The verdict is out on EDGE.
The new Memphis and Shelby County economic development umbrella agency has been in the organizational phase for the past year, so maybe it’s too soon to get a complete sense of its ultimate effectiveness. That said, some of its work so far have created concern about its focus, its operating philosophy, and its obsession on driving local chamber of commerce into love pacts for the future.
As we wrote in our post earlier this week, Memphis and Shelby County need to abandon its business as usual demeanor and EDGE has the potential to make this happen; however, to many in Memphis, it got off on the wrong foot when suburban interests were overrepresented on the board when it was created.
Half of its members are from Memphis and half are from outside Memphis. In other words, Memphians are 50% of EDGE members although Memphis’ population is 70% of the county population.
More of the Same
So far, there’s been a lot of talk at EDGE about a more ambitious vision for the future, about hiring more people for staff (although it’s still unclear to many where EDGE stops and the Greater Memphis Chamber starts and if the new agency is duplicating some functions already performed by the major economic development entity in our region), and about how it’s going to do things differently
When EDGE was created, it was said that it would streamline economic development implementation and guarantee coordination of all public economic development strategies (although the Memphis and Shelby County Airport Authority was not even included in a reporting relationship), but so far, it’s been as much as anything a faster way to give away more tax money.
There’s always a lot of rhetoric about getting control of the tax freezes – PILOTs (payments-in-lieu-of-taxes) that are given to anybody who can fill out an application – but so far, there’s been more of the same and justified by the inevitable questionable report that reliably claims that giving away massive amounts of property tax money produces bushels of new revenue from other sources. These reports over the years have been laughable at worst and overwrought at best and inevitably undermines EDGE’s needs for solid, well-researched information.
In a city and county where we are now approaching $100 million in tax money that is being waived for companies like the Fortune 500 company, Nike, that was yesterday granted a $58 million tax waiver over 15 years – that amount is about how much money NIKE makes in 24 hours.
Paying Too Much?
Of course, defenders of the status quo argue that we’re not really giving up taxes because without the company, we wouldn’t have any new revenues any way. But that misses the point. The question is whether the tax waiver is even needed in the first place to close the deal. It would be good if someone on the EDGE board had bothered to ask Nike officials – either publicly or privately – at what point is our community good enough that we don’t have to pay it and other companies to love us.
We wrote in July of last year about our concern that the Memphis and Shelby County Industrial Development Board – now folded into EDGE – was routinely overpaying for jobs. At its last meeting as a free-standing organization last year, the IDB doled out tax freezes of $21.8 million for 259 jobs, or $84,256 for each new job, and yes, they were distribution jobs.
By way of comparison, Toyota got $148,000 in incentives per job in 2007 for its $1.3 billion plant and 2,000 jobs in Tupelo, and in Franklin, Tennessee, Nissan got $151,000 per job for its North American headquarters and 1,300 jobs.
Here, EDGE just doled out $232,000 per job for Nike’s 250 jobs.
Building the Economy Inside Out
For years, we have been told that we need distribution jobs because our workers don’t have the skills for jobs of the knowledge economy. It begs the question of why, if we have the workers that are perfect for distribution, we have to continue to grant tax waivers for them, and it’s stupefying if a distribution company doesn’t understand the value of being near FedEx’s world headquarters and getting the extra hours in a day that results from being here.
Meanwhile, county officials working with EDGE seem more fixated on making the local chambers of commerce play nice than in determining the strengths and weaknesses of each organization and creating collaborations that respond to those realities. It’s the Greater Memphis Chamber that has the resources, the research, and the expertise that drive local recruitment and economic development thinking, and because of it, there’s little reason to act like all chambers of commerce are created equal or should have equal standing in economic development planning and execution.
As we blogged Tuesday, we need to build our community and our economy inside out. So far, EDGE seems to be sending the message that it’s not interested in adopting any policy or launching any program that doesn’t treat all of Memphis and Shelby County the same. It’s a self-defeating approach, not only for EDGE but for Memphis, because it is in creating more neighborhood-based economic growth, more minority businesses, and more urban vitality in the Memphis that our regional economy succeeds the most.
Some people involved with economic development in our community say that EDGE has not taken a more Memphis-centric approach because City of Memphis didn’t fund EDGE while Shelby County did. Of course, this would be specious, because roughly 60% of the county’s money comes from Memphis taxpayers.
If Memphis funds EDGE, it will find itself in a familiar position – paying a disproportionate share of a joint city-county agency. In other words, Memphians would be paying 100% of the city share and then 60% of the county share, which means that Memphians would in the end pay 80% of EDGE’s budget – and to do it while none of the other county’s cities are putting in any money. Shelby County should fund the total costs of EDGE, because in this way, all cities are treated the same way.
Acting as an Agent of Change
In our view, it would be smart economic development policy for EDGE to acknowledge that our economic future hinges on what takes place in Memphis, and if we are unwilling to establish that as our leading economic principle, we will remain on the edge when it comes to key indicators of progress.
Our challenges are too great and our opening for progress is too small for EDGE not to narrow its focus on drivers of our economy, particularly minority business development, talent development, entrepreneurs, college attainment, and quality of place, and to refuse to accept the old justifications and the questionable data that often drives decisions to a preordained destination.
Most of all, we’ll know EDGE has been successful when we no longer have to sell Memphis at a discount to get companies to move here, and instead of tax waivers, the big magnet will our quality of place, the quality of opportunities, and the quality of talent.
Yes, it’s a tall order, and it will take many more EDGE boards in the future to complete these tasks. And yet, other cities have done it, and we acknowledge as we begin that it took them decades to turn their economies and their cities around. No cities are more at risk than mid-sized cities in the nation’s heartland but building on our assets and leveraging them to act dramatically, we can create more than the incremental movement ahead that we too often consider progress here.
Raising the Bar
EDGE can raise the bar. It can challenge conventional wisdom. It can shake off business as usual. It can refuse to accept things as they are. It can recognize that we can’t work harder, but we can work smarter. It can insist that we focus on quality rather than cheapness in our incentives. It can keep the pressure on the importance of developing a workforce that can compete in the highly competitive global economy.
In the end, the new EDGE board will have to develop an economic development plan that positions our community strongly for the brave new world that will exist after the recession. It’s not about low-skill, low-wage jobs.
It’s about, as Professor John Eger said: “The effort to create a 21st century city is not so much about technology as it is about jobs, dollars and quality of life. In short, it is about organizing one’s community to reinvent itself for the new, knowledge-based economy and society; preparing its citizens to take ownership of their community; and educating the next generation of leaders and workers to meet these global challenges…At the heart of this effort is ultimately defining a ‘creative community.’”
Part 2 of series.
I wonder if EDGE simply doesn’t know how to do neighborhood-based economic development. That seems like a whole different skill-set requiring slower patient approach that appreciates the complexity of starting small and local.
If you create a new entity with the same players versed in traditional economic development maybe you’ll get the same results.
Great article SMC!
Harumph!
Memphis want to play, memphis needs to pay.
Unfortunately, this isn’t play. We’ve given seven times more tax breaks than the other large counties in Tennessee combined. And then we cut services because there’s not enough tax money. We are in a vicious cycle and we’re largely fighting for the jobs that the most successful cities don’t want. It’s a race to the bottom.
The neighborhood approach mentioned earlier in a comment above sounds great (or maybe cute). However, you will never be able to create the number of jobs necessary to actually employ this city using that approach. The results will be so small and slow to achieve that it would require accepting that the end result will be a Memphis region that is defined by a significantly smaller economy and population. It also bends toward a service economy (which usually results in lower paying jobs) because small neighborhood based industries are not able to create the economies of scale necessary to actually compete on the national or international stage. Finally, a neighborhood approach is extremely intricate and involves extraordinary levels of detail which- seeing the overall need in Memphis and Shelby County- would require a small army of staff that then must be trained and funded. Not to be overly critical, but having been witness to what most of the local trained professional private and public (UofM/city) sector have come up with thus far, I am not convinced that this city has the number or quality of professionals to accomplish the task.
Time is not on this city’s side. In fact, we may be nearing a point where time has essentially run out. The appraisal process that is set to begin in the next year or two is expected to yield a significant decline in the overall value of property in Memphis and perhaps Shelby County as a whole. Lower property values will result in less funding for all services which will in turn make it even more difficult to attract or grow businesses and the quality of individuals necessary to support and lead them. Many years ago (long before I moved here), SCM wrote a post that hinted that the city was nearing the edge of a cliff. There would come a time where the downward spiral would be nearly impossible to reverse. Well it appears that time has finally arrived. The real shame is that there was a period of at least a decade when enough individuals could see the approaching train and gave plenty of warning, and yet the drivers (and most of the passengers) ignored their comments.
The neighborhood approach is a key element of a balanced economic development policy, which we do not have at this time. It’s also the work that’s being done by the Bloomberg Philanthrophy’s Innovation Teams right now and hopefully, soon, there will be new programs launched to show how this can be done.
The decline in property values won’t hit local government as hard as you think. In keeping with state law, the tax rate is always recalculated to produce the same amount of property tax revenues following a reappraisal. In the past, the tax rate has always gone down with reappraisals because of increased property values but with declining property values, for the first time, the tax rate will be recalculated upwards. In the end, city government will be whole when it comes to revenues but there is likely to be some political chafing as taxes go up.
We agree completely with your point about seeing the approaching train and continuing business as usual (the theme of this series of posts). As we wrote 2006: Sometimes in Memphis, it’s as if we’re the city equivalent of the frog sitting in the pot on the stove as the water gets warmer and warmer until it’s boiled to death.
local trained professional private and public (UofM/city) sector have come up with thus far…
There IS one? Where? who?
Planners? ED professionals?
Lipscomb?
Anon 11:36 Check out Advance Memphis. Using the neighborhood approach, they have trained and placed over 100 workers into the workforce at no cost to the taxpayer. They are one of the few nonprofits in the City who not only train low income residents ( in the Foote community) but also employ them with their employment agency. It’s taken 10 years for Advance to get to this point but they are gaining momementum.
Here is their website: http://www.advancememphis.org/
Hopefully what they are doing is recognized as model for more neighborhood based economic development. It’s working but turning the tide on poverty takes time and a lot of volunteers coming into help mentor and coach and prepare lower income residents for the workforce.
Please pardon my lack of brevity on this one:
I agree with you wholeheartedly that the degree and type of entrenched poverty that define so much of this city and region will take enormous resources and an entire generation to address or “lots of time and lots of volunteers”. The time issue has already been discussed- this region is essentially out of time so 10 years is too long to effectively combat the trend especially when there are currently trained citizens who are unemployed in the area and/or have relocated because of a lack of employment opportunities.
Regarding Advance, I would question where the employees were placed. Were they all full time positions? Were they hired by some of these distribution type companies that we are giving away the store in order to entice? The answers are not available on Advance’s website. I am not discrediting Advance’s accomplishments, as being employed beats being unemployed every time. However, when the training offered is only enough to help an individual land a service job at the back of a cafeteria or loading dock at a warehouse it is hardly bucking the trend and making sustainable neighborhood based economic changes. If anything it is simply feeding the types of employers that the EDGE is attracting making the community more dependent on EDGE economic policies. In the end, programs like Advance and the EDGE are aiding each other’s efforts. Advance provides the bare essential training for individuals to fill low skill employment and the EDGE is attracting low skill employers. In a world where we duplicated Advance’s efforts to every neighborhood in the city, we would have actually reinforced EDGE’s economic efforts because every employable person would have the base skillset for a job in a warehouse. If the desire is for Memphis to continue its current path, than growing both of these programs efforts would be ideal.
The financial support required to operate programs like Advance may not come via the tax collector, but it does rely on the generous contributions from individuals who also pay taxes. That fact should be balanced against a few very important points.
1) There is a limit to the financial support that is available to be donated by individuals in every community. Memphis is beset by a triple whammy of sorts: High poverty rate, relatively low average incomes and a demographic trend showing that every day several individuals/families with a higher education leave this region to be replaced by those with only the basic level of educational attainment. At some point we will exhaust not only the Fred Smiths and Pitt Hydes of this city but we will also have exhausted our for profit organizations that have all too often come to our rescue (like FedEx, AutoZone, Int’l Paper, the West Clinic. I-Bank, etc…).
2) In every community, there is a limit to the number of volunteer hours available from those whose time and skills might be of some benefit. There may be 1.3 million people in the metro, but having many of them volunteer for organizations like Advance Memphis would essentially be the blind leading the blind. In a city where the future is becoming so dependent on volunteer programs from A (Agape) to Y (Youth Villages) or even Z (if you count the Zion Cemetery clean up organization), we are tragically undermanned and understaffed.
While I am usually a grass roots, mom & pop, glass half-full kind of person, I am faced with the reality that no-where in the history of United States has a region that was defined by the similar levels of poverty, poor education, unskilled labor, institutionally lacking, and lack of financial wherewithal managed to reverse its negative trend. The turnaround stories like NYC, Pittsburgh, Portland, etc… either did not share the scale of these issues or were exceptional in one of those 5 categories. While I agree with SCM per the focus of the EDGE, I cannot help but think that they may simply be doing the best with what they have.
and what they have is half of what they were promised sinze memphis reniged on their funding.
As we wrote, Memphis should never fund EDGE. Memphians are county residents too and county government should pay the entire amount. After all, none of the other cities are paying any money into EDGE so why should Memphis?
Just wanted to clarify that when I mentioned EDGE “doing the best with what they have”, I was referring to the characteristics of the local/regional workforce and not to EDGE’s financial resources.