EconSouth (Third Quarter 2008)

Grassroots

Tourism, Manufacturing Revive Chattanooga

Photo of Chattanooga Walnut Street Bridge
Photo courtesy of the Chattanooga Area Chamber of Commerce
The renovation of the Walnut Street Bridge, the world's longest pedestrian bridge, has contributed to the revival of downtown Chattanooga.

If there were an award for the city that has won the most awards, it might well go to Chattanooga, Tenn.

A host of media outlets have hailed Chattanooga, located on the Tennessee River in the Ridge-and-Valley Appalachians, as an eco-friendly ideal of urban transformation. Southern Living readers named the city their third-favorite place in the South to take children, behind only the tourist meccas of Walt Disney World and Orlando, Fla.

Since 1990, local and state government, private businesses, and local charitable foundations have invested more than $2 billion in downtown Chattanooga—in an aquarium, parks, a river walk, historic theaters, bike paths, small inns, museums, residences, and one of the world's longest pedestrian bridges. The city even runs free electric buses downtown.

And the city is about to receive an economic boost. The German automaker Volkswagen announced in July that it will build a $1 billion plant—its first in North America since it closed a Pennsylvania plant in 1988—just outside Chattanooga. The plant will employ between 2,000 and 2,500 people when it begins production in 2011.

"Chattanooga is a model of what a mid-sized downtown can achieve when its community unites in a common cause," said RevitalizationOnline.com, a Web site about restoring communities. And Utne Reader magazine noted several years ago, "Chattanooga's progress, past and present, demonstrates that problems, however onerous, needn't defeat people who care."

Clearing the air
Chattanooga has had its problems. A former iron smelting hub, the city enjoyed prosperity through the 19th and 20th centuries that had its downside: dirty air. The city began cleaning up after the federal government in 1969 dubbed Chattanooga's air quality the nation's worst. A local newspaper editor once told National Public Radio that pollution used to make his white windowsill look like it had pepper sprinkled on it.

State outline highlighting Chattanooga
Chattanooga, Tenn.
Population 151,944
Hamilton County population 312,905
Households (city) 65,518
Median household income $36,981
Source: U.S. Census Bureau's 2006 American Community Survey

In the 1970s, local factories agreed to install pollution-control devices. In addition, iron and steel foundries declined through the 1970s and '80s. Although improving the air quality, the industrial decline also hammered the city's employment base. "We've been on a climb back ever since all of that happened," said Tom Edd Wilson, a retired banker and president of the Chattanooga Area Chamber of Commerce. "It's been an interesting climb."

The climb took a big step in the early 1990s. City leaders launched a downtown revitalization campaign lauded for its inclusion of citizens from various neighborhoods, socioeconomic strata, and ethnic groups. The aquarium opening in 1992 and the christening of the Walnut Street Bridge the following year were two of the most visible early components of the downtown resurrection. The bridge, a 100-year-old span over the Tennessee River, was slated for demolition but instead was renovated as a walkway. Downtown Chattanooga also now boasts 140 acres of parkland, up from virtually none before the revitalization.

By most accounts, the downtown makeover has succeeded wildly. The city of about 152,000—and metro area population of 514,000—attracts some three million visitors a year. Many of them are drawn to the riverfront, whose $120 million rejuvenation was completed in 2005.

That renewal project included a $30 million expansion of the Tennessee Aquarium, the linchpin of the downtown resurgence; a $19.5 million expansion of the Hunter Museum of American Art; and $61 million spent on a pier and bridge, boat slips, green space, and the rerouting of a four-lane highway to improve pedestrian access to the river.

Tourism can't go it alone
The resurgence of the city's downtown has been a boon for tourism. But tourism alone is not a solid base for the local economy, said Bruce Hutchinson, an economist at the University of Tennessee-Chattanooga. He points out that tourist attractions, hotels, and restaurants offer mostly lower-paying service jobs with little chance for advancement.

After expansion through the 1990s, job growth in the Chattanooga area has slowed. Through May, total nonfarm employment in 2008 averaged 246,800. This figure is up from 238,400 in 2000 but is down from 2007, according to the U.S. Bureau of Labor Statistics. Some of the city's larger employers—the Tennessee Valley Authority, DuPont, and Wheland Foundry Co., to name a few—have shed jobs over the past several years.

Facts About Chattanooga
bullet image In 1899 Chattanooga became the first city to bottle Coca-Cola.
bullet image The Moon Pie was created in Chattanooga in 1917 and has been produced continuously since then.
bullet image The country's first miniature golf course was built in Chattanooga in 1929.

Along with Tennessee and the nation, Chattanooga has shown other symptoms of slowing: The value of permitted residential and commercial construction projects fell 30 percent in 2007 compared to 2006, and retail sales growth in Chattanooga's Hamilton County slowed to 2.6 percent from 7.9 percent during the same period, according to the Chattanooga Area Chamber of Commerce.

Nevertheless, in spite of weakening in some old-line industries, the local economy overall has been performing better than it should have, Hutchinson said.

One reason for that performance is a handful of large construction projects in the metro area. Blue Cross and Blue Shield of Tennessee is building a $300 million, five-building campus headquarters scheduled for completion in June 2009. Alstom, a French manufacturer of power generation equipment, is constructing a factory to make generators for nuclear power plants, a $280 million investment expected to add 300 jobs when it begins production in 2010. Memorial Health Care System is spending a similar amount on an expansion.

The insurance industry has become a local stalwart. Blue Cross and Blue Shield of Tennessee is the area's largest employer, with 4,800 workers, while Unum Group and Cigna HealthCare are also among the top 10.

Meanwhile, downtown development has not stopped. More than 400 condos were completed in late summer and early fall. Despite the nationwide housing slump, two big projects in Chattanooga appear healthy, said Jeff Pfitzer, director of special projects for the River City Co., a private nonprofit and a leader in downtown development. As of Aug. 1, a 200-unit building was 75 percent presold, and a 100-unit building had 65 percent of its residences sold, though those sales have not all closed, Pfitzer said.

Rolling out the welcome wagon
But of all the boosts to the modern Chattanooga economy, the biggest one in recent history is Volkswagen's plant. Auto plants typically attract a fleet of suppliers, so Chattanooga business boosters are aglow. To prepare for challenges along with an anticipated bonanza, Wilson and several other Chattanooga officials have visited Greenville and Spartanburg, S.C., to study that area's experience with the BMW factory that opened there in 1994.

State and local governments and community colleges will help provide job training as part of an incentive package awarded to Volkswagen that is expected to total at least $400 million, according to the Chattanooga Times-Free Press. Training will be "a huge undertaking," Wilson said. Local schools also must prepare for an influx of students.

No one yet knows how many Volkswagen jobs will be filled by Chattanoogans or how many people the company might move from elsewhere. Soon after Volkswagen's news conference in July, though, it was already clear that luring the automaker polished Chattanooga's image as a city for commerce and not just a nice place to live and play. "The psychology is playing out very positively for Chattanooga," Hutchinson said. "We shouldn't underestimate that in terms of businesses seeing it as a viable place to grow."

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