One of Bill Haslam’s most daunting challenges and crowning accomplishments as mayor of Knoxville was giving birth to the Regal Riviera cinema on Gay Street that has contributed so much to downtown’s vitality.
The story of the resourcefulness and selflessness with which Haslam made it happen has largely been writ before. But it begs to be recounted now in the wake of scurrilous charges by his Republican gubernatorial primary opponent, Zach Wamp, that Haslam committed a “serious breach of ethics” in connection with the cinema’s financing. Nothing could be further from the truth, and the egregious misrepresentations on which Wamp based his charges discredit him as a candidate for governor. The fact that he hasn’t retracted them after their baselessness has been well established compounds the stain on Wamp’s integrity.
Among Wamp’s reprehensible charges is the assertion that the cinema is “co-owned by Haslam and other members of his family.” And then there’s the assertion that the high-risk bonds backed solely by the cinema’s revenues—which the Haslams bought to fill a gap in the cinema’s financing (after no other investors wanted any part of them)—represent a “mixing of personal investment funds with the taxpayer money you oversee for your own gain or profit.”
In fact, the cinema is solely owned by Regal Entertainment Group, which leases its premises from the city of Knoxville’s Industrial Development Board. The main reason the IDB was vested with this ownership was to make use of its tax-exempt borrowing authority to issue revenue bonds without putting city taxpayers on the hook (as would have been the case if city general obligation bonds had been used).
Bond financing became necessary to complete the project because its costs had escalated from an original estimate of $9.3 million to nearly $15 million. This was due primarily to the great lengths to which the city went to preserve the historic (but decrepit) buildings surrounding the cinema on the 500 block of Gay Street. Their restoration has, of course, beget the S&W Grand (not to mention other establishments) in its historic setting, but made construction of the cinema much more complicated than original plans that called for demolition of these buildings.
When Haslam undertook the cinema project in 2004 as a major boost to downtown revitalization, its chances of succeeding seemed problematic. He pledged that no more than $3 million of city funds would be invested. It was believed that a $2.5 million investment on Regal’s part, plus complex tax credits that took a tremendous amount of effort to obtain, would cover the balance of the cost.
Just getting Regal to agree to a downtown cinema without any operating subsidy was a major coup on Haslam’s part. Regal’s chieftains had previously been loud and clear that an unsubsidized cinema in that location would not be viable. But Haslam eventually brought them around in complex negotiations that included the $2.5 million commitment and lease terms that have yielded enough revenues to service the IDB debt that eventually had to be incurred.
Finding a way to fit the cinema on the site in a way suitable to Regal without demolishing the historic buildings was also a remarkable design feat, for which architect Faris Eid deserves great credit. But it added substantially to the project’s tab, as did rising construction costs during a prolonged design phase. Hence, the need for IDB issuance of $4.25 million in revenue bonds.
Cumberland Securities, which managed the financing, sought out other prospective purchasers of these bonds bearing a low 5 percent interest rate. But it soon became apparent that only “angel investors” were prepared to buy them, and the Haslams became the angels.
Fortunately for all concerned, the cinema’s performance has exceeded expectations, and Regal’s lease payments have more than covered debt service on the bonds. Beyond getting repaid on his high-risk bond investment, Bill Haslam has no financial interest in the cinema’s success. Nor would he benefit in any way from a subsequent sale of the property by the IDB once the bonds are paid off. The IDB’s board of directors, who are appointed by the mayor, could authorize such a sale, which would put the property back on the tax rolls provided that the proceeds must be used for a city economic development purpose.
Without Bill Haslam’s resourcefulness and perseverance as mayor, it’s safe to say the cinema never would have come to fruition. And it’s also safe to say that the cinema’s pulling power has served as a catalyst for a lot of other downtown redevelopment, including the Mast General Store and many of the restaurants that now line Gay Street and even more so Market Square.
For Zach Wamp to attempt to besmirch Haslam’s role in all of this is really just a smirch on Wamp and renders him unfit to be governor of this state, as far as I’m concerned.