Bradley Partner Tom Trent Featured in Q&A with NBJ on Selling Nashville During the Pandemic
Nashville Business Journal
Bradley attorney Tom Trent was featured in a Q&A with the Nashville Business Journal about selling the Nashville region through recruiting efforts and the use of incentives during the COVID-19 pandemic.
NBJ: What questions are people asking about Greater Nashville that they didn’t ask before?
Trent: How will the city’s budget issues affect the potential for economic development incentives for relocations and expansions in Nashville; will the mayor’s proposed tax increase enable Metro to continue the momentum recruiting new companies and expansions bringing high-quality jobs? What will the city be doing to alleviate the increasingly challenging traffic issues as more growth occurs in the metropolitan area? Will the city be creating an incentive program to help address the affordable housing challenges?
What questions are regional ECD leaders asking about the companies interested in the area?
Our metropolitan area contains 10 counties, and they vary widely. Some are most concerned about recruiting companies that pay higher wages than the local median income level, some are focused on market segments like headquarters; health care companies or manufacturing, distribution and assembly; some are focusing on livability (additional or elevated retail offerings) — some on all of these areas, and a few are becoming concerned about reducing the rate of the population growth and how it is changing their community (and requiring additional expenditures on schools and essential services).
How has your advice to localities changed when it comes to incentives?
I believe that communities should identify their goals, structure their incentives in a manner that accomplishes those goals and that the recipient should be accountable to meet the promised objectives (or something close to their promises) or else the incentive should be reviewed, adjusted or in some instances repaid (such as for free or discounted land). For some communities, increasing the tax base may in and of itself be a reasonable objective, while for others it may be a certain level of employment at a living wage or at a higher than median wage, for others it could be to stem a decline in population, or enhance the quality and quantity of retail offerings or to improve health care services. Communities should not be totally bound by their identified goals, but be open to new opportunities and serendipities that are not anticipated or expected.
What types of jobs are more likely, and less likely, to get incentives now versus 5 to 10 years ago?
It depends entirely on the community. In Nashville, with the growth of the hospitality sector, hotels are not as likely to receive an incentive as they were during the Great Recession. In rural areas that are not near an interstate interchange with quality hotels, there may be a need to use incentives to attract nice hotels to the community, which helps employers, families and education facilities in these areas. Just about everyone is interested in attracting or retaining high-quality, name brand companies that pay their employees well to their communities and will do what they are able to try to attract them.
How common are clawback provisions?
Most of our incentives include some type of performance agreement that if the promised employment level, investment level or other commitment does not materialize within a reasonable range, then the incentive can be revisited and adjusted, typically going forward. A clawback is typically a required repayment, as opposed to an adjustment and is less common, but is used if there is a cash grant, free land or other out-of-pocket incentive or investment made by the community, since the payment is usually made up front before the performance can be evaluated.
How has excitement about growth changed in the localities you have represented?
It varies widely by community. I remember when it was nearly impossible to get new investment downtown, and now with the traffic, new downtown living and success of the tourism industry, the excitement about the growth in downtown Nashville appears to have waned a bit. On the other hand, the growth and increase in property values has been uneven, and some areas of Nashville (such as the need for high-quality grocery retail in the so-called “food desert” areas), and other communities in the metropolitan area, would welcome the growth and investment, as well as the enhanced shopping and dining options that come with it. Some suburbs are struggling to keep up with the need to build schools and provide essential services in light of their tremendous growth, and they appear to now be less excited than a few years ago about growth.
How will the COVID-19 pandemic change economic development and recruiting companies to Nashville?
The COVID-19 pandemic has dramatically impaired the business climate, which will have a material adverse effect on economic development everywhere, including Nashville. It appears likely that the economy will be in recession, and that limits capital investment which reduces expansions and relocations. Nashville is in a low-tax, business-friendly state, so some companies may decide to look here to reduce operating costs, which could mitigate the effect of the downturn. Companies will also continue to be looking to locate and expand where they can find talent, and when life can get back to normal, Nashville may rebound more quickly than some other places. However, with sky-rocketing unemployment rates, companies may be able to find talent where they are rather than need to move or add a facility here in order to recruit their workforce, which could dampen our prospects a bit.
The original article, "How These Execs are (Still) Selling Nashville," appeared in the Nashville Business Journal on April 10, 2020.