Lawyers for Knox County and the Tennessee Valley Authority met Tuesday at the City County Building and made “substantial progress” in talks of moving Knox County Schools headquarters from the Andrew Johnson Building to TVA’s East Tower downtown.

Finding a home for the school system has been the biggest sticking point in the county’s year-long quest to sell the AJ Building, currently housing the school system's 230 employees.

Knox County Mayor Glenn Jacobs' spokesman Rob Link said Law Director Bud Armstrong has been hanging up the potential TVA deal.

Armstrong pushed back on any notion he had been delaying the possibility of an arrangement with TVA and added the mayor can proceed without his approval.

Law director says he's not hanging up TVA deal

“Politically, Bud has no position on what the mayor and school board want to do in the matter of where they want to put the school (system) … I’m just wanting to look out and try to reduce the risk to the Knox County taxpayer in whatever position we take,” Armstrong said.

“It is my job to look out for the best interest of the taxpayer legally,” he continued.

Armstrong said Tuesday’s nearly two-hour-long meeting quieted some of the concerns he had with the legality of TVA’s lease agreement. He wanted confirmation the county could enter into an “easement” agreement instead.

“The (easement's) not a sale-stopper,” he said. “It never has been. It’s just about us coming together to protect the county.

“All I asked for was if TVA could give me some authority (proof) whereby you have the power to use an easement in the place of a lease,” he said. “That’s it. Nothing more. It’s just a legal question.”

In a written statement, TVA spokesman Jim Hopson said TVA has several options for disposing of property under the TVA Act.

“TVA reviews each real estate proposal or transaction to determine what is best for TVA, stakeholders and ratepayers,” he said.

After the story published, Link said Jacobs does not think Armstrong is holding up a deal with TVA, "because there is no deal at this point."

"Additionally," he wrote. "The two of them have not even discussed a potential deal for any relocation option.”

The AJ Building's history

The "AJ Building," as it is commonly called, houses approximately 230 school employees on the South end of Gay Street, immediately across from the City County Building. It shares space with the Knox County Sheriff's Office Merit Council, the Public Building Authority and the county's probation and pre-trial release department.

The 140,000-square-foot building was named after the 17th president. It is a former luxury hotel and has hosted Elvis and then-vice presidential candidate Lyndon B. Johnson and his wife. Hank Williams Sr. may have spent his last night in the hotel, though it’s debatable whether he actually died there.

It was the tallest building downtown when it was erected in 1929, and was placed on the National Register of Historic Places in 1980.

The TVA East Tower is part of two similarly-sized towers on West Summit Hill Drive in downtown Knoxville, across from Market Square. The West Tower currently holds TVA headquarters. Last year, TVA announced it would be consolidating employees into the West Tower.

Easement details, TVA tour

According to an October 2017 easement draft between TVA and Knox County, the 12-story East Tower would provide the school system with 211,863 square feet of office space. It would not share office space with TVA.

According to the draft, the county would pay 75 cents per square foot per year to TVA. This amount would increase 1 percent annually over the first 15 years of the deal.

TVA CEO Bill Johnson welcomed Jacobs and some of his administration to TVA in September. The group met in Johnson’s office and received a personal tour of the East Tower.

Mike Arms, a political strategist who used to serve as chief of staff to former Mayor Mike Ragsdale, helped broker the meeting. He said Johnson told Jacobs he’d love to have the school system as a neighbor.

Arms said the county tried to sell the AJ Building nearly 15 years ago during Ragsdale’s tenure, but commission balked at the idea.

“The fact that one of the towers is now available, it looks like all the stars are aligning and why everyone’s not excited about doing this I’m not sure,” he said.

Commission would have to approve

Any deal between the county and TVA would have to get the approval of the Knox County Commission.

New Commissioners Larsen Jay and Justin Biggs said the county needs to take a look at how much it would cost to move the school system, and both stressed the need for enough parking.

Knox Schools spokesman Carly Harrington deferred to the mayor's office questions posed to the Schools Superintendent Bob Thomas about a potential move.

"The Mayor has indicated to us that a decision whether to move the district’s administrative offices to another location will be made soon," she said in a written statement.

School board member Patti Bounds, former chairman, however, said she isn’t sold on TVA being the best home for the schools.

“I think the main driver of using that property is the low rate of square foot that the former mayor was working out as a deal, and that doesn’t necessarily transfer into the best scenario just because you get it at a bargain or discount price,” she said.

How we got here

The county issued an “intent to award” contract to Nashville developer BNA Associates for the AJ Building last October, but progress has stalled since, as the county still hasn’t found a suitable place for the school system to relocate.

A representative from BNA could not be reached for comment. Earlier this month, Link said it was his understanding BNA was still interested in the project.

More:Andrew Johnson Building sale remains incomplete goal of Mayor Burchett's time in office

The commission, which has yet to approve the contract, has kicked the $6 million deal off its agenda several times this year. Link said such agreements take time.

“Since Mayor Jacobs took office, he has been very careful to exercise due diligence before proposing a deal that could affect taxpayers' money and this process has taken some time,” he said.

BNA proposal for AJ Building

BNA's proposed $43 million investment would transform the AJ Building into a 94-room boutique hotel with apartment units and a rooftop bar.

More:Andrew Johnson Building's future one step closer after Knox County names BNA Associates buyer

The proposal included an additional 75 residences and the group estimates it will add 100 permanent jobs and $1.5 million in local sales and hotel/motel tax revenue.

The 18-story building has been home to the Knox County Schools' administrative offices since 1992.

In 2015, the school system hired local architecture firm McCarty Holsapple McCarty to do a needs assessment in anticipation of a possible move. The firm concluded the district needed about 95,713 square feet of administrative office space.