published Wednesday, July 16th, 2014

Cook: Why VW may not matter

The good news is that VW will build its SUV here, adding an estimated 5,600 more jobs -- direct and indirect -- to the region.

The terrible news is that it may not matter.

In the last several years, Southeast Tennessee has received more European investment than some places will see all century. VW, and its $1 billion footprint at Enterprise South. Wacker. Alstom. All in all, German companies alone have invested billions in the Chattanooga area.

It makes for a dreamy verse in the renaissance song we sing to ourselves: from dirtiest city to best place to live, the Chattanooga story keeps getting better and better.

Call it the VW mystique. We believe that with more and more European investment, we can somehow overcome the economic fragmentation plaguing the rest of America.

There's only one problem.

We can't.

"The rising tide of global investment has not raised all ships. In fact, many neighborhoods in Chattanooga are poorer in 2013 than they were in 2000," writes Dr. Ken Chilton, professor at Tennessee State University and former director of the Ochs Center for Metropolitan Studies.

In June, Chilton and two others -- Owen Furuseth at the University of North Carolina-Charlotte and Kimberly Triplett, also at TSU -- presented a paper at the City Futures Conference in Paris, France, that rethinks the VW-as-savior narrative.

The title of the paper speaks volumes: "Who Benefits from European Investment in a mid-sized US City? The Bad News from Chattanooga, Tennessee."

"Economic development success is not translating into widespread economic improvement," they write.

It was 2008 when VW announced its initial investment here. State leaders had promised $577 million in tax incentives. Since then, more than 12,000 jobs have been created and $53 million a year added to the state and local tax base, according to a University of Tennessee study.

So leaders chased the SUV expansion like a Holy Grail, ultimately offering another $300 million -- or perhaps even more -- in tax money.

(Consider the irony of Tuesday's shiny-happy news conference, held at an art museum, yet Hamilton County chooses not to fund art teachers in its elementary schools.)

All together, that's nearly $900 million in tax breaks.

So you'd think things would have improved remarkably, right?

"General prosperity and growth in Chattanooga do not seem to be alleviating glaring inequalities," Chilton writes. "In fact, the data suggest that the rising tide is lifting fewer and fewer ships out of poverty. This has major implications for U.S. economic competitiveness."

Major implications? It has damning implications. Even with all our foreign investment climbing into the billions, our city remains fractured, with some neighborhoods not unlike Third World countries.

Chilton's research shows:

• Economic segregation increased between 2000 and 2012.

• Social class is becoming more rigid.

• A large population of unskilled workers attends highly segregated schools.

• Roughly one-third of African Americans live in poverty.

"Concentrated poverty," he writes. "Health disparities, community violence, low-quality schools and a general lack of economic, human and political capital."

This should be the news out of Flint, not Chattanooga. Yet our Euro-VW investment has not trickled down enough to alter and uplift the opportunities available for those who need them most; a very clear line remains between investment and disinvestment.

"The low-hanging fruit of economic development has been picked, and the new norm is slow growth characterized by increased inequality," he writes. "The old jobs that provided pensions, secure incomes and upward mobility are gone and they're not coming back."

Chilton sees it as an issue of public education.

Graduating students aren't ready for entry-level VW jobs, a point that should both embarrass and motivate us. No one knows this more than VW, which partnered with local community colleges to create workforce development.

But with nearly $900 million in tax breaks, it shouldn't stop there.

"It's great to have the Chattanooga State-Volkswagen Academy, but why not tie in directly to Howard and Tyner and Brainerd, where these kids can see from grade nine a path that pays off with a job from VW paying $18 an hour at age 18?" Chilton said over the phone this week.

With the new SUV, we have been given a second chance to craft such policies -- with intention -- that creatively and purposefully steer the blessings of foreign investments into the places starving for them.

Otherwise, we face a very real dead end.

"A permanent underclass is emerging," he concludes, "that is ill-equipped to compete in a global economy."

Contact David Cook at dcook@timesfreepress.com or 423-757-6329. Follow him on Facebook and Twitter at DavidCookTFP.

about David Cook...

David Cook is the award-winning city columnist for the Times Free Press, working in the same building where he began his post-college career as a sportswriter for the Chattanooga Free Press. Cook, who graduated from Red Bank High, holds a master's degree in Peace and Justice Studies from Prescott College and an English degree from the University of Tennessee at Knoxville. For 12 years, he was a teacher at the middle, high school and university ...

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aae1049 said...

If things are hunky dory why has the poverty rate climbed from 17 percent in 2008 to todays 28 percent> Why is the municipal sales tax base revenue remained relatively flat for the so called boom town. Why has the property tax base for Chattanooga remained flat, and annexation was required to grow the base. Where is the tangible municipal revenue increase if giving VW all of our damn money is so great. If these corporations we pay to come to Chattanooga generate so much revenue, where is the growth?

The fact is only 50 percent of the workers at VW actually live in Chattanooga, most hit the highway to live else where.

What if the city and county invested the bond issues and pilots into our own infrastructure and schools, instead of drinking the trickle down Chamber Kool Aid. I would rather buy 2000 people a house or send their children to college free than give a rich corporation $300 million in local tax dollars.

The city of Chattanooga claimed dead broke status and cut promised pension and benefits, but will find millions to give to VW in bond issues with term obligations that will exceed the life of the plant.

David, why won't the TFP tell the people the truth about PILOTs that are cumulatively impoverishing our city by passing the cost of these corporations service onto we the little peasants.

July 16, 2014 at 12:19 a.m.
adoucette said...

What isn't shown is ANY CONNECTION to VW opening its plant and THESE:

• Economic segregation increased between 2000 and 2012.

• Social class is becoming more rigid.

• A large population of unskilled workers attends highly segregated schools.

• Roughly one-third of African Americans live in poverty.

All that shows is the abject failure of the current Black Culture.

Neither Corporations nor Whites will ever solve the problems they live with, only those living this way can change it.

If the culture doesn't change, nothing else will matter.

July 16, 2014 at 9:36 a.m.
timbo said...

The big fat question is...Where is the $52.2 million in cash that was promised in this deal from the city and county coming from?

It has to be borrowed or taxes increased. More money wasted down a rat hole.

July 16, 2014 at 10:25 a.m.
timbo said...

Cook....One more thing..the problem is that the PROFIT from these companies go back to Germany. Profit from American companies stay here and work through the economy.

The other problem is these huge tax breaks that foreign companies get mean that their actual contribution to the tax base is small compared to small business and American corporations. Just look at the lousy VW deal and it's virtually non-existent tax contributions to the local government.

VW and the Germans are laughing at us all.

July 16, 2014 at 10:32 a.m.
GaussianInteger said...

"Profit from American companies stay here and work through the economy."

That's BS and you know it, Timbo.

July 16, 2014 at 6:52 p.m.
timbo said...

Gaussianinterger...You are absolutely wrong. Most business profits of american companies are spent in the US. You have succumbed to the myth that they ALL profits are hoarded in overseas banks. Although there is a substantial amount being kept internationally, the bulk is spent right here.

If you disagree, show me something to dispute my statement.

July 17, 2014 at 2:34 p.m.
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