Comment on this story

by Joe Sullivan

One of Bill Haslam’s first moves as mayor was to “fast track” getting a movie theater built on Gay Street as a catalyst for downtown redevelopment. But it’s been six months since Haslam made that vow, and plans for the cinema are still on a drawing board, or negotiating table, that has many unsettled questions.

So is the cinema in jeopardy of going the way of so many other grand designs for downtown revitalization over the past several years: namely, down the tubes?

While acknowledging that, “I’m incredibly frustrated by how long it takes,” Haslam insists that the design and negotiating processes in which he’s been much involved are moving toward fruition. “It’s not a done deal, but I’m growing increasing comfortable that we can get this deal done and be able to make an announcement by early fall,” the mayor avows.

The reason it’s taking longer, he says, is that the deal has “so many moving parts.” These include: (1) the terms on which the city would obtain the property on the 500 block of Gay Street on which the cinema would be located—property that is presently owned by Knox County; (2) the issue of whether to preserve at least the facades of the historic buildings that line the 500 block but whose retention would add to the cinema’s construction cost; (3) the basis on which the city would invest in the project as part of a complex financing package that also contemplates other investors; and (4) the terms under which a cinema operator would lease the facility or perhaps become its owner.

In all of these negotiations, Haslam has hitched the cinema’s destiny to what he characterizes as a partnership with Regal Entertainment Group. Knoxville-based Regal is the nation’s largest theater operator with a dominant presence in the local market. But when a city-backed downtown cinema was first proposed a few years back, Regal initially opposed it as a threat to its existing properties. Haslam insists, however, that since he took office the company’s top officials have become “increasingly involved in the community” and are now wedded to the eight-screen, 2,000-seat cineplex that’s envisioned.

It’s Regal to whom Haslam is looking for the construction cost estimates, operating projections and other data on which the cinema’s financing will be based. While the final returns aren’t in, he provisionally places the cost at “somewhere in the $8 million to $10 million range.” And he foresees the cinema generating enough revenue to secure private financing for perhaps one third of the cost on which the city and its taxpayers won’t be on the hook.

The mayor is resolved to keep the city’s direct investment in the project to no more than $3 million. Not just coincidentally that equals the cost reduction (from $14 million to $11 million) that’s been wrung out of the new 693-space city garage just west of Market Square for which ground-breaking ceremonies took place last week.

The rest of the cost, as Haslam envisions it, would be borne by Regal itself covering all of the furniture, fixtures and equipment that would go into the cinema. Regal would own the FF&E, as it’s known in the trade, and just might opt to invest more and take ownership of the theater itself as opposed to leasing it. “Our discussions have been going three or four different ways on that,” the mayor relates.

Where preservation of the historic buildings on the block is concerned, Haslam says, “I’ve asked Regal to give us a cost that saves the buildings and one where we don’t.” Once the cost and design differences are known, he plans to seek public input before deciding how to proceed. But he spurns the notion of “a charette where you let people vote” because “I’m not sure that would be a representative group.” Both the higher cost of preservation along with Regal’s preference “to build a grand physical structure” seem likely to tip the scales in favor of demolition, and preservationist protests can be expected.

Haslam also seems likely to be subject to criticism for dealing exclusively with Regal rather than providing a competitive selection process for the cinema operator. The mayor justifies his course by saying, “I’m convinced we’re better off finding the right partner and then negotiating the very best deal we can rather than throwing it open to the world because there are so many variables involved.... Regal is a local company with a local commitment that understands the movie business and is our partner rather than just our contractor.” The cinema construction contract will be the subject of competitive bidding, he adds.

Haslam is sticking his neck out by taking this course. But I subscribe to his belief that it’s serving to bring things to a conclusion sooner whereas going out with an RFP would only serve to slow them down. When he was president of Pilot Corporation, the mayor gained a lot of experience negotiating deals with fast food franchisees at the company’s travel centers that are not dissimilar to the cinema deal that’s on the table now. He’s also got strong credentials for lining up the local investors who may be needed to keep taxpayers off the hook for a portion of the financing of a complex deal whose credit worthiness figures to be anything but bankable.

Haslam is hesitant to say when the long-awaited cinema may finally be up and running. But after considerable coaxing he holds out hope for a start by the spring of 2006. Downtown Knoxville’s hopes for a major economic boost are riding with him.

August 26, 2004 • Vol. 14, No. 35 © 2004 Metro Pulse