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.