There has been a nice discussion about the Standard Knitting Mill proposal over at the Compass Colloquy FB group site. I posted the following there and would like to share it with the Knoxviews family who may not be members of that group.

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Recently many have raised a lot of issues and concerns regarding the redevelopment of the Standard Knitting Mill site. This is understandable and appreciated as it provides a good opportunity to address these from the point of view of our team at the City.

Let’s start with a bit of background. This privately held property has gradually deteriorated over decades through a variety of owners While many have seen its potential, this potential has been overshadowed by its many liabilities. Its proximity to an active rail line negatively impacts residential options. Parking is a significant challenge. It has extensive environment issues adding to the cost of repair and construction. However the greatest problem has been with its access. As Peter Davis of WRS put it at our meeting on Thursday, this is a “Statue of Liberty property - very visible but hard to get to.

It has been clear to us and to potential owners and developers that this property would remain a blight on the Parkridge neighborhood and beyond for a very long time unless there was significant public sector participation in any development plan. The market, left to its own devices, would not yield a positive outcome. The benefits of any plan could not overcome the associated costs and risks. In this case the externalities associated with this market failure are very negative. The property would remain undeveloped and eventually lead to the destruction of an historically meaningful structure. The environmental issues would remain unabated.

The policy in place at the City created under the Haslam administration and expanded upon a bit under Mayor Rogero is to involve the public sector in such situations through a two pronged test. (1) - Is the development in the public interest to a degree that would justify public support? and (2) Can we be assured that the development would not take place “but for” the support?

The former is not subject to a formulaic approach, but rather a holistic evaluation involving multiple factors. The latter is an economic evaluation involving cost, projected income, and risk. In recent years we have employed the services of an out of town firm with no connections to Knoxville or any potential developer to ascertain whether what level of deferral of new taxes makes the project viable. We refer any developer who approaches us to this policy.

With the nature of the property and its challenges along with applicable policy in mind, we can return to the time when WRS first contacted the city earlier this year, They let us know that they were in negotiation to purchase the property from the now-previous owner. We had previously met many times with a number of former owners’ representatives but none had made much progress toward a development solution.

We were very impressed with WRS’s vision for Standard Knitting Mill. Their approach saved and rehabilitated the historic building. They were willing to commit hundreds of thousands of dollars to studying environmental contamination and to spend much more during construction if the issues were resolvable. Their plan was for retail, residential, and office with sensitivity to the surrounding community. Their vision for access involved an outstanding, multi-modal design, greatly increasing bicycle and pedestrian connectivity to the Parkridge community. Their parking could be accomplished on the present rubble yard property. They also recognized the opportunities to work with the city to provide a more open greenspace at Ridley Helton field.

WRS continued their negotiations with the owner during which time we agreed to the following. We would pursue making the rubble yard available, most likely through a long term lease. We agreed to shared funding , with the city’s cost capped at 3.5m, for the new road, the cost of which would range from 5m - 6m. We also agreed to support the application for a PILOT but emphasized that it would involve a third party review and ultimate Council and Commission approval. Of course the expenditures for the road and arrangement for parking would also necessitate Council approval. We pushed back on the original design for the boulevard to ensure that it would not adversely affect the historic field layout.

Mayor Rogero has made the Standard Knitting Mill’s successful redevelopment a priority for her administration and been heavily involved in these efforts. We have worked closely with Councilwoman McKenzie as we approached these negotiations. We fully briefed Mayor-elect Kincannon after the election to make sure she could support the commitments. We then awaited the closure of the property purchase for $4m after which we immediately made the contours of the arrangement public and sought to schedule a public presentation at the earliest possible date.

The above underscores a few points. First, cities are structured under state law as municipal corporations. While of course a city’s main task is providing services, we are also empowered by state legislation and our home rule charter to represent the public interest in situations like we face with the Standard Knitting Mill redevelopment. In such cases the developer approaches the City with the prospect of significant private investment with not insignificant risk in an important project that also necessitates significant city commitment. As we respond to such requests we evaluate the degree to which the City’s investments are necessary for a successful outcome. Either side can walk away, with the result a continuation of the status quo. We have used this approach with success to aid the revival of the city core.

Our approach under Mayor Rogero, as it has been under Mayors Haslam and Brown, is to find the point of common interest while realizing the other party’s ability to walk away from the project. The neighborhood and the City will benefit greatly from the WRS. development at a very reasonable commitment of public dollars. The developer benefits from the ability to realize a successful project which should represent a reasonable return on their investment commensurate with the significant risk associated with the unknowns of the economy, the business cycle, and retail, residential, and office demand. Finally, there is real political risk because of needed administration, Council, and, for the PILOT, County Commission approvals.

The City’s risk is minimal and far less than that of the developer. But that is as it should be.. Private sector decisions are made on a risk / reward basis. If everything works out perfectly the project could yield a good return on investment. But there is always risk that the development will lose money or fail completely. However, there is no risk to the City with the PILOT; it keeps taxes where they are. If the project does not occur we are no worse off than we are now. The new road is a plus that will facilitate future development if this project fails.

On the other hand, failing to reach a mutually satisfactory outcome has very real risk to the City. Failed negotiations would mean continuation of the blight and failure to create the jobs that the construction would bring. It would mean the loss of the jobs associated with the functioning retail and office sectors. It would mean losing the opportunity to provide an environmentally clean site with lingering and likely increasing environmental justice issues for a neighborhood with many lower income residents.

I hope this case study provides a bit of a glimpse into this situation from the point of view of those of us on the public side as we sought a solution for this very important site. Apologies for the lengthy post. Thanks for your patience.