Journal Express, Knoxville, IA

August 15, 2013

Washington offers VA Lease to City of Knoxville

Steve Woodhouse
Journal-Express

Knoxville — Two years after the Knoxville Veterans Alliance was awarded the opportunity to enter into an enhanced use lease (EUL) with the Department of Veterans Affairs for the Knoxville campus, the KVA is offering the lease to the City of Knoxville.

James Washington, one-half of the KVA, partnered with Aubrey Wilson of Virginia, told the Journal-Express that he does not see a way forward with the lease. There have been too many conflicts with Wilson, a lack of cooperation and support, as well as other stumbling blocks with the VA, for his vision to succeed.

Washington’s goal of attempting to get the lease, since entering the fray several years ago, has been to utilize the campus to help and improve Knoxville. Originally, he had hoped that the campus would remain tax-exempt. However, since then it has been clarified that the campus would be subject to taxation as soon as the lease is signed. 

The KVA has not signed the lease, as it has been waiting to secure a subtenant that would provide enough revenue to cover the expenses associated with operating the campus. Marketing has been ongoing, but no large tenants have agreed to take over any of the buildings. 

Washington believes that if an agreement for the EUL was struck among the KVA, the VA and the City of Knoxville, with the City being the actual leaseholder, the campus could be tax-exempt. He believes that if the City had this capability, it could offer the buildings to tenants for free. 

Mike Roberts, on behalf of Washington, has met with members of the Knoxville City Council and City Manager Harold Stewart to discuss this proposal. 

“We don’t have the money to take those buildings over,” Mayor Don Zoutte said. “I think it’s still best left to the private sector.” 

Zoutte said there are still too many unknowns regarding the campus. The idea, however, he says is “worth looking at” in the future. 

Councilor April Verwers said there would have to be many pros and cons to weigh before making any decision regarding the EUL. She also has reservations about working with the federal government. She believes the VA has offered Knoxville “a lot of lip service” over the years, but has not followed through on any promises. As for Washington’s efforts, she gives him a great deal of credit. 

“I don’t know anybody that’s worked harder than James,” she said. 

Past reservations expressed by the City, about taking ownership of the campus, include roads and sewer infrastructure that are not up to City Code. Recent discussions about the VA have not taken place at city council meetings. 

A voicemail message was left for Stewart on Wednesday. He sent this response via email Thursday morning.

The City of Knoxville Council and staff have been working closely with KVA and the VA for several years in an effort to ensure that the VA Hospital ground is used in a way that moves Knoxville forward.  Examples have included the City creating an Urban Renewal Area over the property, and signing a Memorandum of Understanding regarding the use of Tax Increment Financing for the future development of the campus by KVA. Staff has also been drafting a new zoning designation specific for the property that would allow for development as proposed by KVA.  At one point the City even explored the idea of moving City Hall to the VA Campus but chose not to due to concern of citizens and downtown business owners.  The City is constantly exploring and considering options, concepts and ideas as they come forward on how to successfully redevelop the property. Staff has also had many conversations with potential tenants on the how their proposed use of specific buildings could work and be successful.  For whatever reason those potential tenants always seems to walk away during the lease negotiation process with the VA and KVA.

Mike Roberts, representing KVA, did present the idea of the City taking over the lease as a hypothetical concept, but to this point the City has not received an official offer from KVA for consideration.  Should the City receive an official offer for consideration there are a few questions the City should consider during the decision process. First, how much of a role should the City take in the redevelopment of the property?  How much should the City do and how much should be left to the private sector?  Should the City take on the role of owning the property? There are pros and cons to the answers of these questions.  Second, if the City determines that it needs to take on the role of owning the property should this be done by leasing the property for 75 years or should it seek permanent ownership?  Finally, how does the City bear the costs associated with a project of this magnitude? Will the Federal Government provide funding to address the infrastructures issues facing the project due to years of vacancy and minimal maintenance?  The City understands and is concerned about the costs to the community if the property continues to deteriorate, however, the City needs to consider what is the best solution over the long term of the foreseeable future.

At this point the City is trying to do what it can to help KVA successfully negotiate a lease with the VA for the property so they as private developers can take the lead.  Should, for whatever reason, this no longer be feasible and viable the City will have to reassess how best to move the community forward while taking into consideration the questions outlined above.

We will continue to follow this story as it moves forward.