Comment on this story

by Joe Sullivan

A Downtown Advisory Committee appointed by Mayor Bill Haslam is charged with setting development priorities that look beyond projects already in the works, such as the Gay Street cinema, for which Haslam hopes to announce firm plans before year’s end.

“I’m looking for them to say what are the next three things we need to be focused on,” the mayor has said.

But even as the advisory committee assembled for its first meetings on Wednesday (after Metro Pulse’s deadline), three developments are in prospect that would provide a major boost to downtown’s economic vitality if they come to fruition. Consider:

• Developer (among other things) Sam Furrow is poised to buy TVA’s nearly vacant East Tower at an auction set for Nov. 24. While other bidders could emerge, Furrow is the only one who’s known to have committed to TVA’s minimum purchase price of $12 million. Though he says he doesn’t have any tenants lined up, Furrow wouldn’t be acquiring the building if he didn’t believe he can repopulate its 247,000 square feet with office workers.

• Mast General Store is seriously considering locating what would be a vintage retail outlet in the long vacant building on the 400 block of Gay Street that was once a White Store. Mast, which operates six stores in the Carolinas, is negotiating lease terms with the building’s new owner, Wayne Blasius. Mast stores have an Outdoor Outfitters’ aura to them, but their many lines of merchandise are both distinctive and diverse. A 20,000-square-foot Mast store could serve as an anchor that would bring other retailers to what was once the city’s prime shopping block.

• Plans are progressing for restoration of the dilapidated McClung Warehouses on Jackson Avenue as loft apartments, with developer Leroy Thompson in the lead. Thompson is partnering with the warehouses’ longtime owner, Mark Saroff, who has been unsuccessful in trying to restore them on his own. Thompson’s firm, BDT Development, in which vaunted developer Bob Talbot is also a partner, has stronger credentials for the undertaking. Its first stage calls for 50 residential units in two of the four McClung structures, and their $8 million restoration would also remove an eyesore that confronts anyone entering downtown from North Knoxville.

Spurring office, retail and residential growth, as well as attracting more visitors, have all been part of the city’s downtown revitalization efforts going back to the administration of former Mayor Victor Ashe. But up to now the residential sector is the only one that’s met with much success.

More than 200 new dwellings have sprung up over the past two years, mostly in renovated older buildings, and upwards of 200 more are now in the works. Property tax abatements have facilitated most of them. And in addition to the abatements known as PILOTs that the Ashe administration offered, the Haslam administration has turned to another form of development incentive known as tax increment financing. Under a TIF, the additional property taxes resulting from a development are dedicated to its financing for a period of years.

“TIFs and PILOTs will be our weapons of choice in furthering development,” Haslam has said. And beyond the $3 million he has committed to investing in the cinema (with Regal Entertainment Group and private investors covering the rest of its estimated $9 million cost) the mayor has tended to frown on direct outlays on the part of a city that’s become financially strapped by $10 million in annual debt service on a languid new convention center.

It remains to be seen, however, whether Haslam’s weapons of choice will be sufficient to bag the big game the city covets by way of commercial development. The cinema is supposed to be a catalyst for retailers and restaurants. But other than Mast, the only prospects Haslam is aware of at this point are “mom and pop type smaller shops.”

He recently went to Greenville, S.C. to meet with Mast’s president at its store that opened there last year, and he came away encouraged, both by that meeting and a meeting with Greenville’s mayor. “The mayor told me that with more people deciding they like the downtown lifestyle and moving there to live, it’s also buoyed the demand for office space,” he says.

Such hasn’t yet become the case in Knoxville, where the occupancy rate in many older office buildings has been going down, and no new ones are going up. The only sizable amount of space to come on the market in the past few years resulted from Furrow’s renovation of the vacated downtown post office to accommodate the relocation of the state Supreme Court. Union Planters Bank also became a major tenant.

As a prerequisite to his undertaking the post office renovation, Furrow sought and got a $500,000 grant from the city for faÇade work in the name of historic preservation. Furrow says he hasn’t approached the city about any form of financial assistance in connection with the purchase of TVA’s East Tower. But he acknowledges that it’s going to take a dedicated new parking garage to attract an anchor tenant with several hundred employees.

“Somebody is going to have to build one, and they don’t work financially unless you get some help,” he says. That help may have to be forthcoming quickly because the terms under which he’s committed to bidding for the building are really in the nature of an option that gives him 90 days to decide whether to consummate the purchase. A man as resourceful as Furrow may have other options besides city backing, but the city has a big stake in bolstering downtown office tenancy with more workers who’ll spend more money while they’re in the central business district.

Under an act of the state Legislature that was intended to provide a source of funding for the convention center, the city is entitled to “recapture” sales tax revenues generated in the CBD that would otherwise have gone to the state. This entitlement applies to revenues in excess of a base—a base that’s adjusted upward each year by the percentage amount of growth in sales tax collections in Knox County as a whole. The city’s recapture take of $1.37 million during the year it went into effect was somewhat heartening, considering the dearth of convention center bookings that were supposed to be a major stimulus. But recapture revenues slipped to $1.35 million in the fiscal year ended June 30, and it’s now apparent that it’s going to take stimuli other than the convention center to lift them much higher anytime soon.

Along with the cinema and destination stores like Mast, further residential growth that spurs nearby shopping and dining represents the best hope. And restoration of the McClung Warehouses as loft dwellings would make a major contribution to that growth. These landmark structures also beg to be preserved for their historic significance. Yet absent a developer like Thompson who’s prepared to undertake it, the city’s only recourse could be to acquire them via condemnation and rehabilitate them on its own, as it did with the Miller’s building.

Once again, though, the question becomes how much backing the city is—or needs to be—prepared to provide to facilitate the undertaking. In addition to TIF financing, Thompson is also seeking a faÇade grant to beautify, as he puts it, the blighted exteriors that are a conspicuous eyesore bounding downtown’s northern perimeter. Then there’s the need for streetscaping and sidewalking the decrepit stretch of Jackson Avenue between Gay Street and Henley Street. “We are prepared to move if we are able to secure a public/private partnership,” Thompson says.

Whether Haslam will be prepared to deploy more than his weapons of choice remains to be determined, but there’s ample precedent for it. The city, under Victor Ashe, shelled out millions to induce Image Point and Brunswick Boat Group to locate their corporate headquarters downtown. Market Square property owners, along with Furrow’s post office, have gotten faÇade grants. And just last month City Council, at the mayor’s behest, aided the financing of a 100-unit condominium development on Jackson Avenue by agreeing to lease 200 parking spaces on the property.

Getting a return on the city’s investment is Haslam’s desideratum. With property taxes foregone, sales taxes become the prime form of monetary return. Hence, the emphasis, he says, is on “getting some retail going, plus getting some more sales tax recapture money.”

November 18, 2004 • Vol. 14, No. 47 © 2004 Metro Pulse