EXECUTIVE SUMMARY

CHAPTER 1 - INTRODUCTION

CHAPTER 2 - HISTORY OF ECONOMIC DEVELOPMENT IN OAK RIDGE

2.1 WORLD WAR II ERA
2.2 COLD WAR ERA
2.3 POST-COLD WAR ERA
2.3.1 Establishment of CROET
2.3.2 Reindustrialization
2.3.3 A Future of New Challenges

CHAPTER 3 - CURRENT MISSION, ORGANIZATION, AND OPERATIONS OF CROET

3.1 MISSION OF CROET
3.2 CURRENT ORGANIZATION OF CROET
3.3 CURRENT OPERATIONS OF CROET
3.3.1 Leasing of Excess DOE Facilities and Equipment
3.3.2 Developing New Industrial Sites
3.3.3 Administering Grants
3.3.4 Administering a Revolving Loan Fund

CHAPTER 4 - CHALLENGES AND OPPORTUNITIES

4.1 CHALLENGES

4.1.1 Identify New Opportunities Early and Fully
4.1.2 Capitalize Fully on Each Opportunity
4.1.3 Avoid or Mitigate Catastrophic Legal Liabilities
4.1.4 Minimize Tax Liabilities
4.1.5 Demonstrate Corporate Business Viability Without Supporting Grants

4.2 OPPORTUNITIES

4.2.1 Reindustrialization of Heritage Center

4.2.1.1 Subleasing of Reusable Space
4.2.1.2 Management of Infrastructure and Services
4.2.2 Greenfield Development (Horizon Center)
4.2.3 Gateway Center
4.2.4 Greyfield Parcels

CHAPTER 5 - STRATEGIC REORGANIZATION OF CROET

5.1 PROPOSED REORGANIZATION STRUCTURE

5.1.1 CROET Holding Company
5.1.2 Heritage Development Corporation
5.1.3 Horizon Development Corporation
5.1.4 Vista Corporation
5.1.5 CROET Foundation, Inc.
5.1.6 CROET Investments, Inc.

5.2 MEETING THE CHALLENGES AND OPPORTUNITIES: STRATEGIC ADVANTAGES OF A TIERED STRUCTURE

5.2.1 Re-Energize the Organization
5.2.2 Increase the Efficiency of Operations
5.2.3 Avoid or Mitigate Legal Liabilities
5.2.4 Minimize Tax Liabilities
5.2.5 Enhance Organizational Flexibility
5.2.6 Promote Capitalization of Resources
5.2.7 Maintain Business Confidentiality
5.2.8 Improve Personnel Management
5.2.9 Enhance Public Relations Efforts
5.2.10 Demonstrate CROET's Viability Without Supporting Grants

CHAPTER 6 - STAFFING PLAN

6.1 STAFFING PLANS FOR FY 2000

6.1.1 Current Positions and Responsibilities
6.1.2 Plans for FY 2000 79

6.2 REORGANIZATION STAFFING PLANS ( FY 2001-2002)

6.2.1 CROET Holding Company

6.2.1.1 Plans for FY 2001
6.2.1.2 Plans for FY 2002
6.2.2 Heritage Development Corporation
6.2.2.1 Plans for FY 2001
6.2.2.2 Plans for FY 2002
6.2.3 Horizon Development Corporation
6.2.3.1 Plans for FY 2001
6.2.3.2 Plans for FY 2002
6.2.4 Vista Corporation
6.2.4.1 Plans for FY 2001
6.2.4.2 Plans for FY 2002
6.2.5 CROET Foundation, Inc.

6.2.5.1 Plans for FY 2001
6.2.5.2 Plans for FY 2002 87

6.2.6 CROET Investments, Inc.

6.2.6.1 Plans for FY 2001
6.2.6.2 Plans for FY 2002 88

6.3 SUBCONTRACTOR SUPPORT

6.3.1 Subcontracting Plans for FY 2001
6.3.2 Subcontracting Plans for FY 2002

CHAPTER 7.0 - MARKETING PLAN

7.1 MARKETING PLAN FOR FY 2001

7.1.1 Organizational Goal
7.1.2 Research
7.1.3 External Forces
7.1.4 Allies/Partners
7.1.5 General Observations
7.1.6 Human Resource

7.2 MARKETING STRATEGY FOR FY2001

7.2.1 Overall CROET Marketing Goals

7.2.2.1 CROET Holding Company Marketing Strategy
7.2.2.2 CROET Holding Company Marketing Tactics
7.2.3.1 Heritage Center Marketing Strategy
7.2.3.2 Heritage Center Marketing Tactics
7.2.4.1 Horizon Center Marketing Strategy
7.2.4.2 Horizon Center Marketing Tactics
7.2.5.1 Gateway Center Marketing Strategies
7.2.6.1 Vista Corporation Marketing Strategy
7.2.6.2 Vista Corporation Marketing Tactics
7.2.7 Budget Estimates

CHAPTER 8 - FINANCIAL PLAN

CHAPTER 9 - IMPLEMENTATION PLAN

CHAPTER 10 - CONCLUSIONS

APPENDIX A - Financial Plan Data for CROET Holding Company

APPENDIX B - Financial Plan Data for Heritage Development Corporation

APPENDIX C - Financial Plan Data for Horizon Development Corporation

APPENDIX D - Financial Plan Data for Vista Corporation

APPENDIX E - Financial Plan Data for CROET Foundation, Inc.

APPENDIX F - Financial Plan Data for CROET Investments, Inc.

APPENDIX G - Example By-Laws & Charter

APPENDIX H - CROET Policy and Procedure Overview

APPENDIX I - Risk Assessment Sheet

Figure 1. Chart Showing the Historical Development of CROET 20

Figure 2. Impact of DOE Downsizing on the Oak Ridge Economic Base

Figure 3. List of Organizations Represented on Board

Figure 4. Current Organizational Structure of CROET

Figure 5. Membership and Responsibilities on the Integrated Economic Development Team

Figure 6. Reindustrial Complex

Figure 7. Location of Theragenics Corporation - New Isotope Production Facility in Horizon Center

Figure 8. Artist's Conception of Theragenics Corporation - New Isotope Production Facility

Figure 9. Site Plan of Theragenics Corporation - New Isotope Production Facility

Figure 10. Construction in Progress of Theragenics Corporation - New Isotope Production Facility in Horizon Center

Figure 11. Primary and Secondary Impact Area

Figure 12. Heritage Center Facility Identification

Figure 13. Reindustrialization of Brownfield Facilities in Heritage Center

Figure 14. Aerial View of the K-33 Building at Heritage Center

Figure 15. Conceptual Development Plan for Horizon Center

Figure 16. Aerial View of the Horizon Center Site

Figure 17. Map Showing the Location of Parcel ED-3

Figure 18. Aerial View of Parcel ED-3

Figure 19. Map Showing the Locations of Greyfield Parcels in the ETTP

Figure 20. Proposed Reorganization Structure for CROET

Figure 21. Stages in the Normal Life Cycle of a Business Organization

Figure 22. Current Staffing as Related to Organizational Structure

Figure 23. Transitional Staffing Plan for FY 2001 as it Relates to Reorganized Structure

Figure 24. Staffing Plan for FY 2002 as Related to Final Reorganized Structure

Figure 25. Comparative Schedules for Implementation of CROET holding Company and Its Subsidaries

Figure 26. Implementation Plan for CROET Holding Company

Figure 27. Implementation Plan for Heritage Development Corporation

Figure 28. Implementation Plan for Horizon Development Corporation

Figure 29. Implementation Plan for Vista Corporation

Figure 30. Implementation Plan for CROET Foundation, Inc.

Figure 31. Implementation Plan for CROET Investment, Inc.

Table 1. Projected Operating Costs of the Reorganized CROET

Table 2. Distribution Grant Fund for East Tennessee Region

Table 3. Current Status of Grants

Table 4. Current Status and History of the Financial Assistance Fund

Table 5. Current Staff in the CROET Support Office and Proposed Staff for CROET Holding Company

Table 6. Proposed Staffing for the CROET Subsidiaries

Table 7. CROET Support Contractors and Associated Costs (FY 2000 - 2002)

The city of Oak Ridge and the surrounding East Tennessee region have faced enormous challenges during the past 58 years. The two principal challenges were winning World War II and prevailing over the Soviet Union in the Cold War. Using a combination of federal funding, solid planning, keen intelligence, and intense creativity, these enormous challenges were successfully met and overcome. Unfortunately, each of these successes opened the door to waning federal influence and deep concerns about the economic future of the region. In response to Post-Cold War concerns, the U.S. Congress mandated the establishment of regional organizations to transition U.S. Department of Energy (DOE) communities from economic dependence on the federal government to reliance on private industry. Beginning in 1993, the DOE Office of Worker and Community Transition worked with local officials and business leaders to establish one of these organizations in Oak Ridge. By 1995 the initially created organization had evolved into the Community Reuse Organization of East Tennessee (CROET).

The CROET assists private sector businesses in creating quality jobs for the East Tennessee region. This is accomplished by using the underutilized land, facilities, equipment, personnel, and technologies available in the DOE Oak Ridge Complex. In pursuit of its mission, CROET conducts four major operations: leasing excess DOE facilities and equipment for reuse, developing industrial sites, administering grants, and administering a revolving loan fund.

Since its inception, the CROET organizational scheme has consisted of the Board of Directors of CROET (41 members); an Executive Committee; the President & Chief Executive Officer (CEO) of CROET, who manages the permanently staffed CROET Support Office; and four standing committees (Reuse Committee, Land Use Committee, Grants Committee, and Nominating Committee). The members of the board and the standing committees have been drawn from diverse backgrounds and constituencies within the region. This diversity has been a source of broad-based support and expertise for organizational decision making. Through teaming arrangements and strategic partnerships with private sector and governmental organizations, the current management-by-committee approach has been effective in paving the way for successful economic development and diversification in the region. It has effectively met the challenges that confronted CROET during its first five years of operations. These challenges have included the establishment and start up of the organization, staffing the organization, identifying initial economic development and diversification opportunities, developing approaches to capitalize on these opportunities, and demonstrating the ability to implement these approaches. Major operational successes have included attraction of the first facility reuse lessees to Heritage Center, start up of development in the Horizon Center industrial park, attraction of the first major industrial tenant to Horizon Center, and administration of Regional Economic Development (RED) and Regional Workforce Development (RWD) grants. Additional successes have included the establishment and management of the Small Business Development Program and creation of the Financial Assistance Fund to help small- and medium-sized businesses engaged in manufacturing products or providing technology-based services. As a result of these past efforts and successes, CROET has become a mature organization standing on the threshold of becoming a dynamic force in the regional economy.

The time has come to cross this new threshold, assume this dynamic role, and effectively meet the new challenges and opportunities that lie ahead. The principal challenges facing the organization are as follows: 1) early and full identification of new opportunities for economic development and diversification, 2) full capitalization on each opportunity, 3) avoidance or mitigation of catastrophic legal liabilities, 4) minimization of tax liabilities, and 5) demonstrating the business viability of CROET without supporting government grant money. The emerging opportunities are: 1) acquisition and reindustrialization of more reusable building space in Heritage Center, 2) management of site-wide infrastructure and support services at Heritage Center, 3) full build out of the Horizon Center industrial park, 4) start up and eventual completion of the proposed Gateway Center office and industrial park, and 5) development of previously undeveloped land (greyfield parcels) in Heritage Center. To successfully meet these challenges and opportunities, the current organizational structure of CROET should be changed.

This strategic plan proposes the reorganization of CROET according to a tiered structure. In this tiered structure, the 41-member Board of Directors of CROET and the President & CEO of CROET should preside over CROET Holding Company, a new parent or quasi-holding company for five subsidiary corporations. Each of the five corporations should correspond with one of the major operations or activities currently underway within CROET. Heritage Development Corporation should be responsible for reindustrialization activities in Heritage Center. Horizon Development Corporation should manage industrialization operations on CROET land. Vista Corporation should rapidly capitalize on opportunities not clearly within the purview of the other CROET subsidiaries. CROET Foundation, Inc. should handle CROET's grant operations. Another new organizational unit, CROET Investments, Inc., should be responsible for administration and potential ownership of the East Tennessee 2000 Loan Fund.

CROET Holding Company should appoint a separate Board of Directors and a Chief Operating Officer (COO) to administer each corporation. The COOs should report directly to the President & CEO of CROET Holding Company. Functional employees of each subsidiary should report to the COO of the subsidiary.

The proposed reorganization provides numerous advantages for the early and full identification of opportunities and for full capitalization on both known and emerging opportunities. In this regard, the key advantage lies in its ability to increase the overall efficiency of CROET operations. Specifically, the creation of subsidiary corporations will concentrate corporate resources, expertise, and energy solely on the unique opportunities within the purview of each corporation. In addition, the proposed reorganization should: 1) re-energize CROET to better meet its opportunities, 2) enhance organizational flexibility to create subsidiaries targeted at new opportunities, 3) maintain business confidentiality to more easily close opportunity-based deals, 4) promote capitalization of resources to better pursue opportunities, 5) improve personnel management to increase employee morale and performance when pursuing opportunities, and 6) enhance public relations by targeting grant and loan packages to regional opportunities outside of Oak Ridge.

A tiered organizational structure for CROET should meet the challenges posed by potential legal and tax liabilities. By creating CROET Holding Company and its subsidiaries, the organization can effectively insulate each corporation from legal and tax liabilities accumulated by the other corporations.

CROET must develop and maintain self-sustaining cash flow instead of depending on DOE grant money for its continued viability. If the foregoing advantages are collectively realized, the proposed reorganization should put CROET well down the road to successfully meeting this challenge.

The proposed reorganization would be partially staffed by current positions in the CROET office. The President & CEO of CROET would become the President & CEO of CROET Holding Company in fiscal year (FY) 2001. This person would also temporarily assume roles as COO of Horizon Development Corporation, Vista Corporation, CROET Foundation, Inc. and CROET Investments, Inc. Because the responsibilities of these COO positions are not anticipated to be an excessive burden during the initial reorganization period, assumption of these additional roles is deemed both practical and supportive of cost containment. However, this assumption of additional roles should be considered temporary. If the combined responsibilities of these roles were to become unmanageable, one or more roles would be assigned to another CROET employee or a new hire. This assignment would be made according to a practical analysis of business conditions and potential costs at the time.

The current Vice President for Reindustrialization would become COO of Heritage Development Corporation. The current Vice President for Operations position would be converted to the position of Director of Marketing, effective during FY 2001. The current positions of Chief Accountant, Bookkeeper (part-time), and receptionist would move to CROET Holding Company, while the current positions of Account Executive (1), Administrative Assistant (1) and Intern (1) would be functionally distributed to Heritage Development Corporation.

Four new staff positions would be created during FY 2001. The positions of Office Manager and Bookkeeper (full-time) would become part of CROET Holding Company's staff. A Facility Manager (1) and an additional Account Executive (2) would be functionally assigned to Heritage Development Corporation.

During FY 2002, five new staff positions would be created. Two of these, an additional Facility Manager (2) and the Director of Health & Safety, would be functionally assigned to Heritage Development Corporation. The other three, Account Executive (3), Administrative Assistant (2) and Intern (2), would be functionally assigned to Horizon Development Corporation.

From the early days of CROET, the organization's marketing efforts have been focused on building awareness, as opposed to strategic marketing that reflects the commercial real estate, private sector model. In parallel with the reorganization, CROET should shift its marketing emphasis from awareness to aggressively recruiting tenants for its facilities and properties. To accomplish this, CROET has developed a preliminary marketing plan. Based on the results of current market research by Fluor Daniel Consulting and future market research, this preliminary plan should be fine-tuned into an itemized, detailed program of action for the years to come. This plan is expected to be finished in FY 2001.

The preliminary marketing plan contains three principal features. One of these is the recommendation to hire a full-time Director of Marketing for CROET. Supported by a marketing firm, a real estate/site-selection consultant, the Bechtel Jacobs Company, and DOE, this position would oversee the development of marketing programs, community relations, and world-wide media relations. The individual in this position would proactively pursue new partnerships and enhance cooperative activities with the many allies that leverage CROET's resources. Another feature of the preliminary marketing plan is a set of tentative assumptions about the potential target audiences for marketing campaigns. For example, the potential audience for Heritage Center would include heavy machinery manufacturers, waste management, automotive industry support, and advanced engineering, whereas the audience for Horizon Center would include high technology companies. These assumptions also emphasize outreach to firms outside the technology arena, targeting the regional economic development community, and strengthening relationships with business leaders in the region. Finally, the preliminary marketing plan establishes specific marketing strategies and tactics for CROET Holding Company, Heritage Center, Horizon Center, Gateway Center, and Vista Corporation. These 14 strategic and 34 tactical initiatives are aimed at aggressively recruiting tenants for CROET facilities and properties.

The reorganization of CROET and subsequent corporate operations should be accomplished within the limits of total funding available. The organization has developed a highly detailed breakdown of the projected funding receipts and disbursements for CROET Holding Company and each if its subsidiaries in FY 2001 and 2002. These projections are included as Appendicies.

Table 1. Projected Operating Costs of the Reorganized CROET

Corporation	Projected Total Expense and Overhead
	FY 2001	FY 2002
CROET Holding Company
Primary Projection	$545,457 1	$512,322
Alternative Projection	$1,766,8562
Heritage Development Corporation
Primary Projection	$14,320,802 1	$14,356,952
Alternative Projection	$15,058,970 2
Horizon Development Corporation
Primary Projection	$311,644 1	$450,415
Alternative Projection	$349,260 2
Vista Corporation
Primary Projection	$30,547 1	$20,357
Alternative Projection	$33,572 2
CROET Foundation, Inc.
Primary Projection	$3,880,951 1	$100,000
Alternative Projection	$0 2
CROET Investments, Inc.
Primary Projection	$37,106 1	$32,543
Alternative Projection	$40,781 2

¹ Projection assumes $2 million in additional funds are received from DOE for FY 2001.

² Alternative projection assumes $2 million in additional funds are not received from DOE for FY 2001, and use of $500,000 from the prior year's lease revenue to upgrade facilities at Heritage Center.

Implementation of the proposed reorganization of CROET should begin in October 2000 and should be completed no later than April 2003. During this period, CROET plans to take all of the board, legal, administrative, and accounting actions necessary to formally establish, staff, and operate CROET Holding Company, Heritage Development Corporation, Horizon Development Corporation, Vista Corporation, CROET Foundation, Inc., and CROET Investments, Inc.

The overall implementation processes for the corporations should begin simultaneously and proceed in parallel over much of the total implementation period which is not expected to be "fully" complete until April of FY 2003.

The contents of the strategic plan are subject to review, comment, and approval by the Executive Committee of CROET and the Board of Directors of CROET. When the review process is completed, the revised plan will be submitted to the Executive Committee of CROET and the Board of Directors of CROET for final approval. Upon final approval of the strategic plan, the President & Chief Executive Officer (CEO) of CROET will use its contents to guide implementation of the proposed reorganization, staffing, marketing, and financial plans.

The Community Reuse Organization of East Tennessee (CROET) was created in response to the diminishing economic presence of the U.S. Department of Energy (DOE) in Oak Ridge, Tennessee. Its purpose was to promote private sector economic development and diversification in the East Tennessee region through the reuse of DOE facilities and land.

From its inception in 1995, this new organization faced a number of challenges. These included the establishment and start up of the organization, staffing the organization, identifying initial economic development and diversification opportunities, developing approaches to capitalize on these opportunities, and demonstrating the ability to implement these approaches. During the past five years, these initial challenges have been met successfully. As a result, CROET has become a mature and firmly established organization standing on the threshold of being a dynamic force in the regional economy. The time has come to cross this threshold and press towards achieving the organization's full economic potential.

This strategic plan is a road map for reaching CROET's full economic development and diversification potential. Its purpose is to document specific reorganization, staffing, marketing, financial, and implementation plans that should enable the organization to reach this new level of success.

The overall plan is divided into 10 major chapters. Chapter 1 introduces the overall strategic plan, identifies its purpose, describes its contents, and discusses its final approval and use. Chapter 2 traces the history of economic development in Oak Ridge and ties it to CROET's future economic development challenges. The current mission, organizational structure, and operations of CROET are described in Chapter 3. In Chapter 4, the strategic plan provides an in-depth description of the economic development challenges and opportunities that lie on the horizon. Chapter 5 contains strategic plans for reorganizing CROET to meet these challenges and take full advantage of new opportunities. Chapter 6 discusses specific plans for staffing the proposed reorganization. Chapter 7 is a preliminary plan for marketing CROET properties to private sector businesses and industries. Chapter 8 covers plans for financing operations under the reorganization, and Chapter 9 contains plans for implementing the overall strategic plan. Concluding statements on the contents of the strategic plan are presented in Chapter 10.

The contents of this strategic plan are subject to review, comment, and approval by the Executive Committee of CROET and the Board of Directors of CROET. When the review and comment process is completed, the revised plan will be submitted to the Executive Committee of CROET and the Board of Directors of CROET for final approval. Upon final approval of the strategic plan, the President & Chief Executive Officer (CEO) of CROET will use its contents to guide implementation of the proposed reorganization, staffing, marketing, and financial plans.

On August 2, 1939, Albert Einstein wrote his now famous letter to President Franklin D. Roosevelt. In hopes of addressing the potential threat of atomic fission research by an increasingly belligerent Nazi Germany, this letter urged the administration to capitalize on recent research of Enrico Fermi and Leo Szilard to "...set up a nuclear chain reaction in a large mass of uranium." It prophesied that, "This new phenomenon would... lead to the construction of bombs... extremely powerful bombs of a new type..." (Clark 1970).

While Dr. Einstein was writing his letter, John Arnold was going about his tasks on the family-owned farm in the tiny East Tennessee community of Wheat. Unknown to each other, the lives of Dr. Einstein and Mr. Arnold would converge just a few short years later in the area surrounding this small community.

2.1 WORLD WAR II ERA

The U.S. government purchased approximately 60,000 acres of property near Black Oak Ridge in Anderson and Roane Counties, Tennessee in 1942. Encompassing the Wheat Community and many other small hamlets with names such as Elza, Robertsville, and Scarboro, this land was used to develop an ultra-secret industrial city, Oak Ridge, Tennessee (Gillette and Whitman n.d.). During the war years, the residents of Oak Ridge were charged with building and testing key components of the world's first atomic fission weapon.

This work required the planning of enormous new industrial facilities. The construction of such large industrial facilities had never been attempted in human history. However, in an unprecedented engineering effort, three mammoth facilities were completed almost overnight in the separated valleys of Oak Ridge. The Y-12 Plant was constructed to separate uranium 235 (U-235) from naturally occurring uranium ore containing only 0.7 of one percent U-235. This was done through an electromagnetic process first developed at the University of California, Berkeley. The X-10 facility was the location for a graphite-moderated nuclear reactor. This reactor was used as a pilot facility for the larger-scale plutonium production complex in Hanford, Washington. The enormous K-25 Site was located on 2500 acres at the far west end of Oak Ridge. This facility was used to separate U-235 more economically through the gaseous diffusion process (Gillette and Whitman n.d.).

The construction and operation of these facilities created thousands of direct and indirect jobs in the economy of the Oak Ridge area. These jobs were filled by employees from the indigenous population and employees drawn from all corners of the nation. In just 2.5 years, the population of Oak Ridge swelled to a peak of 75,000 people, making it the fifth largest city in Tennessee (Gillette and Whitman n.d.).

During World War II, the activities in Oak Ridge and the operations in these three facilities were conducted under strict security controls. To the extent possible, measures were taken to obscure the existence of Oak Ridge from persons outside of the region. Within the major facilities, each worker knew how to do his or her own job, but very few knew the ultimate purpose of the three plants and how they were contributing to the overall war effort.

On August 6, 1945, almost six years to the day after Dr. Einstein wrote his letter to President Roosevelt, a lone B-29 bomber dropped an atomic bomb on the Japanese military city of Hiroshima. Three days later, a second nuclear weapon was dropped on Nagasaki. On August 14, 1945, the most devastating conflict known to man ended when the Empire of Japan capitulated to the allied forces. Finally, the people of Oak Ridge knew what they had been working on so diligently and secretly for the last three years of the war.

The arrival of VJ Day brought jubilation to the citizens of the United States and particularly to those in Oak Ridge. Oak Ridge residents believed that their work had successfully accelerated an end to the war, and it had made the world safe for democracy. Almost immediately though, an important question arose. What would become of Oak Ridge now that its war-time mission had been accomplished? After all, the city had been constructed for a singular, defined, and finite purpose. Even the houses were only designed to last for a few years. As one looked around, this planned urban obsolescence seemed to be an emerging reality. The population of the city was already declining rapidly as academicians returned to academia, carpenters migrated to postwar boom areas, and soldiers returned home. As a result of these emigrations, the immediate postwar population in Oak Ridge would decline by 53 percent to about 35,000 people.

2.2 COLD WAR ERA

Uncertainty became part of the community culture in Oak Ridge during the early years of the Cold War Era (1946-1991), and it was only partially assuaged by creation of the Atomic Energy Commission (AEC) in 1947. This civilian agency provided tangible assurances of continued atomic research in the United States. With the transfer of responsibility for the local atomic energy facilities from the U.S. Army to the AEC, there would be a continued reason for Oak Ridge to exist. However, portending a continuing aspect of life in Oak Ridge, the U.S. Army announced a 5000-man reduction in force at the Y-12 Plant before the planned transfer (Johnson and Dixon 1999). During this long era, government responsibility for the Oak Ridge facilities would again change from the AEC to the Energy Research and Development Administration and finally to DOE.

During the late 1940s, there was considerable debate within the government and academic circles about whether or not to share the nation's atomic knowledge with the rest of the post-war world. A decision either way would have a significant impact on Oak Ridge. History records that the decision was made to maintain tight control over this new knowledge, particularly as it related to weaponry. Such knowledge was coveted, particularly by former allies such as the Union of Soviet Socialist Republics. Under the leadership of Joseph Stalin, the Soviet Union soon initiated a concerted effort to develop a national nuclear capability. It took only eight years for the Soviet Union to become a highly belligerent and persistent nuclear adversary of the United States. The resulting Cold War between the two superpowers lasted nearly five decades.

The Cold War became Oak Ridge's reason for continued existence. Better technologies were always needed to combat the Soviet Union's growing nuclear expertise, and Oak Ridge played a key role in the development of these technologies. Budgets were generally as large as they needed to be to meet the menace. While the United States was in a constant state of war readiness, uncertainty remained the continuing hallmark of life in a "temporary city" such as Oak Ridge.

During the Cold War years, much direct and indirect scientific good came from continuing efforts to maintain and improve the nation's nuclear deterrence capability. Many "temporary" Oak Ridgers married; had families; built houses, churches, and businesses; coached Little League Baseball games; proudly attended graduations; worked diligently and secretly; received promotions; retired; and watched the next generation do the same. In short, they built a community they could call home.

Beginning in the 1960's, there were efforts to make Oak Ridge more "normal" through the attraction of private sector businesses unrelated to the government programs. Efforts to balance the economic base, while laudable and while achieving some success, could never hope to match a government presence that by the mid-1990's would have a budget of about $3 billion.

Throughout the Cold War, the Berlin wall was a tangible symbol of the battle lines between the two superpowers. In 1989, the wall came tumbling down. Two years later, the Soviet Union crumbled-- effectively ending the Cold War Era. As with a previous generation of Oak Ridge citizens, jubilation was the rule of the day. Just like 45 years earlier, Oak Ridgers began to worry about the economic future of their community.

2.3 POST-COLD WAR ERA

The DOE began this era (1992-present) with concern for the economic futures of its nuclear communities around the nation. Foreseeing a significant reduction of the federal presence in these communities, DOE began efforts to transition these communities to more balanced, private-sector-oriented economies and to transition thousands of workers who would no longer be needed by the DOE facilities. Many of these efforts were focused on the economic revitalization of Oak Ridge and the surrounding region.

2.3.1 Establishment of CROET

In 1993, the U.S. Congress mandated DOE establishment of regional community reuse and transition organizations throughout the nation. These organizations were established to assist DOE communities with the transition from economic dependance on the federal government to reliance on private industry. The DOE Office of Worker and Community Transition was charged with supporting the overall transition effort.

The East Tennessee Economic Council (ETEC) [formerly the Roane-Anderson Economic Council], local chambers of commerce, county officials, and city officials worked with the DOE Office of Worker and Community Transition to develop the concept for a community reuse organization in Oak Ridge. As a result of this cooperative effort, the East Tennessee Community Reuse Organization (ETCRO) was established in 1993. This organization was operated by a 15-member board of directors consisting of volunteers from the local business community (Figure 1).

Under the auspices of ETEC, this new entity enjoyed initial success as an out-grant organization. The major economic development initiatives supported by ETCRO grants were as follows:

1. $ 27 million to establish the basic funding structure for the Oak Ridge Center for Manufacturing's Skills Campus.
2. $ 1 million to leverage state and private sector funds to establish Technology 2020, a state-of-the-art business incubator and telecommunications center.
3. $ 50,000 to determine the feasibility of a regional industrial/business park.
4. $ 2 million to establish a revolving business loan program.

Although ETCRO was initially successful, its limited scope of grant activity could not meet the full range of economic challenges looming on the horizon in the region. The need for a new organization with broader capabilities was quickly recognized. This new organization needed to be more pro-active in developing economic programs to enhance the regional economic base. It also needed to add real value to the evolving local mission of DOE, particularly in converting the massive K-25 facilities to private sector use.

To meet these looming economic challenges and operational needs, the CROET was established as a direct outgrowth of ETCRO. The CROET was chartered as a Tennessee 501(c) 3 nonprofit corporation in 1995. In 1996-1997, the original 15-member board of ETCRO was expanded to 41 members (see figure 2) under CROET. This provided a larger voice for affected stakeholders in the region.

2.3.2 Reindustrialization

By the mid-1990s, DOE was undertaking a new and somewhat radical change of thought on the shuttered facilities under its stewardship. Up to this point, DOE and many in the Oak Ridge community had thought of these facilities as liabilities. Such liabilities would provide economic returns predicated only upon relatively short-term decontamination and decommissioning activities. Even if the best economic outcomes were to occur as a result of these environmental clean-up

Figure 1. Chart Showing the Historical Development of CROET

Figure 2. Impact of DOE Downsizing on the Oak Ridge Economic Base

activities, the community would be left with a "graveyard" containing thousands of acres and populated only by the remembrances of what once was, of how many jobs had been lost, and of what this community had meant to a former generation. This potential outcome was unacceptable to a number of DOE officials and business leaders in the impacted region.

These leaders stepped forward with a new and sustainable economic vision for Oak Ridge and the surrounding region. The leaders within DOE included Jim Hall, Robert Brown, Bob DeGrasse, and Dan Wilken. They were joined by community leaders Joe Lenhard, Pete Craven, Jeff Bostock, Bill

Manly, Tom Rogers, Dave Patterson, Amy Fitzgerald, Ken Yager, and others who envisioned blazing a trail different from any other. Their vision was a revitalized industrial complex--replacing a waning government presence with private sector jobs, reusing facilities that still had potential value, and creating regional economic diversity. In effect, they envisioned "reindustrializing" the old industrial complex (Figures 3).

The term "Reindustrialization" is the proper name of a program authorized by certain acts of the U.S. Congress. It refers to the private sector reuse of abandoned or underutilized government assets (land and facilities) to achieve the following objectives:

1. Mitigate the underemployment and unemployment effects of government downsizing and facility closures.
2. Accelerate environmental clean up and reduce its cost.
3. Diversify the regional economy to make it less dependent on the transfer of payments from the federal government.
4. Make better and continuing use of taxpayer investments in government assets.

Consistent with this new vision for economic revitalization, there was a desire to accelerate the environmental clean up of the DOE assets in Oak Ridge. However, DOE Oak Ridge Operations (ORO) recognized that DOE's overall clean-up funds would soon diminish and that the federal government would use these reduced funds to clean up highly visible and politically volatile contaminated sites. Most of these sites, such as the DOE Hanford Site in Richland, Washington, were located far from the Oak Ridge area. Local leaders realized that these new priorities would inhibit local clean-up plans and result in an extension of the timeline to clean up the Oak Ridge Complex.

Successful Reindustrialization would provide an opportunity to accelerate this time-line through several innovative initiatives. One of these initiatives was trading or bartering the occupancy of space to private sector firms in return for their decontaminating the space. In 1996, the concept of Reindustrialization was firmly in place; however, implementing the vision was yet to come.

Figure 3. List of Organizations Represented on Board

CROET was to be an integral part of implementing Reindustrialization. Continuing its historic role of funding community-based economic diversification efforts, CROET provided out-grants totaling $14.5 million. These grants were used for the following purposes:

1. Establish diverse programs ranging from industrial infrastructure improvements to equipping a distance learning facility. 66 %
2. Develop outreach materials. 4 %
3. Assist with training for minorities and displaced workers. 30%
4. Support renovation of affordable housing units. 1%

In addition, CROET assumed the role of lessee, and more importantly sublessor, of underutilized facilities in the Oak Ridge Complex. The organization effectively became the real and personal property intermediary between DOE and private sector companies. The CROET began by leasing 1000 acres of property known as Parcel ED-1 from DOE with the intent of developing the property into a "greenfield" industrial/business park. The organization did so knowing that all prospective industrial clients would not want to locate in existing facilities. It also realized that many clients would not be able to retrofit existing facilities in the Oak Ridge Complex. For Reindustrialization to succeed, there needed to be a full complement of new sites, as well as existing facilities. The development of Parcel ED-1 (now known as Horizon Center) was designed to accomplish this goal.

The development of Horizon Center began in 1998 with the intent to develop the overall infrastructure for the entire park and to complete the necessary infrastructure for fully developing the first phase of the park. This first phase would result in the availability of more than 100 acres of park for private sector companies to build facilities. By the end of 2000, $9.3 million will have been expended to develop the electrical, water, wastewater, telecommunications, and roadways infrastructure for the park.

More importantly, CROET and DOE were successful in attracting the first tenant to Horizon Center, even before its completion. Theragenics Corporation, producer of a revolutionary and highly successful cancer therapy, announced the development of a new manufacturing, research, and development facility. This 100,000+ ft² facility will cost $25 million and house up to 240 new jobs. The attraction of such a significant tenant would not have been possible without Horizon Center. The CROET's ability to access extremely sophisticated equipment and technical expertise from the Oak Ridge Complex via DOE was equally important.

This same type of access played a vital role in CROET's successful Reindustrialization of brownfield facilities across the Oak Ridge Complex. In 1996, there was only one lease from DOE to CROET. By the end of that same year, only one private sector firm was occupying space at the former K-25 Site (now known as Heritage Center). The DOE and CROET continued to learn and build a base of knowledge that would allow significant accomplishment over the next three years. During that

period, CROET leased over 2.7 million ft² of brownfield real estate and thousands of items of equipment from DOE. It assumed the operation of Heritage Center infrastructure, which includes 26 mi of roads, a railroad (11 mi of track), a 4-million-gpd water treatment facility (currently averaging 1.85 million gpd), a centralized steam heating system, and a 600,000-gpd wastewater treatment system (currently averaging 294,000 gpd). The CROET has leveraged the equipment and facilities necessary to sublease approximately 600,000 ft² of buildings to 30 private sector firms. This has created more than 340 new private sector jobs in the regional economy. It has invested nearly $600,000 in bartering for clean up of contaminated facilities or in directly accelerating the clean up of these facilities. In the process, CROET has helped save American taxpayers $800 million in defrayed security and maintenance costs over the term of these leases. To date, CROET and its predecessor organization (ETCRO) have transferred over $56 million of DOE funds into the regional economy, leveraging nearly $43 million of local funds to help create over 4500 jobs.

2.3.3 A Future of New Challenges

Our yesterdays speak of success. Our tomorrows speak of new challenges to development and diversification of the private sector economy in the East Tennessee region. Some of these challenges are already apparent, and others may soon emerge on the horizon. The principal identified challenges facing CROET and achievement of its mission (regional economic diversification) are as follows:

1. Fully identify emerging economic development opportunities within the scope of the CROET mission at the earliest possible time.
2. Capitalize on each opportunity to the greatest extent possible to maximize the positive impacts of CROET operations on the regional economy.
3. Avoid or mitigate potentially catastrophic legal liabilities for CROET operations.
4. Minimize potential tax liabilities for CROET operations.
5. Demonstrate corporate business viability without supporting grant funds.

Each of these challenges contains within it the seeds of opportunity for future success. To continue the long history of success in Oak Ridge, CROET must meet these new challenges with the same keen intelligence, intense creativity, and solid planning that have been the hallmarks of the community's and the corporation's past successes.

This chapter describes the current mission of CROET and the internal organizational structure responsible for executing the mission. These descriptions are followed by a detailed discussion of current CROET operations.

3.1 MISSION OF CROET

The CROET is an economic development organization whose mission is to assist the private sector in creating quality jobs in the region. This is done by using the underutilized land, facilities, equipment, personnel, and technologies available in the Oak Ridge Complex. To achieve this mission, CROET focuses on the following economic development operations:

1. Leasing excess DOE facilities and equipment.
2. Developing industrial sites.
3. Administering grants.
4. Administering a revolving loan fund.

Underutilized facilities are located on all the sites that make up the Oak Ridge Complex [Oak Ridge National Laboratory, Oak Ridge Y-12 Plant, and East Tennessee Technology Park (ETTP)]. The CROET's initial operational emphasis was on the facilities at Heritage Center in the ETTP, and this emphasis continues today.

3.2 CURRENT ORGANIZATION OF CROET

The CROET organization consists of the Board of Directors of CROET, the Executive Committee of CROET, a permanent support staff in the CROET Support Office, and four standing committees. These organizational units and their relationships are shown in Figure 4.

Because CROET is in a unique position as the central point of contact between DOE, local communities, and businesses, it must incorporate a wide range of views. The organization's 41-member board of directors includes representatives from the business community, organized labor, displaced workers, environmental groups, area colleges and universities, local governments, and the Governor of the State of Tennessee's office. Federal officials have also taken a close interest in CROET.

Figure 4. Current Organizational Structure of CROET

The Board of Directors of CROET is unusually large and diverse, a combination that would typically inhibit rather than encourage progress. Contrary to conventional wisdom, the board has generally been successful in achieving CROET's mission because of its management expertise and a shared commitment to the well being of the regional economy and environment.

The Executive Committee of CROET consists of the Chairperson, Chairperson-Elect, Secretary, Treasurer, Past Chairperson, elected political officials, the chairpersons of the four standing committees, and the President & CEO of CROET. The four standing committees are the Reuse Committee, Land Use Committee, Grants Committee, and Nominating Committee. The Executive Committee of CROET and the four standing committees are charged with bringing issues before the full board of directors for approval. While sometimes cumbersome, this structure does ensure that all viewpoints are represented in final decisions.

The Board of Directors of CROET is supported by the President & CEO of CROET, six full-time staff members, and two part-time staff members. These employees provide administrative and business operations support, including managing industrial recruiting, administering grants, overseeing a small business loan program, and fulfilling landlord and facility management responsibilities. The support staff is directly managed by the President & CEO of CROET.

Like most other economic development organizations, CROET does not accomplish its mission alone. It works as part of an integrated team made up of DOE-ORO and its Oak Ridge management and integration contractor, Bechtel Jacobs Company, LLC. Each team member is responsible for critical parts of the site redevelopment process (Figure 5). The guidance and support of DOE-ORO are essential in facilitating the transfer of assets such as buildings, machinery, and recyclable materials from DOE to CROET. In turn, CROET leases these assets to new tenants. Key to this transfer is the completion of all necessary environmental, safety, and health reviews and protective actions, which are performed to assess risks and ensure the safety of all personnel at the site. Bechtel Jacobs prepares facilities for occupancy and provides technical support during the leasing process.

Additionally, CROET has strategic partnerships with numerous academic, industrial development, and community organizations. These organizations provide parts of the total "package" presented to companies considering start up in the Oak Ridge region or relocation to the area. For example, CROET can draw upon the offerings of universities (e.g., University of Tennessee, Oak Ridge Associated Universities), community colleges (e.g., Pellissippi State Technical Community College, Roane State Community College), Oak Ridge National Laboratory, and the Tennessee Valley Authority to address the financial, technical, and workforce issues facing high growth industries such as those in the information technology cluster. It can also draw upon high-tech consortiums such as Technology 2020, Oak Ridge Centers for Manufacturing Technology, and the Technology Business Alliance.

Figure 5. Membership and Responsibilities on the Integrated Economic Development Team

3.3 CURRENT OPERATIONS OF CROET

The operations of CROET are focused on bringing new industry to the Oak Ridge Complex. To do this, CROET generally follows standard economic development practices not unlike those used by communities across the nation. Traditional methods such as national advertising, recruiting trips,

trade shows, and targeted mailings have been used extensively. More recently, many of the economic development agencies in the region have been using fax-data-on-demand systems and Internet sites with extensive links to other regional resources important to industry. A renewed emphasis on technology transfer programs and support for new product commercialization represent part of the region's foremost weaponry in the hunt for economic expansion. Considering the number of economic organizations in the region and the increased specialization within the broader economic development mission, a successful partnership approach to marketing the region has emerged. The CROET has been assisting with this partnership, which has become the model for this marketing approach.(Figure 6)

The economic development activities of CROET are currently divided among four major operations. Each of these operations is discussed in this section of the strategic plan.

3.3.1 Leasing of Excess DOE Facilities and Equipment

The former K-25 Site (Oak Ridge Gaseous Diffusion Plant) is gradually being converted into a private sector industrial site called Heritage Center. This site and other areas of the Oak Ridge Complex contain numerous buildings ideal for leasing to private sector industries. However, the age of these buildings and their histories with nuclear materials present challenges different from those related to selling or leasing other types of commercial properties to industry. As a result, CROET has developed innovative leasing arrangements and barter-for-clean up exchanges to serve as incentives for attracting private industry to Heritage Center and other areas of the Oak Ridge Complex.

The buildings in the Oak Ridge Complex have a number of features that make them potentially attractive to private industry. The necessary utilities and infrastructure are already in place, and transportation is enhanced by easy access to rail lines, Interstate 40, and the navigable Clinch River. In addition, East Tennessee boasts a highly trained and motivated workforce.

Because of their past uses, many of the available buildings contain valuable assets such as machinery, metal, and other recyclable materials. The presence of these assets is attractive to many leasing prospects. For example, Dienamic Tooling Systems, Inc., a company that builds high-precision industrial equipment and machinery, has a twenty-one-person operation in Building K-1401 at Heritage Center. They are using heavy-duty equipment left in place and unused following closure of a DOE machine shop.

In the case of buildings containing legacy radioactive contamination, interested companies frequently exchange clean-up services for favorable lease terms. Because of the minimal amounts

of contamination present and the low environmental, health, and safety risk posed by this contamination, many buildings are given low priority in DOE's risk-based clean-up plans.(see appendix I) This clean-up-for-lease-terms exchange accelerates the clean up of these buildings by many years. It also saves taxpayer dollars in terms of projected DOE clean-up costs and avoids long-term surveillance and maintenance costs.

This unique approach to leasing has been successfully applied in Heritage Center. For example, CROET has leased over 100,000 ft² in the Building K-1200 Complex to the Materials & Energy Corporation (M & EC). This corporation plans to establish a hazardous, radioactive, and mixed-waste treatment complex in the leased space. Currently, they are performing decontamination and decommissioning of Building K-1200 and removing all classification concerns in exchange for favorable lease terms and commercial use of the facility.

Another example is Materials and Chemistry Laboratory (MCL), a company formed by a group of displaced workers who incorporated and leased a laboratory and its contents, including five electron microscopes. This company is performing clean up in Building K-1006 by removing radioactively contaminated laboratory hoods and asbestos floor tiles in exchange for reduced-lease payments.

In some cases, the leasing of uncontaminated facilities eventually benefits the DOE site clean-up program. In a barter arrangement, a business incubator made advanced, reduced-lease payments to CROET for two uncontaminated buildings. With the advanced lease payment, CROET contracted with another Heritage Center tenant to decontaminate an area in another building at the site. This area was leased to Dienamic Tooling Systems. This tool-and-die maker is now providing needed jobs for machinists and other skilled employees. Thus, clean up was accelerated without the use of federal funds, and comparable private sector jobs were created to replace some of those lost through local DOE downsizing.

The role of accelerating environmental clean up while fostering economic development is unique to community reuse organizations. Because CROET is in the economic development business, and not the environmental management business, this accelerated clean-up approach should only be viewed as supplemental to the overall DOE clean-up program.

3.3.2 Developing New Industrial Sites

As an alternative to existing facilities, CROET can offer incoming industries the opportunity to locate in a greenfield industrial park called Horizon Center. This 1000-acre park is adjacent to Heritage Center (formerly K-25) on land owned by DOE and leased by CROET. Approximately 500 acres of this land are being developed. One of the objectives of this development is to meet specific requirements for preserving a variety of on-site environmental characteristics--wetlands, stands of old growth hardwoods, and wildlife. These conservation measures make Horizon Center an aesthetically pleasing, state-of-the-art location for new business. Revenues from leases at Horizon Center will fund further development of Horizon Center and clean-up activities at Heritage Center, making still more space available there for job creation and growth.

Horizon Center has already attracted its first tenant. As mentioned in Section 2.3.2, a lease was recently signed with Theragenics Corporation for a 21-acre parcel of land and surplus DOE equipment (Figures 7, 8, 9 and 10). Theragenics is currently building a $28 million, 100,000+ ft² facility to develop and manufacture medical radioisotopes. This facility will house 240 employees with an annual payroll of around $9 million. Theragenics will refurbish and update a major item of surplus DOE equipment, use the Oak Ridge National Laboratory's High Flux Isotope Reactor as a "work for others" production vehicle, and be contractually responsible to DOE for providing radioisotopes.

3.3.3 Administering Grants

The CROET's commitment to economic development extends beyond the boundaries of the Oak Ridge Complex to a 15-county region in East Tennessee (Figure 11). In addition to several major initiatives that are being successfully started using programmatic grant funding, CROET administers two other types of grants. These are Regional Economic Development (RED) and Regional Workforce Development (RWD) grants. Both grants foster economic and community improvements among the regional municipalities. RED grants are used to assist affected communities with bringing new industry to the area. This assistance frequently involves building and preparing new industrial parks or marketing existing assets. The RWD grants augment community resources and other funding to educate and retrain displaced workers. Table 2 shows the distribution of these grants within the region. Table 3 shows the current status of the grants distributed throughout the region.

3.3.4 Administering a Revolving Loan Fund

The CROET manages the Small Business Development Program (SBDP), which is part of a comprehensive business assistance network. This program is designed to strengthen and expand existing technology transfer efforts, small business development efforts, and incubation programs in the region. This generates investment and employment to replace jobs being lost through DOE downsizing in the defense realm. The SBDP was developed because the creation and expansion of small businesses, particularly technology-oriented ventures using the world class talent and resources unique to East Tennessee, will continue to be the region's best opportunity to retain and increase its high-quality employment base.

The Financial Assistance Fund, which is a revolving loan program, functions as an integral component of the SBDP to leverage critical start-up and expansion capital for regional business ventures. This fund targets small- and medium-sized businesses engaged in manufacturing products or providing technology-based services that will create new jobs and represent new economic activity in the area.

The fund has loaned $2.79 million to eligible companies, leveraging a return of 223 jobs created. Table 4 shows the current status and history of the Financial Assistance Fund.

Figure 7. Location of Theragenics Corporation - New Isotope Production Facility in Horizon Center

Figure 8. Artist's Conception of Theragenics Corporation - New Isotope Production Facility

Figure 9. Site Plan of Theragenics Corporation - New Isotope Production Facility

Figure 10. Construction in Progress of Theragenics Corporation - New Isotope Production Facility in Horizon Center

Figure 11. Primary and Secondary Impact Area

Table 2. Distribution Grant Fund for East Tennessee Region.

Table 3. Current Status of Grants.

Table 4. Current Status and History of the Financial Assistance Fund

In 1995 the newly created CROET first faced the recurring challenge of economic uncertainty in Oak Ridge. At this time, the DOE presence in the region was already diminishing. With this major change came the initial challenges involved in revitalizing the regional economy. These challenges included getting CROET established on a solid foundation and appropriately targeting its energies at the initial challenges to economic development. Each of these challenges came with opportunities. The CROET has met these challenges and successfully capitalized on many of the opportunities.

Today CROET is a mature and firmly established organization standing on the threshold of being a dynamic force in the regional economy. The time has come to cross that threshold to the next level. However, this level has its own unique challenges and opportunities that must be met if CROET is to continue its success.

4.1 CHALLENGES

The five major challenges facing CROET and its operations during the coming years were briefly introduced in Chapter 2. These challenges and their implications are described in more detail in this section of the strategic plan.

4.1.1 Identify New Opportunities Early and Fully

The mission of CROET rests firmly on the foundation of opportunity. All of the organization's key operations target specific opportunities to expand the private sector economy of the region and create jobs. As a result, the identification of new opportunities is in many ways one of the most important challenges facing the organization.

Unrecognized opportunities are missed opportunities. Opportunities recognized only partially or too late for effective action are also missed opportunities, and missed opportunities are costly to the regional economy. During the coming years of rapid change in the region, CROET must be positioned to fully identify new opportunities at the earliest possible time. This includes potential opportunities for economic development that may lie just over the horizon and opportunities that are just beginning to emerge.

Louis Pasteur said that discoveries are made only by those minds that have been properly prepared to recognize them. This principle also applies to the identification of economic opportunities. Creative thinking and deep expertise in CROET's key business areas are essential to the identification of future opportunities. If CROET is to be fully successful in the coming years, it must now deepen this expertise in its major business areas and position it within the organization in a way that will achieve maximum results.

4.1.2 Capitalize Fully on Each Opportunity

Whenever an opportunity is identified, CROET must face the new challenge of capitalizing on this opportunity to the greatest extent possible. In doing so, CROET will successfully maximize the positive impacts of its operations on the regional economy.

Full capitalization on opportunities requires the most effective application of an organization's human and economic resources. The human resources must be configured into patterns of responsibility and authority that can specifically target available opportunities with the appropriate expertise and economic resources. Simultaneously, this configuration must enhance the overall efficiency of the organization and increase its effectiveness in achieving organizational goals. The CROET was originally organized in a climate of extreme uncertainty about the future of the regional economy. Appropriately, the organization was configured to address the challenges that were readily apparent in 1995. Unfortunately, all the puzzle pieces needed to construct a complete picture of the organization's contribution to regional economic development were not on the table at this time. As a result, CROET had to jump into the box of puzzle pieces, examine them in detail, figure out how best to fit them together, and begin the assembly process.

During the past five years, CROET's knowledge and capabilities have matured substantially. As a result, the organization must now position itself to take charge of the remaining puzzle pieces and work towards completion of the regional economic development picture. Completion of this picture will require a new organizational configuration that can take current realities into account and meet the challenge of fully capitalizing on new opportunities.

4.1.3 Avoid or Mitigate Catastrophic Legal Liabilities

One of the most important organizational challenges CROET must face in the coming years is the potential legal liability of its operations. The CROET is currently involved in four major operations (See Section 3.3). Any of these operations could give rise to a potentially devastating law suit.

As currently structured, all of CROET's operations are housed within a single legal entity. This structure may predispose the entire organization to catastrophic losses in a law suit. For example, if a catastrophe hit Heritage Center, all cash and investments held by CROET, whether earmarked for grants or other uses, would arguably be at play in a suit. The attorney for a potential plaintiff would view them as part of the total pot from which CROET could satisfy a judgment or settlement. Similarly, all lease payments being made by tenants (e.g., Theragenics Corporation) at Horizon Center would be a tempting target.

From its beginning as a part of ETEC in 1995, CROET has quickly become a mature operating business with a significant balance sheet. Although CROET is a "nonprofit entity," this tax-related label does not mean the organization and its operations are immune from being sued. The CROET can be sued just like any for-profit business (e.g., a real estate developer), government agency (e.g., the county), or nonprofit organization (e.g., research labs and hospitals).

Many types of claims that might be brought against CROET should be covered by insurance, but for certain types of claims, insurance coverage is the exception rather than the rule. Additionally, such claims could exceed CROET's insurance policy limits. Thus, just one legal catastrophe in one of CROET's operational segments could seriously hamper and impair the organization's ability to sustain its other operations. While an insurance coverage audit may be part of the answer, insurance alone does not provide all the answers to meeting the legal liability challenge.

4.1.4 Minimize Tax Liabilities

The Internal Revenue Service (IRS) has granted CROET's application for tax-exempt status and has recognized CROET as a 501(c)(3) charitable organization. However, the granting of this tax status does not automatically mean that all operations undertaken by CROET qualify as tax-exempt activities or that all of CROET's income is nontaxable. As a result, the organization may face future challenges to the tax-exempt status of it's operations.

The tax laws contain the concept of "unrelated business activities." It is not entirely clear when real estate and industrial development activities qualify as an integral part of an entity's exempt purpose under the tax laws and when such activities become nonexempt. Federal tax law attempts to distinguish between operations that are an integral part of an entity's tax-exempt purpose and those that essentially mean the entity is operated in competition with for-profit businesses. Tennessee now follows this distinction, but the lines of demarcation are not always clear. For example, advertising revenue generated to make a professional journal self-sustaining is generally not tax-exempt, but constitutes unrelated business income.

Additional factors complicate the analysis of tax liability for an organization such as CROET. If activities determined by the IRS to generate nonexempt income compose a significant part of a tax-exempt entity's overall operations, federal tax law indicates the entity's tax-exempt status may be in jeopardy. Where a substantial portion of an organization's resources are devoted to activities producing nonexempt income, the tax presumption is that the corporation is no longer focusing on its exempt purpose. Thus, it is no longer entitled to tax-favored status.

4.1.5 Demonstrate Corporate Business Viability Without Supporting Grants

The operations of CROET must develop and maintain self-sustaining cash flow instead of depending on DOE grant money for continued viability. This independent viability must be demonstrated in the face of a significant cost burden on the organization. This cost burden consists of high facility maintenance and repair costs at Heritage Center (resulting from years of facility disuse and degradation), necessary and continued improvements to Horizon Center, and maintaining and improving upon critical, key staff positions.

4.2 OPPORTUNITIES

To achieve a successful tomorrow, CROET must capitalize upon opportunities that are within its grasp today and upon opportunities that have yet to come into focus. If it is to be a driving force and create an economic juggernaut in the region, CROET must become more organizationally intelligent, nimble, sophisticated, and opportunistic than it is today.

The CROET has already demonstrated significant economic development capabilities, especially in creating and capitalizing on opportunities to lease industrial space to the private sector. To date, 800,000 ft² of space have been leased from DOE to CROET. As a result, DOE-ORO has become confident that CROET can manage certain aspects of leased facilities. With this success in hand, the time has come to expand the organization's operations into new areas of opportunity.

A number of new and continuing opportunities have been identified. However, CROET does not now have the authority or capability to fully capitalize upon them for the economic benefit of the region. These new opportunities include the acquisition and preparation of much more space for leasing to the private sector. Other opportunities lie in the transition of certain site-wide service functions from DOE to CROET management. For example, CROET is aggressively pursuing an opportunity to beneficially manage the ETTP rail transportation system. This section of the strategic plan discusses these and other readily apparent current and future opportunities to further develop the regional economy.

4.2.1 Reindustrialization of Heritage Center

The Reindustrialization of Heritage Center revolves around current and future opportunities to acquire reusable industrial space from DOE and sublease it to private industry. The CROET also has opportunities to manage a number of site-wide services at Heritage Center. The management and innovative use of these service functions will significantly enhance CROET's ability to sublease industrial space to the private sector.

4.2.1.1 Subleasing of Reusable Space

The Reindustrialization of brownfield facilities provides the greatest opportunity for achieving regional economic diversification while simultaneously providing the greatest challenges. These facilities account for approximately 6.5 million ft² of potentially reusable space at Heritage Center (Figures 12 and 13). The private sector has demonstrated a significant market for reusing this space. Approximately 600,000 ft² are currently being subleased to private sector industrial tenants. This is the most readily marketable square footage in Heritage Center.

Figure 12. Heritage Center Facility Identification

Figure 13. Reindustrialization of Brownfield Facilities in Heritage Center - Current Status

Buildings 1007, 1035, 1036, 1056, 1058, 1095, 1330, 1401, and 1580 account for over one million ft² of reusable space. These buildings have the highest potential for long-term reuse. Many of these facilities, accounting for approximately 350,000 ft², have already been entrusted to CROET. Efforts are being made to upgrade these facilities, extend their useful lives, and make them more marketable to long-term, private sector clients. Within five years or less, office facilities such as Buildings 1007, 1058, and 1330 will probably come under CROET's control. Building 1007 contains 132,000 ft² of space. Twenty-six thousand square feet of this space have already been leased to CROET.

The K-33 Building (Figure 14), a former gaseous diffusion process facility, contains approximately 2.8 million ft² of potentially reusable space. This facility will be cleaned up under the innovative British Nuclear Fuels, Ltd. (BNFL) contract, and it will be transferred to CROET in late 2001. The sheer volume of this facility presents significant opportunities and challenges. The universe of potential clients for such a facility is relatively small; however, the availability of such space nationwide is also finite. The challenge will be to match potential client needs at a given time with CROET's resources. Of course, this holds true with all the facilities under CROET's control.

Another former gaseous diffusion process facility poses many of the same opportunities and challenges as the K-33 Building. The K-31 Building contains 1.6 million ft² of reusable space. Under the BNFL contract, clean up of this facility is scheduled for completion in 2003. However, the recent DOE prohibition on radioactive metals recycling under the BNFL contract may delay or possibly eliminate clean up in this building.

With the massive gaseous diffusion process buildings, the operational challenge for CROET will be to maintain these structures in stasis or upgrade them slightly (e.g., improve lighting) to make them more marketable. It may take a year and probably longer to find suitable clients to occupy these facilities.

Several facilities have only marginal reuse potential. These include Buildings 722, 723, and 1098-E and dozens of temporary structures such as trailers. They account for a total of about 100,000 ft². Such facilities are not expected to have life extensions beyond the 5-10-year horizon. After an appropriate period of reuse, they should be removed using some combination of CROET and DOE funds.

The reuse potential of some buildings at Heritage Center remains uncertain. These include Buildings 1004-D, 1037, 1210, 1220, and all or portions of several other buildings. Their total interior space is approximately 200,000 ft². Because of security issues, clean-up uncertainties, or other unknowns, these facilities may or may not be future candidates for reuse. For planning purposes, they are not anticipated to come under CROET control within the next five years.

The remaining property at Heritage Center is a greater challenge for any one of the following reasons:

1. It is less suitable for retrofit.
2. It is uniquely suited to very limited real estate market sectors.

Figure 14. Aerial View of the K-33 Building at Heritage Center

1. It has deteriorated beyond the point of being financially viable to upgrade.
2. It has contamination or national security issues that make it difficult to reuse.

The K-25 Building, K-29 Building, 1001 office complex, 1004 laboratory complex, 1015 laundry building, and the medical services complex (1003) are located on this property. These facilities contain about 5.5 million ft² of space.

These contaminated, dilapidated, and aesthetically unpleasing facilities are located in a manner that reduces the most effective future use of the Heritage Center complex. As a result, they are extremely unlikely candidates for reuse. For Heritage Center to be a viable, long-term asset to regional economic diversification, DOE will need to decontaminate, decommission, and demolish these facilities. The success of the entire Reindustrialization effort at Heritage Center depends on the commitment of the U.S. Congress and DOE's Environmental Management program to removing these facilities.

Buildings 722 and 723 were not originally envisioned to be candidates for Reindustrialization and indeed may not remain so long term (beyond five years). However, the private market identified these facilities as leasable, and as a result, they are currently in CROET's leasing portfolio. It should always be remembered that market drivers are the most powerful force behind Reindustrialization. So, buildings and sites not identified as Reindustralization candidates in this plan may swiftly become leasable and even highly valuable property. Such flexibility has been a hallmark of CROET's success to date and should be maintained as an integral part of its corporate culture.

4.2.1.2 Management of Infrastructure and Services

The CROET plans to operate Heritage Center as a unified industrial complex. The effective operation of this complex will require a full range of site-wide infrastructure and support services. These include water, wastewater, natural gas, electricity, telecommunications, and transportation (roads and railroads) infrastructure. They also include occupational health and safety support, food services, vending services, and health services. Although many of these utilities and services functions are still under DOE management, CROET has already assumed responsibility for some of them.

On April 1, 1998, Operations management International, Inc. (OMI) commenced management operation and maintenance of utility and infrastructure systems at East Tennesseee Technology Park (ETTP) under an agreement with CROET. Under the terms of its agreement, OMI has certain responsibilities at ETTP, including the following:

• Provide management, operations, repair, preventive maintenance, predictive maintenance, and corrective maintenance, monitoring and rehabilitation services for all equipment, vehicles, grounds, and facilities now existing within the current property boundaries of or being used to operate and maintain CROET's facilities and maintenance of the buildings and grounds at all such facilities including:
  • Steam Generation and Distribution
  • Compressed Air Production and Distribution
  • Nitrogen Storage and Distribution
  • Potable Water Treatment and Distribution
  • Sanitary Sewage Collection and Treatment
  • Natural Gas Distribution
  • Roads, Sidewalks and Parking Areas
  • Grounds (G&H include roads, sidewalks and parking areas of the entire ETTP Site and certain property elsewhere on the Oak Ridge Reservation and the water plant on Bear Creek Road)

   

• Within Project design capacity and capability, manage, operate, and maintain the Project so that regulatory performance, safety requirements and production needs meet consumer requirements and performance objectives set forth in NPDES Permits, State of Tennessee and U.S. EPA requirements for Public Water Systems and National Primary Water Treatment Regulations, Tennessee Air Pollution Control Board Permits, Industrial Waste Discharge Monitoring requirements and other requirements specified in Appendices C and D of the Agreement with CROET;
• Maintenance of buildings leased to CROET includes maintenance of exterior structures and systems necessary for safe and efficient operations of the buildings. For utilities systems, define the interface between CROET maintenance responsibility and ETTA Site maintenance on an individual basis as the most sensible cut-off or interface point;
• Maintain the following facilities, systems and services as part of CROET's landlord responsibility for all CROET leased buildings: potable water supply and backflow preventers, sanitary sewer, HVAC service, roof and exterior building repair, steam system repair, change house and rest room maintenance, interior common areas shared by various tenants such as break rooms and hallways, plant air system, nitrogen service, electrical system (including lighting), fire protection system, cranes, hoists, and lifting fixture inspection and maintenance, pressure relief device inspection and repair, water heater maintenance and operation, recirculating cooling water, elevator inspection and maintenance, emergency alarm system;
• Provide the following services to CROET tenants as requested: spill response, equipment repair, instruments repair, computer and computer network installation and repair, crating and shipping, janitorial, painting, carpentry, waste collection and transport;
• Provide and support an emergency response plan in coordination with DOE;
• Maintain a Health and Safety Plan and comply with applicable OSHA standards and provisions in 29 CFR;
• Provide all planning, design, permitting, procurement, installation and construction services related to Major Repairs and Rehabilitation Programs projects;
• Provide an inventory of vehicles and equipment that are being used at the Project when OMI begins service and provide all licenses for vehicles assigned to OMI for use on the ETTP;
• Ensure environmental compliance for excavation/repair activities, including water discharges.

The DOE has already transferred management of food services and vending to CROET. In addition, CROET has been negotiating lease of the on-site railroad right of way. As a result of leasing the two on-site switch yards, CROET already manages the movement of cars on this railway. Via an expected November 2000 leasing contract with DOE, CROET will officially operate the entire on-site railway system.

The CROET foresees an opportunity to manage the rest of the support services and infrastructure to enhance its subleasing efforts at Heritage Center. With full management of these functions, CROET would be able to guarantee efficient and consistent delivery of vital services to all of its tenants. In addition, CROET would have the option of developing innovative support services packages. When mixed with other incentives, these packages would induce more private sector subleasing at Heritage Center.

4.2.2 Greenfield Development (Horizon Center)

The Horizon Center, formerly known as Parcel ED-1, has been benchmarked against the finest industrial/business parks in the United States (Figures 15 and 16). When fully developed, this 1000-acre greenfield site will provide nearly 500 acres of property for private sector customers. It is anticipated that the park will be populated by customers fitting two principal industrial clusters, information technology and biotechnology. This is consistent with and integral to CROET's marketing initiative, (see chapter 7). To date, $7.6 million have been spent on the development of Horizon Center. An additional $1.7 million needs to be spent to fully develop Phase I of the park. This additional commitment will provide for final grading, landscaping, paving, and signs.

Full build out will provide CROET with the opportunity to lease and possibly sell property to private sector customers. The resulting probable economic impact on the region would include 4,000,000 ft² of high end, high technology tenants with an estimated investment impact of up to $1.2 billion (1999 dollars).

4.2.3 Gateway Center

The Gateway Center, also known as Parcel ED-3, is a 450-acre greenfield development (Figures 17 and 18, Figure 19- Parcels 5 and 6). Linear in nature, the property fronts State Highway 58 and Blair Road (State Road 327). The location of this property, its topography, and its close proximity to infrastructure now being constructed by CROET as part of Horizon Center make it ideally suited for mixed use office, light industrial, and commercial development. It is an ideal complement to Horizon Center and Heritage Center, providing higher visibility office settings, commercial support facilities, and possibly smaller flex-space/light industrial sites.

The development of this property provides an opportunity to "amortize" the cost of developing

infrastructure for Horizon Center across a broader property base. It also provides a significant opportunity for CROET to partner with a seasoned and successful property developer to effectuate the build out of the commercial development areas. This partnership should provide an opportunity to defray much of the development costs of the remaining properties.

4.2.4 Greyfield Parcels

Realizing the full opportunity of the ETTP should include the development of previously undeveloped parcels of land at Heritage Center. These are referred to as "greyfield" parcels (Figure 17- Parcels 1, 2, 3 and 4).

Greyfield parcels account for approximately 400 acres at Heritage Center and provide an opportunity to site heavier manufacturing projects in the ETTP. These parcels would attract projects not fitting the profile envisioned for Horizon or Gateway Centers and projects that cannot easily be retrofitted into an existing facility. Full development of this property will also provide an opportunity to use existing or nearby infrastructure, providing for reduced development costs and more efficient use of the existing support systems.

Figure 15. Conceptual Development Plan for Horizon Center

Figure 16. Aerial View of the Horizon Center Site

Figure 17. Map Showing the Location of Parcel ED-3

Figure 18. Aerial View of Parcel ED-3

Figure 19. Map Showing the Locations of Greyfield Parcels in the ETTP