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Some not-so-ancient history

An article and editorial in this past week’s editions of The Oak Ridger reported that Doug Janney of the city’s Industrial Development Board (IDB) had asked the owners of Oak Ridge City Center LLC if they still wanted the $5 million in development assistance promised earlier.

These articles confused some people who remember the 2002 referendum that rejected the issuance of general obligation bonds for the City Center redevelopment project, but have forgotten the events that followed. To help refresh some memories, I’ve dug into the not-so-ancient history of the city’s agreements with Oak Ridge City Center LLC (Steve Arnsdorff and partners).

In 2003, after the referendum had failed, Doug Janney of the IDB developed a plan to aid redevelopment of the mall property without the use of general obligation bonds. The IDB proposed issuing $5 million in revenue bonds, which under Tennessee law do not involve the possibility of a referendum (unlike general obligation bonds, revenue bonds would not be backed by the full faith and credit of the city).

This was to be part of an in-lieu-of-tax arrangement in which the mall property would be deeded to the IDB (basically, a paper transaction) and redeveloped by its “real” owner. Then, instead of paying property tax to the city and county, the landowner would pay the IDB an amount equal to the tax otherwise due, and the IDB would use this in-lieu-of-tax money as a revenue stream to pay off the bonds. This was later modified (based on a recommendation by Councilman Willie Golden) so that only the taxes due on improvements to the property would be pledged toward paying off the bond.

The saga was pretty thoroughly reported in the Oak Ridger. Here are links to a partial selection of the articles about it:

Describes the proposed arrangement, Aug. 15, 2003

More on the arrangement, Aug. 15, 2003

Still more on the arrangement, Aug. 18, 2003

Article on IDB approval of the arrangement, Aug. 19, 2003.

Article reports on Arnsdorff’s agreement to the plan, Aug. 21, 2003

Article about bringing Anderson County into the conversation, Sept 4, 2003

Article about Anderson County Commission approval of the deal, Sept. 8, 2003. (Interestingly, one of the county commissioners told me this was the only time the city asked county commission to approve an in-lieu-of-tax agreement on a commercial project. In other instances, it seems the city has overtaken the county property tax without asking the county’s permission.)

Briefly explains the financial aspects of the proposed deal, Oct. 7, 2003.

Extensive information on the financial and legal aspects of the deal, provided in response to questions submitted by Councilman Leonard Abbatiello (Oct. 7, 2003)

About Councilman Golden’s proposal to modify the deal to increase property tax revenues to the city and county by giving them both the tax on the land and using only tax on the improvements to pay off the bond, Oct. 9, 2003.

Richard Cook op-ed piece on the deal, Nov. 28, 2003.

Article on Council’s vote approving the deal (they approved Golden’s modified version), Dec. 2, 2003.

Article on a progress report from Arnsdorff, March 16, 2004.

Points out that the Starbucks development counted a small part of the way toward the requirement for bringing in 50,000 square feet of businesses new to Anderson County, which was one of the criteria the city had established to qualify for the proposed bonds. (May 19, 2004)

This proposal was very controversial at the time, but when compared with the current Crestpointe proposal, the safeguards for the city in this earlier scheme look extremely solid to me (for example, in the City Center deal the IDB would title to some very high-value real estate in the center of town, but in the Crestpointe deal the IDB would have title to a smaller parcel in a problematic location). Also in hindsight, it is not clear to me that this was an exceptionally attractive deal for the mall property owner (although at the time I thought it looked good from the developer’s viewpoint).

Ironically, there was almost no public discussion later in 2004 when the city gave the IDB blanket authority to grant property tax abatements for retail developments (this authority was most notoriously used for National Fitness). See http://www.ellensmith.org/forum/viewtopic.php?t=22 for comments I made at the time.

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One Comment

  1. Ray Kircher says:

    Is it because the city manager cut the Oak Ridge City Center master plan in favor of the Oak Ridge Waterfront master plan?

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