This city has been a poster child for economic development, the good and the bad.
Tax breaks and cash incentives have flowed. Tourists, sports teams and conventioneers have come. Hotels and restaurants have bloomed. And now Amazon.com Inc., among the most-sought-after employers, is erecting a pair of towers downtown to house 5,000 new employees, a move the company promises will “further the resilience, the vibrancy and just the overall coolness” of a place once known only for music.
With coolness comes clutter. I’ve been traveling here since my brother moved to Tennessee in 2004. Over 15 years, the population has grown by 19 people a day on average — from 588,512 residents in 2003 to 692,587 in 2018 — as folks stream in to take jobs in health care, autos, banking and more.
Home prices rose; public services sputtered; traffic clogged. Growing pains are now as plentiful as the honky-tonks lining the city’s Broadway.
Big business, once the object of Nashville’s desire, is increasingly seen as a source of ills. An annual Vanderbilt University survey shows growing discontent with the rate of expansion: three-quarters of those polled say the population has grown too quickly and that corporate-subsidy spending in the Music City is overboard.
Corporations should be keeping a close eye on whether a new mayor with a big mandate can figure out how to soothe the bad feelings. Nashville isn’t the only place, after all, wrestling with this problem.
New York’s breakup with Amazon this spring, bipartisan criticism of handouts for companies and the emergence of big-business skeptic Sen. Elizabeth Warren in the 2020 presidential race indicate a broad appetite for a new formula for economic development.
John Cooper, a 63-year-old real-estate developer, won Nashville’s recent mayoral race by nearly 40 percentage points, promising to curb the subsidies that lure big business. Skyscrapers and luxury housing developments are everywhere, yet city leaders can’t balance a budget. A surprising deficit, reported in 2018, has given Nashville a cold shower. “People are saying, ‘We were told one story, and now we’re dealt this slap in the face,'” said John Geer, a Vanderbilt political science professor who co-wrote the study.
Justin Owen, chief executive of the Beacon Center of Tennessee, a right-leaning think tank, asked: “Why do we have to talk about the inability to pay our teachers, police and firefighters, yet we’re still announcing megadeals with Amazon and other companies?”
The city has committed big dollars to international businesses — including $56 million in long-term incentives to tire maker Bridgestone Corp., $62 million to Omni Hotels & Resorts and $17.5 million for the Amazon towers. But local and state tax structures, including no income tax and property-tax equalization policies that encourage commercial and residential property owners to appeal assessment hikes, make it hard to profit on growth.
Between 2010 and early 2017 the city awarded businesses-property tax breaks and other incentives worth more than $167 million, according to The Tennessean’s analysis of data from the Mayor’s Office of Economic & Community Development. Those companies then promised to add about 13,000 jobs and $1.2 billion in capital investments, the newspaper said.
“People say, ‘With all these cranes in the sky, how did we run out of money?'” Mr. Cooper, a Democrat, told me during a long chat on a rainy afternoon.
A month into his tenure, he signed a deal with the Music City Center, a city-owned convention hall, to transfer millions of dollars to city coffers to address immediate shortfalls. The longer-term goal is to design incentives that focus on developing Nashville’s existing talent base instead of just importing more people.
“We are an ambitious town, and we want to make the most of our moment,” Mr. Cooper, a Nashville native, said. “We’ve got a generation of economic development narrative here that we are a welcoming, affirming place to move. But you’ve got to be super careful what you give away, because you’re already giving [companies] a major deal in our low tax rate.”
Mr. Cooper supports low taxes and his real-estate business has undoubtedly profited from the region’s corporate development.
The mayor said corporate subsidies aren’t always designed with the existing population in mind. Amazon, for instance, is bringing jobs with an average salary of $150,000 — jobs that will create more economic activity but won’t necessarily go to Nashville locals.
Mr. Cooper has told Amazon “it is important that you be a famous success here. We are not New York.” But he’s also started dreaming up a better mousetrap for future business attraction.
His ideal incentive “looks like a human-capital investment where you would say what skill set do you need to come from our workforce and I’ll go get certifications for these people,” Mr. Cooper said.
Cities, counties, states and the federal government all offer various subsidies to companies looking to move or expand. Nashville offers to waive property taxes for various periods and hand a business $500 for every job created. Those deals are bundled with state incentives that sweeten the pot.
The Upjohn Institute, a nonprofit research center, estimated that business incentives cost all levels of U.S. government $45 billion in 2015, more than triple the 1990 level. Still, the growth of incentives has slowed since the early 2000s as cutbacks are happening in certain parts of the country.
That’s because skepticism has been rising about the need for the inducements. Amazon, for instance, earns more profit in a single day than Nashville will pay it over seven years. The Beacon Center’s Mr. Owen said these incentives can be “press-release economics” — pleasing to shareholders and beneficial to politicians, but hard to justify to workaday citizens.
Look no further than Nashville’s “cherry-tree moment,” as Mr. Cooper called it, to see how the calculus is changing in Nashville.
Last spring, city officials planned to cut down 21 historic cherry trees along the Cumberland River to make room for a stage for the National Football League to hold its draft. The trees would be turned into mulch for a trailhead.
Jim Gregory, a Nashville-based data scientist and tree conservationist, cried foul. He set up a Change.org petition to protest the plan.
“The zeitgeist of the city was that we have had so many outside forces encroaching on us that the trees represented a final straw,” Mr. Gregory said. He estimated that 5% of the city’s residents supported the petition, based on data provided by Change.org.
Officials reversed course, with the NFL vowing to keep 11 of the trees intact, pay for the relocation of the other 10 and fund the planting of hundreds more.
The cherry trees may have gone unchopped, but I cannot tell a lie: The incentive game remains vibrant. Many companies still demand tax breaks to seriously consider a region or city.
Waste Management Inc. recently searched for a new headquarters. It considered several locations, including Nashville, before settling on property in its current home city, Houston. CEO Jim Fish told Chief Executive magazine that Nashville was crossed off Waste Management’s list — in part because it didn’t offer incentives.
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