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

This chapter of the strategic plan proposes the reorganization of CROET to successfully meet the challenges and opportunities outlined in Chapter 4. It presents the proposed structure of the organization and describes the major administrative units in the new organizational scheme. Chapter 5 concludes by discussing the advantages of the reorganization for meeting the challenges and opportunities that lie ahead.

5.1 PROPOSED REORGANIZATION STRUCTURE

Today CROET stands on the threshold of being a dynamic force in the regional economy. To successfully cross this threshold and realize its full potential for economic development and diversification, the organization must meet the challenges and opportunities outlined in Chapter 4. How can CROET meet these challenges and opportunities while remaining loyal to the spirit of its fundamental and traditional mission? This can be accomplished by reorganizing CROET according to a tiered structure consisting of subsidiary corporations.

This approach to reorganization is by no means unusual or radical for a nonprofit organization such as CROET. In fact, it is a rather typical approach for re-energizing an organization to meet new challenges and opportunities. It has been taken by numerous nonprofit organizations, foundations, technical societies, and hospitals throughout the nation. Furthermore, management research indicates this is the appropriate time for CROET to be considering this approach to reorganization (See Section 5.2.1).

The law concerning relationships between parent and subsidiary corporations is fully developed. As is the case with tax law, corporate law is very formalistic. In other words, once the form of a transaction or legal structure has been chosen, so long as the formalities of that structure are maintained, the law will generally recognize each entity as a separate legal entity responsible only for its own liabilities. This rule has been consistently upheld by the courts, even where the two corporations (whether parent-subsidiary or brother-sister subsidiaries) have had the same directors and officers.

When addressing the corporate formalities necessary for the separate entities to be respected, the courts generally require each corporation to be a separate, validly existing corporation under state law. Each corporation must have its own (but not necessarily completely different) directors and officers. Each must have and maintain written minutes of the meetings of its board of directors (meetings which should be independent of the others). Furthermore, each corporation must have its own accounting records and bank accounts--without the commingling of funds. All transactions between and among related entities must be reflected in the corporate records of each entity as having been approved by the boards. Finally, each entity is held out to the public as being independent of the others.

Each of CROET's current operations is well suited to being separately organized as a subsidiary corporation under the foregoing requirements. In this tiered structure, CROET and the governing Board of Directors of CROET should function as a parent or quasi-holding company for five subsidiary corporations. These are Heritage Development Corporation, Horizon Development Corporation, Vista Corporation, CROET Foundation, Inc., and CROET Investments, Inc. Each of these corporations should correspond to one of the major operations or activities currently underway within CROET. Under this reorganization, the quasi-holding company should own and control 100 percent of the stock for each subsidiary corporation. The proposed reorganization structure for CROET is shown in Figure 20.

This tiered structure should provide CROET with significant flexibility to meet and take advantage of new business opportunities. The organization may be able to handle new opportunities under one of the five existing subsidiaries. However, as CROET grows, any one of the five subsidiary corporations might be split into additional subsidiaries to capitalize on particular opportunities with highly focused expertise or to minimize potential liability to the respective corporate entities.

In Sections 5.1.1 through 5.1.6, the major units of the proposed reorganization are described in detail. These descriptions include the proposed functions of the organizational units, the strategic and tactical objectives of these units, and formal lines of authority.

5.1.1 CROET Holding Company

The lead unit in the proposed reorganization should be CROET Holding Company. It should be led by the 41-member Board of Directors of CROET, which would become the Board of Directors of CROET Holding Company. Within the tiered reorganization structure, the board should be responsible for overall business planning and coordination within CROET. Because the board is drawn from a broad-based regional constituency, it should retain its traditional role of establishing balanced policy and direction for the entire organization. The implementation of its policies should rest with the five expertise-based subsidiary corporations.

The Board of Directors of CROET Holding Company should have the authority to efficiently transfer funds where needed among the various subsidiary corporations. A transfer mechanism would be essential to appropriately place funds where necessary to achieve overall corporate missions.

The responsibilities and activities of the Board of Directors of CROET Holding Company should be supported by the Executive Committee of CROET and the President & CEO of CROET Holding Company. The President & CEO of CROET Holding Company should manage the staff of the holding company and its subsidiary corporations.

The strategic objective of the board should be to implement CROET's mission and achieve economic self-sufficiency for the organization. With the achievement of this objective, the organization should not have to rely on the transfer of payments (DOE grants) for corporate survival

Figure 20. Proposed Reorganization Structure for CROET

Achievement of the following tactical objectives should result in achievement of the overall strategic objective:

1. Less governmental control and bureaucratic red tape.
2. Streamline the prospecting and lease-up process.
3. Operate consistent with commercial business practices.
4. Restructure corporate assets to mitigate potential liability impacts.

5.1.2 Heritage Development Corporation

This subsidiary corporation should be responsible for handling and controlling all operations associated with the Reindustrialization of Heritage Center and any other Reindustrialization projects that may arise in the Oak Ridge Complex. This corporation should supercede the existing Reuse Committee and should be named Heritage Development Corporation.

The Board of Directors of Heritage Development Corporation should have five members drawn from the real estate, banking, business, government, and environmental protection communities. Two of the seats on the board should come from the Board of Directors of CROET Holding Company. Initially, the members of this subsidiary board should be approved by the Board of Directors of CROET Holding Company and have terms of one (two members), two (two members), and three (one member) years. As with the existing Loan Committee, the Board of Directors of Heritage Development Corporation should appoint its own board member replacements as the initial terms expire. The Holding Company board slots would continue in perpetuity to be appointed by the CROET Holding Company.

The responsibility for administering this new corporation should be lodged with the Chief Operating Officer (COO). The COO of Heritage Development Corporation should have expertise in real estate and property management and should report directly to the President & CEO of CROET Holding Company.

The strategic objective of Heritage Development Corporation should be to renovate and restore underutilized DOE facilities to attract and stimulate the expansion of commercial enterprises that would not be funded by DOE. Achievement of the following tactical objectives should result in achievement of this overall strategic objective:

Create an effective on-site real estate management and marketing entity.

Contract non-expertise functions (e.g., utilities).

Establish teaming arrangements with transitional subcontractors.

Manage fire protection, emergency response, and other similar capabilities.

Manage food and adjunct business support service functions (e.g., conference/training support).

Lease, manage, and maintain infrastructure systems deemed critical to marketability.

5.1.3 Horizon Development Corporation

Horizon Development Corporation should manage industrialization operations on CROET land. It should be responsible for the development and leasing of all greenfield space. This subsidiary corporation should supercede the current Land-Use Committee.

The activities of this corporation should be guided by the Board of Directors of Horizon Development Corporation. This board should consist of five members, two of whom should come from the Board of Directors of CROET Holding Company. The rest of the corporation's five-member board should be drawn from the real estate, banking, and business sectors. The terms of board members and the appointment of replacements should follow the pattern described for Heritage Development Corporation in Section 5.1.2.

The responsibility for administering this new organization should be lodged with the COO. The COO of Horizon Development Corporation should have expertise in real estate and finance and should report directly to the President & CEO of CROET Holding Company.

The strategic objective of Horizon Development Company should be to "target market" prospective companies for which the region's underutilized real estate, technical facilities, and displaced manpower assets are particularly valuable. Achievement of the following tactical objectives should result in achievement of this overall strategic objective:

1. Team with the state's and region's economic development and marketing organizations.
2. Develop and implement a new, targeted visual impact media program.
3. Establish a web site and links with prominent partners--consistent with targeted marketing.
4. Use contacts in the contractor industry (Lockwood Greene Technologies, Source Analysis & Evaluation Corporation, etc.).
5. Develop Horizon Center, Parcel ED-3, and the greyfield parcels at Heritage Center.

5.1.4 Vista Corporation

For the specific purpose of rapidly capitalizing on opportunities not clearly within the operational purview of existing business units, a research and development/partnership corporation should be created. This organization should be focused on emerging but not readily apparent economic development opportunities. This subsidiary should be called Vista Corporation.

A board of directors would guide Vista Corporation. The Board of Directors of Vista Corporation would be larger than those of the other subsidiaries. A large board with a wide spectrum of knowledge and experience would be needed to identify and address opportunities that could arise in various sectors of the regional economy. This board should consist of seven members drawn from the scientific, legal, and business communities. Three members of the board should initially come from the existing Board of Directors of CROET Holding Company. Initially, their terms should be for one (3 members), two (2 members), and three years (2 members). As with the other subsidiary corporations, the Board of Directors of Vista Corporation should be self-perpetuating.

The responsibility for administering this new corporation should be lodged with a COO. The COO of Vista Corporation should have broad expertise in science, law, and business and should report directly to the President & CEO of CROET Holding Company.

5.1.5 CROET Foundation, Inc.

This subsidiary corporation should handle CROET's grant operations. It should supercede the current Grants Committee.

The activities of this corporation should be controlled by the Board of Directors of CROET Foundation, Inc. This board should consist of five members, two of whom should come from the Board of Directors of CROET Holding Company. The rest of the corporation's five-member board should be drawn from the real estate, banking, and business sectors. The terms of board members and the appointment of replacements should follow the pattern described for Heritage Development Corporation in Section 5.1.2.

The responsibility for administering this new organization should be lodged with a COO. The COO of CROET Foundation, Inc. should have expertise in business and finance. He/She should be an employee of CROET Holding Company and should report directly to the President & CEO of CROET Holding Company.

5.1.6 CROET Investments, Inc.

This subsidiary corporation should be responsible for the administration and potential ownership of the East Tennessee 2000 Loan Fund.

The activities of this corporation should be controlled by the Board of Directors of CROET Investments, Inc. This board should consist of five members, two of whom should come from the Board of Directors of CROET Holding Company. The rest of the corporation's five-member board should be drawn from the real estate, banking, and business sectors. The terms of board members and the appointment of replacements should follow the pattern described for Heritage Development Corporation in Section 5.1.2.

The responsibility for administering this new organization should be lodged with the COO. The COO of CROET Investments, Inc. should have expertise in business and finance. He/She should be an employee of CROET Holding Company and should report directly to the President & CEO of CROET Holding Company.

The strategic objective of CROET Investments, Inc. should be to forge intra-regional partnerships for economic expansion, diversification, and capitalization initiatives targeted on rapidly expanding and long-term product markets. The existing management contract with Technology 2020 should be maintained & possibly expanded to facilitate the goals.

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

This section discusses the direct advantages of the proposed reorganization. It shows how the reorganization should position CROET to meet the challenges and opportunities in Chapter 4.

5.2.1 Re-Energize the Organization

Management research has shown that business organizations have a predictable life cycle. Just as a person goes through a series of distinct life stages from birth to death, organizations go through a distinct series of stages from start up to eventual decline. These stages are illustrated in Figure 21.

Many business organizations follow the complete life cycle and enter a state of decline. However, some organizations continue to live and thrive. These are the organizations that recognize impending decline, find ways to escape it, and renew themselves to meet future challenges. In effect, they respond to their next level of challenge and reposition themselves at the starting gate in the organizational life cycle.

CROET has already passed through the Innovation and Production Stages of its life cycle. It is now near the end of the Institutionalization Stage. When this stage is completed in the near

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

future, the current organization will be at risk of stagnation and decline. However, CROET should also be standing on the threshold of becoming a dynamic force in the regional economy--if it can escape this decline. The proposed reorganization should allow CROET to escape decline and reposition itself at the starting gate on the organizational life cycle. In addition, it should re-energize the organization so it can meet the challenges and opportunities ahead and become a dynamic force in the regional economy.

5.2.2 Increase the Efficiency of Operations

The tiered structure should streamline CROET and increase the efficiency of its operations. Through this increased operational efficiency, the subsidiary corporations would be able to fully capitalize on currently known opportunities. Furthermore, they would be prepared for the earliest possible identification of future opportunities. As a result of this increased efficiency and the early identification of opportunities, the subsidiaries would be able to fully capitalize on all of their future opportunities.

A single business unit focused on a single operation can be more productive than a single unit focused on many different operations. The distribution of CROET operations among five subsidary/corporations should result in five separate, business-centered economic development efforts. Under CROET Holding Company, each of these corporations should be able to concentrate its authority, activities, and resources on one major economic development operation. As a result, each corporation would be focused only on those challenges and opportunities within its unique realm.

An employee who has in-depth credentials and experience can work with a single operation more efficiently than a less qualified employee. Similarly, a highly qualified employee can work with one operation more efficiently than a highly qualified employee who is burdened with several different operations. Under the proposed reorganization, each corporation should be permanently staffed with experts who have education and experience specific to the demands of its major operational focus. This expertise can then be concentrated exclusively on one major operation. For example, the key employees of Horizon Development Corporation should be experts who concentrate on finance and real estate management. For each corporation, this application of expertise should optimize its ability to identify opportunities at the earliest possible time and fully capitalize on them.

The efficiency of an organization is closely tied to its ability to attract professional employees, keep them over a long period of time, and grow their potential within the organization. The five proposed corporations should create permanent, stable centers of career growth within the overall CROET organization. This stability should allow each corporation to attract and retain highly qualified professional employees. It should also promote professional growth and long-term organizational access to employee expertise.

During the past five years, much of the professional expertise necessary to support operations has come from individuals on the 41-member Board of Directors of CROET. Their work has been done on a volunteer basis and has involved long hours of dedicated and much appreciated service. For many of these individuals, it is arguable that too many hours of their valuable time have been tied up with CROET issues. Furthermore, many of the key board members are of retirement age--a productive time in life to be sure but also a period of time when unexpected family and health issues can interrupt service to the organization. In addition to increasing the efficiency of each corporation, stable corporate centers of employment and expertise should provide needed relief valves for overworked members on the Board of Directors of CROET Holding Company.

The "one size fits all" principle rarely promotes efficiency in an organization. Organizations operate more efficiently when their business practices can be tailored to meet their unique needs and circumstances. Under the proposed reorganization, each subsidiary corporation should promote efficiency by establishing its own specific business practices within the confines of its overall corporate strategy. These specific practices should be aimed at the following:

1. Meeting the unique needs of each corporation.
2. Responding directly to forces in each corporation's target market.
3. Identifying economic development opportunities at the earliest possible time.
4. Capitalizing fully on all opportunities.

   1.  

Standards of performance and accountability promote efficiency within an organization. With the creation of five subsidiary corporations, it should be possible to develop reasonable performance metrics for each corporation. These metrics should make each organization and its management accountable for the best possible annual performance. Furthermore, it may be possible to develop reasonable metrics to comparatively assess the performance of the subsidiaries against each other. The use of such metrics should create a sense of competition among the corporations and engender greater organizational efficiency.

5.2.3 Avoid or Mitigate Legal Liabilities

Perhaps the single greatest advantage to implementing a new organizational structure is to insulate the major CROET operations from each other. This provides protection to the organization as a whole and to its members. This is particularly important as the organization moves forward to capitalize on the numerous opportunities outlined in Chapter 4. For example, if the organization is successful in maximizing its opportunities to reindustrialize underutilized industrial facilities across the Oak Ridge Complex, it will have to undertake prudent risks in accelerating clean up. In doing so, it will need to be certain potential difficulties with this activity do not jeopardize other corporate activities such as developing facilities or greenfield sites. In this regard, the greatest jeopardy is posed by potential law suits.

Fortunately, spill over liability can be avoided or mitigated by separately incorporating each of CROET's operating divisions: Heritage Center Reindustrialization efforts, Horizon Center greenfield activities (including any additional greenfield opportunities), the grant-making activities, and the revolving loan activities involving the East Tennessee 2000 Fund. In fact, CROET should analyze each new business or industrial development opportunity to determine whether it should be separately incorporated or whether it should be combined with an already existing subsidiary. This strategy should significantly protect the assets of each subsidiary from legal liabilities arising out of the other corporations.

5.2.4 Minimize Tax Liabilities

Under the IRS rulings on tax liability, it is not entirely certain whether all of CROET's Reindustrialization and greenfield development activities qualify as tax-exempt purposes. Placing each of CROET's separate operations in its own tax-exempt or taxable subsidiary should have the advantage of clarifying and solidifying the tax status of each operation. Should the IRS change its position on the tax-exempt status of one CROET subsidiary, this strategy should also help isolate the income and cash flow derived from CROET's other operations and protect them from becoming taxable. The income and gains generated by the East Tennessee 2000 Loan Fund constitute a specific example of this taxation conundrum.

For liability purposes, state law often recognizes the separate existence of the parent and its subsidiaries, even though the directors are the same for both entities. However, the IRS does not look favorably on interlocking directorates in the tax-exempt arena. In fact, depending upon the exact set of facts, interlocking directorates often contribute to the wrong tax result. Therefore, while some minimal overlap between CROET's policy arm (Board of Directors of CROET Holding Company) and the everyday management boards of the subsidiary corporations is desirable, such overlap would have to be minimized to the extent politically feasible.

One only has to look to the Fortune 500 companies and many of the larger tax-exempt entities throughout the United States (e.g., many hospitals and universities) to find examples of businesses choosing to minimize the adverse impact of certain liabilities through a tiered corporate structure. While many of these decisions have been made to isolate liabilities arising from the speculative or hazardous nature of their activities, a significant number of those structuring decisions were also tax driven. Where the receipts from certain business activities are clearly exempt from taxation, it would be imprudent to subject those receipts to a 35 percent tax merely because they were received within the same legal entity as the gross receipts from an activity clearly classified as an unrelated business by the IRS. Accordingly, many tax-exempt entities separately incorporate those operations that are or would be at risk of being treated by the IRS as generating unrelated business income. The entity holding the operations generating unrelated business income then pays tax on its net income. The net after tax profits can then be paid to the tax-exempt parent as a dividend. The parent receives the payment free of any additional income tax obligations.

One matter of special interest when considering a tiered structure is an understanding of how cash can be moved within the consolidated group to take advantage of opportunities or subsidize losses. The law in this area is very formalistic. Therefore, as long as all related-party transactions are properly documented and reflected in the board minutes, any type of transaction available to for-profit tiered enterprises to move cash to where it is needed is likewise usually available to tax-exempt tiered operations. The most common way of moving cash in a tiered structure is for the subsidiary with excess cash to pay a dividend to the parent. The parent can then make either a capital contribution or a loan to the subsidiary needing the cash. If the cash movement is only temporary or the parent knows the cash will eventually need to be returned to the original subsidiary, the first subsidiary can itself make a loan to subsidiary number two. There is no change in the usual business issues and concerns that go into the decision on whether or not to fund a cash need by capital contribution or by loan (e.g., Is the new venture speculative? Is the operation needing cash likely near bankruptcy? What are the future cash needs of the company providing the cash, and from where will that cash come?). Cash movement in a tiered structure is not as simple as it is when all operations are housed in the same legal entity, but neither is it a significant obstacle.

5.2.5 Enhance Organizational Flexibility

Successful organizations must be internally flexible so they can easily adapt to changing needs and conditions. The reorganization should make CROET more internally flexible.

In the future, CROET may encounter economic development and diversification opportunities that are incompatible with the operational focuses of its five initial subsidiaries. New subsidiaries may be necessary to concentrate resources on these opportunities. The precedent of an already existing tiered structure with subsidiary corporations would provide the flexibility necessary to rapidly add new subsidiaries that can fully capitalize on these new opportunities.

Although not often encountered in the non-profit arena, certain types of business activities may require the use of a separate subsidiary because the type of activity being undertaken may be beyond the scope of activities allowed within the charter of the parent company or because of special provisions of state law limiting what types of entities can engage in such activities (e.g., banking, insurance, and certain types of transportation business activities). If CROET were to encounter this situation, one direct advantage of a tiered structure should be the relative ease of adding a sixth corporate subsidiary to address the problem.

At the moment, CROET's operations are confined to Tennessee. However, in the future, CROET may need to expand its operations into other states. Such an expansion might involve creation of a research and development company or a research and development support organization. A tiered structure should allow CROET greater flexibility to pick those states in which a subsidiary chooses to do business, be susceptible to a law suit, or be subject to taxation.

A tiered corporate structure should also make it easier to obtain investments or partnering-type arrangements in each of CROET's individual business operations because more options exist on how the arrangements can be structured. For partnering transactions, the tiered structure is much more flexible than the current structure.

5.2.6 Promote Capitalization of Resources

The proposed reorganization should make it easier for CROET to approach traditional lending institutions for needed funds. It should also position CROET to more effectively obtain borrowed capital and internally distribute it to where it is most needed to pursue opportunities.

The CROET is a single legal entity under its current organizational structure. When approaching a lending institution to borrow capital, it goes as this single entity. Under the proposed reorganization, it would go as five separate legal entities. This should afford several advantages to the organization as a whole. A single entity would have a single, fixed loan cap, but each of the five proposed subsidiaries could potentially borrow to that same cap or even higher, thus expanding the loaned capital available to CROET. A single entity with a single loan cap would probably be limited to dealing with a small number of lending institutions. However, the proposed subsidiaries should be able to deal with a much wider range of lending institutions and find terms tailored to their individual needs. A single entity would be limited in the number of individual loans it could acquire, but more loans could be acquired among the five subsidiaries.

Finally, and perhaps most importantly, the proposed reorganization should limit financial liability for CROET as a whole. In the unlikely event of a loan default, the liability would accrue to a given subsidiary and not to the holding company or the other four subsidiaries.

5.2.7 Maintain Business Confidentiality

Many of CROET's clients and subcontractors prefer to keep the critical details of business negotiations confidential. This preference is easily understandable. Reasonable confidentiality protects private sector businesses from potentially damaging corporate intelligence leaks to competitors, and it protects proprietary rights to important products, inventions, and processes. Because it is important to so many businesses today, establishing and maintaining business confidentiality can be the key to closing a potential deal.

Under the current organizational structure, the President & CEO of CROET is often involved in detailed negotiations with actual or potential clients and subcontractors. It is usually necessary for him to confer with CROET board members on the details of these negotiations. As a result, CROET board meetings can easily become a forum where confidential and proprietary information needs to be included in the discussions. However, the proceedings of these meetings are open to public scrutiny via attendance of the news media. Under such scrutiny, it is very difficult to simultaneously have meaningful discussions and protect confidential information.

The proposed reorganization of CROET should be a solution to this problem. Under the new scheme, each of the five corporations would hold in-house meetings involving its own experts, the corporate board of directors, and private sector business representatives. These meetings would occur in strictly private settings where confidential information could be freely shared and where the dependent details of agreements could be securely negotiated.

The Board of Directors of CROET Holding Company would exist as a policymaking body under the proposed reorganization. As such, it would continue to have meetings open to the news media. In these meetings, the nonsensitive aspects of the private negotiations could still be raised and discussed for the benefit of the media and the public.

5.2.8 Improve Personnel Management

Another important advantage of a tiered structure involves CROET personnel and their areas of responsibility. For a number of practical reasons, very few non-profits choose to create separate accounting records for each of their divisions. These reasons include cost, lack of staff, and unique financial accounting rules imposed on non-profits--accounting rules that do not lend themselves to separate divisional reporting. Nonetheless, such records make it easier for officers and directors to track the success of separate divisions. Separately organizing each CROET operation as its own corporate legal entity should allow those employees responsible for differing operations to better gauge and benchmark the financial results of their efforts.

A tiered organizational structure offers the potential for a management bonus system based on the financial performance of the CROET subsidiaries. These separate legal entities would require separate accounting books. Based upon these separate books, it should be much easier for both CROET and its responsible officers to gauge the financial success of a specific operation. Separate accounting should also provide each subsidiary with an opportunity to more finely tune its compensation strategies. This should allow the creation of a management bonus system based primarily on the financial results of the activities for which a corporate officer is responsible.

The proposed reorganization should separate CROET personnel into clearer lines of functional authority and responsibility within each subsidiary. In addition, gauging the performance of each subsidiary with financial benchmarks should create a "competitive" spirit between the subsidiaries, a competitive spirit generally not found at the same level within and among divisions of a single corporation. This competitive spirit should promote a sense of dedication and esprit de corps among the employees in each subsidiary. Since this competitive spirit can be a two-edged sword, CROET management should be obligated to keep the competition friendly.

As can be seen, the proposed reorganization has the potential to improve employee morale and performance. This should enhance the overall ability of the organization to meet challenges and pursue the opportunities that lie ahead.

5.2.9 Enhance Public Relations Efforts

Some public relations advantages for CROET should be gained by using the tiered organizational structure. For example, public concern over the perceived dangers of Reindustrialization could be limited and focused solely on efforts taking place under Heritage Development Corporation. This would free Horizon Development Corporation from the whirlwind of public concern as it attempts to partner for industrial development with entities such as the City of Oak Ridge, Anderson County, Knox County, and Roane County.

CROET was originally conceived as a regional economic development and diversification organization to benefit both Oak Ridge and areas beyond its borders. However, its most important activity has become the management of former DOE land and facilities in Oak Ridge. This fact can easily leave the impression that CROET is really a property management organization focused only on municipal rather than regional economic development. The proposed reorganization should help CROET maintain its preferred image as a regional economic development organization.

Under the reorganization, the property management functions would be centered in three separate corporations: Heritage Development Corporation, Horizon Development Corporation, and Vista Corporation. These business units would be organizationally segregated from the rest of CROET, but they would still be tied to it as wholly owned subsidiaries of the proposed CROET Holding Company. Any public perceptions about municipal economic development would then be focused on these three corporations and not on CROET as a whole. With this done, the holding company would be free to promote CROET's overall image as a regional economic development organization.

In the long term, this promotion effort can be bolstered by the other two proposed corporations and the positive results from the property management corporations. CROET Foundation, Inc. and CROET Investments, Inc. have one regional economic capability that exceeds those of the other three corporations and that can extend beyond Oak Ridge. Very simply, greenfield land and formerly utilized DOE facilities cannot be transferred outside of Oak Ridge. However, grant and loan packages can be targeted at opportunities outside of the city, as long as they support efforts in line with CROET's mission and business interests. Furthermore, as the three property management corporations become more successful, they should yield numerous indirect jobs and other economic benefits that extend beyond the city limits of Oak Ridge. CROET Holding Company should monitor the development of these added regional benefits over time and factor them into its public relations efforts.

If CROET stays the course in the foregoing matters, there should be no doubt that it really is a major force in the regional economy of East Tennessee. The proposed reorganization is the starting line on this course.

5.2.10 Demonstrate CROET's Viability Without Supporting Grants

The 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 energy, creativity, and imagination that drive success in any organization are lodged within its employees. As a result, human resources are arguably an organization's most valuable asset. The proposed reorganization of CROET cannot be fully and effectively implemented without adequate human resources in key administrative and support positions. This chapter of the strategic plan presents specific plans for staffing CROET to meet the demands of the proposed reorganization.

Contingent upon final approval of the proposed reorganization by the Board of Directors of CROET, implementation of these staffing plans should begin in fiscal year (FY) 2001. All of the staffing plans should be fully implemented by the end of FY 2002. For purposes of discussion, this anticipated two years of organizational and staffing changes at CROET is referred to henceforth in this strategic plan as the Transition Period.

Some general aspects of current staffing are expected to change under the reorganization and some are not expected to change. Several current positions would be continued with essentially the same titles, responsibilities, and personnel. In other cases, the titles of current positions and their responsibilities would change to better reflect the specific demands of the new organizational scheme. For example, the President & CEO of CROET would have a minor change in title and would at least temporarily assume four other administrative posts. Finally, a number of entirely new administrative and support positions would be created, and new staff would be hired to fill these positions. Under the reorganization, all of the foregoing positions would be responsible for implementing the policy decisions of CROET Holding Company and carrying out the day-to-day operations of its subsidiaries.

The assignment of current staff to new positions and the hiring of new personnel would be done by matching position requirements with individuals who have the specific expertise necessary to meet those requirements. While this expertise would be key, attracting and retaining individuals with broad intellectual capacity, exemplary character traits, and flexibility to amorphous situations would be equally important factors in staffing decisions. The existing CROET tradition of only hiring the most outstanding and capable individuals would be maintained.

Currently, CROET depends on subcontractors for a number of administrative and support activities. During the Transition Period, CROET plans to reduce this dependency by gradually transferring the responsibilities for certain activities to full-time CROET employees. In one key area, subcontracting should be expanded.

The foregoing paragraphs provide a brief overview of plans for staffing the proposed reorganization of CROET. Current staffing, specific plans for staffing the reorganization, and planned changes in subcontractor support are described in detail in Sections 6.1 through 6.3.

6.1 STAFFING PLANS FOR FY 2000

This section identifies staff positions under the current CROET organizational scheme and describes the major responsibilities of those who hold these positions. The current positions are shown in Tables 5 and 6.

6.1.1 Current Positions and Responsibilities

The current staff of CROET in FY 2000 consists of seven full-time positions and two part-time positions in the CROET Support Office. The seven full-time positions are as follows: President & CEO of CROET, Administrative Assistant (1), Receptionist, Chief Accountant, Vice-President for Reindustrialization, Vice-President for Operations, and Account Executive (1). The part-time employees are the Bookkeeper and the Intern. All of these positions are currently filled, except the Intern position. That work is currently being performed under a contract agreement. Each subordinate staff member reports directly to the President & CEO of CROET. However, the Administrative Assistant (1) and Account Executive (1) are functionally distributed to support the Vice-President for Reindustrialization (Figure 22).

The President & CEO of CROET provides broad executive leadership for the entire organization. In addition, this individual manages the overall activities of the support staff for CROET.

The Administrative Assistant (1) assists the Vice President for Reindustrialization, along with the President & CEO of CROET and other staff, with the full range of administrative and clerical activities necessary to sustain the organization and its various operations.

The Receptionist answers telephones and greets visitors to the CROET Support Office. In addition, this position is responsible for a variety of conventional clerical tasks, and some administrative duties.

The Chief Accountant is responsible for management of all financial functions of CROET. This position is assisted on a part-time basis by the Bookkeeper.

The Vice-President for Reindustrialization provides executive leadership for the management, leasing, and reuse of formerly utilized DOE facilities in the Oak Ridge Complex. These activities are centered primarily on the reuse of industrial space in Heritage Center.

The Vice-President for Operations is responsible for a wide range of operational activities within CROET. These activities include grant development and administration, administration of employee benefits, assisting with public relations and marketing, preparation and implementation of employee development plans, coordination of in-house security, management of daily office operations, and maintaining business operations insurance coverage.

The Account Executive (1) is responsible for the interface between CROET and current and prospective tenants on lease-related issues at Heritage Center. Problems and issues are reported

back to the Vice-President for Reindustrialization and the President & CEO of CROET. This

individual maintains databases, assists with lease and sublease agreements, assists with

Figure 22. Current Staffing as Related to Organizational Structure

development strategies for Horizon Center, and maintains the Horizon Center map collection. The Account Executive (1) also assists with development and management of CROET's computer-assisted facility management program (Archibus^®).

6.1.2 Plans for FY 2000

No major staffing activities are planned for FY 2000.

6.2 REORGANIZATION STAFFING PLANS ( FY 2001-2002)

The decision to approve the proposed reorganization rests with the Board of Directors of CROET. If such approval were to come in late FY 2000 or early FY 2001, the major staff changes needed to support the reorganization should begin in earnest no later than the middle of FY 2001. These changes should be essentially completed by the end of FY 2002.

This section describes plans for staffing the reorganization during FY 2001 and FY 2002. The descriptions of these plans are organized according to the six major components of the reorganization. These are CROET Holding Company, Heritage Development Corporation, Horizon Development Corporation, Vista Corporation, CROET Foundation, Inc., and CROET Investments, Inc. Staffing as it relates to organizational structure is shown in Figures 23 and 24. The transition of individual staff members for the holding company and its subsidiaries is summarized in Tables 5 and 6.

6.2.1 CROET Holding Company

Plans for staffing CROET Holding Company in FY 2001 and FY 2002 are presented in this section of the strategic plan.

6.2.1.1 Plans for FY 2001

The President & CEO of CROET should become the President & CEO of CROET Holding Company in FY 2001. The Receptionist, VP for Operations, Chief Accountant, and Bookkeeper (part-time) in the FY 2000 CROET Support Office should also become employees of CROET Holding Company.

The position of Vice-President for Operations would be converted to the position of Director of Marketing within CROET Holding Company in FY 2001. This position would continue to report directly to the President & CEO of CROET Holding Company. The Director of Marketing would oversee the development of marketing programs, community relations, and world-wide media relations for CROET Holding Company and its subsidiaries. This position would be supported by Bechtel Jacobs Company, DOE, a real estate/site-selection consultant, and a high profile marketing consultant such as Deloitte & Touche, Fantus Consulting, or Coldwell Banker. A high profile firm would market CROET properties world-wide, thus achieving a direct link to clients CROET might otherwise never see. In addition, the Director of Marketing

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

1. FY 2000	FY 2001	FY 2002
   CROET SUPPORT OFFICE	CROET HOLDING COMPANY	CROET HOLDING COMPANY
   President & CEO of CROET	President & CEO of CROET Holding Company	President & CEO of CROET Holding Company
   Administrative Assistant (1)
   	Office Manager	Office Manager
   Receptionist	Receptionist	Receptionist
   Chief Accountant	Chief Financial Officer	Chief Financial Officer
   Bookkeeper (part-time)	Bookkeeper (part-time)	Bookkeeper (part-time)
   	Bookkeeper (full-time)	Bookkeeper (full-time)
   VP for Operations	Director of Marketing	Director of Marketing
   VP for Reindustrialization
   Account Executive (1)
   Intern (1)

    

   1. ¹ All positions are full-time unless otherwise indicated.

      Indicates a formal change in job title or employment status during the next or a subsequent fiscal year.

      VP = Vice-President
      

   Table 6. Proposed Staffing for the CROET Subsidiaries.

   FISCAL YEARS	FY 2000	FY 2001 1	FY 2002 1
   BUSINESS UNITS	CROET SUPPORT OFFICE 2	HERITAGE DEVELOPMENT CORPORATION	HERITAGE DEVELOPMENT CORPORATION
   PROPOSED STAFF	VP for Reindustrialization	COO of Heritage Development Corporation	COO of the Heritage Development Corporation
   	Administrative Assistant (1)	Administrative Assistant (1)	Administrative Assistant (1)
   		Account Executive (1)	Account Executive (1)
   			Account Executive (2)
   			Facility Manager (1)
   		Intern (1)	Intern (1)
   		HORIZON DEVELOPMENT COMPANY	HORIZON DEVELOPMENT COMPANY
   		President & CEO of CROET	COO of Horizon Development Corporation
   FISCAL YEARS	FY 2000	FY 2001 1	FY 2002 1
   		President & CEO of CROET	COO of VISTA Corporation
   			CROET FOUNDATION, INC.
   		President & CEO of CROET President & CEO of CROET	COO of CROET Foundation, Inc.
   			CROET INVESTMENTS, INC.
   			COO of CROET Investments, Inc.

   
   

   ¹ All of the positions in this column should officially reside in CROET Holding Company; however, these positions are functionally distributed among the subsidiary corporations.

   ² This column contains only those current positions that would be functionally transferred from the CROET Support Office to the subsidiaries.

   ³ With the exception of Intern (1) and Intern (2), all positions are full-time. Intern (1) and Intern (2) would be full-time temporary or part-time employees.

   Indicates a formal change in job title or the assumption of dual responsibilities in the next fiscal year.

   VP = Vice-President
   

   would proactively pursue new partnerships and enhance cooperative activities with the many allies that leverage CROET's resources.
   

   The new position of Office Manager would be added during FY 2001, with the position of Receptionist reporting directly to the Office Manager. The Office Manager would assume many of the duties of the previous Vice President for Operations, along with additional administrative duties. The Office Manager position would report directly to the President & CEO of CROET Holding Company.
   

   The Chief Accountant's title would change to Chief Financial Officer and a new full-time Bookkeeper position would be added during FY 2001. Both the full-time Bookkeeper and the part-time Bookkeeper would report directly to the Chief Financial Officer. The Chief Financial Officer would also assume any financial-related duties of the Vice President for Operations.
   

   6.2.1.2 Plans for FY 2002
   

   No staffing changes are planned for CROET Holding Company for FY 2002.
   

   6.2.2 Heritage Development Corporation
   

   This section covers the plans for functional staffing of Heritage Development Corporation in FY 2001 and FY 2002. All of the positions identified in this section should reside in CROET Holding Company. The COO position should report directly to the President & CEO of CROET Holding Company. The responsibilities and day-to-day activities of these positions should be functionally distributed to Heritage Development Corporation.
   

   6.2.2.1 Plans for FY 2001
   

   The title of the Vice-President for Reindustrialization would be changed to COO of Heritage Development Corporation in FY 2001. Because the FY 2000 position was already in charge of the Reindustrialization activities at Heritage Center, such responsibilities would remain under the authority of this new position.
   

   The Account Executive (1) position in CROET Support Office during FY 2000 should be transferred functionally to Heritage Development Corporation in FY 2001. This position would support the COO of Heritage Development Corporation, and responsibilities would remain essentially the same as those described in Section 6.1.1.
   

   The Administrative Assistant (1) and the Intern (1) positions in the CROET Support Office during FY 2000 should also be transferred functionally to Heritage Development Corporation in FY 2001. The Administrative Assistant would support the COO of Heritage Development Corporation and other staff members with the full range of administrative and clerical activities necessary to sustain corporate operations.

   The Intern (1) position would be filled by a full-time summer intern or a part-time cooperative program student from a four-year college or university; responsibilities would vary according to programmatic needs and specific assignments during the designated internship period. Functional supervision of this position would be assigned to specific staff members, depending upon the exact nature of the work to be performed by the intern.
   

   Two new positions should be established and filled within the Heritage Development Corporation in FY 2001. These new positions should be Account Executive (2), and Facility Manager (1). Facility Manager (1) would assist the COO with the planning and computer-assisted aspects of facility management at Heritage Center. Duties of Account Executive (2) would parallel those of Account Executive (1).
   

   6.2.2.2 Plans for FY 2002
   

   Heritage Development Corporation should add two new positions in FY 2002. The Facility Manager (2) position should be added to complete the takeover of all facility management responsibilities at Heritage Center from a subcontractor. The responsibilities of the person in this position would be essentially the same as those for Facility Manager (1). The position of Director of Health & Safety, should be created and filled to take over facility-wide health and safety management activities from a subcontractor. This position would be responsible for managing all facility health and safety issues in accordance with applicable federal regulations, state regulations, consensus standards, and best management practices.
   

   6.2.3 Horizon Development Corporation
   

   This section covers the plans for functional staffing of Horizon Development Corporation. All of the positions identified in this section would reside in CROET Holding Company; however, the responsibilities and day-to-day activities of these positions should be functionally distributed to Horizon Development Corporation. The COO of Horizon Development Corporation would report directly to the President of CROET Holding Company. The other positions would report directly to the COO.
   

   6.2.3.1 Plans for FY 2001
   

   The President & CEO of CROET Holding Company would take on a dual role as COO of Horizon Development Corporation in FY 2001. Because the responsibilities in this position are not anticipated to be an excessive burden, this dual role is deemed both practical and supportive of cost containment. However, this assumption of dual roles should be considered temporary. If the combined responsibilities of these roles were to become unmanageable, the COO of Horizon Development Corporation would be assigned to another employee of CROET or a new hire. This assignment would be made according to a practical analysis of business conditions and potential costs at the time.
   

   6.2.3.2 Plans for FY 2002
   

   The President & CEO of CROET Holding Company will continue to temporarily perform the duties of the COO of Horizon Development Corporation.
   

   The COO of Horizon Development Company would be assisted by three new positions. These would be Administrative Assistant (2), Account Executive (3), and Intern (2). The responsibilities of these positions would be comparable to those of their counterparts in the other subsidiary corporations.
   

   6.2.4 Vista Corporation
   

   This section covers the plans for functional staffing of Vista Corporation.
   

   6.2.4.1 Plans for FY 2001
   

   The President & CEO of CROET Holding Company would temporarily serve as COO of Vista Corporation. No additional staffing is planned for FY 2001.
   

   6.2.4.2 Plans for FY 2002
   

   No additional staffing is planned for FY 2002.
   

   6.2.5 CROET Foundation, Inc.
   

   The specific plans for functional staffing of CROET Foundation, Inc. are presented in this section of the strategic plan.
   

   6.2.5.1 Plans for FY 2001
   

   The President & CEO of CROET Holding Company would temporarily serve as COO for CROET Foundation, Inc. in FY 2001. No additional staffing is planned for FY 2001.
   

   6.2.5.2 Plans for FY 2002
   

   No plans have been made for additional staffing of CROET Foundation, Inc. in FY 2002.
   

   6.2.6 CROET Investments, Inc.
   

   The specific plans for functional staffing of CROET Investments, Inc. are presented in this section of the strategic plan.
   

   6.2.6.1 Plans for FY 2001
   

   The President & CEO of CROET Holding Company would also temporarily take on the role COO of CROET Investments, Inc. in FY 2001.
   

   6.2.6.2 Plans for FY 2002
   

   No plans have been made for additional staffing of CROET Investments, Inc. in FY 2002.
   

   6.3 SUBCONTRACTOR SUPPORT
   

   The work of CROET employees in FY 2000 is augmented by subcontractor support in several key areas. These areas are as follows: marketing, facility management, engineering and design, health and safety, and loan management.
   

   In conjunction with the reorganization, CROET plans to gradually reduce its dependence on subcontractor support in health and safety and facility management from FY 2000 through FY 2002. During this time, the facility management and health and safety activities at Heritage Center would be assumed by functional employees of Heritage Development Corporation. These employees would be the Facility Manager (1) and (2) and the Director of Health and Safety, all potentially assisted on an as-needed basis by Intern (1) and other staff of the corporation.
   

   A more aggressive and targeted effort to market CROEIT facilities and properties would be initiated under the new Director of Marketing. This should result in a gradually increasing use of subcontractor support for marketing from FY 2001 through FY 2002.
   

   The current subcontractor support in FY 2000, and the planned changes through FY 2002 in Table 6.
   

   6.3.1 Subcontracting Plans for FY 2001
   

   In this year, the only planned reduction in subcontracting is withdrawal of a portion of the current facility management tasks. Specifically, Heritage Development Corporation should put in-house Facility Managers in charge of the planning and computer-assisted (Archibus^®) aspects of facility management. The operations aspects of facility management would continue to be provided by a subcontractor during FY 2001.
   

   The new Director of Marketing should take over the organization's marketing efforts in FY 2001. During this year, CROET would increase its dependence on subcontractor support for marketing. This increase would be aimed at broadening CROET's access to various market sectors around the globe. A professional industrial recruitment/real estate firm with the potential to tap world-wide markets would be hired to provide this access. Other marketing subcontractors would be used on an as needed basis.
   

   6.3.2 Subcontracting Plans for FY 2002
   

   All subcontractor support for facility management should cease and be taken over by functional employees of Heritage Development Corporation in FY 2002 as Table 7 demonstrates. In addition, all health and safety support should fall to the in-house Director of Health and Safety. Subcontractor support for engineering and design and loan management (Technology 2020) would continue in FY 2002.
   

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

   FISCAL YEARS	FY 2000	FY 2001	FY 2002
   SUPPORT CONTRACTS	Marketing	Marketing	Marketing
   	Facility Management	Facility Management
   		Planning-Archibus®
   		Operations	Operations
   		Engineering and Design (2 contracts)	Engineering and Design (2 contracts)
   		Health and Safety	Health and Safety
   		Loan Management (Technology 2020)	Loan Management (Technology 2020)

   1. A large increase in subcontractor support for marketing is projected for FY 2001; cost for FY 2002 should decrease slightly.
      

As CROET restructures, now is the time to strengthen its marketing efforts to ensure continued success. As the finishing touches are being put in place at Horizon Center, as new facilities come on line at Heritage Center, and as new challenges arise related to the stigma of contamination, CROET must step up its marketing efforts with a strong, professional, and comprehensive marketing plan.

The proposed marketing plan focuses on organizational goals for each of CROET's subsidiaries. These subsidiaries share common goals (i.e., recruit prospective tenants and build local partnerships). However, they must employ vastly different tactics due to the resources they represent. Together, the subsidiaries offer a wide range of resources for economic development, plus the unique technological capabilities that exist only in Oak Ridge.

The Oak Ridge Complex represents a world-wide model for successful reindustrialization, opening up government-owned property to the competitive world of commercial real estate. The economic potential of these resources will only be realized when they are effectively marketed worldwide to reach the cutting-edge companies who can benefit from the unique resources in Oak Ridge.

Since CROET's establishment, marketing has primarily, and quite appropriately, focused on building awareness. A strong communications partnership quickly formed between the Department of Energy, Bechtel Jacobs Corporation and CROET. This partnership is, in large part, responsible for the successes of reindustrialization during CROET's early history. This plan builds on that partnership and helps CROET increasingly take on greater marketing responsibilities.

This plan should be viewed like a preliminary drawing when constructing a building. More data is forthcoming from a previously contracted research project coordinated by the New Century Alliance. Together with input from the CROET board of directors, the forthcoming research findings will enable these preliminary drawings to be fine-tuned into an itemized, detailed program of action for the year 2001 and beyond. A comprehensive presentation of the detailed marketing plan will be provided at that time.

Sections 7.1.1 through 7.1.8 of this Strategic Marketing Plan present the basics of the marketing planning process and the considerations that went into developing separate marketing strategies for Horizon Center, Heritage Center, Gateway Center, Vista Corp. and CROET Holding Company. Sections 7.2.1 through 7.2.6 address the strategy and tactics proposed for the upcoming fiscal year.

7.1 MARKETING PLAN FOR FY 2001

7.1.1 Organizational Goals

The strategies that follow in sections 7.2 and 7.3 are fully intended to focus on and support the organizational goals presented earlier in this planning document. For convenience, they are listed again here as the foundation for the marketing planning effort. The marketing program's effectiveness will be measured against its ability to help CROET achieve these goals.

Heritage Center Goals - Renovate and restore underutilized DOE facilities and stimulate the expansion of commercial enterprises that would not be funded by DOE.

Horizon Center and Gateway Center Goals - Manage industrialization operations on CROET land and recruit prospective companies for which the region's underutilized real estate, technical facilities, and displaced manpower assets are particularly valuable.

Vista Corporation Goals - Rapidly capitalize on emerging but not readily apparent economic development opportunities arising from research and development activities in the Oak Ridge area.

7.1.2 Research

To build upon a variety of perspectives, personal interviews were held with CROET staff and board members, governmental officials, economic development professionals, and current tenants. Input was collected on the current public opinions of CROET and the properties it represents, as well as suggestions on top-priority marketing needs. In addition, existing marketing materials were analyzed, including print materials, video and oral presentations, web-sites, news clips, trade show schedules, and site selection consultant activity reports.

Fluor-Daniel Consulting is conducting a $200,000 market analysis of Oak Ridge. This research is designed to identify the core compentencies of existing economic development entities in the area, to inventory resources to be marketed, to narrow the number of industry clusters for a more targeted mareketing effort, and to identify specific companies within the identified clusters that should be proactively pursued.

CROET will provide input into the research process, ensuring that the resources and interests of Heritage Center and Horizon Center are well represented. Results of this research are expected toward the end of 2000. It is anticipated that additional research may be necessary to hone in on the market niches identified by Fluor-Daniels, as well as to track effectiveness as this marketing plan is put into action. This marketing plan will be updated and refined once the data is returned from Fluor-Daniels.

7.1.3 External Forces

Oak Ridge deals with a fragmented economic development environment. Its resources seem limitless, yet hard to define and rally together. Further complicating matters are governmental red tape, both perceived and existing, and constant environmental concerns, again both perceived and existing.

The early days of CROET have merely opened the door to a proactive marketing program. Bechtel Jacobs has been the primary source of marketing materials, coordinating activities closely with DOE and CROET, and the focus has been one of building awareness, as opposed to strategic marketing that reflects the commercial real estate, private-sector model. In addition, with the shared communications responsibilities among these three entities, an opportunity exists to develop a well-coordinated plan that identifies responsibilities throughout the next few years of transition to CROET. The strategies stated in sections 7.2 and 7.3 establish a blueprint for identifying responsibilities as the corporate goal shifts from building awareness to aggressively recruiting tenants.

7.1.4 Allies/Partners

Albeit fragmented, Oak Ridge offers tremendous capabilities and expertise that can help CROET reach its organizational goals. A solid foundation in sound communications and effective marketing techniques is necessary to develop and maintain effective partnerships with the following organizations, all of whom have provided input into this marketing plan:

U.S. Department of Energy

Bechtel Jacobs, Company, LLC

Bechtel Jacobs Development Company

Oak Ridge Chamber of Commerce

City of Oak Ridge

Roane County

Anderson County

Knox County

Tennessee's Resource Valley

Knoxville Chamber Partnership

Tennessee Dept. of Community and Economic Development

Tennessee Technology Development Corporation

Technology 2020

UT/Battelle

University of Tennessee

Covenant Health

Heritage Center tenants

Theragenics

Tennessee Valley Regional Industrial Development Agency

7.1.5 General Observations

A wide variety and diverse set of target audiences exist for each of the entities outlined in the strategic organization of CROET. CROET desires to obtain maximum utility from the Fluor-Daniels project and therefore this marketing plan will be revisited once the report is finalized, assumptions will be discarded, reviewed, and/or confirmed, and a detailed presentation of the revised section will be presented to CROET's board of directors.

In the meantime, the following assumptions regarding target audiences have formed the foundation of this marketing plan:

• The target markets for Heritage Center include heavy machinery manufacturers, waste management, the automotive industry and its associated support vendors, metal fabricators, laboratory occupancy, and heavy industrial material processors. This does not suggest that these are the only businesses that will be courted or accommodated.
• Gateway Center should be targeted to mixed use office, light industrial and commercial development including retail.
• At Horizon Center, due to the success with Theragenics, high technology companies are the preferred target audience. Biotechnology, computer and computer component and information technology companies, specifically, are the identified clusters.
• Companies on the cutting edge of medical technologies, particularly those that are either engaged in or can benefit from radioisotope production, represent the crown jewels of the marketing effort at CROET. These are the companies that are expected to be identified by the Fluor-Daniels study.
• The challenge is not to miss opportunities. A misperception is said to exist that companies outside the technology arena are not welcome. While a proactive marketing campaign will focus on the identified clusters, an ongoing campaign along the line of traditional economic development activities must keep prospects informed that land is available at Heritage and Horizon Centers.
• In addition, CROET can extend its reach by working more closely with organizations already marketing to business and industry. Therefore, the regional economic development community will remain an important target audience for all of CROET's entities. Leveraging the economic development activities at the Oak Ridge Chamber of Commerce, the Tennessee Department of Economic and Community Development and Tennessee's Resource Valley will maximize limited resources.
• The public image of CROET has advanced from one of negativity and skepticism to one of a growing respect. The momentum must not be lost; rather, the relationship must be strengthened if reindustrialization is to reach its potential in East Tennessee. A continued effort to reach out to economic development professionals and business leaders in the region must continue.
• CROET, as a high priority, will continue to develop strategic economic development partnerships with the centers of excellence and technology transfer at ORNL and the Isotope and Manufacturing Technology Center at the Y-12 Plant as key components in its marketing strategy.

   

7.1.6 Human Resource

To coordinate the marketing activities of CROET and its various entities, a full-time marketing director is necessary. This position would report directly to the CEO of CROET Holding Company and provide staff support to the COO of Heritage Center Development Corporation, the COO of Horizon Center Development Corporation, and the COO of Vista Corporation.

The marketing director will, in essence, function as an in-house account executive for servicing the marketing and public relations needs of CROET Holding Company and its various subsidiaries. As grants administration becomes less integral to CROET and marketing becomes more so, staff can be shifted from one area to the other. This carries the added advantage of strong community relations ties already existing on staff.

Supported by a marketing firm, a real estate / site selection consultant, Bechtel Jacobs, and DOE, this marketing director will oversee the development of marketing programs, community relations, and worldwide media relations. As CROET restructures, this position will help communicate new responsibilities and coordinate communications related to the complex partnerships that will be developed and enhanced.

The sheer number of organizations involved in economic development and industrial recruitment demand the attention of a CROET marketing director to ensure a strong and consistent message is disseminated. This individual will proactively pursue new partnerships and enhance cooperative activities with the many allies that leverage CROET's resources.

As reindustrialization transitions from the government to the private sector, CROET must assume increasing marketing responsibilities. The time for such a commitment is now, as Horizon Center comes online and as Heritage Center adds new facilities to the inventory of available resources. When the facilities are full and thousands of new jobs have been replaced, the need for marketing may not be so great. The focus may shift, perhaps to new properties as we build on our experiences.

Budget Considerations

Addressed in greater detail in section eight of this strategic plan, the budget for CROET must accommodate this proposed increase in marketing efforts. Elements of this budget include retainer fees, staffing, marketing materials and events, and recruitment activities. To maximize the marketing effort, ongoing research is also necessary to measure progress and untapped opportunities.

Preliminary budget estimates are provided along with the strategy and tactics listed in sections 7.2 and 7.3. A more detailed budget will be returned along with the updated marketing plan and detailed plan of action once Fluor-Daniels completes its market analysis and report.

As the program of work is finalized, some budgetary items may be negotiated. For example, real estate development professionals may be offered special incentives for finding new tenants. Their compensation may be retainer with commissions or commissions only, based on a percentage of the resulting contract. In addition, it is anticipated that Bechtel Jacobs will continue to provide marketing expertise and production of printed materials for marketing purposes. These and other fiscally relevant aspects of the marketing program will be confirmed and detailed once the Fluor-Daniels study is complete and CROET board members have had a chance to provide input and direction to this preliminary marketing plan.

7.2 MARKETING STRATEGY FOR FY2001

7.2.1 Overall CROET Marketing Goals

The Marketing Strategy for CROET is designed to further the organization's corporate goals summarized in Section 7.1.1. To accomplish these goals, the strategy presents a cost-effective program to promote Heritage Center, Horizon Center, Gateway Center and related resources to businesses and industries that can benefit from these unique facilities.

In addition, the proposed marketing program promotes the success of existing businesses and industries at these two properties, while also developing and sustaining cooperation between CROET and the many organizations that stand to favorably influence development at Heritage Center, Horizon Center, and Gateway Center.

7.2.2.1 CROET Holding Company Marketing Strategy

• Continue ongoing regional communications efforts to support the specific marketing efforts proposed for Heritage Center, Horizon Center, Gateway Center, and Vista Corporation.
• Provide support in areas that will benefit all CROET entities.

7.2.2.2 CROET Holding Company Marketing Tactics

• Continue and enhance upon existing community relations programs:

1. - Expand and upgrade newsletter by increasing audience and redesigning into four-color, quarterly report

   -Maintain monthly schedule of presenting columns to The Oak Ridger.

   -Prepare regular press releases about activities at Heritage Center, Horizon Center and Gateway Center.

   - Prepare advertisements that demonstrate local support and promote a friendly image.

   - Coordinate special events to draw attention to major announcements.

• Formalize the marketing responsibility for Heritage Center, Horizon Center, Gateway Center and related resources with the Department of Energy and Bechtel-Jacobs. Place the approval of all marketing communications related to the three properties with CROET, as the organization transitions to the private sector model.
• Tap the valuable resources at Bechtel-Jacobs as an in-house agency and coordinate all marketing activity related to Heritage Center, Horizon Center and Gateway Center within one well-coordinated and comprehensive program.
• Contract with a site selection consultant/real estate executive to promote Horizon Center & Heritage Center to prospects identified by the Fluor-Daniels study and to complement ongoing efforts by Tennessee's Resource Valley and Bechtel Jacobs.
• On a recurring basis, brief Tennessee ECD staff, DOE public affairs representatives, Bechtel Jacobs representatives, city leaders and regional economic development professionals on CROET's strategic marketing program to ensure a well coordinated and consistent message.
• Coordinate a consistent brand identity for CROET and its subsidiaries, with a marketing program for each entity that is distinct and targeted, yet connected and coordinated.
• Publicize activities at Horizon Center, Heritage Center and Gateway Center on a national level. Develop media lists based on identified target market niches, and engage in a strong ongoing media relations program. Clarify whose responsibility this will be, and coordinate with the existing publicity program at Bechtel Jacobs.
• Develop a proactive schedule of participation in targeted tradeshows, and accompany the Oak Ridge Chamber, Tennessee's Resource Valley and other allies when they attend trade shows that focus on biotechnology, information technology, heavy manufacturing, or other target market niches identified by Fluor-Daniels.
• Hold an annual commercial real estate day, perhaps coordinating event with Oak Ridge Chamber of Commerce. Pursue similar joint marketing activities where appropriate.
• Involve board members by forming marketing advisory committee.
  

7.2.3.1 Heritage Center Marketing Strategy

• Define and promote the features of Heritage Center that make it attractive and unique. These include "quick to lease facilities", available land parcels, infrastructure, transportation, administrative support and security as technological advantages.
• Proactively recruit businesses and industries that desire these identified facilities, benefits and services and need quick to market facilities.
• Target heavy machinery manufacturers, waste management, automotive industry and its associated support vendors and distribution, metal fabricators, laboratory occupancy, and heavy industrial material processors. Accommodate and encourage interest from other sectors, as well. (Note: The targeted market may change as a result of Fluor-Daniels study.)
• Promote a positive attitude among existing tenants, and create a more user-friendly atmosphere.
• Leverage success stories of existing tenants and utilize their trade publications to market the center.
  

7.2.3.2 Heritage Center Marketing Tactics

• Utilize the existing excellent promotional materials developed by Bechtel Jacobs Company, DOE and CROET. The professional information has been developed to be factual and informative, with a high quality plus sales-oriented perspective. Partner with the "City of Tomorrow" campaign to include the Oak Ridge Advantage! Utilize the excellent "Reindustrialization at Work" video to highlight the Center.
• Develop a comprehensive marketing campaign, including a collateral materials package that is coordinated with the promotional materials previously mentioned, targeting manufacturing activities consistent with the existing capabilities within Heritage Center.
• Develop a crisis communications plan, and proactively address the controversial aspects of doing business in Heritage Center.
• Develop a consistent, up-to-date, easily accessible list of available properties (current, and projections, i.e. within six months, one year, five years, etc.).
• Prepare a well-thought-out strategy for marketing new facilities as they come online.
• Leverage the existing land parcels at Heritage Center to compliment the Horizon Center parcels.
• Expand, simplify and update web site, and enhance site content.
• Continue regular meetings with tenants. Strengthen the positive perception of these meetings by enhancing the content of information presented and creating an effective feedback mechanism for tenants to voice their concerns. Empower well-functioning, two-way communications.
• Create a more user-friendly environment "behind the fence." For example, once buildings are available for lease, rename them with "real" words, not numbers. Select from a chosen "family" of building names as they come on line. For example,:
• Theme-Old & New: Catalyst, Analogos, Chrysallis, Metamorphosis, Phoenix
• Theme-Greek Places: Lyceum, Forum, Parthenon, Acropolis
• Theme-Science: Discovery, Endeavor, Conception, Enterprise
• Theme-Constellation: Andromeda, Orion, Pegasus
• Theme-Space: Apollo, Mercury, Gemini
• Theme-Latin: Novitas, Imperium, Novus, Primum, Initium, Principium, Natare
• Reconsider the emphasis on financial incentives. Presenting them as the primary reason to locate at Heritage Center may set us up for financially unstable situations. Such a focus also sets CROET up for an apology as to why the cost is so low. It would be much more powerful to present the financial incentive almost as a value-added extra.

7.2.4.1 Horizon Center Marketing Strategy

• Promote heavily the "opening" of the Center by inviting site selectors, politicos, news journals, etc.
• Position this park as a premium, high-tech business plus industrial park with the advantages of an environmentally pleasing setting, with the most convenient access to the technologies of Oak Ridge, and leverage the telecommunications infrastructure.
• Leverage the positive story of Theragenics within the biomedical and high technology client base.
• Get the word out about this new resource regionally and internationally.
• Tap the expertise of a nationally recognized real estate executive / site selection consultant.
• Target information technology, biotechnology, and medical technology companies.
  

7.2.4.2 Horizon Center Marketing Tactics

• Develop marketing materials for Horizon Center that blend with and highlight the center in the City of Tomorrow theme as a major Advantage Oak Ridge. This will include print materials showcasing Horizon Center in a manner complimentary to its premium image, and leveraging the Theragenics success story.
• Develop marketing campaign, including collateral materials package and advertising in trade publications, targeting biotechnology, information technology and medical technology.
• Develop direct mail campaign to attract the attention of site selection consultants to Horizon Center. Utilize mailing list of site selection consultants maintained by Tennessee's Resource Valley, and follow up by phone and personal visits with a select group identified in conjunction with Tennessee's Resource Valley.
• Plan for exciting grand opening and publicize in local, national and trade publications; invite executives, property developers, political figures, etc.
• Maximize Theragenics grand opening. (Offer assistance for their celebration.)
• Equip Tennessee's Resource Valley and other groups to effectively market Horizon Center to site selection consultants.
• Fully engage the Oak Ridge Industrial Development Board to highlight and utilize the "Center" as Oak Ridge's Premier Real Estate Venue.
• Carefully consider advertising in site selection and real estate publications.
• Leverage the State ECD to include Horizon Center as a major state advantage to recruit industry.
  

7.2.5.1 Gateway Center Marketing Strategies

Create awareness that additional governmental property exists that can be developed for a variety of uses, including mixed use office, light industrial and commercial development, including retail.

Fully engage the Oak Ridge Industrial Development Board to highlight and utilize the "Center" as Oak Ridge's premier real estate venue for their type of occupancy.

7.2.5.2 Gateway Center Marketing Tactics

Create a marketing brochure for Gateway Center

Target real estate consultants and piggyback on efforts underway related to marketing Horizon Center and Heritage Center.

Host real estate developers in one-on-one settings on an ongoing basis.

7.2.6.1 Vista Corporation Marketing Strategy

Create awareness for this new entity, and the many opportunities it presents.

7.2.6.2 Vista Corporation Marketing Tactics

Identify core competencies at ORNL.

Develop system to identify emerging commercial technologies and recruit prospective tenants arising from ORNL, and Technology 2020, based on the existing memorandum of understanding.

Build relationship with research and development organizations at the University of Tennessee.

Establish dialogue with Covenant Health related to medical technologies being developed at Oak Ridge Methodist Medical Center.

7.2.7 Budget Estimates

Laine Communications has provided budget estimates for the marketing strategy covered in section 7.2. These estimates are for planning purposes only. They will be refined once the Fluor-Daniels study is concluded and the detailed program of work is developed.

CROET Holding Company:

Upgraded Newsletter $30,000

Columns 6,000

Regular Press Releases 4,000

Newspaper Ads 5,000

Special Events 15,000

Site Selection Consultant (% of sales--work into rent?)

Briefings 5,000

Coordinate Brand ID 8,000

National Publicity Consulting 7,000

Annual Real Estate Day 5,000

TOTAL CROET Holding Co. $85,000

Heritage Center:

Update Materials $50,000

Marketing Campaign 10,000

Crisis Communication Plan 6,000

Strategy for New Facilities 5,000

Web Site Enhancement 15,000

Tenant Activities 6,000

New Facility Names and Signage

Design 6,000

TOTAL HERITAGE CENTER $98,000

Horizon Center:

Grand Opening $10,000

Assist Theragenic's Grand Opening 5,000

Marketing Materials 60,000

Marketing Campaign 10,000

Direct Mail Campaign 10,000

Advertising in Trade Publications 20,000

Other based on Fluor-Daniels

Study 40,000

TOTAL HORIZON CENTER $155,000

Gateway Center:

Marketing Brochure $8,000

Travel/Misc. 12,000

TOTAL GATEWAY CENTER $20,000

Vista Corp.:

Misc. $10,000

TOTAL VISTA CORP. $10,000

The reorganization of CROET and subsequent corporate operations should be accomplished within the annual funding available to each new corporation. This financial plan contains a highly detailed breakdown of the projected funding receipts and disbursements of CROET Holding Company and its five subsidiaries in FY 2001 and 2002.

Eighteen schedules, each containing multiple pages of data, present the overall financial plan for CROET. Projections for FY 2001 are presented in two separate schedules for CROET Holding Company and each subsidiary corporation. The first schedule includes additional grant funds of $2,000,000 from DOE and other potential grants of $625,000, The second schedule for FY 2001 includes no additional grant funds. Thus, the two schedules present a "best case" and a "worst case" scenerio for FY 2001. For each of the corporations, the third schedule projects receipts and disbursements for FY 2002.

The 18 schedules have not been included in the main text of this chapter. This decision was made to avoid potential difficulties for the reader posed by having so many similar looking items together in one place without clear segregation by corporation. To make them more user friendly, the tables for each corporation have been included as separate appendices to the strategic plan.

The three schedules showing projected receipt and disbursement data for CROET Holding Company are presented in Appendix A. Appendix B contains the projected receipts and disbursements for Heritage Development Corporation. Appendix C contains projections for Horizon Development Corporation. Appendix D has the three schedules showing projections for Vista Corporation. The schedules for CROET Foundation, Inc. and CROET Investments, Inc. are located, respectively, in Appendices E and F.

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.

Figure 23 compares the overall implementation schedules for CROET Holding Company and its five subsidiaries. Figures 24 through 29 show the detailed implementation plans for each corporation. These plans consist of specific actions to be taken and a time line for completing each of these actions. The actions are consistently organized into four categories: actions to be taken by the Board of Directors of CROET, legal actions, accounting actions, and administrative actions. The administrative actions include the recruitment of additional staff to manage and operate the corporations (See Chapter 6).

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.

The CROET is a mature and firmly established organization standing on the threshold of becoming a dynamic force in the regional economy. The time has come to cross this threshold and lay claim to more businesses and jobs for the East Tennessee region. To be successful in this quest, CROET must be prepared to tackle the key challenges that lie ahead. These challenges are: early and full identification of new opportunities for economic development and diversification, full capitalization on each opportunity, avoidance or mitigation of catastrophic legal liabilities, minimization of tax liabilities, and demonstrating business viability without supporting government grants. The proposed reorganization of CROET into a holding company and five subsidiary corporations would re-energize the overall organization, increase its efficiency, and contribute significantly to meeting these challenges. Pending early approval by the Board of Directors of CROET, CROET Holding Company and its proposed subsidiaries can be legally established, fully staffed, adequately financed, functionally implemented, and heavily engaged in marketing by the end of FY 2002.

Clark, Ronald W., Einstein: The Life and Times. New York: Avon Books, 1970.

Gillette, John and Grady Whitman, The Story of Oak Ridge. Unpublished Brochure, n.d.

Johnson, Betty and Dixon Johnson, "Oak Ridge is Here to Stay..." Celebrate Oak Ridge, 1999.

APPENDIX A

CROET Holding Company

APPENDIX B

Heritage Development Corporation

APPENDIX C

Horizon Development Corporation

APPENDIX D

Vista Corporation

APPENDIX E

CROET Foundation, Inc.

APPENDIX F

CROET Investments, Inc.

APPENDIX G

APPENDIX H

APPENDIX I