EconSouth (Second Quarter 2007)

Montgomery Drives Ahead With Autos

Montgomery Amphitheater
Photo courtesy of the Montgomery Area Chamber of Commerce
Part of Montgomery's plan to rejuvenate its downtown, the recently completed outdoor amphitheater sits on the banks of the Alabama River and next to the city's minor league ballpark.

Montgomery, Ala., is no stranger to contradictions. The original capital of the Confederacy and current state capital is also where in 1955 Rosa Parks refused to give up her seat at the front of the bus, setting in motion the Montgomery Bus Boycott that helped launch the civil rights movement.

Today, the economy of this metro area of about 333,000 people, long bolstered by the stability of state and federal government jobs, is benefiting from another pair of distinct forces from opposite sides of the globe.

Autos drive growth
The South Korean automaker Hyundai opened an assembly plant just south of the city in May 2005 that, along with related suppliers, has created more than 5,000 jobs throughout the four-county Montgomery metropolitan area, estimates Keivan Deravi, an economics professor at the Auburn University Montgomery campus who tracks the local economy.

The auto plant helped to round out the local economy by beefing up a weak manufacturing base and raising wages. Before Hyundai came to town, the area's average manufacturing wage was about $12.50 an hour; since Hyundai's arrival, that same wage is more than $14 an hour, Deravi said.

Hyundai's growth isn't over, though. In March 2007 the company announced plans to build an engine factory next to its assembly plant and plans to employ more than 500 people there. The engine works will supply both the Hyundai assembly plant and the assembly plant that its sister company, Kia Motors, is building in West Point, Ga.

Besides Hyundai, the other major economic muscle at work in Montgomery is the locally based Retirement Systems of Alabama (RSA). The $30 billion state employees' and teachers' pension fund is a force in real estate across Alabama; its holdings include the 10 Robert Trent Jones Golf Trail resorts around the state. In Montgomery, RSA owns eight downtown buildings and is a dominant player in efforts to revitalize the heart of the city.

Hotel accommodates high aspirations
The pension fund has three projects under construction in Montgomery, including what will be the city's signature hotel: the 12-story, 346-room Renaissance Montgomery Hotel & Spa at the Convention Center, which will feature an adjoining performing arts center. The complex is scheduled to open in early 2008.

Facts About Montgomery
The city was named for Richard Montgomery, a Revolutionary War general.
In 1886, the city introduced the world's first electric trolley transportation system.
Montgomery is the home of Zelda Sayre Fitzgerald, wife of writer F. Scott Fitzgerald. The city houses a museum in her former home.
Country music legend Hank Williams Sr. lived in Montgomery for a time and is buried there.
Martin Luther King Jr. was pastor of the Dexter Avenue Baptist Church in Montgomery from 1954 to 1960.

Montgomery is pinning considerable hopes for its downtown on the success of the hotel complex, projected to cost about $160 million (not including $29 million to renovate the existing civic center, which will be part of the complex). The development, which is also partly owned and will be operated by the city, is the linchpin of what Montgomery officials hope will be a revival of the city's downtown and its long-neglected Alabama River front.

"It is the first four-star hotel that Montgomery has gotten, and it's . . . probably the most significant economic development opportunity we will have for quite a while," said Randy George, president of the Montgomery Area Chamber of Commerce.

Montgomery has historically attracted little convention business in part because the city had no viable facilities to accommodate big meetings, George said. With that problem solved, the challenge will be to lure conventioneers to fill the gleaming new complex and to parlay that business into spillover development along the riverfront and elsewhere. Boosters figure the seat of state government, home to political leaders and state agencies, not to mention the offices of more than 100 trade associations, will make Montgomery a natural place for industry groups to gather.

More than $1 billion has been invested downtown during the past 15 years, including RSA building projects, George said. Several historic buildings have been refurbished. In 2004, a minor league baseball park opened near the river, incorporating a century-old railroad station into the design. The Montgomery Biscuits, a farm team of the Tampa Bay Devil Rays, have been second in the Southern League in attendance during their three seasons. Most recently, an outdoor amphitheater was completed on the riverbank next to the ballpark, and a boardwalk that will stretch along the bank is under construction.

"They're trying really hard to reverse the decaying infrastructure of downtown," Deravi said. "You are seeing a complete facelift. It's all coming together, but it's painfully slow. Most of us are impatient. We want results yesterday. But it's coming together."

Montgomery, Ala.
Population (city only) 200,127
Montgomery County population 209,374
Occupied housing units 80,947
Median family income $47,994
Source: 2005 American Community Survey, U.S. Census Bureau

Bustle in the 'burbs
The focus on downtown Montgomery comes as the city's suburbs have been attracting most of the new people and development. According to U.S. Census Bureau figures, the populations of suburban Autauga and Elmore counties grew 15 percent and 14 percent, respectively, from 2000 to 2006, far outpacing the statewide population increase of just 3 percent. Montgomery County's population was essentially unchanged during that period, yet 81 percent of the area's jobs are in the city of Montgomery, George said.

Super Wal-Marts, Bass Pro Shops, Target, and a mall have opened in Autauga and Elmore counties in the past two years. And sprawling office parks, shopping centers, and subdivisions flank Interstate 85 in unincorporated Montgomery County east of the city. Jobs spawned by Hyundai have spurred much of that activity, Deravi figures.

"We were basically a government town, with the state and federal governments," he said. "We had Kershaw [Manufacturing Co., a railway maintenance equipment maker] and Rheem [Manufacturing Co., a maker of central heating and cooling equipment], but we were pretty challenged in the expansion and retention of manufacturing. Hyundai came in and just changed the whole economic horizon."

Renaissance Montgomery Hotel
Photo courtesy of the Montgomery Area Chamber of Commerce
Scheduled for a 2008 opening, the Renaissance Montgomery Hotel & Spa is at the heart of the city's efforts to make its downtown attractive to tourists and convention groups.

Manufacturing boosts employment
During the first quarter of 2005, just before the Hyundai plant opened, the four-county Montgomery metropolitan statistical area's average monthly employment was 169,200 jobs, including 17,800 in manufacturing, according to statistics from the Alabama Department of Industrial Relations (DIR). Two years later, in March 2007, total employment was up by about 10,200 jobs, to 179,400, according to estimates from the DIR in cooperation with the U.S. Bureau of Labor Statistics. Manufacturing employment, meanwhile, climbed during the same period by 3,300, to 21,100, according to DIR figures.

While Montgomery is experiencing job growth and low unemployment, and development is resuscitating its urban heart, the city faces challenges. Among them is wages, which have historically been insufficient to attract the skilled labor the area now needs, Deravi said. In addition, according to numerous reports, such as a study by Market Street Services Inc., an Atlanta-based consulting firm, the public school system, especially in the city of Montgomery, needs substantial improvement.

The general economic health of the Montgomery area is strong, Deravi said. In fact, he figures the area needs to attract more workers to fill jobs and, to do so, must pay them generally better wages.

This article was written by Charles Davidson, a staff writer for EconSouth.