Drawing from the Community Chest (Page 1 of 5)

Knoxville proper — not long ago a disheveled and somewhat-eerie cluster of burned-out buildings, dingy sidewalks and sparse signs of commerce — has convalesced in recent years with refurbished facades, a new blinking marquee and high-rise condominiums checkering the eclectic grid. Today, a jaunt from any hundred-block of downtown to another could instantly transport a pedestrian from a State Street ghost town to a Gay Street piazza between traffic lights.

It’s a patchwork that city leaders are darning with the aid of a new-fangled tool, known as tax-increment financing (TIF), which provides incentive for a developer to improve a designated piece of property by using the difference between the property tax before the TIF begins and the tax assessed after the property is finished to foot infrastructure or revitalization costs. By doing this, city coffers only collect property taxes for the amount levied at the original value of the land.

As opponents spurn the slack bestowed to “bigwig” and big-box developers through the TIF process, others say it’s a dangling carrot necessary to woo construction and business back to a previously battered and blighted downtown.

Developers enjoy TIF subsidies because they receive upfront funding for the deal without interest; their tax rate stagnates, and the bonds to the bank come from money that would have otherwise gone directly to the city tax collectors. The city essentially settles on a tradeoff of future tax income for an immediate benefit.

Projects like the Fire Street Lofts — an upscale example of urban living also offering commercial opportunities on the ground level — The Holston condominiums and the Regal Cinemas Riviera Stadium 8 movie theater began with TIF negotiations and sidle other prospective developments like the coming attractions of the JFG Coffee Co. Lofts, apartments offered at lower prices than the luxury condos typical of the district, and Sentinel Tower, as much a “skyscraper” as downtown may ever claim with its proposed 21 stories of townhouses, condos and offices.

“I think that the goal is getting people living downtown, to revitalize downtown,” says Councilman Bob Becker, “if you start out with the assumption that downtown is everyone’s neighborhood — some people don’t buy that — but it’s our neighborhood. It’s the Sunsphere; it’s Market Square.”

Downtown may be everyone’s neighborhood, but the residents attracted to the area by TIF-backed developments are of a considerably higher income than the average Knoxvillian – most developments receiving TIFS from the city are considered luxury housing, with prices typically ranging from $250,000 to $500,000.

Yet while Knoxville’s City Council and Industrial Development Board concentrate on rebuilding the core “neighborhood” and the sprawling South Knoxville Waterfront district, some TIF applicants have also made proposals before Knox County Commission in recent months for facilitation in other types of developments: A big-box Lowe’s hardware store on Chapman Highway, and in suburban Halls, another Lowe’s plus a Wal-Mart.

It’s a fine line on which both local governing bodies have and will continue to tread because the use of TIFs grows evermore popular not only in Knoxville but in every Anytown, USA.

A Brainchild of the ’50s

Though fairly new to Knoxville, TIFs have been around the block — at least around the blocks of other revitalized downtowns across the country.

TIFs have existed for more than a half-century with the first use of the finance technique in California in 1952. The California state government concocted the concept as a way to find matching dollars for federal funds, but TIFs didn’t become widespread until the 1970s and 1980s when President Ronald Reagan’s administration began to phase out federal grants for local redevelopment projects. By 1993, 44 states had adopted some form of legislation that made TIFs possible.

Today, Arizona is the only state that doesn’t currently have TIF laws in place to lure developers for rehabilitation projects, although it, too, has granted a handful of individual TIF projects.