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Proposed “Crestpointe” development – wrong proposal for Oak Ridge

Well, it’s no secret that I’m a candidate for City Council in the June 5, 2007, election (with the filing deadline still several weeks away, all of the local papers have reported that I have filed as a candidate). It’s also no secret that the hottest local issue of the season is the proposal for City taxpayers to help fund the GBT Realty proposal to build a shopping center (“Crestpointe,” expected to be anchored by a SuperTarget store) on the site formerly known as Pine Ridge.

In an article by John Huotari entitled “Potential candidates weigh in on Target,” the Oak Ridger correctly reports my opposition to this proposal:

…two other potential council candidates said they oppose the Pine Ridge project, tentatively called Crestpointe of Oak Ridge. They would prefer that redevelopment efforts be focused on the city’s downtown area, which includes the former Oak Ridge Mall.

“If we develop retail on the top of the mountain, on Pine Ridge, we’ll be putting a nail in the coffin in the center of the city for a long time,” said Ellen Smith, who serves as chairman of the Oak Ridge Environmental Quality Advisory Board.

Smith, who has qualified to run in the June 5 election, said she is also concerned about Crestpointe’s potential impact on existing Oak Ridge businesses.

I’ve studied the proposal, and I’ve concluded that it is the wrong proposal for Oak Ridge, although I believe that its proponents are pushing it for valid reasons.

Yes, I do think there are some good reasons for this proposal:

  • There is a substantial pent-up desire for more retail in the city. I have long believed that the dearth of retail in Oak Ridge (not a shortage of housing, as some others have said) is the single most important reason why people who work here choose to make their homes elsewhere. Many local residents identify Target (which calls itself an “upscale discounter”) as the single store that would go the farthest toward satisfying their shopping needs. Target claims to be particularly attractive to “young, well-educated, moderate-to-better income families who live active lifestyles,” who are exactly the kind of people that Oak Ridge would like to have more of as residents
  • The local sales tax is an important source of revenue for Tennessee municipalities and counties. When Oak Ridgers spend their money outside the city, the city loses out on potential sales tax revenue. Conversely, if we spent more money in town — and if our stores and restaurants brought in more trade from people who live elsewhere, local public coffers would benefit.
  • Oak Ridge’s retail sales (and sales tax collections) are declining from one year to the next, indicating that the city is losing more and more business to surrounding communities, the Internet, and mail order.
  • Shopping center developers say that they have been unable to identify available commercial sites in the city that are both big enough to site a Target store and would give the company the visibility and accessibility to potential customers that it wants. Therefore, GBT, the Chamber of Commerce, and city staff have looked for a creative siting solution.

Good reasons notwithstanding, the proposal before the city right now is all wrong. Here are some of my thoughts on it:

  • It’s contrary to good planning. The proposed Crestpointe shopping center would occupy a site (on Pine Ridge) that is not zoned or planned for commercial use (its zoning is industrial), is not adjacent to or connected with any existing retail areas, and currently even lacks road access. Locating retail at this site would, in effect, mean tearing up the city’s existing comprehensive plan. I believe that the city’s demonstrated eagerness to abandon comprehensive plans in order to accommodate every development request is a principal reason why the city’s recent survey of a sample of residents found that, when asked to “rate how well you think the City does overall in providing each of the following services,” 29% of respondents (40% of those who gave a rating) rated Planning and Zoning as “poor” or “fair.” (Only Attracting Industry and Economic Development drew stronger negatives.)
  • What we are being asked to subsidize is the continued destruction of the ridge, not the creation of something of value. The $10.5 million that the city is being asked to contribute to this development would not be an “investment” in something of value, as some citizens have been led to believe. Rather, about $9 million of this money is budgeted to pay for continuing the flattening of Pine Ridge (note that among other things, this would involve extensive bedrock blasting, which likely would be detrimental to nearby high-tech industrial companies) and building massive retaining walls (estimated to be 50 feet in height and totaling more than 2000 feet in length) on the sides of the ridge in order to make this privately owned site buildable. Basically, we are being asked to spend public funds to finish the destruction of the ridge.
  • Crestpointe would not boost the city’s existing retail. Retail developers and planning consultants tell us that retail begets retail. Thus, if new stores or shopping centers are established near existing retail centers, both the new stores and the existing stores will experience more shopping activity than if they sat by themselves. One of the reasons I have wanted new retail in Oak Ridge is that I expect that new stores would enhance our existing shopping areas. However, because the Crestpointe site is a stand-alone site that is not convenient to any existing shopping areas, it would not have this positive impact. Thus, we would miss out on the opportunity to boost our existing retail sector. Instead of locating a smaller shopping center near existing stores where the new stores would get positive synergism from other shopping areas, the developer proposes a large development (on a scale almost as large as the former Oak Ridge Mall) where synergism (and profits) would come from stores within the shopping center.
  • This development would eliminate chance of redeveloping the City Center (former Oak Ridge Mall) area. The 450,000 sq ft of new retail space at Crestpointe would fully absorb any need for retail growth in the city — the city population would have to grow quite a bit to generate enough additional demand to support additional retail in the City Center area. Thus, if we support this new development, we can expect the City Center property to remain in its present state for many years to come.
  • Not only that, but Crestpointe would detract from existing in-town retail. If the stores to be located at Crestpointe are as successful in drawing retail business as GBT’s projections and the city’s analysis assume, their gross sales revenues would total $140 million a year, of which the city assumes about $80 million would be diverted from existing retail business in the city. Retail sales in the city currently total about $440 million a year, so diversion of $80 million in retail activity would mean a loss of 18% of the business from our existing stores. That’s a big loss o f business that I expect would lead to the closure of more than a few existing stores. (If you think that some of our shopping areas look blighted now, just wait!)
  • The financial analysis of benefits to the city government appears overly optimistic. As some of my fellow citizens have pointed out (see Oak Ridge Citizens for Due Diligence and Citizens for a Progressive Government of Oak Ridge), there is reason to question whether the city has done appropriate “due diligence” on this proposed deal. The developer’s analysis of site preparation costs were checked out with TVA staff — that’s a good start. However, the city’s optimistic analyses of tax revenues rely on the developer’s assessment of market potential, which the city has not independently verified. For example:
    • It appears that in order to achieve the $60 million increase in Oak Ridge sales that the city projects, Oak Ridge would have to change from a community that “leaks” sales of consumer goods (clothing, electronics, home furnishings, etc.) to other communities into a community that sells more consumer goods than its residents buy. That seems very unlikely in view of our city’s position as a secondary city in the Knoxville metro area. I don’t want to stifle optimism, but I don’t want to bank on unrealistic assumptions.
    • The analyses seem to implicitly assume that the people who live outside Oak Ridge would shop at Crestpointe instead of at similar centers located closer to their homes. That’s little more than wishful thinking, if you ask me.

    Additionally, the city’s analysis of potential tax revenues assumes that increased property taxes (from the value of the store buildings) and sales taxes (from new sales) will flow in starting with the first year after the proposed bond issue. That’s just plain impossible! If it takes 2 years to build the shopping center (as expected), there would be 2 years without any additional tax revenue. If someone like myself can find that kind of mistake by reviewing presentation graphs and summary tables, what other errors are buried in the analysis? Remembering how poorly the last city’s last “can’t possibly lose” investment (the Centennial Golf Course) turned out (last time I looked we citizens were subsidizing the golf course at the rate of $300,000 per year), I think it is irresponsible to put taxpayer money into this proposal without some independent verification of the numbers.

  • Aesthetics (another planning issue). I don’t want the most prominent view from many parts of the city (and the scene that greets people arriving from Knoxville) to be of the neon commercial signs atop a hill that resembles a medieval fortress, but that’s my impression of what this development would look like. We might as well change the city’s nickname to “Target City.”
  • Traffic (yet another planning issue). Now that the road has been 4-laned, traffic flow on South Illinois Avenue en route to Knoxville is pretty smooth now at most times of the day (at least until you reach the Solway Bridge area), but retail traffic from Crestpointe is likely to change that. Access to this shopping center would be from South Illinois Avenue (a new stoplight would be installed) and the Boeing interchange, adding tremendously to traffic volume on this main highway into and out of town…

Now, I imagine you are asking “What would you do instead?” I have some thoughts, but I’ll save them for another post.

In the meantime, I’d like to note that if City Council votes Monday night to authorize general obligation bonds for this project, there almost certainly will be a successful petition to place a bond referendum on the June ballot. That will give voters the opportunity to make their own decisions. I hope, however, that Council will exercise some leadership on Monday night and vote this down, sparing voters the need to go through another divisive referendum process.

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7 Comments

  1. Raj Jain says:

    Good to see you blogging. Truth shall prevail.

  2. Fred Stephens says:

    I have not decided whether I am for or against the GBT Realty proposal. I have attended several meetings and asked many questions. I know this and from your text I see you probably agree. The City needs more revenue and the land on the ridge will be used for something eventually. So, what would you do instead? Now is the time to answer this question. We need solutions. What will you do about the economic woes? What would you prefer to see on the ridge? Could you imagine worse on the ridge? By referring to Bill Schramm’s analysis are you endorsing it? If so, I must take great issue – because at least half of what his article says today is an outright lie or very misleading. – Fred Stephens

  3. Ellen Smith says:

    Response to Fred Stephens

    I agree that the city needs retail, but this is not the right location for it. Not only are there huge site-preparation and infrastructure costs, but siting new retail at this location would detract from our existing retail districts.

    The ridge-top site is currently zoned for — and has been marketed for — industrial use. It is not ideal as an industrial site, but industrial development would not require that the entire site be at a single elevation (this is one of the biggest costs of the current proposal) and it would not have the potential to generate the traffic congestion that could come from a busy shopping center. Most significantly, using the site for the purpose for which it is currently designated would not detract from the city’s existing commercial districts.

    If you are convinced that “at least half of what [Bill Schramm’s] article says … is an outright lie or very misleading,” please explain.

  4. Fred Stephens says:

    I am in communication with Mr. Schramm about his analysis and what I think are misleading statements. For example, #8 about the abatements is simply not true. City staff said from the first meeting that abatements will not be available. There is not enough room here to repeat all of my communications with Mr. Schramm. I repeat my main question: “What will you do about the economic woes?” Have you no fear that what will end up on the ridge could be worse than retail shopping.

  5. CrackerNation says:

    Alas, Raj Jain, the data crunching expert for the so called “Oak Ridge Citizens for Due Diligence” forgot to do due diligence on himself. http://www.citizennetmom.com/ points out that he has a relationship with a Knoxville realty firm that is pushing its own development in town.

    I think that it is time look again at all his claims that may form the basis of our opinions.

  6. Ellen Smith says:

    Netmom appears to have her facts wrong, CrackerNation.

    As I posted on her blog, Raj says he was surprised to learn (from a newspaper reporter who asked him to comment on Netmom’s blog post) that he works for the Oliver Smith Realty company (because he doesn’t).

    For the record, his business website is http://intelisim.com/. His site does list a client called the Smith Group (http://www.smithgroup.com/), but they aren’t related to Oliver Smith Realty, and aren’t even located in this area. Maybe that was the source of the misinformation.

    Whoever started this rumor should be informed that “Smith” is not a unique name (I can definitely vouch for that fact!).

    And before it’s too late, I guess that I’d better go on record to say that I have no relationship to Oliver Smith Realty.

  7. Raj Jain says:

    Hi Ellen; Glad you are standing for elections… Five years since Crestpoint… I wonder if the developers are still in business.
    You served our city well. I will do what I can to help you get elected….

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