Knox Economic Development Failings

Does Knoxdom have its act together when it comes to economic development?

The prevalent answer from close observers of efforts to attract new employers and grow more jobs in Knox County is a resounding no. The county's economic growth is being stunted, in their view, by top to bottom failings on the part of everyone who is—or should be—involved in encouraging more manufacturing, distribution and other business activity in the Knoxville area. The bill of particulars includes:

* Lack of leadership on the part of top elected officials in giving direction to economic development activity or even getting involved in new business recruitment and facilitation efforts.

* Lack of coordination between the recruitment role of the Knoxville Area Chamber Partnership and the Development Corp. of Knox County, an extension of county government that acquires and controls business parks.

* Inability or unwillingness on the part of the Development Corp. to make sites available to prospective employers on terms that meet their needs.

Amid a cacophony of claims and counterclaims on the part of all involved, it's hard for a journalist like me to judge the validity of these indictments. But to the extent that they hold true, it's clear that Knoxvillians are being hurt by them in a variety of ways. For one, stunted economic growth translates into lack of growth in the tax base, which means reduced revenues to support schools and other governmental services (or else higher taxes to cover the shortfall). For another, lessened job growth means less opportunity for young people entering the work force. Especially hurtful is the inability to keep or attract highly skilled and/or educated workers here.

The ranks of critics include not only private developers and realtors who would stand to benefit from more economic stimulus but also the heads of companies that have located or relocated elsewhere because they couldn't get a site in Knox that met their needs. While many of them insist on anonymity, some are prepared to be quoted at least to some extent.

When it comes to lack of exertion on the part of elected officials, Alex Fischer, who was until recently the state's Commissioner of Economic and Community Development, observes that, "In communities that are doing well you generally have a commitment from the very top. I was hearing frequently from [Chattanooga Mayor] Bob Corker and [Hamilton County Executive] Claude Ramsey, and [Shelby County Mayor] Jim Rout always has a prospect card in his pocket." Fischer, who is now Gov. Don Sundquist's chief of staff, goes on to say, "I don't believe I ever heard from [County Executive] Tommy Schumpert or [Mayor] Victor Ashe.

Where the Development Corp. is concerned, a developer, Joe Hollingsworth, in a Nov. 30, 2001, letter to its 11-member board of directors, blasted the performance of its executive director, Melissa Ziegler. Hollingsworth, who has served as Vice Chairman of the Tennessee Board for Economic Growth, cited several examples of what he termed "credibility problems" on Ziegler's part. His letter concluded that, "our company has made a deliberate decision never to build any more speculative industrial facilities in Knox County as long as your present executive director remains. We simply cannot risk our credibility and integrity with our clients based on the lack of credibility of your executive director."

A long-running schism between the Development Corp. and the Chamber Partnership was exacerbated last fall by two recruiting losses. In September, Trex Corp., a manufacturer of synthetic wood products, announced it was canceling plans to build a $50 million plant that would have employed 160 workers at Eastbridge Business Park. In December, H.T. Hackney Co. announced it would be relocating a distribution center with 320 jobs from Dale Avenue in Knoxville to Roane County—a loss for which the Chamber Partnership and the Development Corp. both took some blame.

Finger pointing and trash talking between the two entities has reached the point that a professional facilitator from TVA in Chattanooga has been retained to attempt to mediate their differences. "We're looking to delineate our respective roles and make it into a seamless operation," says the head of the Development Corp.'s board, Hank Bertelkamp.

The head of economic development at the Chamber Partnership, Jim Breitenfeld, says, "It's not appropriate for me to go off the reservation in the midst of a good faith effort to establish productive relationships." But he and the Chamber's president, Tom Ingram, go on to make clear their belief that Trex should have come here and Hackney should not have been allowed to get away. "Site selectors all over the country were watching to see where Trex landed; so you have both tangibles and intangibles associated with their decision not to locate here, though we are continuing to pursue them," Ingram says.

Ziegler, for her part, insists that, "It wasn't that we lost the project. It was a decision on their part that they're not doing another facility at this time." Coming, as it did in the midst of a recession and close on the heels of September 11, that seems highly plausible. But the chamber crowd remains convinced that the Development Corp. didn't go far enough in offering Trex incentives including lower land costs for its plant and coverage of site preparation costs that reportedly exceeded original projections by more than $1 million. Ziegler says she's "in the process of having an incentive study done by an industrial consultant. We want to know how we compete." But she adds that, "It's probably important for the Chamber to have incentive resources beyond what we can do." Knox County funds the Development Corp., but it's not clear where the chamber would get the money for incentives.

As for Hollingsworth's allegations, Ziegler reels off the names of several firms that have located in county business parks, firms she says will attest to her proficiency in accommodating them. In a lengthy rebuttal to Hollingsworth's letter, Development Corp. board member Lee Inglehart concludes, "I have satisfied myself that the allegations in your letter are unfounded. Melissa, as all of us, may have some faults, but I feel very strongly that credibility and integrity are two of her best qualities."

It's anything but clear how much developmental shortcomings have cost the Knoxville area job wise or otherwise. According to the state Department of Labor and Workforce Development, the number of people employed in Knox County has grown 8.5 percent over the past four years. This exactly equals the employment growth rate in the five surrounding counties that comprise the Knoxville MSA—several of whom are anecdotally perceived to have been running rings around us. Moreover, it exceeds the statewide average of 6.6 percent and, even more so, Davidson County's 6.1 percent.

Critics contend, however, that Knox job growth has been mostly in low-end service jobs whereas others have been plucking more manufacturing, high tech and other high-end jobs on which economic development activities are supposed to be focused. Since the state doesn't categorize employment growth by county, there's no way to measure this.

Despite Knox County's remarkably low (for these times) unemployment rate of 2.5 percent, it seems clear that a continuous, concerted effort is needed to attract and foster more high-end employment opportunities for the longer haul. And that is where a lot of evidence (more than can be presented within the space constraints of this week's column) suggest that Knox is falling down.

Next Week: Issues and Resolutions.

© 2002 MetroPulse. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.

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