Downtown Knoxville's Next Big Something

So we've come a long way in the past decade. Get over it. What's next: A grocery store? More retail? Toilets? A monorail!

During much of George W. Bush's time in office, just about anyone who wanted to question the evolving justifications for invading Iraq felt compelled to first perform a ritual affirmation of basic patriotic values, a kind of rhetorical ablution that began with "I support our troops."

In a similar way, before beginning any discussion on downtown's current situation, one feels compelled to first categorically acknowledge how far the city's come in the last 10 years, recounting the liturgy of successes in the Mast General Store, Regal Riviera theatre, the redevelopment of Market Square, and the reopening of the S&W building as the S&W Grand. There are the now 26,000 people working downtown and 2,000 living there, those residents probably comprising the most significant change from a decade ago. Even amid one of the worst economic climates in 70 years, new businesses—mostly restaurant but some retail—continue to open.

There are also a number of large-scale projects underway in various stages of development, including Marble Alley, Sentinel Tower, the South Waterfront, and Knoxville Plaza.

If and when these projects approach realization, they'll likely become the next milestones in downtown's recent history. But for now, there are some worrying conditions—stalling development as financing is harder to come by and the projects themselves are more difficult; the coming political transition as a champion of downtown, Mayor Bill Haslam, departs (rumors have it he's running for governor); and a continued dearth of retail, by no means unique to downtown as the recession works its way through the economy—that make it an appropriate time to reflect on what can be done in the meantime.

Indeed, for the past few months, the Central Business Improvement District, a body tasked with improving downtown, has been considering some existential questions about how to continue downtown's momentum as it's worked to adopt a three-year strategic plan. One concern is that a principle tool of the CBID—direct grants to businesses for facade and interior improvements—may not be working as well as it once did: there are now $246,000 in grants to projects that have not moved forward, 90 percent of them because of the economy, according to CBID Treasurer Matt Synowiez. With around half a million dollars in its coffers now, there's a question of how to best marshall these funds to help the next piece of the urban puzzle fit in.

"We're at another tipping point, or maybe a plateau," says Patrick Hunt, chairman of the board of the CBID. "In my opinion, the next stage of revitalization and growth is going to be even harder and more critical to creating long-term sustainability."

So before we raise the "Mission Accomplished" banner over the City-County Building (last Bush/Iraq/Arrested Development reference, promise) and celebrate downtown's arrival, it'd be wise to ask where we go from here, what role the city and CBID can play in pushing it that direction, and what downtown's still lacking: a grocery store? Retail? Parking? Public toilets?

Another convention center? Did someone say monorail?

Re-tailspin

Tuesday, Jan. 19, was an unseasonably warm day, briefly lifting the winter cloud then hanging over Knoxville. The mayor had invited the board of the CBID to his conference room on the 6th floor of the City-County Building for an hour-long conversation on how the CBID and city could better coordinate their efforts.

Created in 1993 with the mission to make downtown a better place to "live, work and play"—a phrase repeated ad nauseam by board members, the city, and developers—the CBID focuses on the one square mile of downtown between the Old City to Volunteer Landing and 11th St. to Hall of Fame Drive. It's funded by 32 cents of every $100 collected on property taxes in that area, a sum that has about doubled in the past 10 years—from $233,116 in fiscal year 1999-2000 to $437, 008 in the 2008-09 fiscal year.

"I don't have a big, long agenda," the mayor began the meeting in his casual way. "What are the things you all want to be focused on in the next year? How can we help?"

Haslam explained he just wanted to ensure that the CBID and the city, which have so many overlapping duties and goals, are "pushing in the same direction" regarding downtown and its objectives.

The timing of the conversation came just as the board neared the adoption of its strategic plan, which lays out as its No. 1 priority what many have long been concerned about: business recruitment and retention.

"It's worrying," said Jeffrey Nash, a prominent developer and owner of the Crown and Goose, in an interview at his office days before the meeting. "Retailers always want to come into an urban environment where there are lots of people. But that isn't the case here. You see a lot of really, really empty retail spaces, because we haven't done the right things to sell Knoxville to retailers."

Nancy Solomon, owner of Reruns second-hand clothing store and a 26-year veteran of downtown, says this is a marked change from what downtown used to be: "One of the biggest differences now is there are people living downtown now, and that wasn't the case when I opened. But there was a whole lot more retail down here," she says.

According to the CBID, there are currently 31 non-restaurant retailers downtown. Its goal is to have "a net gain" of employees and businesses, office and retail, during the next three years—a considerably less ambitious target than earlier drafts boasted. Originally the plan called for a doubling of non-restaurant retailers in two years, but the board thought prescribing a net gain more realistic.

Identifying this problem isn't exactly earth-shattering news: The lack of retail has been on many minds since at least 2007, when Va.-based consultant Blount Hunter estimated downtown could more than double its revenues—from $45 million to $94 million—if it could bring in more retailers.

"There's momentum," says Bill Lyons, senior director of policy and communications for the city. "Have we reached critical mass? We're always vigilant to make sure we don't backslide. I think part of that momentum—a lot of us are sensing that [it's] retail. That's sort of the next place to push on to that would extend the momentum."

The question has been, and continues to be, how do you do that?

Price Check on Gay Street

To many, by far the sexier of the two priorities (insofar as priorities for business development can be described as "sexy" at all) is what the CBID calls its "Big Ideas. " By this the board means evaluating and funding "catalyst" projects—businesses it deems a good fit for downtown but which, on their own, may be unwilling or unable to find the funding to open there.

Some possible catalyst projects batted around by downtown residents, city officials, and CBID board members include: a grocery store, such as Whole Foods, which could combine hot, prepared foods, and possibly a coffee shop, with basic grocery necessities; an electronics shop; a book store, something in the model of Carpe Librum; a shoe store; and a pharmacy.

But the grocery store is perhaps the most oft-discussed addition. With 26,000 workers downtown and 2,000 residents, some feel it's past time the city had what seems a basic amenity in other urban areas.

And about three years ago, Nash and his wife wanted to make that happen.

"We needed assistance from the CBID at the time—which was similar to the assistance given to the Mast General Store—and it was declined by the CBID. And I categorically told the CBID at the time, if that grant was not forthcoming in order to assist us in bringing it in, we couldn't do it. We'd already invested quite a considerable amount of money with architects," Nash says. "In their infinite wisdom they didn't think it was the right thing for them to spend their money on."

Nash was not a board member at the time. He says not much has changed since then, except the mindset of the CBID.

"That's not decrying all the things that the previous CBID did, it is just saying that there is a realization that Knoxville has not made it," Nash says. "The reality is that even though over the past 10 years there have been enormous strides made in getting Knoxville into the 21st century, the reality is it's not there. Not by a long, long, long, long way."

Nash believes there's still a need for a grocery store, as well as a pharmacy, but that entrepreneurs like himself—"little guys," he calls them—do not have the resources to make those things happen all on their own.

But another little guy, developer David Dewhirst, doesn't necessarily agree. "Back 10 to 12 years ago, there was a big debate about incentivizing a grocery store to come downtown because that would be a catalyst for residents," Dewhirst says, "and you might find this surprising, but I really didn't support that." Dewhirst says he believed then there was great demand for residential development—which he says is still the case—and that the board needed to focus on ensuring that demand was met.

Once the residents were downtown, he explains, there would be a natural draw for the amenities to serve that population.

The Chicken and the Egg

And this gets at a tension underlying these priorities—the recruitment initiative and the Big Ideas—a chicken and egg question that roughly tracks two competing theories of economic development: one that goes, as residents continue to move downtown, they will create demand for retailers, a grocery store, and all the other things people want. In this economic environment, with the piecemeal, time-consuming nature rehabilitations requires, it will simply take time; and another that says, while that's generally true, public and semi-public entities, such as the CBID, can play a pivotal role in incentivizing businesses to go where they otherwise could or would not.

Dewhirst and Leigh Burch—who between them have been responsible for some of the most prominent downtown rehabilitation projects over the past 10 years, including the Holston Building, the JFG Building, the Phoenix, and Sterchi Lofts—tend to fall more in the first camp. Dewhirst, once a member of the CBID board, says if the city continues to bring residents and workers downtown through residential rehabilitation and development projects, while providing basic things like safety, cleanliness, infrastructure and parking—things generally under the city's domain—the retailers and businesses will follow. "There's a supply of people who would really like to live downtown," Dewhirst says, "but we just don't have the buildings to put them in right now. It takes so long to do a development of each building."

Burch agrees that the market will determine what's needed."This is not the ‘Field of Dreams': you build a park and the people will come. It doesn't work that way," Burch says.

Joe Petre, president of Conversion Properties, Inc. and CBID chairman from 2002 to 2008, says the CBID has found a winning formula in its grant funding and facade improvement program and should continue on its current trajectory, waiting for the economic storm to pass and the retail to come.

Current CBID Chairman Hunt, who's careful to point out he speaks for himself and not the board, falls more in the second camp. "I do believe very much in market-driven forces. But I also think there are moments when the public, and/or a sort of quasi-public group like CBID, can create incentives and/or an environment that make it more tenable for something that otherwise wouldn't happen."

The example he and others point to is Mast. "There is no way that Mast General would have come if it were not for a lot of people coming to the table to make it happen," Hunt says, "including the CBID, which put $275,000 towards it—an outright grant to get a major retailer. Knoxville is now Mast's top performing store. It continues to exceed their expectations in sales; the community's embraced it."

Regal Cinemas is another example of a business that needed some coaxing but found great success downtown. Lyons says the effort required many private and public players working in concert to convince Regal the downtown location could work. "Regal, purely on its own—its numbers never really worked for them," Lyons says.

"A lot of people seem to have felt that we're there, and everything now is just gonna happen evolutionarily," said Nash in the meeting with the mayor. "I personally don't think that will happen... I think that the bringing of the cinema downtown was magnificent. Mast General Store was unbelievable. But as we've seen from those two arriving here, they haven't automatically encouraged other things to happen." However, some nearby restaurant proprietors would likely disagree.

Lyons believes three-quarters of the effort still has to come from the private sector, but that sometimes the city and CBID can play a role in bringing them the rest of the way. Dewhirst doesn't discount the Mast experience, but he fears committing large sums of public funds to something that may not work, a la the convention center.

"Sure, there are times when you have to get something over the hump that's not quite there," Dewhirst says, "but you can't artificially put something in place, because then you're going to be forced to subsidize it for a long time."

Of course, that money hole cost the city $160 million to build; the largest grant the CBID has awarded, to Mast General, was less than $300,000.

Daddy, Don't Go

There was an elephant in the room that day of the meeting—at least, there was, until Nash, perhaps given greater leeway because of his English accent, confronted the pachyderm head on.

"Our biggest problem is that we're going to lose Mr. Haslam as our mayor very shortly," said Nash, his bluntness eliciting laughs of embarrassment from his colleagues. "It's true. We may laugh but it happens to be a fact. It doesn't necessarily say the next administration's priorities will be the same as Mayor Haslam's. We really don't know that."

Once the subject was named, others took the opportunity to express their discomfort with the coming transition.

"The reality is that when that change occurs, if the next administration has a different feel for it, we may have to take on more responsibility to keep downtown at the level that it currently is," worried Matt Synowiez, CBID treasurer.

Some board members and developers wonder if the mayor's departure doesn't highlight the need for some new tool for downtown, possibly one that exists outside the vagaries of the political process. Hunt mentioned making the CBID more akin to a downtown development corporation, as some other cities have done. In that scenario, something like the wayfinding project—a city effort underway for years to put up signs to help guide visitors—could be handled more expeditiously through the CBID rather than through city government.

Others, such as Dewhirst, talk about a "downtown czar."

"I think here in downtown Knoxville, we need someone who wakes up everyday and says, ‘What do we need to do in order promote and foster downtown in general, but retail specifically on the existing storefront locations that we have, hopefully, and where we create new ones?' And I think—I just don't see that," Dewhirst says.

There was talk at the CBID of hiring a full-time business recruiter, but the board ultimately determined it would be better to work more generally at business recruitment and save the money required to hire such a person for other uses.

Petre says it was the right move. "We'd like to believe that you can just put somebody in a position, every day they're calling retailers and retailers will come. That's just not at all the case," Petre says. "Retail nationally is one of the hardest real estate sectors, and there's just not an influx of new retail, particularly in urban markets."

Back in the conference room, the mayor listened to the concerns and then tried to quell them—fairly modestly, considering the rather immodest implications for his career as mayor and prospects for governor.

"You've got a problem as mayor. You've got a prescribed boundary: city limits. You can add X beyond it, but that's problematic," Haslam said, describing the complications that arise from annexing property or developing land in the face of neighborhood opposition.

"Growth is hard in itself. So downtown, and the core, and growing out from that really is your only way to bring in new revenues to the city, if you think about it," Haslam said.

The mayor's confidence is derived at least in part from the numbers. As buildings once vacant come on line, they generate significant property taxes for the city and county. An example: the Holston building, developed by Dewhirst under tax-increment financing, a redevelopment tool, was worth $2.6 million before its rehabilitation. Now it's worth slightly more than $7 million, increasing city and county tax revenues on that property alone by $212, 886.

In fact, according to numbers provided by the city, just seven projects downtown have increased city and county revenues by more than $775,000, while 10 projects underway are estimated to increase those revenues by more than $915,000.

As the mayor finished his point, it wasn't clear his confidence in a future administration had assuaged the board's insecurities.

John Sanders, an architect and vice-president of the CBID, responded, "It just depends how long it takes [the new mayor] to figure that out," a quip that received uneasy laughter from the room.

Keeping the Powder Dry

What the CBID ultimately ends up doing with half a million dollars may be far less interesting than some might wish. A rather mundane subject that repeatedly comes up in conversations is the lack of downtown parking—both perceived and real.

The city recognizes this as a core issue and is considering expanding the State Street garage, but that's not even in the capital budget yet so won't be happening anytime soon. A garage costs between $15,000 and $20,000 per space to build, so it can easily run north of $15 million, and it "doesn't begin to pay for itself," Lyons says. The CBID couldn't finance a parking garage on its own, but it could contribute to one, possibly through a public-private partnership. In addition, the wayfinding effort, the new lots in the Old City and under the bridge, and the completion of the 100 Block of Gay Street will help alleviate the problem for now. But in the next three to five years, this issue will continue to resurface.

Another idea, perhaps the least sexy of all, is putting public restrooms on or near Market Square.

When one considers a sequence of events that begins with a movie theatre and Mast General and ends with installing public toilets, there's obviously a lot left to be desired. However, the difference between a bold idea (the Riviera) and reckless one (the convention center) is largely the result: If it works, it took great foresight; if it fails, it took great stupidity.

And as the region and nation works through the recession, the argument can be made that many small improvements will build a strong foundation, so that when investment conditions do improve, businesses—including a grocery store—will move downtown on their own accord. In the process, CBID can keep its resources available, "keep its powder dry," in development speak, for when those big things do come along and need a little help.

"I think we can hit a lot of singles right now and look for a way to hit a triple and a home run," Petre says. "But you can't just pull that out of your hat. The economy does dictate some of the mood."

There will likely continue to be something of a tension between those who believe downtown has enough momentum that it will naturally build out from this point, and those who believe there's a long way to go and now is not the time to get timid or complacent.

"At least in my mind's eye, we're past the point of no return," says Hannah Parker, who sits on the CBID board and serves in the mayor's office as downtown coordinator. "I don't ever see downtown going back to where we were even a decade ago."

"Downtown has made some big strides from where it was," Dewhirst says, but "it's still very much in its infancy."