The Government Accountability Column

 

Editor’s Note:  The following article incorporates some verbatim statements, used with permission, from press releases issued by the Oak Ridge Accountability Project, a group of Oak Ridge families interested in helping government reach for that next higher level of accountability and performance.  The Tennessee Law Times has independently added commentary and verified the key facts contained in this article.  We are pleased to debate the merits of Oak Ridge’s mall redevelopment scheme with any proponents and have already used the previous Oak Ridge mall redevelopment proposal as a case study for an undergraduate economics course taught last year at Tusculum College in Knoxville.

 

The Atomic City’s Bomb for Transactional Law:  Asset-Backed Securities With a Dubious Stream of Collateral Income.

 

Recently, the Industrial Development Board (IDB) in Oak Ridge, Tennessee, home to atomic research reactors and the Y-12 nuclear weapons complex, proposed a five-million-dollar revenue bond to support the remodeling of Oak Ridge’s downtown shopping mall.   Under the plan, the bond will be repaid by diverting future property tax payments above the current level paid by the mall.  Future property taxes would rise only if the market value increased as a result of the remodeling of the downtown mall.  In backing a security with a hypothetical stream of income, the Oak Ridge’s IDB mall development bond seems more like a bomb waiting for unsuspecting investors than a secured transaction. 

 

Mall Property Taxes Held Constant. Under the IDB bond financing scheme, Anderson County would continue to receive for thirteen years its current property taxes of $90,000, and the city of Oak Ridge would continue to receive its current $85,000 in property taxes on the downtown mall.  The city provides more local public services to the downtown mall and should receive more taxes than does Anderson County, but we will put that issue aside. 

Current Mall Value in Dispute.  The current IDB financing plan calls for repayment of the bond over 13 years, but questions remain about who will have to repay the bond if the mall value fails to increase on target.  The parties cannot even agree on the current value of the downtown mall.  The mall's previous owner, Crown American Corp., and the current owner, Steve Arnsdorff, are suing the county for a reassessment of the taxable value of the mall.  Crown American and Arnsdorff contend the mall is worth less than the $14.2 million value assessed by Anderson County.  Arnsdorff bought the mall earlier this year from Crown America for about $6 million, and they contend this sales price should be the market value and tax-assessed value of the mall.  Real estate law in Tennessee would tend to support Crown America and Arnsdorff.

If a judge finds the downtown mall is worth $14.2 million, then Anderson County would normally collect $178,780 in property tax revenue from the mall.  If the downtown mall is found to be worth $6 million, then Anderson County would normally collect $75,360 yearly in property taxes, according to the local Oak Ridge newspaper.

 

Radio Shack’s rent was increased so high that the company would have paid more per square foot to lease a store in the struggling Oak Ridge mall than it paid for its store in West Knoxville’s opulently decorated WestTown mall.  Today the mall is about 75% vacant.

 

 

 

 

Divided Electorate.  At present, the citizens and voters of Oak Ridge are fairly evenly divided into two camps.  One group is fed up with unachieved past promises from city council and the mall owners to transform the downtown mall and thereby increase business and sales.  The other camp is committed to revamping the mall anyway necessary; no matter how costly the proposal for mall redevelopment, they will support it. 

 

Prior Remodeling of the Mall.  About twenty years ago, the downtown mall in Oak Ridge was converted from a large U-shaped outdoor mall to an L-shaped enclosed mall at a cost of several million dollars.  Initially sales took off and a food court at the mall with seven or more restaurants had a thriving lunchtime business.  For whatever reason, the mall owner systematically forced the food court vendors out of operation with too high rent or other restrictions.  Soon they all moved out of the mall, other stores followed.  Radio Shack’s rent was increased so high that the company would have paid more per square foot to lease a store in the struggling Oak Ridge mall than it paid for its store in West Knoxville’s opulently decorated WestTown mall.  Today the mall is about 75% vacant.  The remodeled mall building still serves as a rather excellent indoor walking track utilized by fitness enthusiasts and Oak Ridge’s large senior citizen population.

 

The most recent proposal to remodel the downtown mall in Oak Ridge is the second taxpayer-funded mall bond issue to surface in Oak Ridge within the last year and a half.  The first bond proposal involved tearing down a large segment of the mall and paving a new road to run through the middle of the former mall building.  The $15 million cost of the proposal generated a storm of citizen protest and created the single most successful petition drive in city history.  A third of all registered voters (over 5,500 citizens) came forward to sign protest petitions in a period of less than three weeks¾and force a referendum vote on the measure.

 

Voter Referendum Overrules City Council.  In August 2002, Oak Ridge voters overruled city council and soundly defeated the mall redevelopment scheme.  That $15 million scheme would have raised Oak Ridge city taxes by an estimated 9% annually for at least six years on top of a prior 70 - 80% increase in city taxes over the preceding seven years.  With so many tax increases to pay for city council capital spending blunders, it is no surprise that the four-person majority on city council, also known as “The Committee of Four to Bankrupt Oak Ridge,” attempted to force the mall redevelopment on the taxpayers without any public referendum. 

 

The current bond proposal contains essentially the same level of direct financial subsidy for the mall owner as last year’s bond contained.  In last year’s bond, the mall subsidy was factored into the cost of a number of overlying public works projects.  While those projects were advertised at the time as very important for the health of the city, the city has not attempted to resurrect any of them since the bond’s defeat. The projects are also absent from the current mall bond strategy¾leaving the impression that last year’s projects were mere camouflage for the real bond driver, a multi-million-dollar bailout payment for the mall owner.  If that impression is accurate, the Oak Ridge Accountability Project contends it would justify the belief that Oak Ridge government is overly calculating, manipulative, and willing to employ deception in the pursuit of its goals.  If city council members were held to the same standard of honesty in public announcements as firms in the securities industry, then several city council members would be in hot water right now. 

 

	A nickel per day is a far cry from the 9% projected increase in property tax rates for six years that would have been required to fund the ill-conceived mall development scheme last year.

 

 

 

 

 

 

 

Unlike last year, the bond proposal currently under discussion does not include a provision for a citizen-sponsored referendum.  Should the Oak Ridge City Council choose to enact a bond on the same subject without a citizen vote, it will be hard to escape the conclusion that they are intentionally nullifying last year’s referendum decision.  Such ongoing action by the city council could have a seriously negative and lasting impact on citizen trust of their civic government.

 

Deception.  Members of city council and their agents tried to assure taxpaying voters that last year’s mall redevelopment scheme would have a trivial impact on taxpayers.  One of their agents even appeared on local television news to announce that most taxpayers would only pay “a nickel a day” for the mall redevelopment.   A nickel per day is a far cry from the 9% projected increase in property tax rates for six years that would have been required to fund the ill-conceived mall development scheme last year. 

 

City council is repeating its same dishonesty mistakes by assuring citizens that a “revitalized” Oak Ridge Mall would be able to compete with newer and more extensive shopping areas located outside of Oak Ridge.  Last year, students in our Tusculum College economics class questioned whether local governments should stay out of the mall development business, and they thought the city government was arrogant to think it knew better than private industry how to stimulate sales at local retail stores.

 

Restrictive Land Covenants.  The “Crown Covenants” in the Oak Ridge downtown mall leases also make the mall redevelopment more difficult and problematic. The covenants are 50 pages of detailed land restrictions that were placed upon the property by the previous mall owner, Crown American.  They remain in effect for the next one hundred years and preclude a number of important and potentially lucrative mall options. The Crown Covenants are well known to top city officials, yet many in the community are unaware of their existence (or their impact on the future of the mall).

 

As one Oak Ridge Accountability Project supporter stated:  “I hope that the city really levels with citizens about the costs and risks of this bond. People love Oak Ridge and want to see it grow.  I think that folks are more than willing to invest in these types of projects and even accept some downside risk¾but they have to be told the truth up-front. Right now, the city’s heavy sales pitch sounds like Parcel “A”-rhetoric, warmed over.  It makes you wonder: what are they exaggerating or keeping from us now?”  Parcel “A” was a city development plan and publicly owned golf course, which ultimately proved a major financial failure, costing Oak Ridge taxpayers millions of dollars.  In fact, the Parcel “A” land development scheme is still costing the city taxpayers to this day.

 

Too Much Flatulence.  Oak Ridge Mayor David Bradshaw, basking in the glow of his recent re-election, and Vice-Mayor Tom Beehan, two members of the city council majority that supports mall redevelopment, have shown no concern with adhering to the citizens’ preferences expressed in the last referendum.  They were both prepared to support a previous version of the IDB downtown mall development scheme that would have diverted all of the mall’s property taxes to the city and county over the next eight years towards repayment of the IDB bond.

 

 

	In last year’s bond, the mall subsidy was factored into the cost of a number of overlying public works projects.  The projects are absent from the current mall bond strategy¾leaving the impression that last year’s projects were mere camouflage for the real bond driver, a multi-million-dollar bailout payment for the mall owner

 

 

 

 

 

 

 

 

 

 

 

            After the city staff reformulated the bond repayment formula, with the county and city retaining their current levels of property taxes from the mall, the Anderson County Commission voted 10-5 on Nov. 17, 2003, to endorse the mall development scheme. 

 

            The Oak Ridge Accountability Project charges that the overall benefit to the mall owner (and cost to the taxpayer) from this bond will be in the neighborhood of seven to eight million dollars¾with bond interest factored in.  But city council has not told the voters how the taxpayers of Oak Ridge are ultimately liable for the bond repayment.  If the Oak Ridge city taxpayers lose another seven to eight million dollars, on top of the losses foisted upon the taxpayers with the Parcel “A” land development scheme, it would have a devastating impact on the city’s ability to fund local public services.

 

Stream of Income?  Holding property taxes constant for the mall owner does not generate a stream of income.  It is possible, and indeed likely, that this “revitalizing” of the downtown mall will have no more success that the last remodeling of the mall.  If the market value of the mall does not increase significantly, and annual sales increases on the order of 20% may be required for the whole IDB bond financing scheme to work, then the bondholders will either have recourse against the general tax fund for the city of Oak Ridge, or the income backing the IDB bond is illusory. 

 

            The proposed Oak Ridge city mall IDB bond shares many attributes of an asset-backed security.  Normally, an asset-backed security has a readily identifiable stream of income to repay the bondholder for advancing investment funds.  These streams of income include bundled repayments on mortgage loans (for collateralized mortgage obligations), repayments of automobile loans, even streams of income from the sale of tickets at movie theaters. 

 

In practice, these streams of income are often transferred to an independent trustee, who holds title to the underlying assets so that the income will be preserved for the benefit of the bondholders.  No such transfer mechanism is possible with the Oak Ridge IDB bond issue, because the repayment income is illusory, at least at the time the bonds would be issued.

 

	The bondholders will either have recourse against the general tax fund for the city of Oak Ridge, or the income backing the IDB bond is illusory.

 

 

 

 

 

 

            The dollars spent revitalizing the mall building does not directly equate to increased mall transactions and revenues.  If that were true, then the millions spent on enclosing the Oak Ridge mall and decorating the interior would have guaranteed millions in increased sales at the mall, not a 75% vacancy rate.  Thirty years of history stands in the way of transforming the Oak Ridge downtown mall from a big white elephant into a busy hub.

 

            Consumers Want Lower Prices.  Ironically, the WalMart superstore located adjacent to the downtown mall has a thriving business.  The current mall owner ought to turn the entire mall space over to the WalMart superstore, because the management of WalMart clearly does know how to maximize sales and profits in each square foot of its floor space.  Perhaps WalMart would relocate a Sam’s Wholesale Club the unoccupied downtown mall.  Even better, the mall owner could bring to Oak Ridge the one store chain that has proven its ability to consistently beat WalMart on prices:  Costco Wholesale.  Costco has a store in Memphis, but none in middle or east Tennessee. 

 

Between a Sam’s Wholesale Club, a Costco Wholesale, and a Lowe’s hardware store, there would be a constant stream of consumers buying products at the downtown mall.  Little specialty stores, which have always been the darlings of the Oak Ridge mall owners, will always be perceived by consumers as overpriced due to the comparatively high rents at the downtown mall.  If the mall owner focused on filling the mall with wholesale outlets (read Costco Wholesale) and stores that offered cheaper prices than Knoxville malls, the downtown mall might be viable. All of this revitalization could take place without $15 million in capital spending; it would take a dramatic change in business philosophy for the Oak Ridge mall:  compete for consumers based on lower prices, not on remodeling gimmicks. 

 

No Business Plan.  Thus far, the IDB has not required Steve Arnsdorff to provide a public plan describing how the public money would be used.  Simply put, the mall redevelopment project appears to have no business plan, and that is a scary prospect if millions of dollars of taxpayer funds are ultimately at risk.  Instead, the plan calls for an IDB member to review all construction expenditures.  But that IDB member will not be able to determine whether the construction expenditures are over- or under-budget, or whether money is being wasted.  No member of the Oak Ridge IDB has any background in internal auditing.  So for practical purposes, having ol’ Elmer from the IDB review project expenditures will reassure no one.

 

Despite declining retail sales within the main downtown mall building, overall sales tax revenue from Oak Ridge retailers has risen in recent years.  The rise in sales taxes comes from the addition of the WalMart superstore and a large multi-screen movie house to the Oak Ridge mall property. 

 

Taxpayer Risk Management.  The Oak Ridge Accountability Project has expressed concern for the absence of “common sense” financial safeguards within the IDB proposal.  The Oak Ridge city government’s no-questions-asked approach could easily lead to serious sales tax losses for both county and city schools over time, and it was a hallmark of the Parcel “A” land development debacle, as well as the fifteen-million-dollar bailout for the former owner of the downtown mall that the Oak Ridge voters rejected last year.

 

	Oliver Spring Mayor Ed Kelly said it best when he wondered what the city of Oak Ridge would think if he used the Oliver Springs Industrial Development Board to rebuild the shopping center in Oliver Springs.

 

 

 

 

 

 

 

The Oak Ridge City Council majority always announced the potential benefits of great big capital spending plans.  It would be boring to serve on city council and have to tell people the city only has money for essential government services.  It is much more fun for city council members to spend the taxpayers’ money on big projects that leave an impact on the city.  Any good lawyer would always advise his client to think about the worst-case scenario and form a reasonable exit strategy for a contract or investment.  City council never considers the worst-case scenario, which always seems to visit their speculative capital spending projects.     

 

Several important safeguards need to be put in place by the IDB in order to reduce the overall risk to more reasonable levels.  These safeguards represent key financial protections which lay dormant as long as the project performs as expected by the IDB¾but which spring into action to minimize taxpayer loss, if the project falls short of its claims.  They make the recipient of tax money accountable to taxpayers. 

 

Future Mall Retailers. As an example, consider the matter of future mall occupancy.  Should mall retail space be turned into commercial office space in the future, county sales tax revenue could take a major hit¾since office space yields no sales tax.  At one point last year, the former mall owner wished to transform a large portion of the Oak Ridge Mall into commercial office space. A safeguard should be installed to ensure that this type of arrangement is not established in the future¾to the detriment of city and county taxpayers. 

 

The reformulated mall development plan calls for the mall owner to provide evidence that 50,000 square feet of mall space is leased to retail businesses “new to Oak Ridge and Anderson County.”  This new covenant appears to address the future mall occupancy issue; however, there is no guarantee that the 50,000 square feet will be maintained with new retailers to Oak Ridge for more than a year.  Businesses can get out of leases if they are losing money and going bankrupt. 

	It would be possible to show evidence of 50,000 square feet leased to new retailers one year and see that number drop to 20,000 square feet the next year.  When stores start to leave a mall location, they often leave in herds.

 

 

 

 

 

 

 

 

In past development cycles at Oak Ridge’s downtown mall, the redeveloped mall has strong sales and fully occupied space in the first two years after the redevelopment is completed.  Then the downward spiral will begin in which stores move out, the mall owner must raise rents on the remaining tenants to cover the lost revenue, and the higher rents force more retailers out of the mall.  It would be possible to show evidence of 50,000 square feet leased to new retailers one year and see that number drop to 20,000 square feet the next year.  When stores start to leave a mall location, they often leave in herds.  One store’s relocation triggers other stores to move out as well as fewer and fewer consumers have reasons to visit the mall.

 

Setting a Precedent for Other Towns. Did the Anderson County Commission consider these revenue loss scenarios when they endorsed the Oak Ridge mall development scheme?  The Anderson County Commission may have set a dangerous precedent in endorsing the Oak Ridge mall development scheme.  Nothing would prevent other municipalities in the county from grabbing their “fair share” of county property tax money to help redevelop their shopping centers.  Oliver Spring Mayor Ed Kelly said it best when he wondered what Oak Ridge would think if he used the Oliver Springs Industrial Development Board to rebuild the shopping center in Oliver Springs. 

 

Two thirds of Anderson County’s population, nearly fifty thousand people, currently live outside the city of Oak Ridge and have absolutely no tie to the Oak Ridge Industrial Development Board.  Oak Ridge City Council was poised to move ahead with mall redevelopment regardless of the “taxation without representation” for all of these non-Oak Ridge residents of Anderson County. 

The Oak Ridge Accountability Project was concerned with the taxation without representation issue as well those enumerated as follows:

 

1.  The full implications¾both political and financial¾of the proposed revenue bond must be spelled out clearly by the IDB and the Oak Ridge City Council.  The implications and consequences of increased sales revenues not meeting targeted levels must be stated in a manner that city and county residents can easily understand. 

 

2.  Implications for the Oak Ridge Economy.   The Oak Ridge economy is currently held down by its very high property tax rates (the second highest in the state).  As it is currently structured, the bond will cost the City of Oak Ridge and Anderson County millions of dollars of property tax revenue.  There is no guarantee that increased future sales tax revenue will ever be able to offset this loss¾especially if the main effect of a revitalized mall is to simply shift existing Oak Ridge and Anderson County retailers from their present locations to a mall location.  If the bond ends up pushing city and county property taxes higher, it could have a distinctly negative (rather than positive) impact on the overall Oak Ridge economy.

 

	The previous owner of the mall, Crown American, sold a series of important major land covenants (the “Crown Covenants”) to WalMart.  These land restrictions give WalMart the right to veto virtually any substantive change (as well as many minor types of changes) to the mall property for the next hundred years.

 

 

 

 

 

 

 

 

 

 

3.  Nullification of Last Year’s Mall Bond Referendum.  Last year, Oak Ridge voters rejected a mall bond in a prominent citizen-sponsored referendum.  Enacting a new bond on the same subject, without an accompanying referendum, will act to overrule and nullify that referendum¾a move which will fundamentally undermine the credibility of Oak Ridge government.

 

4.  Implications of Breaking Mayor David Bradshaw’s Promise.  Prior to the referendum last year, Mayor David Bradshaw anticipated the potential defeat of the first mall bond and personally guaranteed city residents that they would be able to vote on a second mall bond¾should he be given an opportunity to develop one.  The recent IDP proposal is a “second” mall bond.  If it is now passed without an accompanying referendum, his promise will have been broken.

 

5.  Impacts on Other Oak Ridge Shopping Centers.  A significant portion of last year’s prospective tenants for a revitalized mall turned out to be retailers already located in Oak Ridge (and Anderson County).  Presumably, the same thing will happen this year.  If it does, the mall subsidy will end up having a distinctly negative financial impact on those shopping centers and their owners.  Is it wise or fair to offer the downtown mall owner a major financial subsidy that directly penalizes other Oak Ridge and Anderson County shopping centers?

 

6.  The Absence of WalMart Approval. The previous owner of the mall, Crown American, sold a series of important major land covenants (the “Crown Covenants”) to WalMart.  These land restrictions give WalMart the right to veto virtually any substantive change (as well as many minor types of changes) to the mall property for the next hundred years.  This means that mall development strategies must be considered WalMart-Friendly (or at least WalMart-Neutral) to be pursued. This also means that WalMart must have formally bought-in to a mall revitalization strategy, before that strategy can be considered a realistic option.  Official WalMart approval has not been obtained for the current revitalization strategy, rendering it little more than an interesting (but speculative) possibility.

 

7.  The Total Size of the Proposed Taxpayer Investment. The total size of the proposed tax-dollar investment in the mall has not been publicized.  It will be much larger than the five million dollar figure that is currently being discussed, because it will include millions of dollars in bond interest.  Citizens should be told the total projected cost of the bond.

 

8.  The Size of the Developers Financial Risk.  The true amount of money that the developer plans to put at risk in a mall revitalization project should be clearly understood. Last year, the so-called “developer’s investment” turned out to include money that prospective mall retailers were expecting to invest in their individual stores¾rather than just reflecting the funds the developer had at personal risk. 

 

9.  Contractual Safeguards to Protect the City.  The current IDB plan appears to give five million dollars to a developer without a corresponding contractual commitment to a detailed development plan.  The developer should be required to work to a specific development plan and there should be contractual safeguards in place to suitably penalize the developer, should the mall project fail to perform as advertised. 

 

10.  Furnishing Public Money Up-Front (Versus Providing Down-Stream Performance Awards). Placing city money into this project before the mall owner demonstrates that the mall can and will perform at a sustained higher level¾is inherently risky.  A safer and more successful strategy, given the uncertainties in this case, would be to offer a set of down-stream financial rewards to the developer, based upon actual growth in sales tax revenue.  This strategy makes perfect sense from a risk management perspective, yet it somehow has escaped comprehension by the city council majority.

 

11.  Inadvertent Bailout of Crown American. The possibility that the current bond will still act as a taxpayer bailout of Crown American should be ruled out.  If Crown, the previous mall owner, is partnered or in any way contractually linked to the current owner, the IDB bond could act as a taxpayer-funded reimbursement for past business decisions¾including the decision to place far-reaching land restrictions (the Crown Covenants) on the mall property.  City taxpayers should not reward Crown for its past business practices.

 

	If the bondholders have ultimate recourse against the city of Oak Ridge through its IDB, then that role as ultimate guarantor must be explained to the voters and then put up for public referendum.

 

 

 

 

 

 

 

 

12.  New Oak Ridge Residents.  A large number of people who work in Oak Ridge now, choose to live elsewhere due to Oak Ridge’s high property tax rates.  The mall bond should recognize this important phenomenon. It should include a guarantee that mall employees actually live in Oak Ridge and support the city and county tax base.   (Otherwise, Oak Ridge taxpayers are stuck paying for salaries of people who spend they income outside the city.)

 

            To these concerns, The Tennessee Law Times would add the following:

 

13.  Sales Tax Revenues.  What impact will the proposed mall redevelopment have on sales taxes?  Will these sales taxes be paid at the same rates after redevelopment as before?  Is any portion of sales tax revenue being used to support repayment of the bond?

 

14.  Source of Income Backing the Bond.  What is the source of income that the bondholders will view as ultimately backing repayment of the bonds?  Can that stream of income be segregated from other funds and serve as collateral for the bond repayment?

 

15.  Municipal Guarantees.  If the city is issuing government-backed bonds, what are the possible scenarios in which the taxpayers would get stuck footing the bill for repayment of the IDB bonds?  What steps have the city planners taken to prevent these scenarios from occurring?  If the bondholders have ultimate recourse against the city through its IDB, then that role as ultimate guarantor must be explained to the voters and then put up for public referendum.

 

16.  Property Tax Rates.  Will the mall redevelopment scheme have any negative impact on the city of Oak Ridge residential property tax rates, under even a worst-case scenario?  Every time city council runs short of money, they raise the property tax rates in Oak Ridge, which now has the second-highest property tax rates in the state of Tennessee.

 

            Misplaced Priorities.  The Oak Ridge city mall development scheme appears to be much less risky to the taxpayers of Oak Ridge than before the city staff reformulated the plan to maintain the existing payments for mall property taxes.  Nevertheless, somewhere along the line, the city government and city council lost sight of the objective for IDB bonds:  industrial development.  These tax-exempt bonds are supposed to be issued for economic development.  Having a new downtown mall is not going to attract new businesses or industries to move to the atomic city.

 

One-Company Town.  For more than forty years, the mantra of the Oak Ridge City Council has been to diversify the economy of Oak Ridge, so that the city workforce is not so heavily reliant on a single employer:  the U.S. Department of Energy and the contractors for its facilities.  But the Oak Ridge economy is as badly tied to the fortunes of the federal facilities today as it was in 1960, 1970, 1980, or 1990.  Despite millions being spent on economic development, Oak Ridge remains a “one-company town” with a declining and aging population.

 

The city of Oak Ridge is violating the intent of the Tennessee statute, if not the letter of the law, by using a state-authorized tax-exempt tool to spruce up its mall, instead of using the money to recruit the next Nissan, General Motors, or Toyota factory to the state.  Any town could claim that improved fire stations, or shopping malls, or hospitals would help recruit industry to their area, but they would be contorting the intent of the state legislature.

 

 

 

 

 

 

 

 

 

 

 

 

A new facade on the old shopping mall in downtown Oak Ridge seems an unlikely source of industrial recruiting or economic development.  A “revitalized” mall is not going to bring new technical and professional jobs to Oak Ridge, nor will it enhance or expand the city’s tax base.  The city of Oak Ridge is violating the intent of the Tennessee statute, if not the letter of the law, by using a state-authorized tax-exempt tool to spruce up its mall, instead of using the money to recruit the next Nissan, General Motors, or Toyota factory to the state. 

 

If Oak Ridge can use IDB bonds to spruce up its mall, then what would stop a city in west Tennessee from using IDB bonds to spruce up its police and fire stations, or a middle Tennessee town from using IDB bonds to expand its local hospital?  Any town could claim that improved fire stations or hospitals would help recruit industry to their area, but they would be contorting the intent of the state legislature. 

 

The Atomic City would do better to focus its IDB bonds on supporting the relocation to Oak Ridge of some major firm with no ties to the Department of Energy facilities.  Maybe that firm could employ the many laid off scientists, engineers, and other professionals in the area.  But it is a whole lot easier to refurbish the mall than recruit non-Department of Energy businesses to Oak Ridge, so guess which one the Oak Ridge City Council will pursue?

 

 

© Copyright 2009 by Michael A. S. Guth. All Rights Reserved.  No portion of this article, including this web page, may be copied, retransmitted, reposted, or duplicated in significant portion without the express written permission of Dr. Michael Guth. Users are always welcome to establish links to this web page or to quote from it freely.