Council agrees to negotiate on AMSE property for Main Street; DOE wants to dispose of museum

 

Note: This story was last updated at 2 p.m. June 16.

The Oak Ridge City Council agreed Monday to allow the city manager to negotiate with federal officials and the company redeveloping the former Oak Ridge Mall for the transfer of the American Museum of Science and Energy property—if the federal government wants to get rid of it.

And it appears that the federal government does want to dispose of the museum. The U.S. Department of Energy has asked the federal General Services Administration, which disposes of federal property, for help with that process, said Claire Sinclair of Oak Ridge National Laboratory Site Office Public Affairs. GSA took on that role last week.

But the transfer of federal property such as AMSE usually takes a few years, Sinclair said, and if a new use were proposed for the museum property, adequate public notice would be given. ORNL manages AMSE for DOE.

In the meantime, AMSE is expected to continue operating, officials said.

Under the resolution approved by Council on Monday, the 17.12 acres of federal property at the AMSE site could be transferred to the city. Or RealtyLink, the company redeveloping the mall, could negotiate directly with federal officials. The U.S. Department of Energy owns the museum, and it would work on any proposed transfer through the General Services Administration.

Council approved the resolution giving the city manager the authority to negotiate in a 6-1 vote after about 90 minutes of discussion Monday evening.

During the past 15 years or so, DOE has said it is not in the museum business. There have been several proposals to develop or transfer the AMSE property or parts of it during the past 15 years. There was also a series of community meetings that focused on the future of AMSE in 2014.

Three DOE sites in Oak Ridge—Oak Ridge National Laboratory, Y-12 National Security Complex, and East Tennessee Technology Park—provide funding to AMSE. In Fiscal Year 2015, they gave $1.5 million to the museum. Sinclair said the museum’s operating and labor costs have been as high as $1.7 million to $1.8 million per year. Other officials have said DOE is interested in cutting its costs.

DOE has said AMSE is “over-sized” and “operationally challenged.”

RealtyLink, the company redeveloping the 58-acre mall site, has said any redevelopment of the AMSE property that competes with its project, known as Main Street Oak Ridge, would be harmful to its efforts to build the mixed-use town center, which could include retailers, restaurants, residential units, and possibly a hotel.

A development at the AMSE site that competes with Main Street Oak Ridge could cause tenants at the redeveloped mall to move across the street after their five-year lease expires, said Ray Evans, the city’s retail consultant. That in turn could lure co-tenants to the other side of South Tulane Avenue, Evans said. And that would have a devastating effect on Main Street Oak Ridge, he said.

“This is not a slam-dunk deal for the developer,” Evans said, citing lease rates that are lower than in other cities such as Nashville or Charlotte, North Carolina, even though construction costs are the same.

Voting to give Watson the authority to negotiate with DOE and the GSA, should land transfer negotiations become necessary, were Oak Ridge Mayor Warren Gooch, Mayor Pro Tem Ellen Smith, and Council members Kelly Callison, Rick Chinn, Charlie Hensley, and Chuck Hope.

Council member Trina Baughn cast the only “no” vote. She raised several questions and concerns related to the resolution. Among them were expanding the reach of one entity—she said RealtyLink’s reach could go from 60 acres to 80—and the effect of other property restrictions known as the Walmart covenants that have affected the potential redevelopment of the mall property.

“The Walmart convenants have been the thing that have really had the biggest stranglehold on this property to begin with,” Baughn said.

She also questioned whether the sales tax revenue estimates for Main Street Oak Ridge are too optimistic; raised concerns that the city and county won’t get new property tax revenues while the project’s tax increment financing, or TIF loan, is being repaid; and asked if the current zoning of the AMSE property would even allow commercial development.

But other Council members supported the resolution allowing the AMSE land transfer negotiations.

“To me, this a no-brainer,” Hensley said. “It’s not costing us anything.”

“I think it’s inevitable that it’s going to be developed someday,” Smith said.

“I’m looking forward to voting on this and moving on,” Callison said.

RealtyLink has said the resolution on the AMSE property was the last remaining hurdle before closing on the purchase of the mall site by the end of June. RealtyLink Principal Neil Wilson said the company has a $100,000 penalty if it doesn’t close by its June 28 target date.

RealtyLink, which is based in Greenville, South Carolina, plans to invest about $41 million in the first all-retail phase of Main Street Oak Ridge. Stores are expected to open in the spring of 2017.

The second phase, which could cost $19 million, could include local businesses, outdoor businesses, a wine bar and coffee shop, and a service district that could include dry cleaners and insurance agencies, for example.

The future of AMSE isn’t completely clear. In part, it would appear to depend upon DOE and the GSA. It would also seem to depend upon funding.

Wilson said his company would be okay if the museum stays open and the city controls it. RealtyLink also seems open to the idea of combining a museum and visitors center for the new Manhattan Project National Historical Park, which includes Oak Ridge, as part of its development.

“This resolution does not determine the future of the museum,” Smith said. “I believe we all want the museum to stick around.”

Evans said the resolution was not about closing AMSE, and it did not suggest that the federal government is ready to do anything with the property. But it does prepare the city and the developer for future discussions with DOE and GSA.

 

The negotiations approved by Council have certain conditions attached to them. Among the conditions: RealtyLink would have the right to the first option to buy the land at a price of $200,000 per acre, or the value of the “consideration” divided by 17.12, whichever is greater. RealtyLink would have 180 days for due diligence after a purchase agreement were fully executed and 45 days to close after that. The company would agree to develop the property in a way that is agreeable to both parties, but Oak Ridge and RealtyLink would focus on a development that maximizes sales tax revenues.

Officials said the AMSE site at the busy intersection of South Tulane and South Illinois avenues is prime commercial real estate that is well-proportioned for development and developers have sought to build on the land. Wilson said it could be possible to build apartments there.

Some people have compared the AMSE land transfer resolution to agreements that have at least partially restricted development at the former Oak Ridge Mall, but Evans said they’re not the same. The AMSE resolution sets certain milestones, including at least $140,000 per year in new property taxes by the 2021 tax year.

Smith described the AMSE land transfer resolution as more of a near-term contract, unlike the Walmart covenants that have been cited by many who have questioned the AMSE land transfer resolution.

Wilson said RealtyLink has invested $400,000 in Main Street Oak Ridge so far, with $140,000 spent cleaning out the former mall, $30,000 on a new sign, and the rest on expenses like architectural work and attorney fees.

The AMSE property is included in an economic impact area associated with the mall redevelopment. That plan was adopted by the Oak Ridge Industrial Development Board, Oak Ridge City Council, and Anderson County Commission. Property tax revenues from the future development of the property would be used to help repay a $13 million tax increment financing, or TIF, loan. (Tax increment financing uses new property tax revenues generated at a site to help pay development costs.)

Oak Ridge Today has contacted GSA for more information, and we will update this story as we can.

More information will be added as it becomes available.

 

See previous stories here:

• DOE sites provided $1.5 million in funding for AMSE in FY 2015
• AMSE: Transfer of federal property usually takes few years, public notice would be given
• Chamber supports AMSE land transfer resolution
• Main Street: Ready to close by end of June, AMSE property the one remaining hurdle

See previous Main Street Oak Ridge stories here.

See the Oak Ridge City Council agenda, which included the AMSE land transfer resolution, here.

More information will be added as it becomes available.

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