BlueCross BlueShield of Tennessee will reshape Chattanooga’s downtown skyline over the next five years by building a $200 million office complex atop Cameron Hill. In the biggest downtown office reshuffling in two decades, BlueCross announced plans Thursday to consolidate its 3,800-employee Chattanooga staff in a new corporate campus on Cameron Hill overlooking downtown.

"This is a defining moment for Chattanooga and our downtown, and I would suggest this project will anchor in bricks and mortar the future sustainability of BlueCross," said Dan Jacobson, vice president of properties for the Chattanooga-based health insurer.

The new BlueCross headquarters will displace the biggest downtown apartment complex and leave vacant parts of 10 Chattanooga office buildings. But Chattanooga boosters insist future growth in downtown housing, retail and office demand should fill the void. BlueCross officials said combining the company’s separate facilities into a corporate campus on Cameron Hill should improve security, cut $3.5 million a year in operating expenses and offer better facilities and parking for employees.

"We believe this move will be better for our employees and yield cost savings, efficiencies and responsiveness for our customers, particularly to our government contracts," BlueCross President Vicky Gregg said. To help replace the 362-unit Cameron Hill Apartments complex, BlueCross has joined with former Mayor Jon Kinsey to convert one of its downtown sites into a 170-unit apartment complex within the next year. Before construction begins on the BlueCross offices on Cameron Hill, the new apartments should be ready for interested Cameron Hill tenants, Mr. Kinsey said. Another one of BlueCross’s buildings is being eyed for a city and county-owned business incubator, Mayor Bob Corker said. The Miller Brothers and Hub buildings owned by BlueCross are well suited for more downtown housing and commercial projects, according to BlueCross consultants.

"In 50 years, I truly believe people will look back on this day as a moment in time when the vibrancy, vitality and strength of our downtown area was put in place," Mr. Corker said. "This creates one of the greatest opportunities in the future for our city."

But for all of his enthusiasm Thursday, Mr. Corker said the decision by BlueCross to try to consolidate all of its offices initially presented one of the greatest challenges of his mayoral term.

In November 2001, BlueCross bought 210 acres of riverfront property in Lupton City to house a corporate campus near the Chickamauga Dam. Mr. Corker and other government officials have spent most of the past three years trying to locate another downtown site to convince BlueCross to stay in the central city. BlueCross owns or leases nearly 1 million square feet of office space in and around downtown and leases another 186,037 square feet at the Eastgate Town Center.

After years of prodding by local officials, BlueCross ultimately agreed to build on the 48-acre Cameron Hill site instead of Lupton City, Ms. Gregg said. The insurer hired Mr. Kinsey’s company — Kinsey, Probasco, Hays — to buy the Cameron Hill Apartments when the land became available this summer.

"We may be paranoid, but we have found that when people know that BlueCross is an interested buyer the price tends to be higher," Ms. Gregg said.

BlueCross officials said the company plans to sell its Lupton City property and already has received several offers on it. To make up for the extra expense of building on the more expensive Cameron Hill site, BlueCross will seek property tax breaks from the city and county within the next few weeks. Although the terms of such incentives have yet to be worked out, Mr. Corker and Hamilton County Mayor Claude Ramsey said they expect to come to an acceptable agreement.

Even with such tax breaks, the $200 million complex is expected to boost city and county tax collections by $40 million over the period of the incentives, officials said.

Preliminary plans call for the building of five office structures with a total of 800,000 square feet and a parking garage and surface parking for more than 3,800 vehicles on Cameron Hill. To improve access to the site just west of U.S. Highway 27 downtown, the city has agreed to open up a second road to the top of the hill behind the current Chattanooga Housing Authority headquarters.

Mr. Jacobson said BlueCross has yet to hire an architect for the project, and construction won’t begin until 2006. He said the new offices, which won’t be finished until 2009, will have more security to meet new government Medicare standards and more flexibility to allow easier office changes.

The BlueCross facility will be the biggest office complex built in Chattanooga since TVA opened its $163 million power headquarters complex in 1986. BlueCross’ staff and business volume has doubled over the past decade, and Ms. Gregg said the company is looking at more government contracts in the future to further grow the business. BlueCross could lose some of its current TennCare customers if the state goes through with plans to dissolve the state health plan and remove people not Medicaid-eligible from its rolls. But BlueCross could be selected to administer the remaining slimmed-down Medicaid program, which could create even more business for the Chattanooga insurer, officials said. "As a former commissioner of (the Department of) Finance and Administration," Mr. Corker said, "I can tell you there is no company better equipped to handle this business than BlueCross." Founded in 1945, BlueCross is Tennessee’s largest health insurance company with more than 2 million customers in the state. The company also administers Medicare plans in 46 other states. E-mail Dave Flessner at dflessner@timesfreepress.com BY THE NUMBERS $102.5 million: Cost of new office buildings $36.3 million: Cost of park ing garages $15.3 million: Land acquisi tion for 48 acres of Cameron Hill $41 million: Fees, furniture, fixtures and relocation expens es 800,000 square feet: The size of the proposed corporate campus 3,800: Number of parking spaces HISTORY OF CAMERON HILL 1860s — Site of Union cannon emplacements during the Civil War.

1880s — A casino, German-style beer garden and the city’s first incline were built.

1900s — Premier neighborhoods were built. In 1904 Boynton Park was created as part of the Chickamauga-Chattanooga National Military Park. 1962 — The top half of the hill was removed for dirt to build U.S. Highway 27 and the Olgiati Bridge.

1974 — The city sold the northern section of Cameron Hill to Oxford Cameron Development Co., which built the existing apartment complex a year later.

2004 — Through Kinsey, Probasco, Hays, BlueCross BlueShield of Tennessee agrees to buy the 48-acre site for $15.3 million.

2006 — BlueCross plans to begin construction of a $200 million office complex.