Changing the Game of Economic Development in Oak Ridge: Part 2

The topic of city council’s work session this month was Economic Development. Since the city manager’s initial presentation to council on the subject in January, the two most heavily funded organizations (of the Economic Diversification Fund) have made multiple attempts to persuade council to continue funding them at nearly the same levels as in the past.

Both the Chamber of Commerce and the CVB made presentations at our work session prior to our discussion. I must say that I was floored by the claims made by the Chamber of Commerce. As usual, they appear to be taking extensive credit for growth that has not truly materialized or that they had little-to-nothing to do with.

Their claims of bringing in nearly $500 million in capital and nearly 5,000 employees did not go unchallenged. When fellow councilmember Anne Garcia Garland asked for details on how many of the employees lived in Oak Ridge and how much revenue the city had seen from the capital investments, chamber president Parker Hardy flippantly replied that such data would take months to glean and that he could either spend his time looking up data or chasing leads. Clearly, he has no intention of substantiating his lavish assertions.

The meeting moved on to the discussion phase, moderated by Darrell Akins. His initial question to us was, “Should the City of Oak Ridge be engaged in Economic Development?” As I was attempting to explain my position (that our role should be significantly limited compared to what it has been), I was cut off mid-sentence and we were all directed to answer “yes” to the question posed. I foresaw no benefit in my continued participation under such conditions, so I chose to leave. No action or decisions came out of the remainder of the meeting. Mr. Akins has since apologized, I’ve accepted and we’ve moved on.

As a follow up to my earlier piece, I shared the following letter with the press and my fellow councilmembers. Ideally, I’d like to give the entire $1.4 million back to the taxpayers and allow capitalism to flourish unfettered. But because I am the only council member who subscribes to the laissez-faire philosophy, my position statements are meant to be a reflection of my willingness to compromise.

Mr. Watson & Fellow Council Members:

At our last retreat, I proposed that we each share our specific positions regarding the Economic Diversification Fund. A successful economic development strategy must focus on both retaining and increasing business and residents with a primary goal of establishing a more competitive financial position. For Oak Ridge, that means becoming a more affordable place to live and work. With that in mind, I present my point-by-point response to Mr. Watson’s Eight Point Economic Statement:

1. I support the city manager’s proposal to eliminate this fund and distribute the costs within the general fund IF that distribution includes some reduction and/or reallocation of funds to the direct benefit of our taxpayers. Of the $1.4 million we currently spend, I recommend that we attribute half towards a reduction in the property tax rate (the equivalent of 7.7 cents). Such a reduction will benefit every existing and future business and home owner.

Given the tremendous impact of the EPA mandate on our water/sewer rates, the only responsible action we can take with the $119K water works transfer is to apply it in a manner that minimizes future rate increases. The remaining $581,000 would still be a very generous amount to attribute to economic development when compared to our staunchest competitor who spends less than one-tenth that amount ($52K per year) for the same cause.

2. I support modifying the current tax abatement policy by making council the final approving authority on any and all PILOTS, TIFS or other tax incentives. As it stands, the IDB has issued over a dozen of these subsidies and is preparing to issue a second for the same business. They sit on a bank balance of over $1M that the city cannot access and, to date, we’ve no hard data to support the claim that these incentives have truly benefited the tax-paying citizens and businesses who pay all of their taxes without protest.

If anything, these incentives lure in temporary tenants who move on once they’ve met their obligation. Farragut brought in the only Costco in the entire state without incentives. We should aim to attract long-term businesses that are more committed to the vitality of our city than how much they can save in the short term.

3. I agree that all future contracts should contain measurable benchmarks that clearly demonstrate Return on Investment (ROI). We have far too many organizations taking credit for any and all successes but none that take responsibility for our failures. This charade must end.

4. I neither agree nor disagree with the recommendation that the CVB be brought in house. Having served on the CVB Board of Directors for a year, I do believe that they are grossly overfunded and have yet to demonstrate any true ROI. Because the city is their sole source of funding, I would recommend a 50% reduction to ~$200K with a stipulation that some of that funding be allocated for tangible tourism improvements, i.e. the rowing lane improvements cited in this year’s CIP. A narrowed focus on those events that bring in the most overnight visitors should be factored into any contract. As it stands, the three largest attractions (rowing, Windrock and the half marathon) are unaffected by CVB efforts.

5. I agree that capitalizing on the UPF project should be our top economic development priority. I believe that the most important aspect of that initiative should be an emphasis on reducing the cost of doing business in Oak Ridge via a reduction in our property tax and fee structure.

6. I support the development of an internal Economic Development team that does not increase the city’s total number of full time employees (FTEs). Such a team should remain dynamic (via contracts) to avoid stagnation and myopic foresight. Additionally, we should be looking to reduce FTEs whenever attrition will allow given how heavily staffed we already are (compare our 396 FTEs to Maryville’s 300.)

7. I support Mr. Watson’s recommendation that festivals, arts, events and entertainment should be outsourced and funded by community sponsorships. We are blessed with a tremendously rich base of organizations that fill practically every imaginable art and entertainment need. Even if we were to lose some of the many free events that we’ve provided for in the past, Oak Ridge would still be flush with affordable art and entertainment opportunities.

8. I agree, in part, that Oak Ridge should continue to belong to some organizations that contribute to our goals. However, we should eliminate those that have competing interests and/or have proven ineffective. The Chamber of Commerce is the most heavily funded of all to the tune of $268K per year. This is outrageous, especially when compared to surrounding communities who’ve experienced significantly greater growth. Farragut pays $14,000 to their chamber while Lenoir City pays even less at $7,050 per year.

I take issue with our chamber on a number of fronts. First, is their treatment of some of their members. I’ve heard countless stories from past and present members that the chamber lures them in with great promises only to hound them with requests for free or reduced services. This is an unacceptable way to treat anyone, especially dues-paying members, many of whom are struggling small businesses.

And even though they have no problem taking from taxpayers, the chamber denies meeting access to non-members. I recall being contacted by Mr. Hardy regarding the sign ordinance meeting they held a few months back. He wanted to clarify that non-members, even though affected by the chamber’s recommendations, would not be allowed to participate.

In addition to the $268K we give them, the city generously allows the chamber to occupy a prime piece of real estate for less than $600 per year. The value of that gift is exponentially compounded when you consider the property tax revenue we could be collecting if sold to a private developer.

Finally, and most importantly, our chamber has demonstrated no significant impact on our overall financial health. Furthermore, they cannot fairly fulfill their obligation to advocate for their members while simultaneously being so reliant on the city. It’s time they stand on their own merit and become self-sustaining like other chambers across the country. I support cutting the city’s contribution to the Oak Ridge Chamber of Commerce by 100%.

While I agree that City Council and senior community leadership hold some responsibility for economic development, we must be realistic about what government can impact within the framework of a free market. Our past attempts greatly exceeded our scope of influence, as Mr. Watson has pointed out. Those efforts have proven both unsuccessful and wasteful of taxpayer monies.

This council must ensure that we are making the best use of every single dollar entrusted to us. Part of that responsibility requires that we acknowledge and do something about the burden that we’ve placed upon our constituents.  If we add to the 7.7 cents I referenced earlier what my fellow councilwoman Jane Miller has proposed (a 10% reduction in the general fund) we can save ALL taxpayers a total of 29 cents of their $2.39 property tax rate. That’s a 12% annual savings! That should be our goal and I will personally strive to see it become a reality as there truly is no stronger marketing message than “Oak Ridge is cutting taxes!”

Sincerely,

Trina Baughn

Oak Ride City Council