2018 Revue: The Shifting Business Landscape

Regal Building

2018 Revue: The Shifting Business Landscape

Takeovers, makeovers and other transitions mark a busy year in the economic life of Knoxville and Knox County.

by scott barker • december 31, 2018

Regal Entertainment Group's new headquarters on the South Waterfront.

This story is part of a series looking back at 2018. See also:

The sales of two of Knoxville’s most prominent companies were completed in the past year year, the longtime head of the Knoxville Chamber announced his retirement, and Knox County flirted with full employment.

Change was the norm in the local business community in 2018, and 2019 promises more of the same.

Change was the norm in the local business community in 2018, and 2019 promises more of the same -- especially with the expected approval of the city’s new zoning code.

Takeover Time

Discovery Communications completed its $14.6 billion purchase of Knoxville-based Scripps Networks International in May. The cable television company, which had already announced it would move its national operations headquarters to Knoxville, immediately changed its corporate name to Discovery Inc. and within a few weeks began shaking up operations. (It is also establishing a global headquarters in New York City.)

In July, Discovery announced that Knoxville’s broadcasting unit would move to the company’s NoVa Tech Hub in Sterling, Va. Layoffs and transfers began a month later, though the company also began filling positions created by the headquarters move.

Discovery’s brands now include Discovery Channel, HGTV, Food Network, TLC, Investigation Discovery, Travel Channel, Animal Planet and OWN: Oprah Winfrey Network. About 1,000 people work at Discovery’s West Knoxville campus.

Cineworld Group, a London-based conglomerate, finalized its acquisition of Knoxville-based Regal Entertainment in February. After the $3.6 billion deal went through, Regal’s leadership team stepped down.

Despite the change in corporate ownership, Regal still is living up to the agreement that provided $12.5 million in incentives to move into the city-owned office tower on the South Waterfront from its longtime headquarters in Halls, city officials have said.

Regal is one of the nation’s largest theater operators, with 7,306 screens in 558 theaters in 43 states, the District of Columbia and three U.S. territories, according to its website.

Employment and the Economy

Knox County’s unemployment rate in November was 2.9 percent -- basically full employment according to state figures. Only Nashville and its surrounding counties posted better numbers. The statewide unemployment rate for November was 3.3 percent.

According to the annual Economic Report to the Governor released this month by the University of Tennessee’s Boyd Center for Business and Economic Research, the millennial generation is flexing its muscles.

Millennials, defined as people born between 1980 and 2000, now make up the largest segment of the labor force, according to the Boyd Center report. They are living longer with their parents, waiting longer to have children and tend to prefer urban living.

Knoxville-Knox County Planning (formerly the Metropolitan Planning Commission) credits millennials with the faster pace of population growth in Knoxville during the past few years. The city’s share of Knox County’s population growth jumped from 9.9 percent in 2000-2010 to 28.6 percent in 2010-2017.

Chamber Changes

Mike Edwards, who has been president and CEO of the Knoxville Chamber since 2002, is retiring. Under Edwards’ watch, the chamber has grown to 2,293 members, a 31.2 percent increase during the past decade. The chamber has also embraced a regional approach to economic development and become a leading advocate for improving public education. The chamber’s board will select Edwards’ successor.

About 85 percent of chamber members have fewer than 20 employees, and Edwards has said small businesses have driven much of the county’s employment gains.

According to federal statistics from 2013, the most recent available, about 90,000 of 205,000 jobs in Knox County were with businesses of fewer than 500 employees -- about 44 percent. Of those, about 61,000 were with employers of fewer than 100 workers, who had a cumulative annual payroll of more than $2.5 billion.

Full employment is causing headaches for small businesses, which are having a hard time finding employees, even unskilled workers.

A growing part of the small-business landscape is Knoxville’s growing and vibrant entrepreneurial community. Established in 2013, the Knoxville Entrepreneur Center provides support and networking to startup founders. The Mayor’s Maker Council, a group appointed by Knoxville Mayor Madeline Rogero in 2016,  advises the city on issues of concern to local craftspeople and small-scale manufacturers.

Events such as the annual Innov865 Week, which includes the Maker City Summit, Startup Day and other events, focuses on entrepreneurship. PechaKucha Night Knoxville hosts quarterly gatherings where people can learn about innovative businesses. More than 300 people attended the most recent PechaKucha Night on Nov. 29 at the Mill and Mine.

Utility Switches

Retirements are also bringing leadership changes at the Tennessee Valley Authority and the Knoxville Utilities Board.

TVA CEO Bill Johnson announced his retirement on Nov. 14 after six years at the helm of the nation’s largest public utility.

During his tenure, TVA brought a second reactor online at the Watts Bar Nuclear Plant, continued its shift away from coal and reduced its debt. Critics have blasted Johnson for a recent rate structure overhaul and TVA’s lavish air fleet.

The announcement of Johnson’s departure came one week after Jacobs Engineering, the principle contractor for the Kingston coal ash spill cleanup, lost a lawsuit filed on behalf of cleanup workers sickened on the job from exposure to the toxic ash. More than 30 people who worked at the site are dead, and more than 250 are ill.

With a total compensation package exceeding $6.5 million, Johnson, who turns 65 in January, is the federal government’s highest paid employee. TVA is a self-supporting federal corporation that competes with private-sector energy producers for employees.

The TVA Board of Directors is conducting a search for Johnson’s successor. Johnson will stay on at TVA through the transition.

At KUB, Gabe Bolas II replaced Mintha Roach as president and CEO in October. Roach, who retired after 15 years, was the first woman to head KUB. She managed the utility through a massive overhaul of its wastewater system and worked to make KUB more customer-focused.

Bolas is an engineer who worked his way up through the ranks at KUB and served in a variety of executive positions, including environmental stewardship and construction management. Prior to being elevated to the top post, he was KUB’s senior vice president and chief engineer.

Downtown Growth

Downtown Knoxville and the surrounding areas continue to grow, with construction and renovations reaching from the former Regas property to the north to the South Waterfront. There are 16 residential developments with 1,183 units at various stages of planning or construction downtown.

The Rogero administration has reached an agreement with developer Rick Dover to redevelop the state Supreme Court site across Henley Street from the Knoxville Convention Center, though final approval has been delayed pending approval from Knoxville-Knox County Planning to split the property into two parcels -- one for the hotel portion of the development and the other for the apartment segment.

Plans are moving forward to renovate the historic Cal Johnson Building, the last surviving commercial building owned by Caldonia Johnson, who was born a slave and became Knoxville’s first African-American millionaire.

Other redevelopment projects downtown include Dover’s completed Hotel Knoxville in the historic Farragut Hotel building on Gay Street, the Marriott under construction at the site of the old News Sentinel building at the corner of State Street and West Church Avenue, and the Regas Square condominium project on Depot Avenue.

Retail growth downtown has been strong. A recent analysis put together by the Central Business Improvement District and the Tennessee Department of Revenue, shows over the past five years revenues of downtown businesses have increased more than 50 percent, while the city as a whole saw an increase of 21 percent.

Space for Industry

After a long and bitter struggle that featured two lawsuits and an intervention by then-Knox County Mayor Tim Burchett, work has begun on Midway Business Park. The Development Corp. of Knox County is developing the 345-acre business park, which is just north of Interstate 40’s Midway Road interchange near the Sevier County line.

Officials, bundled up on a blustery day, held the official groundbreaking in November. The first phase of construction is scheduled to be completed in 2020.

Meanwhile, on the other end of the county in Karns, plans are underway to develop a 66-acre business park behind Karns High School. The project is notable for its use of tax-increment financing, which essentially shifts the development costs from the Development Corp.’s land sales proceeds to future increased tax revenues. Tax-increment financing has rarely been deployed in this manner, but the state Legislature authorized the method in 2004.

Hospital Shuttered

On Friday, Tennova Healthcare closed Physicians Regional Medical Center, still referred to by many as St. Mary’s Hospital. Most of the 88-year-old hospital’s services -- the discontinued in-patient behavioral health program is a notable exception -- have relocated to Tennova’s hospitals in Farragut and Powell.

The City of Knoxville has been negotiating the purchase of the hospital’s North Knoxville campus. The newer portion of the campus bordering Woodland Avenue would be used as the new home for the Knoxville Police Department, Knoxville Fire Department and Municipal Court. The older portion of the site would be marketed to the private sector for redevelopment.

With the closing of Physicians Regional’s emergency room, many in the healthcare community are concerned about longer waits for patient care. Covenant Health plans to build a new emergency and critical care building at Fort Sanders Regional Medical Center, but the $115 million facility won’t be completed for two years.

Rewriting the Rules

Developers and home builders working in Knoxville will have to learn a new playbook next year. Recode Knoxville, the first effort to rewrite the city’s zoning code in more than half a century, gained steam but could not meet the city’s initial deadline.

The proposed ordinance, which has gone through four drafts, would provide more options for development, particularly along major corridors where mixed-use buildings would be allowed. But the current draft also contains new guidelines on how commercial buildings could be oriented on properties and new regulations on lot sizes in residential developments.

Public meetings and online comments objecting to the pace of the process convinced Knoxville-Knox County Planning to push final approval into 2019. City Council will have the final say on the new code.