase in the city’s property tax rate that Haslam’s recommending represents the first big test of his political leadership. During his campaign, Haslam stressed his business acumen, gained as president of his family-owned Pilot Corp., and pledged to use it to manage the city’s way out of a widely recognized budget bind with “little or no tax increase.”

After five months on the job, he now says, “Once you’re in the office, you learn so many things you didn’t know before, in terms of realizing what’s really important and how things really work. In business, when you have a problem, the best answer is to grow your revenue, but in government, it takes a long time to grow that top line. So we’re looking for efficiencies and different ways to deliver services, but we’re not going to cut services the public values.”

Haslam’s case for the tax hike, which would raise city revenues by $9.6 million, centers on the need to cover a $10 million budget shortfall he inherited from his predecessor Victor Ashe. Over the past two years, he pointed out, the Ashe administration had drawn down the city’s reserve account by about $10 million to cover operating deficits—a practice he’s resolved to stop. Moreover, he stressed that city revenues have only been growing about 2 percent a year, whereas expenses are rising four percent due primarily to a mandatory 2.5 percent pay raise for city employees and spiraling costs of health insurance, worker’s compensation and pension fund contributions.

“Ultimately we had to make a decision—do we want to have a tax hike, which is incredibly painful, or are we going to cut back city services in a drastic way,” Haslam said. In opting for the former, he pledged that in the future “we will work tirelessly” to do two things. “First, we have to focus on growing as a city. If we don’t have consistent real growth in our city, we have no option except to raise taxes. Secondly, it is the job of the City Council and myself to rein in the increases in our expenditures.”

To judge by the responses of Council members, Haslam appears to be passing his first test with flying colors. Six of the nine were quick to support the mayor’s recommendation on which Council is to act on May 25. The other three reserved judgment until they’d studied the budget in more detail. One of them, Councilman Rob Frost, ventured that “the mayor has got a selling job to do with the public.” But there was a consensus that any trimming would only be around the edges.

Adoption of his budget will fortify Haslam to take initiatives, rather than just preside over a city in maintenance mode or worse. But he still faces many challenges and constraints in pursuing an agenda with many lofty goals. Job creation, downtown redevelopment, and neighborhood enhancements head the list. But he’s also resolved to revamp the workings of the city government to make them more efficient and less expensive. And in everything he undertakes, there’s a commitment to be inclusive and responsive to a diverse citizenry with often divergent interests.

“Any time you make a decision you’re going to lose some friends. But hopefully people will say he’s trying to do the right thing,” the mayor allows. And he places great store in the caliber of the management team he’s assembled to help him run the city. Its mettle provides a point of departure for assessing the preparedness of a Haslam administration to make good on its mission.

Managing the City

Of five senior directors that Haslam picked for top posts in his administration, four are new to city government. Heading economic development is Bill Lyons, who took a leave of absence as a UT political science professor to serve as Haslam’s campaign manager and then came to work for the city. For his finance director, Haslam tapped a former Wall Street investment banker, Chris Kinney, who had recently moved back to Knoxville, where he had attended UT and started his career. Margie Nichols came aboard from her post as news director of WBIR-TV to serve as director of communications and government relations, and Jerry Ledbetter moved from KUB to take the position of director of operations.

Of the four, Lyons has been most visible to date, in part because his charge includes responsibility for inclusiveness in the city’s decision-making processes. Lyons quickly won high marks for his role in making the state’s Department of Transportation more responsive to the concerns of center-city dwellers in its plan for widening I-40 through downtown.

“The previous city administration was just kowtowing to TDOT, but the new administration sought input and worked with TDOT to make the plans much better than they would have been,” says Bill Pittman, a Fourth and Gill resident who is one of many who have been trying to engage TDOT on their own for years to little avail. In addition to Haslam and Lyons, Pittman also has kudos for the mayor’s special assistant, Jill van beke. Like Kinney, van beke recently moved to Knoville with her husband who grew up here. Previously, she had been a project manager with a development firm based in Washington D.C.

Front and center on Lyons’ agenda now is a public-input process for deciding on the future of buildings in the World’s Fair Park including the Candy Factory, the Victorian Houses, the Tennessee Amphitheater and the Sunsphere. He’s also engaged in everything from selecting a site for a transit center and other downtown initiatives to coordinating with the Knoxville Area Chamber Partnership on job recruitment and retention.

While they don’t report directly to Lyons, he frequently works in tandem with van beke and with Kevin Dubose, who oversees the city’s downtown residential development incentives program, among other responsibilities.

“Bill Haslam believes in a collaborative approach to management. We work in teams not in silos,” Lyons says.

Kinney is the mayor’s point person in looking for ways to make the city operate more efficiently and at lower cost. Kinney impresses as having a no-nonsense, by-the-numbers management style, and his basic management tool is performance measurement.

“The idea of performance measurement is sweeping the nation, and we’ve been a little behind and are trying to catch up,” Kinney says, “We want to get to quality- and results-oriented measures that tell us how well we’re doing and how efficiently, and then we’ll use that in our budgeting process to determine how we allocate resources.” His goal is to achieve productivity increases and cost reductions over the next four years at least equal to this year’s prospective tax increase. “That will enable us to free up money to invest in the city’s growth.” But he won’t be pinned down as to where it may be found. “We’ve got to go through the entire process, and because it’s new to our people, we’ve got to take it one step at a time.”

In the meantime, Kinney stresses that the city will be financially constrained both by what he terms its “structured deficit” and by the high level of the city’s debt, which has nearly doubled over the past five years to $248 million presently. “In order to maintain our AA credit rating, Bill Haslam and I have promised the rating agencies that we will balance the budget and reduce our debt,” he says. That means any capital outlays in the near term will have to be on what he terms a pay-as-you-go basis, such as $2 million budgeted in the fiscal year ahead for a Gay Street cinema and $1 million for rehabilitation of the Sunsphere.

“We’re not going to be doing any big new bond issues to finance a lot of capital infrastructure until we fix the cost structure and reduce the debt,” he proclaims. Kinney also spurns the idea of debt guarantees on the city’s part, such as developers have proposed to help get financing for a new convention center hotel. “I don’t know if we need a new hotel, but if we do, that’s not the way to go about it,” he asserts.

Nichols defines her role somewhat amorphously as, “helping the mayor fulfill his goals.” Predictably, she portrays him in glowing terms. “Bill is a very warm, compassionate person who cares very deeply about doing the right thing. He’s very thoughtful and deliberate, a good listener who’s also very good at asking probing questions and can be very expressive in terms of saying what he does and doesn’t like,” Nichols extols.

Her sentiments are shared by former Rogero supporters, such as Pittman, who doesn’t have any vested interest in burnishing Haslam’s image. “We have moved from an administration which clearly did not understand the need for informed public input to one that embraces the concept. In my opinion, this stark contrast explains why Knoxville has languished for the past fifteen years... as well as the hope the new administration brings,” says Pittman whose day job is at DeRoyal Industries.

Kim Trent, executive director at Knox Heritage, adds that, “Mayor Haslam has exceeded all of my expectations. He’s really engaged in looking at problems and open to solutions.” Whether Knoxville’s first lady of historic preservation remains enamored of the mayor may depend, however, on how he proceeds with several downtown redevelopment undertakings on which his stance is uncertain.

Downtown Redevelopment

The focal point of Haslam’s downtown redevelopment efforts is bringing a movie theater to the 500 block of Gay Street, connected by Krutch Park to Market Square. “I think a cinema can be a catalyst for downtown drawing restaurants, coffee shops, and bookstores just as other downtowns with cinemas have done that.”

In an attempt to hasten its construction, his first big decision as mayor was to “decouple” it from a planned transit center in which it was to be ensconced. Planning for the federally funded transit center is now pointed toward the county-owned site on State Street that was originally acquired for an aborted new jail.

Now, Haslam is working directly with Regal Entertainment Group on firming up the cost, financing, and lease terms of an eight-screen, 2,000-seat cinema. The mayor hopes to see one up and running within two years, with the caveat that “anything I’d say about how long it will take to build at this point would be a guess.” Regal had once opposed a city-backed downtown cinema, but Haslam says they’ve showed renewed interest in being the operator as the industry’s health has improved. “Our primary interest in Regal is that they are local and they are the largest, and in working out the financing that helps us in satisfying investor concerns about having someone who is stable and will be there long-term,” the mayor explains. He justifies avoidance of a competitive selection process on the grounds that the cinema is part of a Market Square redevelopment plan whose developer, Chattanooga-based Kinsey Probasco, has already been the subject of a competitive selection process. But he could become subject to criticism for going with Regal on a no-bid basis, since Kinsey Probasco has been shunted aside in the negotiations.

Preliminary estimates of the cinema’s cost are on the order of $6 million, but that is subject to many variables, of which the largest is whether the facades of the several historic buildings that now adorn the block get preserved. “It’s a win if you can save the facades, but on the other hand you’ve got to look at how much it’s going to cost to save them,” Haslam says noncommittally. Knox Heritage has proposed a free-standing cinema that would leave the historic buildings intact for separate redevelopment. Haslam terms that “a third option.” The actual construction contract will be the subject of competitive bidding, he says.

Of the $6 million cost, the mayor has recommended only a $2 million commitment on the city’s part. He hopes to raise the balance from private financing backed by the cinema’s cash flow and perhaps the sales-tax revenue it generates. He’s also “hopeful we’ll have a situation where taxpayers won’t be on the hook for any operating losses. But until we have hard numbers, it’s hard to say what we can work out.” His aim is to complete the terms of the deal within the next four to six months.

The $2 million city outlay has been wrung out of the cost of a 675-space new city garage just to the West of Market Square, on which construction is due to start this summer. Hardball negotiations with Kinsey Probasco have reduced the garage’s cost from $14 million to $12 million. No new parking is contemplated for the cinema, in the belief that the city’s 800-space State Street garage can meet the needs of moviegoers on evenings and weekends with little or no charge.

Parking also impinges on other downtown redevelopment efforts. Along with TVA and the Knoxville Area Chamber Partnership, Haslam has gotten personally involved in trying to recruit an anchor tenant to repopulate the East Tower of TVA’s headquarters, which the downsizing behemoth is vacating. “I’ve talked to several people whom I see as potential tenants, but they all have the issue of what’s the parking going to look like,” the mayor relates. “If we get the right tenant, and if the lease terms are good enough, then maybe the tenant can help out on garage costs.” But the city, working through the chamber, is known to have obtained schematic drawings for a garage that would go up at the northwest corner of Gay Street and Summit Hill Drive, with the city bearing at least a portion of the cost despite its financial bind.

Another major issue is what to do with the grand, if not grandiose, design for downtown’s future development that’s been prepared by consultants Crandall Arambula as part of the Nine Counties. One Vision. process. The executive director of the Metropolitan Planning Commission, Dave Hill, lauds “the extraordinary amount of time and effort that went into the Crandall Arambula plan,” and contends, “Its adoption by the city is absolutely crucial for setting goals for downtown. The mayor should take ownership of it, or it will die.”

Haslam concurs that his administration should embrace it as “a very helpful guideline or blueprint.” But he’s not clear what follows. “I would think that Dave Hill and MPC should play a role in that. Beyond that, I don’t have an answer at this point.”

Nor is Haslam clear on the need for something else that MPC and Crandall Arambula have advocated: the establishment of urban design guidelines. Immersed in budget matters as he’s been, the mayor says, “I haven’t put a lot of time and thought into that. I think they can be helpful, but I also think there are dangers in terms of something that stops development.” In any event, his budget didn’t include any increase in funding that MPC has said it needs for shaping urban design guidelines or for comprehensively applying H-1 overlay zoning to protect downtown’s historic buildings.

The budget also failed to provide any funding for the Jackson Avenue/Depot Street redevelopment plan that former mayor Victor Ashe initiated over a year ago. But city officials say that the new owner of the most blighted properties at which the plan was aimed, the McClung Warehouses, may be on his way to restoring them as loft dwellings in conjunction with a more experienced partner. The owner, Mark Saroff, did not return calls seeking his comment.

Convention Center

The biggest single budget problem still facing Haslam is a Knoxville Convention Center deficit that he places at $9.4 million. As one way of addressing it, Haslam has retained a Minneapolis-based consulting firm, Convention, Sports & Leisure International, to study whether a new convention center hotel would attract enough conventions to significantly curtail the losses. “What I want them to tell us is how much difference a new hotel would make,” he says. And he expects an answer within the next two months.

If the study concludes that it would make a major dint, he may be prepared to buck both fiscal and political constraints by backing a new hotel. Existing downtown hotels, who oppose it, succeeded in getting more than 25,000 signatures on a petition last fall that would have forced a referendum to establish an ordinance prohibiting any city backing of a new hotel, even including a garage to support it. But then City Council forestalled the referendum by adopting the ordinance on its own.

“The whole question on the referendum was do you want the city spending money on a downtown hotel without any comeback argument on why that might make sense,” Haslam says. “If it does make sense, and we can say here’s what the city has put up, and here’s the return, then maybe that’s a saleable deal.” But it would appear to take an enormous expenditure of political capital as well as investment capital, for which the city is strapped.

Job Creation

One of the hallmarks of Haslam’s mayoral campaign was creation of more and better jobs in Knoxville. He stressed his experience as president of one of the largest locally based companies, Pilot Corp, as credentialing him for selling other companies on the advantages of locating a business here. And he pledged city support for the Jobs Now! recruitment program, spearheaded by the Knoxville Area Chamber Partnership.

The chamber’s president, Mike Edwards, attests to Haslam’s efforts, but five months into the job, there’s not much tangible to show for them. “It’s a long lead-time proposition, and it’s terribly competitive,” Edwards says.

Both Haslam and Knox County Mayor Mike Ragsdale meet frequently with prospects, and having mayors do so is a big plus in the recruitment equation, Edwards says, “These businesses want to talk with the mayor, and serious prospects don’t want fluff, they want real answers, like if we come, can we have our building up in 22 months, and what incentives can we get.”

For his part, Haslam says, “We go in selling that Knoxville is well-situated for distribution, has a good work ethic and good quality of life. But a lot of times it turns into a numbers-driven exercise. They say, well, so and so is going to give us these kind of incentives, and what are we prepared to do for them. It’s a competitive world, and it’s numbers-driven.”

A case in point is the terms on which the city is prepared to offer land in its I-275 Business Park, formerly known as the Coster Shop, Despite the bad publicity arising from the dumping of contaminated debris from the 40-acre site, it represents a prime location for either a manufacturer or distributor. The city has invested $8 million in the site, and Haslam hopes to recover some of that investment. However, “City Council’s advice to me was focused not so much on maximizing the value of the land but on doing something that will bring great jobs here,” he says. “The more jobs and higher paying they are, the lower the price of the land in the competitive equation. So it becomes a value decision.”

At the same time, the city is concerned with the retention of existing employers. “Both [city and county] mayors understand that we’re constantly at risk of losing jobs in a rapidly changing economy with all the competition,” Edwards says.

For example, Delta Apparel, which employs 73 workers at its distribution center in the former Standard Knitting Mills Building, has served notice that the 80-year-old building has proven inefficient. So Delta is planning to relocate to another site—either locally or somewhere else. Both city officials and the chamber have been much involved, and Haslam says, “I have a phone conversation set up with them this week. We’d obviously love for them to stay, whether it’s at I-275 or other potential sites. But it’s also the reality that these are not $25 an hour jobs, they are $10 to $12 an hour jobs.”

The general manager of the distribution center, Jim Gerrish, says, “I hope we can come to a very positive conclusion and stay close to where we are. The chamber people have tried to be extremely helpful, and I got a call from the mayor asking if there were anything he could do, which was a nice touch.”

Neighborhoods

In his budget address, Haslam devoted more attention to “building stronger and safer” neighborhoods than any other topic. Along with stepping up city funding for street paving, he pledged a strengthened city commitment to everything from traffic calming and sidewalk improvements to solving drainage problems.

Two special fillips were a guarantee to fix potholes within 48 hours after they’re reported and creation (at a cost of $500,000) of a 3-1-1 call center so “you’ll be able to call one number at the city if you’re having a problem or need help with your services,” he said.

Matt Edens, who lives in Parkridge [and writes the Urban Renewal column for Metro Pulse] and serves on a mayorally appointed neighborhood advisory group, says, “there’s been a real stress on addressing the perception that services are less than equitable. In the past there’s tended to be a one-size fits all approach, but now there’s more recognition that Parkridge is very different from West Hills, and the city administration is thinking about ways to restructure to get services tailored to neighborhood needs.”

Edens, who was also a Rogero supporter, goes on to praise Haslam for making a commitment to Danny Mayfield Park in Mechanicsville—honoring the former city councilman who died of cancer in 2001 at age 32. Plans for the park were announced two years ago, but they had languished under the Ashe administration. “Bill deserves credit for getting that off dead center,” Edens says.

There was no mention of parks in the mayor’s budget speech, however. Haslam explains that, “We’re still finishing a lot of parks that Victor Ashe started. My sense is that we’ve done a pretty good job of putting parks around the city, and our job is to make sure we adequately fund the ones we have. There’s a lot more to take care of now.”

On the other hand, Haslam hopes to grow an entire new neighborhood along the South Knoxville waterfront. Looking out across the river from his office window in the City County Building, he gestures expansively at an area east of the Gay Street Bridge that now looks like a tank farm and extends about a mile to the South Knoxville Bridge. “You have Holston Gases and the Marathon Ashland asphalt plant sitting right on the waterfront. Long term, can we find another location for them? I think there’s a great opportunity for mixed-use development and [the same for] the property west of the Henley Street Bridge leading up to Fort Dickerson.” With most older neighborhoods resistant to new development, and annexation no longer much of an option, Haslam sees the South Knoxville waterfront, the I-275 corridor and downtown as the prime target areas for growth that will augment the city’s revenues. But not in that order. Downtown presents the richest potential harvest, in considerable part because the city is entitled to 10 times as much from sales tax growth in the Central Business District as anywhere else in town. That’s because of a dispensation from the state Legislature that allows for CBD recapture to service convention center debt of most of the state’s 7 percent sales tax that would otherwise go to Nashville.

“We’ve got to grow our city or else raise taxes to the point we’re not competitive,” Haslam says. And our new mayor doesn’t intend to let Knoxville become non-competitive on his watch. Indeed, he’s seeking to assure that this year’s tax increase is the last one the city will experience for many years to come.

May 13, 2004 • Vol. 14, No. 20 © 2004 Metro Pulse