Chattanooga Reinvents Its Downtown

As recently as 1990, the Tennessee city had a shrinking economy and population. Now a vibrant and rebuilt downtown is helping to lure new residents

By Greg T. Spielberg

The idea for "Chattanooga Reinvents Its Downtown" came from BusinessWeek reader RJ Burns Jr., an artist in Jacksonville, Fla.

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In 1969, the U.S. Environmental Protection Agency declared Chattanooga, Tenn., the most polluted city in America, thanks in part to smog that had drivers turning their lights on at midday. Manufacturing was the primary industry, with more than a third of residents working at companies like Whelen Engineering making auto brakes, and at U.S. Pipe. By 2000 the portion fell to 16%, mirroring the trend seen across the Rust Belt and South. Chattanooga's heavy manufacturing plants and foundries shed 70% of their workers in the first half of this decade. Textile mills that had turned out clothing for a century cut more than half their jobs, while paper manufacturing lost a fifth of its labor force.

Like many towns over the past 20 years, Chattanooga leaders have dismantled their inner-city industrial infrastructure, replacing warehouses and enameling plants with parks, museums, restaurants, hotels, and apartments. The result is a vibrant tourism and entertainment industry, and a rebuilt downtown that is helping to lure new residents. The city has also developed skills needed to redevelop the urban core, such as efficient public-private partnerships that can attract new businesses.

Those skills helped Chattanooga secure a crown jewel in manufacturing, too. In July, 2008, Volkswagen chose Chattanooga for its first North American auto plant in two decades. Located on a former ammunition depot 12 miles southeast of downtown, the $1 billion plant is slated to start making 150,000 midsized sedans annually beginning in early 2011. The VW plant will create 2,000 direct jobs and 9,000 support jobs for construction, transportation, and suppliers, according to a University of Chattanooga study. Stefan Jacoby, CEO of Volkswagen Group of America, said the company liked that Chattanooga had manufacturing experience, with a quality of life reminiscent of some European cities.

keeping core businesses

As recently as 1990, landing a major auto plant would have been the only bit of positive economic news in a town that had a shrinking economy and population. VW is expected to complement a more diverse portfolio of industries. Blue Cross/Blue Shield of Tennessee recently built a $300 million campus overlooking downtown after seriously considering a move to the suburbs. Disability insurer Unum Group (UNM) decided to stay in the city after a merger between Chattanooga-based Provident Insurance and Unum Corp., which was headquartered in Maine.

"One of the untold stories of the revitalization is not just the effect on tourism and hotels, but that it's kept more of the core professional businesses in downtown," says David Eichenthal, president and CEO of Chattanooga's Ochs Center for Metropolitan Studies and a fellow at The Brookings Institution, a Washington-based think tank. Chattanooga is one of only three cities—along with Milwaukee and Ventura, Calif.—to increase the number of jobs in their downtowns between 1998 and 2006, according to a Brookings study.

Equally important, perhaps, is the reinvestment by those looking to call Chattanooga home. While Rust Belt cities like Pittsburgh and Detroit continue to shrink, Chattanooga is growing. It's the only American city with more than 100,000 people to expand in the 1990s after losing a tenth of its population in the 1980s, according to Brookings' research. This decade the city grew 9.3% between 2000 and 2008, outpacing surrounding Hamilton County, while drawing interest from both ends of the age spectrum. Over the past nine years, the greatest segments of demographic growth—newborns to five-year-olds and 45- to 65-year-olds—suggest an influx of young couples confident about the city's future and retirees who appreciate its feel.

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