The Daily Times

The decision by ProNova Solutions to locate in Pellissippi Place will be a “watershed” development with the promise of transforming the region’s economy, according to a University of Tennessee study.

Dr. Mark L. Burton, UT research associate professor, authored the report that was requested by the Blount County Chamber of Commerce.

“Within the report, I used the phrase ‘watershed.’ I don’t know that I’ve done that before,” Burton wrote in the report’s cover letter.

“In the 25 years that I’ve been evaluating proposed infrastructure, commercial and industrial developments, I don’t remember an instance when a single potential development held as much potential for a community, county or region.”

Burton’s projection is — if the endeavor comes to fruition on the scale envisioned — that ProNova’s development at Pellissippi Place will result in more than 5,000 new jobs with total annual incomes of nearly $500 million.

“That sort of growth will almost certainly be transformative in its impacts. It’s really pretty sobering,” Burton wrote.

Burton’s analysis backs up the assertion of Dr. Terry Douglass, ProNova founder and chairman of the board, that his objective is for the company to become the “center of the universe” when it comes to the diagnosis and treatment of cancer.

The study notes that ProNova Solutions is a developer of medical applications and is aggressively developing the next generation of cancer therapy technology in the form of a highly integrated proton therapy medical device.

To reach its goals, the company will have to develop large-scale manufacturing and research capacity. The Pellissippi Place site will not be a factory, but it will have the capacity to design and commercialize ProNova’s groundbreaking devices.

By 2018, the number of ProNova employees at the research and development park in Alcoa is projected to be 1,613. Total salaries, bonuses and benefits would reach $235.2 million annually. The average compensation package per employee would be $145,815.

Regional development

If nurtured to fruition, the report projects this transformative development will infuse the broader community with a remarkable new source of technology-based economic activity to the greater metropolitan Knoxville region.

The report states the watershed scale and nature of the proposed ProNova activities are also likely to lead to economic outcomes that are simply beyond the reach of typical modeling efforts. The investments and operations are likely to significantly change the nature of the surrounding economies.

“Very simply, the Blount County economy, with its current resources, could not readily accommodate an economic expansion of the magnitude traceable to the ProNova plans. Consequently, regardless of intent, the economic impacts of the ProNova expansion will almost certainly spill into the broader region,” the report states.

The region includes, along with Blount, Knox, Anderson, Roane, Loudon, Monroe, Sevier and Jefferson counties.

Because of the scope of the project, construction activities would require machinery, equipment and facility components throughout the region and beyond. For the year 2018, total construction-related employment would be 2,449 with a total compensation of $103.9 million in 2013 dollars.

The UT study does not calculate prospective ongoing purchases of goods and services from area vendors. “Even so, the job and salary impacts are staggering,” the study reads.

In 2018, total regional employment would be 4,663 with a compensation of $360 million.

Over a period of time, industries with the highest percentage of increased employment would be manufacturing (35 percent), retail trade (16.1 percent), health and social services (7.7 percent), professional scientific and tech services (7.1 percent) and accommodation and food services (5.8 percent).

The UT study also sheds a limited light on related fiscal impacts. Those include identifiable impacts on sales and use (S&U) tax revenues and revenues attributed to incremental growth in property tax collections. In the case of S&U taxes, the figures do not include any increased sales tax revenues related to the purchase of construction materials or services.

Tax revenues

The local-option sales tax collections are based on Blount County parameters, but in reality these collections will likely be spread more broadly across the region.

For construction-related incomes, in 2018, state S&U tax collections project to be $2.2 million, with a $581,745 increase in local option S&U collections.

From ProNova-related incomes in 2018, total outgoing state S&U tax revenue increases would be $5.4 million. Local option S&U revenue increases are projected at $1.4 million.

Unlike S&U collections, the UT study confines the direct impact of the expansion specifically to Blount County.

These projections are the direct property tax effects only. The infusion of economic activity associated with the propose ProNova investment will almost certainly generate third-party investment in a variety of forms necessary to accommodate increased regional spending, according to the report.

Although the study acknowledges there is “no simple, defensible way to estimate the magnitude of this additional investment,” it concludes there is almost certain to be increased property values and corresponding increases in property tax collection throughout the study region.

Public services

The study notes that the analysis would be remiss if it failed to note that the project will likely increase demands on the public sector.

“To a large extent a ProNova decision to locate facilities in Blount County reflects past infrastructure investments by various levels of government and by Blount Partnership participants.”

Blount and Knox counties and the cities of Alcoa and Maryville each invested $5 million in Pellissippi Place.

“Nonetheless, increased economic activity of the magnitude envisioned will also likely place new demands on affected communities for additional public services,” the study states.

The study does not reflect a property tax break that has been granted to ProNova. The projected property tax collections would have been $324,025 in the first accounting period of 2013. By 2018, that tax liability would have grown to $3.4 million.

However, under an agreement approved Thursday by the Operating Committee of Pellissippi Place, ProNova will be granted tax abatements that forgive all property taxes through 2020 and gradually increase through 2024, when the company will required to pay 100 percent.

The UT analysis also notes that the study is preliminary and by no means comprehensive. It is “a very rough sketch” of some of the most easily anticipated effects of ProNova’s proposed development.

Conclusion: “However, with these caveats in place, even a sampling of probable economic impacts clearly suggests that this is a profound economic opportunity, with potential watershed implications for both Blount County and the greater metropolitan Knoxville region.”