Good evening.

It is six o'clock, and I would like to call the this workshop to order.

Um, and we will begin um with uh councilman Grant leading us in the pledge.

Please stand as you are able.

And I'm basically individual, justice for all.

You please call roll.

Councilwoman Adams, Councilman DeBarde Laban.

Here.

Count Vice Migrant, if you go here.

Councilman Grant.

Here.

Councilwoman Hillsley.

Councilman Honeycub, Councilman Lloyd, Councilwoman Parker, Councilman Thomas.

Five of nine are in attendance.

So as we all know, as council members, we've expressed a great interest in what goes on with corridor redevelopment, pilots, tiffs, the process that we use that happens before things get to us.

So tonight I'm pleased that we have Rebecca Jane Justice and Ben Bentley who work on those things for the city of Knoxville here to talk to us and we will they have a presentation after the part about process.

We'll take open it up for questions, then they'll move on to a next session section.

So we'll kind of stop in the middle so we don't have to remember all our questions till the very end.

And at the end of their presentation, then we will open it up for discussion and other questions we have about development along the corridors, barriers, things that we think might be interested to do, and just let this be a conversation as we all work to make things better in Knoxville.

So I think we have the presentation up, and so uh Miss Justice, are you starting us?

Yes.

All right.

Are we ready?

Start.

Yes.

I don't know if you wanted me to sing the national anthem next.

No, ma'am, we don't do that.

That sounds good.

It's better for all concerned.

Well, we appreciate you all inviting us tonight to talk about redevelopment and public finance tools.

Uh we talk a lot about this, specifically over the last few years where we've had so much growth and interest and investment in Knoxville, so how we can be strategic and collaborative in creative ways.

It's great to talk about not only what is possible but what the process is.

Um over the course of the next few moments.

Uh we have organized our information into just talking about why economic development incentives are important, where they're appropriate and focused.

We'll share with you an overview of the process and not only talk about the process but show you where we direct people to find out about the process and what resources are available on our city web pages.

And then we'll dive into what tools are available as public-private partnerships, what's in our toolbox, and then we'll move on to show you some case studies and talk about a little more specifically how those tools have come to life in a few specific projects and just talk about the mechanics of a few projects for some case studies, and then we'll wrap up by sharing how these projects have delivered and what the benefits and the investment opportunity has brought to Knoxville with these partnerships.

So I'm gonna jump back and forth between the slides and the the web because I think that it's important to show you all how we direct people to these resources.

So this is the urban design and development city web page, and I know we're about to change all of our web resources, but um that this information will still be there.

Um so if you jump to a live web page, um you're right here, and you have you can easily get there by typing urban design in the search for anything box.

And up at the top, we've got public-private partnership opportunities, which will share with you those tools and resources, and gets really detailed into the key development priorities and all the exhibits and forms, but also we share our viewer, which I'll go through in just a minute too.

So what's really important to us when we have initial conversations with folks on our process is really just an initial conversation, getting to know the investment and development team, but also allowing that team to get to know Knoxville and what's important.

So it's almost like a business development opportunity to really understand what everyone has as their priorities as they bring an investment to Knoxville.

So in the about five years ago, we created what we refer to as the key development priorities, and you all have heard us bring these to the table specifically in projects that come to council for approval for public private partnerships, and they highlight different categories about project type, project location, project characteristics, how the projects integrate with public amenities and transportation.

So those key development priorities have become really important to those conversations that we have with developers, and I might have to flip through each slide deck to get back, but we can do that.

So just a few highlights out of each of these categories.

We absolutely emphasize that the expansion of our housing supply is important when people are investing in residential projects.

We always ask that they consider incorporating 10 to 20% workforce housing into their multifamily projects.

Also along primary transit corridors and areas that are served by our Knox Area Transit System CAT.

So we also really place a great emphasis on historic preservation and adaptive reuse, really encouraging people also to explore architecturally distinctive and innovative design tactics and incorporating environmentally friendly and sustainable engineering characteristics like lead certifications, etc.

So we talk really big picture, but we also talk into the details when we're guiding people to share with them what's important to Knoxville as we grow.

So this really is an opportunity for us to say, um, what do all those key development priorities really mean when you start to look at a map of Knoxville?

Because whether you're from this area or not from this area, it is really great to start to say, I'm gonna flip a few of these on as I talk about how this map works.

So when we say an area of focus is a redevelopment area, we have digitized those redevelopment areas.

You can zoom in and out to see exactly what parcels are included in these redevelopment areas.

We also show where our existing and past public-private partnerships have been, and each of those will link to some context about each of those projects, and again, I mentioned aligning projects along transit routes.

So you can see all of these layers start popping into place.

There's all our transit routes in green, and again, city investments and infrastructure, so existing sidewalks are there in purple.

So you can really start to see how this is a visual interpretation of the key development priorities that were listed on the previous slide.

I'm gonna turn it over to Ben now.

So after we have that initial conversation with people, get to know them, we introduce some of our resources and priorities, we start to talk about process.

All right, thanks, RJ.

So a little bit about process, which is obviously the most exciting part of government.

This is a really important process roadmap.

It didn't exist until five years ago.

We heard not only local developers, but especially out of town folks that said we would love an expectation for a timeline of what this takes.

We're very clear to say this is a timeline based on, you know, submission in a timely manner of accurate information and it ebbs and flows a little bit, but all in all, this is you know, roughly a six-month process from start to finish if there aren't any major major hiccups in it.

So initial application is sort of a submission to the city of an exhibit A, and I'll talk about these documents in a little bit, but it really is a preliminary snapshot of what is the project?

Tell us the story, what uh what are you achieving from your standpoint as the developer, but also is there community benefit, is there public benefit attached with this, and how does it relate to the development priorities of the city of Knoxville?

So that really is step one, and I'm gonna I'm gonna hold there for a minute because right after that submission in step one, the initial city review, we've established a team that is an interdisciplinary team that includes partner agencies, planning and KCDC in conjunction with RJ's team, they lead this meeting, and then you've got the folks from engineering, the folks from permitting and inspections, like all the people that need to be around the table.

Not to get to a granular level of exactly what the project is going to be, because we don't know at this point, but to try to troubleshoot early on.

Number one, is this a project that based on those cities development priorities is one that we think the city of Knoxville would want to support?

So that's the first question.

And the second, are there obvious significant challenges to this project from a, you know, it could be a land use perspective, it could be just engineering, topography, hillside protection, like everybody in the room has a different perspective with which they're looking at the project, but trying to inform us early on to be able to troubleshoot and work.

I think this is really important because some cities that I've lived in are not like this, to try to work with the development team to make sure that they're able to get a deal done, but that the deal that gets done is in alignment with the things that the city of Knoxville wants to see.

So it's a very collaborative process.

You can see all of the folks that are listed there, and it's a it's a really great process.

At the end of this, we leave the room with sort of a it's an up-down vote essentially, and and it's it's really about does this project align with City of Knoxville development priorities.

And in most cases, if uh in many cases, I shouldn't say most, we're we're positive in favor of the projects, especially if they're specifically housing, and as RJ mentioned, some of those highlights of the development priorities that we're looking to see.

So back to the roadmap for a minute.

Just after the, so let's pretend that uh Vice Mayor Fugit has submitted a development proposal to the team.

The team meets and they say, Wow, she's checking so many of these development priority boxes.

The the sec because she would.

She would know she'd do her homework.

So step two really is a preliminary financial review, and so we, KCDC have developed a lot of in-house capacity for development and financial analysis.

We work directly with the developer, so they submit an exhibit B, which is further financial information that allows us to vet the project and more.

I mean, we're looking at qualitative, but at this point we've moved to more of a quantitative analysis of the project.

So, what is it?

Uh, what you know, what are the construction costs that they are assuming, what are uh normal borrowing rates for debt, what is their equity assumption?

Like all of the nitty gritty granular things that make a deal work or not.

And we're evaluating it both based on, you know, it's it's a it's a butt for test.

So here is the internal rate of return for a project absent any incentive, and this is the report that we submit with you all.

So on the depot project that came a couple meetings back, you probably saw this report.

But what is the return without an incentive and then compared to what is the return with an incentive?

So really step two is KCDC working with the developer to go ahead and refine the assumptions that are built into their financial model, make sure that they pass the smell test.

Step three, we don't want to be the only ones with eyes on this.

Um I think we do a great job, but it's nice to have somebody else, a third party that's unrelated to Knoxville work on this.

So we have a consultant that not just in Knoxville but around the country essentially evaluates the you know financials of incentives for municipalities and gives it one more check to, you know, in some cases he'll bring up a point about the financing or the capital stack that we may not have considered, or say I think that you know construction costs are coming down in your market based on the data that we've seen, we should ratchet this back a little.

It's a very um intensive process that some I mean, if I were the developer, I might not enjoy it.

It's not fun to have your financials picked apart, but it is necessary to make sure that we are fully vetting all of these, and that whenever we recommend a public incentive to city council for approval, that it has been fully vetted financially.

So that's step three is the third party review, and that's report, as I mentioned, gets submitted with you all uh to you all uh with the request for approval of you know a pilot agreement or whatever the specific deal is, it's typically a pilot or a TIFF.

Beyond step three, so once we have you know fully vetted that um public approvals, hey, elected officials, um, so you city council approves first.

In the case of uh really, I'll go through all of the the buckets real quick.

Uh the facade and historic program, that's a singular city council approval.

In terms of TIFFs, it's typically a city council, county commission, and KCDC board approval, and in terms of pilots, it's typically city council approval and then the city's industrial development board.

So the processes are a little different, but there are, with the exception of the facade and historics, multiple levels of approval that have to occur for these to be enacted.

In the background through all this, it says step five, finalize legal documents.

If anybody's closed a house or done any real estate deal at all, you know that's not the way it works.

We've been finalizing and drafting legal documents, financial documents throughout this entire process, but once we have the approvals in place, those get effectuated.

So you can see the days, the time frames at the bottom listed, but you know, typically start to finish, this is about a six-month process if everything goes according to plan.

And I think so.

Oh, I did.

There's exhibit A, B, and C right there.

Cool.

Um, so these are the specific documents that we request.

Those are listed on the website.

So I highly recommend for some fun reading, going and checking all of those out, but they get into more granularity.

We require more of the developer as we go further down the process.

So as you would assume, exhibit A is a fairly light touch, and then B and C are a little more invasive in terms of the types of information and the specifics that we're looking for from the development team.

Well, and just to share with you where that exhibit A is that's just a snapshot on the slides, but you can look at all the information we ask of the team before they enter into the process, and this is after the preliminary conversation, but you see the key development priorities.

So we want them to already be informed about what those are, and so then they before they submit their project to us, they're well versed in these and can share with us what they're committing to on that on that list.

And then at this point, it might make sense because we're about to move more into the specific tools we'll talk about and uh some other information.

If anybody has questions on process, it would be a great time to take any of those.

Yeah, I have a question.

Um at what point when someone's going through this process with you, at what point, and do people like us, do other people begin to learn about the fact that this is in the process so that we can observe and what determines when you share those types of things.

So I would say that the typically on step two, the preliminary financial review, we are still making sure that there will be a but for that's met, that there's even a chance of a public-private partnership and incentive.

So really about the time of step three third party review, which is moving into we have clarity that at least internally the city administration thinks this checks a lot of the development priority boxes.

We have clarity that this will be an item that is more than likely going to need to be voted on, whether it's a TIFF pile or whatever it is.

That would be the point as we're moving into that third party review and finalizing that where we see a vote on the horizon that will be imminent.

I mean, there will be something happening there, but it's, you know, it's leading up to essentially the education process before uh there would be an incentive that showed up on an agenda.

We would never want us an incentive to be, you know, on the city county.

You pull open your packet on the week before, and that's the first time that you've seen it.

Well, and if I can add to that, please, um, I think there's a bit of difference in when do you learn about that a project is being incentivized, or when do you learn that a project has entered conversations with the city or Knox planning about intentions of changes to entitlements?

Um, so zoning DRB, things like that, and again, I always preface everything by saying we are lucky that we have the ability to treat each project uniquely, but we very often will tell applicants to navigate through their entitlements before we jump back into this conversation because there is a public process with most entitlements, and so we want them to navigate through that and know that they can achieve a let's just use a rezoning as an example.

We don't want to offer an incentive to a project that needs to be rezoned from RN2 to RN6.

So we would never encourage them to do that anyway, but it's just a a vast example of how we would say this is a great idea.

There's a there's a section on exhibit A that says are you navigating through any entitlements or other government process or boards or commissions?

So they would list yes, we need to go through DRB, yes, we need to get a variance, yes, we need a rezoning, or what have you.

So we would say great, please proceed through that and let us know, keep us informed on how that process is going.

We stay in tune also, but we don't necessarily support the project before those entitlements are cleared.

And that's so important that ties directly back to the financial review.

So one of the reasons we do that is obviously on an entitlement, but really any of the things that are mentioned, if the project we're evaluating financially assumes a hundred and we're just gonna use an easy multifamily example, 100 units and it has to be RN5 to do that, and it's not currently RN5, we go through the three months of brain damage to try to evaluate a project that doesn't end up entitled, and then we start over again.

So uh we have taken a consistent position that you know, work out the DRB process, work out the entitlement issues, if there are variances, and then we will evaluate a project and we'll do it.

You know, there's a qualitative aspect to that, but we need you to have it ready to fully vet before we can do financial analysis on it.

If I could Mr.

Grant, before you can you explain what you mean by entitlements?

I think we understand this, but this is being recorded.

Your average, you know, we're speaking a lot of jargon that we're familiar with, but what to your average citizen do you mean when you say work out entitlements?

What are entitlements?

So those are any approvals or public process that need to be approached and concluded before you have a buy right development.

So if you need a rezoning, or if you need a variance, or if you have to have any other board or commission historic zoning or DRB approval before your your project is able to be approved and it's considered by right.

Thank you.

And a DRB is the design view board.

Yes thank you.

I mean we throw around all our acronyms and thank you.

I'm hoping that other people watch this who might be interested in doing this and understand all that.

So thank you absolutely Councilman Grant.

Thank you, Vice Mayor.

Um Councilman Barbara been kind of hinted on my question.

So like a similar question but then also just like a recommendation.

In terms of of the process when I'm looking at obviously step one A initial application what's the how many applications are you guys getting?

I mean is it like a fluctuation of applications?

Do you pick I mean what's is there an average in terms of how many of those applications we're accepting.

It varies greatly and it's not really based on anything we might have for example this month we canceled our monthly meeting because we had no new applications to review last month we had six.

Maybe the month before we had three so it's always it's it's never greater than uh it's always an average around from anywhere from one to four and those may be one for a facade program, one for a pilot, one for some other permit that we always evaluate with this team so they're not always big projects that are looking for a tax abatement financing but um it is it isn't it isn't a huge number.

So okay so I average that out to two a month times twelve would be about 24 25 projects a year.

Is that sound about right?

Sure and and you know we may have 50 conversations a year though on people who are interested to learn about what public financing tools and incentives are available but they may never enter into the process or do that first application for whatever reason they're just exploring what cities that they have evaluated have opportunities or maybe their due diligence in their um or their offers on land and real estate transactions don't work out the it the way they anticipated so we have probably twice or three times as many conversations and just meetings and greetings than we do actual applications.

So student housing is the easiest to pick on people are building student housing it tends to pencil all right financially so the city there might be a student housing anomaly that solves checks some other boxes does some other things that are not just house students but on a straight student housing deal the city's taking a position that those are a no-go so we you know RJ and her team still fill conversations and want to be a good you know envoy to the city but that would never show up fully embedded in this process the second category that vets in a little bit of a different way so you all don't see pilots that are approved on low income housing tax credit projects because under state law with a support letter from the mayor and approval through KCDC's board we can effectuate on affordable deals with tax credits pilots.

So there's about there's a universe of about 5,000 units of affordable housing in Knoxville that have these agreements on them.

They still submit an exhibit A but in the and we know that those are not um cash flowing the way that market rate deals do, the rents are very depressed on those.

So we've taken a position that the fully vetting through a third party review that costs money in the last six months is not the approach.

Let's support our development community, whether they're nonprofit, for profit, or governmental that are trying to get more affordable housing out there.

So those are two that are also add quite a few conversations, but don't always show up throughout the whole of this process.

Yeah, and so you know, with my question, and I can only speak for myself here, but um I know like when these projects come, you know, a lot of this stuff that's going on behind the scenes um that you guys are handling that's a part of the process.

You know, a lot of this stuff has to be done before it's even brought to us.

Um I would like to be a part of the process as early as possible, right?

So when I look at step one B, the initial city review, and it says city staff and other stakeholders will review the preliminary preliminary application to determine if the proposed project meets the city's key development priorities.

I think just for me as a as a council member and being in district six, knowing the district right to the best of my ability.

I think I will play a vital role in that process just in terms of having on the ground information, and so I would like to be a part of step one B.

Um I won't be overwhelmed or anything like that.

Um, but I I I do think you guys are are doing a great job in terms of getting these projects done and getting them before us.

Um, but I myself, I would like to be a part early as possible.

I think that is that's great.

And I think that one way we can uh approach that is to when we have initial conversations, um, let people know how to explore and find their district representatives on our KGIS maps, but also as they decide to make that initial application to certainly reach out and let their district representative know that they're interested and working diligently to put their project together and achieve public financing in order to make the project pencil.

Right.

I mean, I and I think just being proactive in that, you know, we we get as council members we can help with that public feedback, we can help with that public engagement to help that individual who's looking to get that that feedback from the community.

Um I think it'd be a resource for them, you know, if we're involved a little bit early in the process.

It certainly might save them some pain in the long run.

Absolutely, absolutely.

Councilwoman Adams and that ditto to everything that you just said.

Uh Councilman Grant, I wanted to ask in the past, when in this process typically have you, not the applicant.

I understand that they may reach out at a different time, but um have you tried to engage a council person who is representing a district?

Just to have a framework of how it has worked historically and the request that councilman grant is making.

Well, typically when projects when we see someone saying they have different public bodies and boards and commissions to navigate through, or they're going to be going through a rezoning, that's when we start to help them connect the dots on where to connect and who to connect with since those are public processes.

I just have one uh clarification question from the applicant's point of view.

Um on your process roadmap, they put their application, you've done your initial review, they need to go through design review board.

Do they sit in between steps one and two at that point until they accomplish that or steps two and three?

What what are what are their expectations?

We yeah, that's a great question.

So at in many cases, we would not have even uh accepted an exhibit A.

If for some reason and it does happen, sometimes they go ahead and submit an exhibit A, it would sit there.

At the point that we uh get to step two, we're really diving in, and so we would want DRB's approval and you know, certificate of what is it called?

I know you know of appropriateness.

That we would want that to be in place before we're vetting a project financially.

That's helpful.

I've just, you know, as we look at the timeline, we can give real uh developers realistic time frames on how long this process is gonna take.

So thank you.

Good point.

Okay, go ahead.

Oh no, sorry, Mr.

Thomas.

I I've got to start looking left.

In regard to private developers, strictly private without the housing aspect of affordability.

Is it often the case where the private developers will approach you and say basically we can't do this project?

We would like to do it, but we really can't do it without a pilot or tax uh TIFF requirements.

Is that pretty much standard?

Yeah.

Yeah.

Yeah, and I I think it would be uh if I'm a good developer and we love them, but I mean if I'm doing my job, I think most of them would start with what you just said, Councilman Thomas.

I I need an incentive to do a deal.

That is true in some cases and it's not true in others.

So step two and three is really trying to tease out which ones do require it and which ones don't.

Right.

And it's the third party um eyes on the project that basically decide uh whether or not this is a project that could go forward without us, or it's a project that really actually wouldn't happen unless uh the pilot or TIFF was granted.

Is that right?

The third party team is really good at having a template for effectively evaluating a return on a deal consistently.

I would say the flavor that we have started to add more of, we being KCDC, is because we build in this market, we borrow money and we raise equity in this market, we tend to have a really good handle on those variables that go into the model that g submitted to the third party.

So it's very much a collaborative process in that step two where the developer may be saying it's costing us stick built 340 of square foot to build, and we're saying that's cray cray, you know, and let's ratchet that back because we think it's 280.

If you can provide a contractor estimate that like a that that's what you're seeing, we'll consider it, but um, this is more what we're seeing in the market.

Once we have valid we would call that sort of variable validation, and once we've validated all of the inputs to the model, we would send it off to the third party, and at that point they are another set of eyes saying yes from both uh a deal perspective and from our perspective working in other communities and knowing the return expectations on a multifamily deal in a market like downtown Knoxville, this is a reasonable return.

So there's a there's an important local flavor that gets added, and then there's a really important out-of-town third-party set of eyes on it.

Yeah, I think uh there's still some misconception out in the public that these are just tax you know, giveaways, but they're really a way that we can increase the tax base on development that wouldn't occur without it.

Um, can we get you to say that on camera somewhere else?

We we say that uh we say that quite often that you know, but for means but for.

Yeah, yeah.

Without the incentive, no bank would finance it.

Well, and this is really the most amazing segue to well.

Let's keep taking questions and then we'll see.

Councilman, easy one.

Um how often when it goes to that third party entity, does that third party entity find some some wrinkles in that or some some issues that need to be addressed?

Pretty much every time there is at least a push and pull in the third party review.

Um yeah, because it pretty hard, but I mean it's financials are both objective and subjective, and there are there's always some perspective that's added through that that changes things a little bit.

And I think the development community that's been through this process a couple of times has gotten more comfortable and used to it, but it was I mean, it was a growing pains.

It was real painful about eight to ten years ago when it was first established, and now we've gotten a pretty good cadence, and people are understanding that whatever they submit is not gonna be taken at face value.

They're gonna have to justify the parts of their model.

Thank you.

Seeing no other lights, go ahead.

Okay.

Um, so back to what tools are available, we want to talk about each of the tools in the toolbox and give you a case study of each one of these to just talk about the details of each one.

So we establish redevelopment areas.

We have tax increment financing pilots payment in lieu of tax, and those LITEX been described the low-income housing tax credit projects.

We have development agreements for public infrastructure.

We have capital improvement project investments and the historic and facade program.

So we've got a case study for each of these to talk through the ins and outs of establishing them or how they work, and I'll let you talk about redevelopment areas.

Cool.

So redevelopment areas, I'm gonna give a little history to get to where we are now.

So in the probably 60s, 70s, 80s, these were urban renewal plans, and they were very specific about what land was going to be acquired, what you know, convention center or uh you know whatever it was is going to be built, and there was a lot of precision that if we were doing a project like that now would take years to vet.

Redevelopment areas over the last 20 years or so are mostly about putting in place the ability under state law to have financial tools like tax increment financing, like pilots that will generate private development.

So I know some of you have voted on uh the St.

Mary's redevelopment area.

This Magnolia redevelopment area was on the agenda just last year.

Uh these are and and it's hard because community members ask, I'm I'm sure uh Councilman Grant when this one was going through got some questions, and it's uh this is not a prescriptive plan for that whole area.

It's much more about how do we lay a framework particularly financially that encourages private investment and and city investment to align in an area that needs more attention.

So one point that I wanted to make on uh the the butt for comment that you made, uh Vice Mayor Fugit, it was so on point.

Uh a lot of people talk about corridor development, and one of the reasons we're emphasizing incentives on our corridors.

Uh I'm gonna use the depot project that you all approved, and it's a very reasonable return for a multifamily asset in a market like Knoxville.

But in the market rate side, those are I'm I don't remember exactly, but two thousand dollars for a two-bedroom, right?

There's some workforce housing that is not that, but that's I mean, that's a good average.

If you move that same project further down Magnolia, the rent per door that you're gonna get is I don't know, 1200, 1400 for the exact same construction cost, the exact same interest rates.

So we can have all the financial tools that we have, and they're really good.

We have a pretty robust tool set, but um and we attack all projects with all of them all hands on deck, but the point of that was to fill what can be 600 to 1,200 a door in rent differential between a downtown market or a like a Southwaterfront type submarket and some of the other areas that need a little more attention.

The only way we can hope to drive uh additional development and private dollars to those areas is through the establishment of redevelopment areas to support the specific projects, but also in some cases to lay the groundwork for major infrastructure investments that are gonna have to happen in order for that private development to follow.

So uh Magnolia specifically, uh this is very much about trying to make available uh tax increment finance and pilots, and then I think also just knowing that corridor historic and facade program will make sense for some parts of that area as well.

I think it would be great to explain how a new redevelopment area is established.

Yeah, that is a so that is a great point.

Typically, and uh we we we may ask for something like this process uh in the next little bit, but there would be a resolution from council requesting that KCDC establish a redevelopment area under state law, we then notify all property owners in that area, so much like a you know, rezoning type action, but anyone that's included in the redevelopment area with their last known address, we notify them via mailer.

Three consecutive weeks we publish in the Knox News Sentinel notices of uh of a public meeting that will be coming up, and we make available uh both online and at our offices, uh, a draft of the redevelopment plan that will correspond to that.

At the end of those three weeks, um, we would have uh a public hearing that really is about listening to feedback within the plan.

Now, as I mentioned, if people take time to digest the plans, they'll quickly see that these are very general.

They establish objectives for an area that I think most people can agree with.

I mean, in in the magnolia area, it would be reinvesting in existing historic structures, promoting business, uh, you know, further investment in Magnolia streetscapes, like things that have been vetted through other processes, but getting those in alignment with the private sector investments that are coming.

So once we have that public hearing, if there was significant feedback in the in an in a negative direction, which there hasn't been because of the nature of those documents, but we would absolutely uh we we could hit pause at that point and say some of this needs to be more fully vetted.

Typically, we get property owners at those public hearings that want to understand more about it, and we sit down with them for as long as it takes to let them know about the financial tools predominantly that now if if approved would exist in that district.

And not surprising uh owners pretty much 100% of the time once they understand that this could number one help their property values, and if they wanted to either redevelop their own property or if they want to market it and sell it to someone else, it's going to help their values as well.

Once we've had that conversation, these are very popular.

It just takes the the time to talk to folks that live in the areas.

So that public hearing, and then we would bring uh a draft of the redevelopment plan to if there's um which there typically would be tax increment finance language, this would be approved by city council and by county commission and then by KCDC's board.

And Councilwoman Adams.

Thanks.

It's related to this because you were saying before you went into detail here about the process that the redevelopment districts aren't prescriptive, um, and that's where my question is going in terms of the benefits or the reasons that this particular area is selected.

Is that because it's before this process that you were just outlining?

How does that part work?

If there's a desire thinking corridors again, that um there may be some different types of tools that could be effective.

Is that done prior to that outlining of the district and kind of setting some different parameters inside that?

So I think uh uh two things.

Uh in most of the redevelopment areas, there would have been significant process, like part of our presentation on Magnolia included uh corridor studies that planning had done, previous efforts on different um whether it's you know greenway planning, park planning, like all these overlays of public process, and we're trying to draw direct lines back to those so that our objectives reflect things that have already been vetted in the community.

If there were other incentives or you know, I mean it typically is financial, but it doesn't have to be.

If there were other things that could generate the objectives that we're trying to accomplish in these areas, absolutely um we're always open to those and would I mean we'd be happy to talk about that.

Councilman Thomas.

Uh so suppose um Councilman Debor Ladman and I uh wanted to propose a uh redevelopment plan for Broadway, which is right through the Center Barry districts.

Probably the appropriate thing to do at first would be to come and speak with KC DC about the possibility of that or certain um areas that you think would be the most welcoming for that uh prior to a resolution.

Yeah I think the the resolution would ask KCDC to to draft but I think the two of us would be the the conversation to have on that.

Yeah.

Yeah I was thinking that before we drafted the resolution just general conversation.

And just kind of see um kind of what the the biggest obstacles may or not be and then after that we could fashion a resolution.

So okay thanks.

I feel like there may be a request forthcoming I I have my light on so I'm gonna speak as well because um I do think that is the other question I have about that is how many redevelopment districts do we actually have right now because I think I I agree with cat my colleagues there are lots of places that could benefit from these tools to help us jump start a lot of what needs to have been done and um so today two former count two people who've been on council for a while we've talked about this for a while and we've added some but um how many can you manage is there is does the city have some idea of places that they would like them we all do because the the places we know um I'm just asking that out of curiosity is we're looking at like are there some that are being thought of that we might not know of so this is a whole nother hour.

No I love that question.

Thank you.

Well I can come to your office and have it that would be no let's start it here and then let's do that.

So there are technically any tax increment financing that has been approved by you all is a redevelopment project so it gets a little quirky because like the 200 block that Tim Hill has just finished and I think looks is a lovely piece to the downtown is technically a a redevelopment project but if you look at the the broader areas that have been identified I think the number is about twelve.

There's some the better way to think of it though is there are some that are more active right now than others because some of these are very much they never expire but they are so old that it probably does not make sense to use them as the basis for making decisions.

I mean you've got there's a sitter a city center redevelopment area that's fairly old.

There's still one that sits over a portion of World's Fair Park in that area.

So these are objectives that were established with specific projects in mind but 40 years ago.

Can excuse me could I ask a follow-up about that because the whole purpose of the redevelopment districts is to generate enough redevelopment that you don't need these financial tools anymore.

So to your point if you never take 'em off I assume you don't have to worry about that because the but four test would not pass.

That's a great way to put it yeah the butt for test wouldn't pass.

I would also say and we can point to the Southwaterfront um you don't know what the economy's gonna hold.

I mean that vision plan and redevelopment area right now is economically very viable but for its first because of the recession in 2008 because of its first 10 years of existence almost nothing happened over there.

So we always would want to give ourself enough runway um to be able to let the economy unfold and things to happen.

Which I g I think speaks to your point of we don't actually sunset them.

They just you either need them for a deal or you don't.

Yes that is that is correct.

I one other just general comment that is related to your question is um uh while uh I don't know that right this minute I have enough information to say this redevelopment area is about to come to you I will say that the need for large scale infrastructure planning with the growth of our city I mean this is not rocket science to you you deal with it more than I do is is significant and there are major investments in downtown on the north waterfront on the south waterfront that are all coming quickly and so um you could see uh the usefulness of approaches that allow us to be able to tap into tax increment financing to borrow now against those future property taxes and make smart infrastructure investments that are forward thinking as opposed to trying to do a piecemeal project by project approach so you mean prior plan thank you uh councilman grant yeah so my question um and this might might be a part of the financial review process but how are the the number of years usually determined in terms of a of a pilot or or a TIFF like how how do we come up with that number of 10 years, 20 years.

So it's a great uh story that really RJ and her team have over the last five years ratcheted back the duration of those so that the property taxes start to flow quicker.

And we always cite the example that I know is a case study in a minute on Cumberland of some of the big student housing projects that achieve some other goals and in a five year about five years from night right now those will deliver about four to five million a year and additional new tax revenue to the city of Knoxville based on those those projects alone the financial model based so it what it does is it looks at a 10 year internal rate of return and it's assuming a sale at the end of 10 years because we have to be consistent some people get really frustrated by that but we have to evaluate these the same way recognizing that not every developer is going to sell exactly at the end of 10 years the if you're selling an asset at the end of 10 years and there's still five years of tax abatement on it your sale price is going to go up right because the thing that someone's buying is going to deliver cash flow for a five year period better than it otherwise would.

So our model that we're really looking at the butt for factors in the duration of the pilot and as that ratchets back the return gets lower and as that ratchets up the return gets higher.

So we try within both our analysis and that third party to stay within we've always said there's a 12 to 20% internal rate of return and the reason that range is big and important is the risk that a developer would take on a downtown multifamily project with no bells or whistles just straight multifamily is exceptionally different from a new condo I mean it's not a new building but a condo development on Magnolia is very different from a small commercial on North Central so like we try to have this IRR model that is transferable to a financial analysis on any type of deal but it does bake into that return number the duration of the pilot and it's when you all see you know a 10% return without pilot and a 12% with it's factoring in that duration and if we extended it that 12% would go up.

Does that make sense?

That makes sense okay and and so in in terms of I know um RJ you mentioned um the workforce requirement anywhere between you said 10 to 20 percent how are we determining that average is is 20% the minimum is that a negoti is is that something that we use to negotiate yes it's a negotiation.

So what in that initial conversation we say if you're doing multifamily let's look at your unit mix and start to work into your pro forma the inclusion of workforce at eighty to 120% AMI into your structure so again each project is unique and it is certainly a push and pull to get that workforce in there because again, you are significantly altering a performer when you start to change those rents.

And and so at the expiration of that pilot or to that developer or the owners of that particular project, they no longer have to provide that work for how that work for housing, right?

At that point, they can choose to go full market rate.

Yes, that is correct.

The the one uh just small caveat is we do there's a graduated rent increase that can occur so that we avoid a situation where the person at 80% AMI is immediately jumping up to market, and that could be uh I mean I'm making a number up, but eight hundred dollars in the next month difference.

So uh there's a there's a percentage that they can ratchet up in year one and we take it up over multiple years.

You guys did that with the moss at the moss project out in C to Bluff.

Most Grove, Moss Grove.

If you guys did that, okay, okay.

I think I remember that that actually helped a lot of those residents who kind of seen that jump from exclusive.

Okay.

Thank you.

Councilman Thomas.

Yes, just in regard to the duration of the pilots.

I've noticed the trend just since I've been on council uh for shorter and shorter duration before the uh developer has to start, you know, paying taxes at the rate.

And I think when I was on first council, we were seeing about 30 years in some day, yeah.

And now I've seen them as short as 10.

So that uh trend is promising because it shows that the analysis is being done before you grant a pilot is actually getting stricter and uh it's working, and I've been basically just really pleased with um the decisions that have been made to submit a pilot, and all of them look pretty solid so far.

Just to kind of backtrack a little bit on some just general comments, you know, it's like um uh talking about housing and affordability and the lack of housing stock.

We've had these conversations, and it could be an hour conversation, but I just generally I wanted to get that in about you know the potential for housing along the corridors.

We see a lot of vacated property, a lot of surface parking lots, um, and um it's in private hands, so that doesn't mean the city can just do what they want to, but uh I appreciated the discussion about the um establishment of redevelopment areas and which I hear kind of authorizes KCDC and the city to be a little bit more proactive in reaching out once that it's been designated as a redevelopment area, then um I think that gives you more uh gravitas to approach a property owner and uh try to have discussions with them about what it would take for them to start developing the property and so uh the focus of my comment really is on increasing housing uh along these areas because it's um uh that potential is not being developed yet, and part of the reason for this workshop was to really start uh continuing to discuss that and figuring out the way that the city can unlock this potential with private uh public uh partnerships.

So thank you.

Thank you.

Go ahead.

Okay, great.

So we have a few more case studies, and and I'll talk about the context and the key development priorities and what crafted these projects to be what they are, and if we have questions about detailed mechanics, I'll I'll elbow my neighbor here.

Um but this project is the 200 block of of Gay Street, so really significant corner on the corner of Summit Hill and Gay Street.

It was a surface parking lot, and this project was a publicly led RFP process.

So a development team was selected to deliver this project, and the focus was on increasing housing, ensuring that we have mixed use.

So this project truly goes above and beyond a unique uh retail approach.

They've got ground floor retail that faces Gay Street, but they've also created an internal corridor where there will be a courtyard that has retail facing the courtyard.

Um it's in an existing redevelopment area, and it really finds a higher and better use.

I think that there's no argument there from a surface parking lot to uh a mixed-use development, and so alleviating conditions of blight.

Um, this was a $30 million investment, and the support was tax increment financing at 3.7 million.

So there are 53 condo units here that do include workforce units, and there is about 20,000 square foot of retail.

So I think they're about 50% sold right now.

So it's really exciting to see people that want to live in the downtown area, and they're having a lot of great success in conversations about leasing their retail spaces.

So we will soon see restaurants and different food and beverage options coming into play.

But again, this project would not have been able to happen financially unless there was the opportunity for partnership and tax increment financing.

So another picture is that those were the renderings before this is the actual construction.

So we can hardly keep up with the construction.

They've already made a lot of advancements since this picture was taken.

But it's really exciting to see that corner filled back out with vertical development.

Councilman Adams.

I just want to say how great I think that project turned out.

I got to participate in the walkthrough, I think that was yesterday or the day before.

But I was not aware, just hadn't thought of it this way, but that that was the first new construction that had been on Gay Street for 40 years, I think is what was said.

So I totally see how this program is making things really work that otherwise just weren't happening.

So if you haven't had a chance to go through it, try to because it really is nice.

And jumping a little bit to the west, Cumberland Avenue Streetscapes, this was a capital investment.

So the city spent approximately $25 million to rethink how Cumberland Avenue could be a safer, more walkable area for students and people shopping in this area, people driving to and from work to the hospital, you know, some major employers in this area that sometimes we forget about because we're so focused on the student population here.

But the incentive here is the city coming in and making a significant investment in efficiency of multimodal transportation and also aesthetics that really complement the form-based code in this area.

So by that 25 million dollar investment in Streetscape, we have leveraged around a billion dollars in private investment.

I know everyone's seen some of the student housing and mixed-use developments coming alive along the Cumberland Corridor.

This is the hub development, so really spurring from that investment that the city made in infrastructure.

This was one of the largest land transactions that Knoxville's ever seen by this development team.

Seeing that Knoxville had a need for student housing, and when we started our conversations early on with this team, we said it's really great that you're investing in Knoxville, but by purchasing this surface parking lot, you are taking away parking for some of the hospitals that they've leased for decades for their employees.

So, how can we work together to ensure that we can support you in including enough parking for not only your student residents but also your retail visitors and the employees in the area?

So I know Ben spoke that we don't incentivize student housing.

We didn't incentivize the housing piece here, but we incentivize the structured parking and very minimally, so a five-year term on a pilot that was focused on the structured parking here.

So there's 2,000 structured parking spaces, which is really significant.

You I know this is a large building, but you would really never walk by and understand how many parking spaces are actually included in there, but so really a partnership.

So when they came to us, we started to connect the dots with the people at the hospitals that they could understand what their parking needs were, and also other retailers in the area.

They had some people that were relocated and even brought back and new opportunities for collaborations.

There's a food hall there that the university students can use their dining cards, but is also available to the public.

So really interesting partnerships and collaborations that go even beyond the incentives are really we're playing, you know, connect the dots and really getting people involved because this is an outside development community or investor, so we're connecting them with the local community, and they know that being a part of the local fabric is going to make their development that much more profitable and meaningful to the community.

A very brief comment on that last one, too.

Um, the the city's investment obviously enabled this, and I think other corridors, while they're not Cumberland, and there's not that much density and demand for housing in any other place of our city, but it does it is a great case study for you know, Magnolia or Broadway or other areas of town.

If we make these types of investments, the housing market will follow there.

So, if you think about it excuse me, didn't the city do that on central?

I was just about to bring that up.

Thank you.

No, thanks.

Thanks.

Um, just some other examples.

There's Sevier Avenue Streetscapes, there's North Central Street.

Um, and so and the the first phases of the Magnolia Avenue corridor, so you can start to really see what types of investments follow public investment.

Councilman Thomas, did you have anything else?

Yes, just uh wanted to kind of underline what um Councilperson Adams said, and then uh to kind of make some comments on the uh mixed use and retail on the street level that we've been seeing.

We had a conversation, Miss Justice and I did about that.

And uh so I was really pleased to see some of these um pilots were awarded, but the requirement for retail on the ground level was there, and we'd had some uh developments, at least a couple in downtown Knoxville, where we exempted that, um, and I voted for them.

I understood why the developer didn't want it, but I didn't want that to be the default uh attitude.

And so when I see these two developments coming in requiring that, that um that's the way we should go, and for obvious reasons, vibrancy, mixed use, uh employment for residences, customers for the retail, all that stuff that you get.

So I'm just thinking still, you know, when these come before us and people are asking for exemptions of this, uh, there's reasons for that, and sometimes they should be granted, but um that shouldn't be kind of a said the default position, it should be only for a good reason.

So thanks.

So another one that Councilman Thomas is familiar with because he was a champion of this project and worked real hard to collaborate with the community on it.

Um, Grovsner Square, I think I pronounced that right.

So this is one of our examples of a light tech pilot that doesn't come before council, but the reason that this new construction of 184 mixed income units was possible was because of the Litech pilot.

Another piece to this one that's interesting from a public-private partnership perspective is the developer granted or you know, essentially dated back 27 acres, mainly hilltop but beautiful area that did not ever need to be developed back to I think legacy parks, and there's a partnership with the city of Knoxville and Legacy to try to, I mean, it will be preserved, but in what form still a little bit to be determined, but it's great the more that we can preserve these open spaces, provide housing for people directly uh adjacent to them is a really big deal.

I I do want to highlight most of these LITEC deals that receive a pilot are also receiving, in some cases, affordable rental development funds.

That was the case here, and then potentially some other resources that KCDC can bring to the table to try to make the financing work out for these.

So once again a very collaborative process between the city, uh the developer and KCDC on these.

And there's uh there's an after picture which really doesn't do it justice.

It's uh I mean that's lovely, but it's it's prettier than that.

Well, and on to our facade and historic program, we've brought a few of these projects to council recently, and it's these are some of the older projects that had happened before this council, but on the top frames, it's the before and after of the K Rue on Broadway and on the lower that is on North Central Street.

So really a big difference that the this program can make, and the these funds are focused on projects that are smaller commercial or multifamily projects that need something that is a little bit more focused and not as um extensive as a pilot or a TIFF.

So we're able to focus funds in different amounts depending on the total investment and depending on the scope of work that's needed to secure and stabilize the envelope of a building.

So if a business program fails, the investments of that infrastructure of the building envelope, the roof, the windows, the doors stays with that uh integrity of the structure for any new business to come along after that.

So really, all in all, uh we we can have some more questions and chats about all the tools, but it's it's great to think big picture on what we have been able to accomplish.

And since 2020, when we establish a new framework with those key development priorities and a process, our public-private partnerships have inspired over two billion dollars in private investment in Knoxville.

So creating and/or preserving over 8,000 housing units, which 5,000 of those were affordable, and generating five million dollars in new property tax revenue.

So over the next five years, uh the majority of these public-private partnerships as TIFS and pilots, and those require no direct capital investment from the city.

So how we're able to leverage that investment and really have an outcome is is so meaningful to Knoxville to have these tools.

Um I would just say that's a good job, and it is it's fantastic results.

Um that probably, and this is why I'm glad we're having this, so we understand it and we can share this with the community and talk about publicly that you know what some people still think of as a giveaway is not, it's an investment in how much we get back, and we can hope all we want that something will happen to a piece of property, but until it makes financial sense, it will not.

So we have to sometimes spur that along and and hence that's part of the role that government is playing with the with the tools we have to help private development create something that they could not afford to do otherwise, and it would just continue to sit there and sit there when we desperately need the more housing, and we desperately need um infrastructure reinvestment.

So it's it's a nice story and one that I think we spend um kind of vote over these pretty quickly because we do so much research on them, and we know about them.

So the projects by the time they get here, but the general story of what it took to get it here, the community also often doesn't understand, and it does take time.

And this didn't happen overnight.

We are um six years in.

Um but it's it's a good story, and um I'm glad we have this, and Scott, please write about it.

Three clocks.

Yes, uh well, you know, it doesn't have to be tomorrow, but you know, it's a good story.

So Councilman Thomas, yeah.

I would only add, you know, many of us had hoped that with Recode and the rezoning along the corridors to mixed use, that that was the main obstacle in redeveloping the corridors, and it was.

You couldn't redevelop it without recode and the changing of the zoning to mixed use.

But then after a period of time, we noticed that not much was happening.

Uh so even the the groundwork was laid and a big obstacle was was removed.

Um we realized we're gonna have to do more, just like uh my colleague said.

So that's kind of what you're hearing from us, and we know you got a hard job.

We're just looking for ways that the city can actually engage and be more proactive to to make that happen.

And um we appreciate the steps that you have made and the successes that that was we just you know want to keep continuing that because that's where a lot of the potential is, mainly for housing.

So anybody have any other questions?

All right.

Any more slides?

That's all we have today.

Well, um, I have two two closing thoughts for them.

Yes.

Um you just celebrated 90 years, KCDC, and you don't Ben, you don't look a day over 70.

So congrats.

No, it was awesome to go to that event and learn the history of um of KCDC and what it was and became so that was very well done.

So thanks for telling that story.

So and then you showed us six tools here, four of them acronyms, and two don't.

So we challenge you to come up with some more acronyms.

I love that challenge.

And for anybody that was not able to attend the event the other night, we are gonna put that content online so you will be able to see the history in pretty short order.

Thank you.

Um I'll just say on behalf of my colleagues, I appreciate you coming and doing this.

We we skirt around it a lot in um meetings and ask some questions, but really having an hour and 15-minute workshop to really lay it all out and tie all the pieces together, I think has been very helpful for some of us who've been around a while and some of us who haven't.

It's just always nice to hear it fresh again and see how much more progress we've made.

So thank you both.

And um with that, I will call us adjourned and everybody have a safe and wonderful long weekend.

And Knoxville is full of plenty to do this weekend.

Thank you.