Downtown Knoxville Construction/Downtown Knoxville Business: Follow the Money

C.B.I.D. Meeting, Knoxville, July 2012

Today we’ll look at four properties, what has been done to them and what is proposed. We’ll also examine the response they got from requests for grants from the Central Business Improvement District.

You’ll recall that CBID underwent a complete re-evaluation of the grant process back in the spring. it all started with the controversial $125,000 (corrected from previous number – thanks, Daniel) grant to the owners of the Kern Building (Hotel Oliver) for facade renovations which will soon be complete. You can see from the photographs that a beautiful facade is in place, though some remain unhappy that the project only included improvements to the bottom floor facade.

Market Square Kitchen, 1 Market Square, April 26, 2011
1 Market Square, Knoxville, August 2012

Prior to the current work, the bottom floor languished, with rotting wood and windows that badly needed to be replaced. A tired awning covered the front and the improvements to other parts of the square underscored what an eyesore it had become. As the photographs show, the facade is now much improved both aesthetically as well as structurally.

Tupelo Honey Plans, 1 Market Square, Knoxville, August 2012
1 Market Square2, Knoxville, August 2012

Still, the grant barely passed amid objections to its size, at approximately 34% of the annual CBID budget, as well as the feeling that it gained momentum by the naming of the retail establishment to occupy the space. The idea had long been held that grants should be awarded to buildings not businesses since other businesses contribute much of the money.

Three current grants requests were frozen while the re-evaluation process proceeded. This conceivably put three contractors and building owners on hold for about six months. In that interim, the CBID determined that the grant total for facade improvement would be $100,000 annually and that the maximum grant for a facade would be $25,000. An exception would be made for “special” projects, for which a larger grant would be considered. That begs the question: “What is special?” Jeffrey Nash asked the question and, as best I could determine, the answer was, “We’ll know it when we see it.”

So, given the new guidelines, what happened to the three requests and what’s happening to the properties?

Cru Bistro, 124 S. Gay Street, Knoxville, August 2012
Cru Bistro, 124 S. Gay Street, Knoxville, August 2012

McCamy Construction had requested $72,832 for renovation of 141 South Gay Street. The site, which will soon be Cru Bistro, involved making two buildings appear to be one. The Development Committee recommended they be denied completely because construction had already begun at the time of the initial request, which violates the guidelines and means the money must not have been necessary to the project. Their representative countered that damage done during the 100 block construction required some of the work to proceed in order to stabilize the foundation. After discussion, a $17,000 grant was awarded for the 1912 square foot facade project – or $8.89 per square foot.

32 Market Square, Knoxville, 2012

Bernadette West requested $57,785 for improvements to the 672 square foot facade  at 28 Market Square. You’ll remember this address most recently housed Harb’s Tailor and Swagger, each of which closed to make way for the West’s planned small concert venue. The Development Committee recommended they receive $8,000, or about $11.90 per square foot, which the board approved with little discussion. I found the details of this project compelling in that the four square windows on the second floor will be returned to the original three arched windows, which doesn’t seem like something they would be required to do, as the historical damage has already been done. The historically accurate cornice will also be replaced.

Finally, owner John Johnson and developer Joe Petre of Conversion Properties requested $190,000 for renovation of the facade of the Arby’s Building at 430 South Gay Street. It is a prominent location at the corner of Gay and Union and sits on a block with other established businesses. The Development Committee recommended it be considered “special” and did not submit a suggested amount. Interestingly, half the committee had to recuse itself because of connections to Conversion Properties.

Arby’s Building, 430 S. Gay Street, Knoxville, August 2012

This type of issue complicates much of the work of the CBID. Committee members as well as board members often have ties to a developer or a project or are competitors with the developer. Would the project have been considered “special” were it not for the ties some shared to Conversion Properties? Jeffrey Nash questioned the granting of “special’ status, arguing that the same could be said, if not more so for the Century Building, the J.C. Penney Building, McClung Warehouses, the Kress Building and many others.

The intention of those involved is to have retail on the bottom and condos above. They passionately stated the case that this building will not get developed without help. The owner pointed out that many people have told him he is crazy to invest over two million dollars in the project.  Tim Zitzman suggested downtown needs soft-goods stores more than restaurants and bars and asked if the developers might be required to seek such tenants and while one committee member, Patrick Hunt, expressed sympathy for that view he said the committee can’t dictate use to an owner.

So, if it is “special,” what does that mean in dollars? The size of the facade, at 11,955 square feet is massive compared to the others discussed and, in fact, is much larger than the first floor facade of 1 Market Square which received the $170,000 and started the whole chain of events. The original request totaled $190,000. In the end, the board awarded $100,000 to the project, or $8.36 per square foot, though the vote was not unanimous, with Patrick Hunt voting in opposition.

So, the final three projects submitted prior to the new guidelines have been addressed. Each of the owners and developers will have to decide, given the final amount of the grants, whether or how to proceed with their projects. So, what do you think? Well played or misplayed? Sound process or still broken?