Middle Tennessee digs deeper to land jobs

Cities say sinking economy makes incentives a must

By Bonna Johnson
THE TENNESSEAN

When Mayor Karl Dean announced this spring that Loews Hotels would put a major service center in downtown Nashville — rather than in one of hundreds of competing cities — it was the first time in more than a decade the city had plunked down cash to lure new jobs.

It's a departure from the way former Mayor Bill Purcell ran Nashville's economic development efforts from 2000 to 2008, and one that site selection experts see as clear evidence that local leaders are willing to play more aggressively in the job-hunting game.

"That's a meaningful shift," said Adam Bruns, managing editor at Site Selection, a trade publication that tracks corporate real estate strategy and economic development.

The change in strategy comes as many state and local governments — many of them coping with tight budgets and diminished tax revenues — search for creative incentive packages and more often court small to midsized companies that they may have given less attention to in the past.

Local Chamber of Commerce officials view Dean's re-engagement and willingness to spend local money to win jobs as a game changer.

"You don't want incentives to be the leading reason a company comes, but if you're not willing to talk about it, you risk losing out on projects," said Janet Miller, chief economic development and marketing officer for the Nashville Area Chamber of Commerce.

Loews promised to create 200 jobs, and city leaders pledged a $310,000 grant to reimburse the company for what it spends on information technology.

The deal was the first significant local incentive package in Nashville since then-Mayor Phil Bredesen landed Dell computers in 1999 with an agreement that offered a long-term property tax break, free use of property and $8 million worth of infrastructure such as water and sewer lines.

Dean has made economic development a top priority, but he doesn't have a set budget in mind by which he calculates the size of deals, said Alexia Poe, economic and community development director in the mayor's office.

"The mayor has said each situation is different, and each project has its own set of needs," Poe said. While he will consider tax abatements or direct cash grants if appropriate, "Giving away the store is not an option," she said.

Tax breaks are often criticized for failing to create the jobs that are promised by a company while eroding a city's tax base.

But national site selection consultant John Gutshaw said that when a company gets "down to two to three communities that really work for the project … that's when incentives become important for the tie breaker."

Everything else being equal, "you go to the place where the incentives are," said Gutshaw, a partner in Wadley-Donovan-Gutshaw Consulting of Bridgewater, N.J. More here.