After Electrolux? Memphis signs look positive
Could Electrolux’s fate stir public backlash over further tax breaks for business? Sure. Could this weigh on the new economic agenda? Yes. But civic leader Richard Smith insists Memphis will prevail.
Just about a year ago, Richard Smith declared, quite publicly, that a culture of complacency had mired Memphis, stagnating the economy.
As the voluntary chairman of the Greater Memphis Chamber, Smith had met with visiting site selection consultants, whose views can steer distant companies like Electrolux to places like Memphis.
What he heard from them was less than flattering. Calling for a deal-making mentality to energize the city, he urged broad reforms for the traditionally staid chamber and especially the tax-cut-granting EDGE board, the economic development arm of Memphis and Shelby County governments.
“I can’t do all this by myself,” Smith told The Commercial Appeal back then. “I need help.” What has happened since then? Memphis hasn’t seen the full revolution, at least not yet, although politicians have pitched in, tamping down the complacency, drawing an expression of satisfaction from the impatient Smith.
“Folks in the public sector did answer the bell,” Smith said, adding, “I’m not worried about complacency at this point.”
Electrolux closing
Accompanied by Beverly Robertson, the chamber’s new interim chief executive officer, and Memphis financial executive David Waddell, a chamber ally, Smith took a seat in a conference room beside his own third-floor Fedex office in East Memphis’ Crescent Center.
For nearly 90 minutes they discussed first-year accomplishments and what they want to do in 2019. They spoke shortly before Electrolux said its kitchen-oven factory will close permanently in 2020.
Despite earlier rumbles that Electrolux was roiled by overcapacity in the appliance industry on top of the retail contraction by its own top customer, Sears, the disclosure hit the city hard. The plant had been recruited from Canada in 2010 with lavish use of public incentives. It had opened in 2013.
Asked this week whether Electrolux walking away will strain his economic ambitions, possibly making the city look worse in the view of site selectors, Smith, whose full-time job is chief executive of the 22,000employee Fedex Logistics division, took a businesslike view.
“This will only put a strain on our efforts if we have a kneejerk reaction, without understanding the context and the facts,” his email says.
“The Electrolux deal precedes my time on the Chamber board, but in hindsight it’s easy to criticize,” Smith writes. “Don’t forget, however, that it was done during the worst recession since the Great Depression, so there was a certain desperation involved. Many communities would’ve thrown everything we threw at them . ... It serves as a cautionary tale, but one that is far in the rearview mirror in terms of how we structure deals today. The protections that many are clamoring for, such as clawbacks or reverters, are already in practice.”
EDGE and the chamber still will try to lure new factories here — about 50 prospects are in the chamber’s pipeline. But as part of the new economic strategy, the agenda has widened beyond reliance on EDGE tax cuts.
The new emphasis, he said, puts a premium on lifting up small businesses in Memphis and Shelby County, luring high-wage offices and training people for the new jobs.
Memphis leaders and residents, Smith wrote, are “now demanding that we grow our economy, and specifically wanting us to channel more of that growth to the historically disenfranchised minority community and also to bring higher wage jobs.”
Memphis strategy
How will this unfold? On three fronts. Robertson, Smith and Waddell discussed the new fronts at length. The aim is to recruit new business from out of town, particularly high-wage firms, grow small firms already here and ramp up worker training programs. What they said boils down to this: ❚ Land factories. ❚ Attract high-wage office and tech firms less reliant on PILOT property tax cuts.
❚ Go small. Invest in local startups. One might someday grow as big as Fedex. Epicenter, a business support group spun out of the chamber, has landed $40 million for its venture capital and aid fund.
❚ Get business into the hands of small minority firms.
❚ Make sure firms locate not only in comfortable East Memphis and the rebounding Downtown, but also in the empty commercial strips common from Frayser to South Memphis.
❚ Just as importantly, unite disjointed worker training programs. A workforce summit is being considered. The aim is to steer thousands of Memphians through training classes that can lead to higher wages and fill now-empty positions at local businesses. And entice the people coming out of prison into job training.
❚ At the same time, find ways cash-strapped commuters can go between job and home at low cost. Buses and child care offered by the region’s extensive faith community could help.
Over the coming months, a new group will form and guide the strategic economic vision. Called a joint venture, it will bring in representatives of EDGE, the chamber, the Downtown Memphis Commission, the Memphis City Council, the Shelby County Commission and the city and county mayors. At the same time, reports on economic progress will appear quarterly.
Efforts also will identify places suited for new investment. As it is now, the city is short on available sites. The latter effort could piggyback on efforts underway to refurbish the old Firestone site and the Memphis Community Catalyst Fund, a new initiative cited by Memphis Mayor Jim Strickland. It would steer investment into eight largely neglected neighborhoods.
Electrolux backlash
Could a fading Electrolux trigger local backlash over further economic incentives for any kind of business? Sure. Could this weigh on the economic agenda? Yes.
Electrolux was the economic development prize of the decade for Memphis. The $188.3 million in local and state incentives was the largest inducement package ever handed out in the region.
Waddell figures the complacency Smith referred to a year ago traces in part to packages like Electrolux’s. Some homeowners rail at corporate tax cuts and believe — mistakenly, he said — that tax cuts raise property taxes on homes. With tax breaks serving as the chief tool for local economic developers, and homeowners discontented about their use, many politicians in the past were reluctant to grapple with a local economy growing unusually slowly since 2000.
Robertson, formerly head of the National Civil Rights Museum in Memphis, said dislike for tax breaks flows from another thought as well. Not every resident links new jobs with tax cuts. They see the same worn homes and old cars on their streets. In the absence of prosperity in the neighborhoods, she said, many Memphians insist economic development only cuts taxes for rich corporations.
“The broader community wants to know how this is going to be good for my community,” Robertson said.
In the coming months, she said, regular community meetings could explain how people and neighborhoods can benefit, particularly as efforts go forward to develop minority firms and train more people.
“Businesses have jobs available,” Robertson said. “We have people available to be trained.”
Memphis in 2019
Memphians may dislike corporate tax cuts, and that attitude may foster long-term complacency, but Smith insists the strategy being set in motion reflects the new energy among community leaders.
When he met with the site selectors a year ago, Smith said, he learned: “The word on Memphis wasn’t good.”
Memphians appeared overly concerned with crime and poverty, recidivism and an untrained labor force, he said, rather than intent on attracting new industry able to help land better jobs for Memphians. Indeed, Electrolux was the last major manufacturer to relocate to Memphis.
“All cities have challenges,” Smith said. “We were hiding behind our challenges.”
He argued then that Memphis required a dealmaker able to woo firms. Last fall, Mimeo and Indigo Ag each announced their operations offices would open in the city, adding about 920 higher-wage jobs combined, the first headquarters-style jobs attracted in high volume in years.
Smith said Mimeo insiders told him EDGE officials made great efforts in reaching out and coordinating with state agencies.
“They answered the bell,” he said of EDGE staff. “Their whole posture was, ‘What can we do to bring you here?’ ”
The urgency evident then isn’t about to fade, he said, as the new agenda unfolds, even if Electrolux is walking away. “I think the community has woken up,” Smith said. Reach Ted Evanoff at evanoff@commercial appeal.com and (901) 529-2292.