No one in this community has written more about the need for an economic reboot in the past 13 years than we have.

We have written numerous posts about the region’s troubling trajectory, and to back it up, we’ve posted our series, Data Points, that show how we are lagging in GDP growth, per capita income, jobs creation, population growth, and talent attraction.

In one of our earliest posts a decade ago, we opined that “Memphis has no margin for error.”

Although trouble signs were clear back then and had been building since the end of the 20th century, they were largely ignored in favor of positive talking points and hyperbole.  Because of it, the Memphis region’s economic indicators have grown more tenuous and various economic rankings showed that Memphis was falling behind cities that it had outpaced for decades.

An Epidemic

That’s why we welcome the candid appraisal of the economy that has been made in recent weeks from unexpected sources; however, for more than a decade, there have been others warning about the growing economic storm facing Memphis and Shelby County.

African Americans did it time and time again, but their concerns were drowned out by sloganeering using words like “renaissance” and “exciting momentum” and by complaints that they were just dwelling on the negative.

As former Urban League head John Jacob observed: “When the economy sneezes, black people catch pneumonia.”  Here, we have been in the midst of an epidemic of pneumonia for more than a decade, and as a result, no one knows more about the realities of Memphis economy than African Americans.

But it was not just these early warnings that we chose to ignore.  There was also the U.S. Conference of Mayors, which in the wake of the Great Recession, issued a report that concluded that Memphis would be one of the last cities to return to pre-2007 economic levels –  and it would not happen until the last quarter of 2017.

There were of course the economists who we quoted last week who should have gotten everyone’s attention, but they too were considered naysayers and ignored.  And yet, they have been proven right.  The Bureau of Labor reports that jobs growth for the Memphis region in 2017 compared to 2016 was only 0.63%, or a meager 4,000 jobs, placing our community #48 among the largest 53 metros in the U.S.

Urgency To Involve All Voices

All this is preamble to where we are today.  For the first time, some high-profile, influential people with the clout to shake up the conventional thinking that has served us so poorly for so long have injected a new sense of urgency into the long overdue discussion needed about our poorly performing economic development processes.

What encourages us the most is their emphasis on accountability, which needs to include new economic development standards, goals, performance requirements, and public reporting.

We appreciate the current sense of urgency about correcting our economic lethargy, but we must not short circuit the community discussion that is needed to define our goals and agree to the plan of action to achieve them.

Most of all, we have to make sure that the people whose voices were ignored for the past decade are at the center of a discussion that is candid and frank.  After all, not only were African Americans pointing out the warning signs but they were coming face-to-face with the realities of a lagging economy anchored in low-wage jobs.

No Musical Chairs

This isn’t about personalities or power or preconceived solutions.  It’s about setting up a respectful, open process committed to a data-driven analysis that agrees on what we can do to perform like a city in the Sun – rather than the Rust – Belt.

There should also be a public report card about the performance of our economic development processes, particularly on whether the strategies are increasing wages and attracting jobs that position Memphis and Shelby County to be more competitive in an economy driven by technology, innovation, and knowledge-based companies.

As this discussion continues, everyone should be mindful of the suspicions and lack of credibility that exist in large parts of the community and why the sense of urgency has to translate into an equally urgent commitment to making sure any discussion about the economy has to be inclusive and diverse.  Already, it has been predicted that this process, as one person put it, will be “another case of white men musical chairs.”

History Lessons

It is also a good time to reflect on the history and context of the economic development process.  For example, before EDGE was created, it was said that the economic development process lacked appropriate checks and balances.   A founding belief of EDGE was that its primary job was to create an economic development plan for Memphis and Shelby County, but that it should not (nor should the Chamber) be doing both recruitment and incentivizing.

As for history, in 2005, Memphis and Shelby County Governments hired URS Corporation and NexGen Advisors to evaluate the PILOT program.  It recommended 13 years ago a series of “summits” to “help define the City/County’s economic development goals and vision.”  “Findings should be incorporated into an overall economic development policy framework.” It also strongly recommended a “but for” test that means “private investment is not reasonably anticipated without public investment relative to this specific proposed project.”

A year later, pro-business Forbes criticized the PILOT program as ill-conceived for a public agency to pick winners and losers and shifts the tax burden from large corporations to small businesses.  Also in 2006, the conservatively-oriented Mercatus Center at George Mason University issued its own critique, calling for the city and county legislative bodies to become final arbiters and making the Industrial Development Board (now part of EDGE) an advisory group.

It also said the cost-benefit analyses rested on “dubious multipliers” and “assumes that none of these companies would have located in Memphis without the program and that the PILOT did not induce some of these companies to ‘crowd out’ existing investment or investment that would have occurred in absence of these PILOTs.”

“As a result, the cost-benefit analysis used in PILOT evaluations is of little practical use,” the Mercatus Center wrote.

A Real Plan Helps Residents

The mounting “lost” tax revenues were mentioned in 2013 as a “fiscal concern” in the Tennessee Comptroller of the Treasury’s scathing letter to former Memphis Mayor A C Wharton urging City of Memphis to improve its financial policies.

In 2015, the City and Regional Planning department at University of Memphis reviewed “policies, practices, and groups that help to define and implement economic development in Memphis.”  A seminal point it made was the definition of economic development as “an increase in the economic well-being of area residents usually manifested by positive changes in the level and distribution of area employment and per capita income.”

It’s the proper framework for evaluating the success of our community’s economic development program and a reminder of how often the “well-being” of residents is not calculated or considered in determining the success of the PILOT program.

The review also made the important point that “real estate development is often confused as economic development.”  “This misconception stems from the difference between what economic development should be and what it is in practice: instead of the focus being on research and analysis, it is more toward marketing, public relations, and sales,” it said.

Finally, the review states that economic development plans like the one developed with the Brookings Institution “contain no specific timelines, deadlines, or deliverables and there are no methods for target setting or performance tracking of implementation.  In effect, there is no mechanism to effectively track implementation of the strategies or to monitor progress.”


Join us at the Smart City Memphis Facebook page for daily articles, reports, and commentaries that are relevant to Memphis.