Drawing from the Community Chest (Page 3 of 5)

March 6, 2008
By: Knoxville Voice

Although planners estimate the public infrastructure projects, such as greenways, recreational parks, parking allotments and new roads and road repairs, will reach $139 million in public funds to make the Waterfront vision a reality, they speculate the benefit of allowing this TIF will eventually stimulate $814 million in private development.

“It makes the whole sense in the world for them to put a TIF there. The South Waterfront is a tremendous TIF district,” says Mike Edwards, president and CEO of the Knoxville Area Chamber Partnership and the Development Corp., which provides oversight of the county’s 11-member, county commission-appointed IDB. “But, in general, I think the City Council’s got to be careful with the word ‘blighted’ because it can take on different connotations.”

The waterfront development incentive has the approval of a significant portion of Knoxville residents who participated in the planning process through public forums, but a previous TIF has many critical of the city’s judgment on when it’s appropriate to bait the hook.

When the city administration decided to sell the World’s Fair Park’s Candy Factory and Victorian houses for $1.82 million, many community members were outraged. That the property was located by the Sunsphere, a historical and unique landmark to Knoxville, made some residents wonder why private Chattanooga-based developers Kinsey Probasco Hayes and Associates needed a $1.6 million TIF to find the project feasible and worth pursuing.

The development company converted the Candy Factory into luxury condominiums at a considerable price-point just less than $300,000. Some Knoxvillians mourned the loss of the historical building as a public space, which was situated between the park and Knoxville Museum of Art and often used to host local art exhibitions and community performances for organizations such as the Knoxville Junior Philharmonia. Only one council member, Steve Hall, voted against the decision.

“There’s always the hindsight question,” says Becker. “When we finally voted approving the TIF on the Candy Factory — if we could have redone the deal right then that would be something. Unfortunately, the deal was made a year before. But even while the condos sold well, the good part with the TIF is you can’t lose money on it.”

But even whether city taxpayers have a cost at stake riles disagreement from many. TIF supporters often justify suspending tax revenue on inducement properties with a notion that the community would not have received revenue on the properties had they remained vacant, but knowing whether another developer would not have seized an opportunity to purchase the property without the tax incentive is hypothetical, at best.

Tiffs centered on TIFs

The Tennessee Advisory Commission on Intergovernmental Relations stated in a recent brief that TIFs have only become controversial since local governments have expanded the definition of TIF-warranted projects to include not just blighted properties that would not be redeveloped if not for the subsidy, but any redevelopment project.

“If a piece of property has enough profit potential to be developed without TIF, then there seems little reason that a local government should give up many years of future property tax revenues to pay for a portion of development,” according to the TACIR brief.

City leaders say they are using money that would not have been generated but for the TIF designation. As an example, if a property were valued at $5 million before offering the subsidy to a developer and the resulting property is worth $25 million, the paradigm is that the difference between the two amounts can be exploited to pay off the bonds. At the same time, surrounding properties may also attract an economic boost.

Alternately, neighboring businesses could potentially suffer at the hand of the TIF-supported competition. Knox County’s Lowe’s TIF development shares Chapman Highway with local Colonial True Value Hardware, and while the Lowe’s store has suspended property taxes, Colonial does not.

The two businesses undoubtedly share overlapping clientele, yet Jason Allen, Colonial employee and son of owner Jeff Allen, says so far they haven’t felt any negative impacts from the competition. “Our property is leased, actually,” says Jason. “And our customers can’t go to Home Depot or Lowe’s and get the help they want. You could ask any of them, and they’d tell you they’d rather come in here.”

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