Legal Confusion Over Universe Knoxville

Universe Knoxville promoters' ignorance of the law seemingly has no bounds.

When Worsham Watkins International first proposed the space-age planetarium and associated attractions a year ago, its original financing plan called for Knox County to guarantee a portion of the debt to build it. However, this approach was soon shot down as a clear violation of the state constitution's prohibition against a county's "lending its credit" to a private venture.

The promoters then came up with a new construct under which the Public Building Authority would nominally own the facility, thus making it into a public undertaking. The PBA would issue all of the bonds to finance it—$65 million in revenue bonds on which Knox County would have no obligation and $36.5 million in general obligation bonds on which county taxpayers would be on the hook.

When County Commission conditionally approved this financing plan in December, it further stipulated (at Worsham Watkins' insistence) that WW be named the developer. "The Authority [PBA] shall enter into a development agreement with Worsham Watkins International for the development of the Project upon such terms and conditions as are acceptable to the parties and in compliance with the Act," County Commission's resolution stated.

The "Act" in question is the state's Public Building Authorities statute, which governs the PBA. As amended last year, the statute requires a competitive selection process for all contracts involving "construction management services and design-build services." According to the PBA's administrator, Dale Smith, the role of developer could have been narrowly defined so as to exclude it from the requirement. But, in no small part at the insistence of Earl Worsham, a much broader role was agreed upon that encompassed the involvement of Denark Construction, a design-build firm with whom WW has been collaborating (for more on Denark and its president, Raja Jubran, see this week's cover story, page 10).

Smith explains that, "Earl wanted to keep his team intact...He needed somebody to handle construction estimates over the next few weeks before going to the bond market, and he had a strong preference for Denark. Given their preferences, it seemed clearly better to let them proceed as a team."

But this approach clearly required a competitive selection process. The upshot is a request for proposals (RFP) issued by the PBA on Monday that supersedes County Commission's directive to proceed with Universe Knoxville. Going far beyond that, the RFP invites proposals "for the financing, design, development, construction, operation and management of a new destination attraction to be located on a Knox County-owned site in eastern downtown Knoxville." The "new destination attraction" need not be similar to Universe Knoxville, and in fact the RFP notes that all Universe Knoxville materials are "propietary," so anyone else proposing a planetarium would have to come up with an entirely different concept. And the RFP gives respondents all of six weeks to come up with a comprehensive plan.

Universe Knoxville has been in the works for well over a year, and has already received funding from County Commission for both design work and a feasibility study. So how many alternative responses to the RFP can really be anticipated?

One of Knoxville's leading developers, Rodney Lawler of Lawler Wood ventures that, "Given everything that Earl Worsham has already put into this that already has the city and county committed to it, I would hate to try to come up with an alternative." But Dale Smith counters that, "We could be looking at projects that didn't go forward in other cities. If someone had a really compelling project and couldn't quite complete a response in six weeks, we could extend the deadline."

But why did PBA deviate so far from County Commission's resolution, theoretically opening the field to other proposals, without going back to Commission for approval?

"The resolution gave the county executive authority to approve all deals, and I viewed it as his prerogative whether to take it back to Commission," Smith says.

Schumpert, for his part, says, "My understanding was that the RFP was going to be for construction. I suppose PBA did what they felt they had to do." County Law Director Mike Moyers says, "I don't know anything about it."

If there's a silver lining amid all the smoke and mirrors, it's that the RFP may compel WW to be more responsive to questions on which it's been evasive up to now. The RFP states that responses must include, among other things, "proposed business/deal structure development/construction phase as well as ongoing operational management.)" Does this mean that UK's promoters will have to divulge the make-up of the board of directors of the not-for-profit entity that's due to be formed to govern it and select an operator, not to mention WW's proposed fees.

Smith is less than clear. "More will come out in the selection process, but a lot will be left to the negotiation stage between the PBA and the firm that is selected," he allows.

And how did WW and everyone else involved so muddy the legal waters in the first place? Predictably, no matter whom you ask, it's always someone else's fault. The president of the Knoxville Area Chamber Partnership, Tom Ingram, who has been one of Universe Knoxville's biggest boosters, tries to brush it all off by saying, "When you get multiple lawyers together, you can get multiple answers to the same question."

© 2002 MetroPulse. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.

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