Is the sale of the AJ Building good for taxpayers?

Is the sale of the AJ Building good for taxpayers?

By Steve Hunley, Publisher

publisher@knoxfocus.com

WVLT Channel 8 television in Knoxville reported on October 4th 2017, “Getting the Andrew Johnson Building back on the tax rolls has been a priority for me since I took office as Knox County Mayor,” said former Knox County Mayor Tim Burchett.

If Tim “dadgumit” Burchett has a white whale he obsessed about it was selling the Andrew Johnson Building. This quest has been passed on to our current Knox County Mayor Glenn Jacobs. When then Mayor Tim Burchett went on the road to sell this ambitious and doubtful project it sounded like the ‘greatest idea’ since giving out PILOTS (payment in lieu of taxes) and TIFS (tax increment financing) to get developers to rehab and build buildings in downtown Knoxville. This was going to be a good deal for taxpayers. Dadgumit.

Sigh, if downtown Knoxville is so great why does the city and county government have to give exorbitant long-term tax breaks/subsidies to developers?

The truth is selling the Andrew Johnson Building for a fraction of its actual value is giving away a very valuable and unique building and is getting close to nothing in return for the county taxpayers. The taxpayers may lose money they will never recover. This is a new low. Not only do the taxpayers have to give a PILOT and maybe also a TIF for this taxpayer subsidy, the low bidder buys a building we the taxpayers paid $25.6 million dollars for in principle, interest  and rent and own outright and then Knox County “sells” it to the highest bidder for $6 million dollars?

How does that make any sense? That is madness. That is a loss of paid for equity of $19.6 million dollars and then the taxpayers are to lease the vacant TVA Tower for 40 years? I’m not making this up. This is happening right now. You and I will take a hit of 77% paid in equity and then will pay a PILOT and maybe a TIF so the Andrew Johnson Building can be on the tax rolls? The requested PILOT is for 25 years. How will this generate any taxes in our lifetimes?

Imagine if you were to sell your house that you own outright at a 77% discount and then sign a 40-year lease at a ‘really good lease rate’ to move to another house so you could escape some maintenance costs and some ADU (American Disabilities Act) upgrades? The actual truth is the elevator needs to be replaced in the Andrew Johnson Building because of a prior ADU agreement. The Andrew Johnson Building is your house. You literally own it. How do you feel about this real estate deal? It is your money. Do you see a financial return in your lifetime?

The low bidder for the Andrew Johnson Building is BNA Associates of Nashville. They want a PILOT before they break ground on renovations to the Andrew Johnson Building should this proposed ‘deal’ pass both the Knox County School Board and the Knox County Commission. The Andrew Johnson Building is worth between $18 million and $20 million dollars at market rate based on comparable real estate comps in that market area downtown. It is appraised at the Property Assessor’s office at $13.5 million dollars. The former county administration thought it was a good deal to sell it for $6 million dollars. What you need to grasp is there is “accountant” accounting and “politician” accounting. They vary by many millions of dollars. You need to pay attention to these things. It is your money.

Boy howdy, you should see the “politician” accounting on this pursuit of selling the Andrew Johnson Building to supposedly put it on the tax rolls. The Knoxville Focus has received both the pro forma cost projections from the county administration and the Knox County School System. In a series of future Publisher Positions we will unravel this maze of cost projections. For this issue let’s keep it simple.

Let’s look at the first numbers presented two and a half weeks ago in a Knox County Workshop by Knox County Commissioner Larson Jay which were compiled with information from Knox County administration. In this workshop Commissioner Michele Carringer asked a great question, “If the TVA tower is such a great building why has it been vacant for 15 years?

Since the commission workshop the numbers presented by Larsen Jay have been wildly revised by county administration.

The 2.0 version of the  AJ Building sale tries to justify the insanity of this deal. The changes from version 1.0 to 2.0 varies by a factor of five for some line items.

Now remember, the whole reason for this quest was to put the Andrew Johnson Building back on the tax rolls. First let’s address the numbers from the 1.0 version of the AJ giveaway from Knox County Commissioner Larson Jay in the last Knox County Workshop. Please sit near a fainting couch. Commissioner Larsen Jay tells us the Knox County taxpayers will get $2 million dollars in taxes over 40 years for putting the Andrew Johnson building on the tax rolls, IF a PILOT is NOT given by Knox County Commission.

You may laugh now. IF a PILOT is not given? Seriously? IF? When does anything happen downtown that does not have a PILOT or a TIF? Seriously, a deal on Henley Street a few months ago was approved with TWO PILOTS. Not one, but two. It’s a mixed use development hotel and condos and some AirBnb units. Since we gave two PILOTS for that new hotel just a few blocks from the AJ Building can we just keep the AJ Building and save our $19.6 million dollars?

Let’s talk about that old non-ADU Andrew Johnson elevator. This is the key ADU remediation that will have to happen no matter who owns the building or is a tenant in the Andrew Johnson Building. Our Knox County Mayor Glenn Jacobs said on the WETR 92.3 FM radio show the Knoxville Morning News with Elaine Davis, “the elevator rehab is around $500,000.” In the 2.0 version from Knox County Finance the amount is $1 million dollars. Close enough? If we the taxpayers lose $19.6 million dollars in equity do we care about a $1 million dollar elevator upgrade? I say fix the elevator and keep the AJ Building.

What does the superintendent and the employees of Knox County Schools want? That is a great question that apparently no one in the past or current county administrations has ever asked. Now the employees park right next to the AJ Building in the Dwight Kessel parking garage. They have private offices. If this deal goes through they give up those private offices and become cubicle dwellers like in a Dilbert cartoon. How does that improve their work environment? In the 2.0 pro forma version for the AJ sale from county administration it is stated, “New KCS space will be more functional, efficient & modern, value added.” I’ve never heard cubicles described that way.

Let’s examine the so called ‘economic benefit’ that the county administration claims will be $68 million dollars over 40 years. Right now the employees of the school system can have breakfast and lunch on the South end of Gay Street. If they move to the north end of Gay Street this is supposed to somehow generate additional economic benefits? If the AJ Building was sold to a private developer people who would stay in the refurbished Andrew Johnson hotel and apartment/condo complex would not be additional business that would be received otherwise. Downtown Knoxville has had an explosion of new apartments and hotel rooms. The claim of a $68 million dollar economic benefit over 40 years is fiction. It is not real.

This is a bad deal for Knox County taxpayers and the school system. Please call your school board member and your Knox County Commissioners and tell them you want to keep your $19.6 million dollars of equity in the Andrew Johnson Building.

You must be logged in to post a comment Login