SOUTHERN HEARTBEAT

LESSONS FROM NASHVILLE,

Introduction phenomenon known as ‘white flight’, occurred as residents relocated to newly developed suburbs. Retailers were impacted by

Famous for its country music stars and recording studios, traffic congestion and urban decay. Recognising the need for Nashville’s rapid economic growth in recent years is due to services and infrastructure to encompass a larger region, city more than music alone. Nashville’s economy is diverse; leaders moved to unite Nashville and Davidson counties, forming a metropolitan government in 1963.3 The consolidation of resources boasting industry leaders in health care management, manufacturing, logistics, finance and insurance, as well as created a consistent approach to economic management and strengths in education and tourism. Nashville has been improved the broader region’s national competitiveness. named as one of the top cities for job and wage growth, with A pivotal moment in Nashville’s history came in 1968, when the third fastest growing economy in the US.1 Hospital Corp. of America (HCA), one of America’s first hospital management companies, was founded. The combination of History Nashville’s commerce and medical education institutions, of which HCA’s founders were graduates, had provided a natural European settlers founded Nashville in 1779 on a well ecosystem for the city to lead the nation in private hospital traversed site in . Land speculators were management. The 1970’s were characterised by rapid growth drawn to the region’s mineral springs and rich salt deposits, and Nashville’s position on the Cumberland River enabled Employment 2 EMPLOYMENT GROWTH the town to prosper as a centre for trade. Nashville fell to growth (%) Index = FY1990 the Union early in the Civil War and its factories and railways 80% NASHVILLE were utilised to support the military. Banking and insurance 70% TENNESSEE became increasingly important as Nashville grew into its role 60% USA as the wholesale distribution centre between the Midwest and Gulf States. During the Great Depression and World War 50% II, construction and manufacturing activity in Nashville 40% expanded under President Roosevelt’s New Deal programs 30% and through large military contracts. A new country music 20% radio broadcast, ‘the Opry’, solidified music in Nashville’s identity and several recording studios were established as 10% 3 the city became a destination for touring musicians. 0%

-10% Along with other US cities, Nashville suffered from the 1991 2011 1997 1993 2017 1990 1999 1998 2013 1995 1996 2010 2001 1992 2015 2016 2012 1994 2014 2007 2003 2000 2009 2008 2005 2006 2002 adverse effects of widespread automobile ownership. 2004 Racially motivated population loss from the city core, a CHART 1: EMPLOYMENT GROWTH 1990-2017, NASHVILLE, TENNESSEE, USA4

Southern Heartbeat - Lessons From Nashville, Tennessee 1 in the sector; many other Nashville companies were founded NASHVILLE INDUSTRY CLUSTERS Job growth and several were acquired by HCA in the 1980’s, including Job creation 2006-2016, Industry size 2016 2006-2016 (%) 5 Hospital Affiliates International and General Care Corp. 60% Business & Healthcare & Life 50% Sciences IT & Communications Financial Services In the early 1980’s, Tennessee governors led an aggressive 40% campaign for Nissan’s first US manufacturing plant. Smyrna Transportation 30% Arts, Entertainment & Logistics (Nashville) was the winning bid due to its rail and interstate 20% & Tourism highway connections and rural situation far from the existing Education 10% Retail 6 automobile industry. Bringing a new style of management, 0% Construction the Smyrna plant quickly became the most productive in the -10% Industry size & Trade Manufacturing % of total jobs 2016 US and generated thousands of highly paid jobs in Nashville. -20%

-30% Government Transition -40% 0% 2% 4% 6% 8% 10% 12% 14% 16%

Towards the end of the 1980’s, property growth in Nashville CHART 2: NASHVILLE INDUSTRY CLUSTERS, JOB CREATION AND GROWTH10,11 had slowed and the city was unfavourably compared to Note: industry categorisation derived by Austrade from Statistics USA innovation clusters Austin and other southern cities that were in the midst of a transition. Nashville’s civic leaders were prompted to create sports teams, build world-class convention venues, develop a targeted development strategy, ‘Partnership 2000’.7-9 Led appealing public facilities, and raise the quality of education. by the Chamber of Commerce, the partnership rallied to The low tax burden played a significant role in attracting new raise $4 million for the promotion of the Nashville region, with business. Tennessee has the second lowest state and local the majority raised from Middle Tennessee’s private sector. tax burden per capita in the US, with no income tax on wages, a 6.5 per cent excise tax, a 0.25 per cent franchise The Partnership’s leaders developed a strategic plan with tax and 7 per cent sales tax. Incentives for relocation and four cornerstones to retain and expand existing business and expansion projects included job tax credits, infrastructure employment, attract new investments, and work to improve assistance, energy credits, low cost loans and tax abatement. the quality of life in the region. The group identified target industry clusters based on the city’s existing capability and Through Partnership 2020, the Nashville region competitive advantages: health care, music and entertainment, advanced manufacturing, corporate achieved remarkable success by engaging operations, and supply chain management. Benchmarking thousands of business leaders around a common was established to track progress by directly comparing vision for economic prosperity. Nashville to Atlanta, Austin, Indianapolis, Charlotte and Raleigh across measures such as the cost of living and tax Bill Carpenter, Chairman and CEO of LifePoint Health, and Partnership 2020 Co-Chair13 burden. A large portion of the fund was dedicated to marketing the strength of Nashville’s metropolitan area (then In the partnership’s first decade, Nashville’s elevated profile, comprised of eight counties), which was its economic core, low tax rates and business incentives attracted major attractive suburbs, and major employers spread throughout national and international players in the five target industries. the region. To further improve competitiveness, the HCA, Shop At Home, , Deloitte and MagneTek partnership laid out ambitious goals to build global economic established or expanded facilities in the region.7 To provide links through an international airport, attract professional the local labour force with industry specific job skills, the

NISSAN SMYRNA GRIFFIN TECHNOLOGY, BRIDGESTONE HCA, HAI, PLANT 1992 TENNESSEE TITANS, NASHVILLE PREDATORS 1983 1997-1998 GENERAL CARE CORP. COMMUNITY ON 1968 HEALTH SYSTEMS DELL, LIFEPOINT S&P 500 INDEX 1999 DELEK US CAPITAL 1985 1957 GM SPRING 2001 RECORDS TRACTOR SUPPLY HILL PLANT 1950 2014 1990 NISSAN HQ 2006 COMPANIES

INSTITUTIONS PARTNERSHIP 2020 METRO NASHVILLE & DAVIDSON COUNTY PARTNERSHIP 2000 2010 MC2 1963 1990 2009 PARTNERSHIP 2010 SCHERMAN SYMPHONY HALL COUNTRY MUSIC HALL OF FAME 2000 2006 1961 CHART 3: KEY MOMENTS IN NASHVILLE’S HISTORY Southern Heartbeat - Lessons From Nashville, Tennessee 2 Government and the Partnership supported initiatives on investment and, to secure future support, the Partnership including the School-to-Career program, job fairs and delivers an annual scorecard with benchmarked performance workshops on employee recruitment and retention. and goal progression. Today over 275 entities participate in Concerted efforts were made to revitalise the downtown. the initiative. The largest private investors, who each donate Mayor Phil Bredesen actively recruited several national at least $50,000 annually, include Bank of America, First sports teams including the Houston Oilers (now Tennessee Tennessee Bank, Pinnacle Financial Partners, HCA, LifePoint Titans) and Nashville Predators.12 New downtown stadiums Health and Saint Thomas Health. were constructed and Bredesen fostered the renovation of city landmarks, including the Country Music Hall of Fame. Over two decades, the consistent strategy supported by private and public sectors oversaw the relocation of more Emphasising a competitive business climate is one than 930 new companies to the Nashville region; among of the reasons Partnership 2020 has been so them: Nissan North America, Louisiana-Pacific, Beretta, Aramark, Caterpillar Financial, Dell, the Loews Corporation successful in attracting and expanding corporate and ServiceSource.13 Local companies including Bridgestone, headquarters. Companies know they can manage HCA, and were provided their national or global business from Nashville. with ongoing support to expand their operations. Targeting national and international development across a broad range Kent Adams, President and CEO, Caterpillar Financial Services Corporation20 of industries contributed to economic resilience, evidenced The success of Partnership 2000 led to rolling commitments by Nashville’s recovery after the Global Financial Crisis, which into Partnerships 2010 and 2020.13 Since inception, the occurred faster than the national average.8 Partnership’s greatest strengths have been independent governance and the provision (to both public and private In addition to the efforts of the Partnership, Nashville’s investors) of a clear strategy to use the funds fairly and Government took an active role in guiding development productively. The Nashville Area Chamber of Commerce through economic development plans.14 In 2010, local health signs an annual agreement with each member county care providers expressed concern for a lack of sufficient outlining what services will be performed based on the health care IT (HIT) talent in Nashville. A year later, Nashville’s county’s mandatory financial contribution. A portion of the Government formed the HIT Working Group to position itself fund is dedicated to economic development staff that act at the forefront of innovation.15 Nashville took measures to independently of any one city or county, and the Partnership improve its workforce via corporate internships, university staff coordinate with county officials to manage activities. training programs, competency evaluation, and marketing Private sector investors demand accountability and a return campaigns. As a result, health care has continued to grow.

CASE STUDY: HOSPITAL CORPORATION OF AMERICA

$

INDUSTRY ANNUAL SALES HEADQUARTERS WORKFORCE

HEALTHCARE $41.5 BILLION NASHVILLE, >10,000 NASHVILLE TENNESSEE METRO JOBS

In 1968, Dr. Thomas Frist Sr., Dr. Thomas Frist Jr. and Jack Massey founded one of the first hospital companies in the US, the Hospital Corporation of America (HCA).18 By working with local physicians to build and improve medical centres, HCA’s mission was to bring patient-focused care to fast-growing communities. This focused approach contributed to healthy growth in Nashville and the surrounding area.

HCA continues to improve community-wide health and collaboration by partnering with the Centers for Disease Control and Prevention (CDC) and other research institutions. The company provides 10,380 jobs in the Nashville area and approximately 240,000 throughout the . In 2017, HCA invested $2.8 billion in new capital.

At HCA, we believe delivering a quality patient experience is central to fulfilling our mission of the care and improvement of human life. R. Milton Johnson, HCA Chairman and CEO

Southern Heartbeat - Lessons From Nashville, Tennessee 3

Present Day KEY NASHVILLE METRICS

Today, Nashville’s health care industry is the city’s largest 27 1.9 cluster, with around 400 companies employing 250,000 POPULATION (2016) million workers.13 In 2016, Nashville’s 18 publicly-traded health care companies generated $73 billion in revenue.16 The city’s POPULATION GROWTH 27 20% famous music and entertainment industry draws millions of (2006-16) tourists each year and the region boasts around 200 PER CAPITA PERSONAL INCOME recording studios and musical instrument manufacturers.17 28 $52,500 Manufacturing and distribution companies remain central to (2016) the economy, employing 150,000 workers. Low taxes 29 minimise operational costs and the transportation system MEDIAN HOUSE PRICE (2016) $225,000 19 maintains strong ties to both the North and South. Corporate operations account for a further 65,000 jobs, with KAUFFMAN STARTUP INDEX 20 30 #29 a number of Fortune 500 company headquarters. RANK (2017)

The most active innovation hub is the Nashville Entrepreneur 31 PATENTS GRANTED (2015) Center, with its accelerator program to fast-track startup 220 companies in health care, digital media and entertainment, tech and social enterprise. The centre has graduated more 32 $131 VC INVESTMENT (2017) than 150 companies in the last year.21,22 Although the city million boasts 12 investment and venture capital companies with a EDUCATIONAL ATTAINMENT health care focus, Nashville does not compete on the same 33 33% (2016) scale as the US’s prominent venture capital centres.23 Bachelor’s or higher colleges are as low as 11 per cent. A recent new initiative, the

Nashville’s Challenges Middle Tennessee Reconnect Community, is a step in the right direction, supporting adults to complete their college Nashville’s population growth is projected to continue as low degree. These challenges are also a focus for the costs and high wages entice new businesses and workers. Partnership, which has identified metrics related to traffic and The region’s dramatic expansion has already placed education that will be measured and reported. pressure on public facilities and services, and a further one million people will move to the area over the next 25 years.8 Lessons for Australia In the last five years, the impact of an additional 100,000 daily commuters faced with limited transportation options Nashville’s strength as a community rests on a solid has increased travel time, making congestion the top foundation of economic diversity. The city’s health care, concern for residents. The city is addressing this challenge manufacturing and distribution, commercial services, 24 by forming a Transit Alliance to fund a mass transit system. entertainment and tourism industries have all played an important role in sustaining growth. Resilience during While job growth is record high, an aging population and demand for more skilled workers is creating a workforce multiple economic downturns has been observed because shortage. Prosperity is increasingly tied to education and skill the economy is not dependent on a single sector. attainment, and leaders are warning that the broadening Although Nashville’s geographic position is a natural link skills gap must be addressed if the region is to enjoy between the Midwest and the South, its economy has been continued growth. Nashville’s public school system falls short shaped by a long-term strategy. The region benefitted from a of Tennessee’s education goals and has experienced a bold vision to consolidate resources and form a joint decline in rankings with increasing student enrolment.25 The metropolitan region, which today consists of 14 counties and region must emphasise training for the industry sectors the private sector working together to lift competitiveness as which are experiencing rapid growth, such as IT and a whole. By identifying and leveraging the region’s existing biotechnology, to ensure that employers are able to source strengths, Nashville was promoted with a clear voice. talent from within the local labour market. Partnerships such as Nashville’s Partnership 2000-2020 can Linked to education is Nashville’s poor ranking for upward provide regions with a larger funding pool, as well as mobility, 41st out of the 50 largest areas in the US. In minimise local conflicts and competitiveness. Nashville’s Nashville a child in a home earning $26,000 (bottom 20 per recent history proves that by presenting a united front, cent) has a 6 per cent chance of earning $100,000 by age smaller regions can compete with major cities to attract 45.26 Focussing on education retention rates will improve large corporate operations by marketing their strengths. mobility; at present the graduation rates for community Southern Heartbeat - Lessons From Nashville, Tennessee 4

REFERENCES

1. Forbes, Fastest Growing City List 2017, ww.forbes.com, accessed 6 March 2018. 2. Encyclopaedia Britannica, Nashville, Tennessee, www.britannica.com/place/Nashville-Tennessee, accessed 7 March 2018. 3. Metropolitan Government of Nashville and Davidson County, www.nashville.gov/Play/History/, accessed 7 March 2018. 4. Bureau of Labor Statistics, National Employment Statistics Survey, www.data.bls.gov/, accessed 7 March 2018. 5. Hospital Corporation of America, HCA at a Glance, www.hcahealthcare.com, accessed 26 February 2018. 6. The New Yorker, The Road Ahead: Smyrna, Tennessee vs Detroit, www.newyorker.com/, accessed 9 March 2018. 7. Nashville Area Chamber of Commerce, Mayors Caucus Presentation by CEO Ralph Schulz, August 2011. 8. Nashville Area Chamber of Commerce, Economic Development Report – The NashvilleNext Plan, published March 2013. 9. Initiative for a Competitive Inner City, What Works for Cities: Chamber Partnership Leads to Catalytic Growth in Nashville Metro, www.icic.org/, accessed 8 March 2018. 10. Bureau of Labour Statistics, Quarterly Census of Employment and Wages, www.bls.gov/cew/datatoc.htm, accessed 9 March 2018. 11. StatsAmerica, Innovation in American Regions, www.statsamerica.org/innovation/industry_clusters.html, accessed 23 February 2018. 12. The Tennessee Encyclopaedia of History and Culture, Phil Bredesen, tennesseeencyclopedia.net/, accessed 9 March 2018. 13. Nashville Area Chamber of Commerce, Partnership 2020, s3.amazonaws.com/nashvillechamber.com/, accessed 8 March 2018. 14. Metropolitan Planning Commission of Nashville and Davidson County, Tennessee, A General Plan for Nashville and Davidson County, www.nashville.gov/Portals/0/SiteContent/Planning/docs/about/Concept_2010_A_General_Plan.pdf, accessed 1 March 2018.

15. Nashville Health Care Council, Strategies to Address the Health Care Information Technology Workforce Shortage, healthcarecouncil.com/HIT_Workforce_Shortage, accessed 9 March 2018.

16. Nashville Health Care Council, The Health Care Industry in the Nashville MSA: Trends, Scope, and Impact on the Regional Economy, www.healthcarecouncil.com, accessed 8 March 2018. 17. Metropolitan Government of Nashville and Davidson County, History of the Music City Music Council, www.nashville.gov/Music-City- Music-Council/About, accessed 26 February 2018. 18. Hospital Corporation of America, HCA at a Glance, www.hcahealthcare.com, accessed 26 February 2018. 19. Nashville Area Chamber of Commerce, Nashville Economic Development Guide – Distribution & Trade, s3.amazonaws.com/nashvillechamber.com/, accessed 6 March 2018. 20. Nashville Area Chamber of Commerce, Nashville Economic Development Guide – Corporate Services, s3.amazonaws.com/nashvillechamber.com/, accessed 6 March 2018. 21. Nashville Entrepreneur Center, www.ec.co/, accessed 9 March 2018. 22. The Tennessean, Venture capitalists waking up to Nashville firms, www.tennessean.com/, accessed 9 March 2018. 23. Business News Daily, The State of Small Business: Tennessee, www.businessnewsdaily.com/9284, accessed 9 March 2018. 24. Nashville Office of Transportation and Sustainability, Let’s Move Nashville, letsmovenashville.com/, accessed 9 March 2018. 25. JP Morgan Chase & Co, Strengthening the Middle Tennessee Region 2020: Building a Vital Workforce to Sustain Economic Growth and Expand Opportunity, s3.amazonaws.com/nashvillechamber.com/Talent/, accessed 9 March 2018. 26. Nashville Area Chamber of Commerce, Vital Signs, s3.amazonaws.com/nashvillechamber.com/VitalSigns, accessed 19 April 2018. 27. United States Census Bureau, Metropolitan and Micropolitan Statistical Area Datasets: 2010-2016, www.census.gov/data, accessed 5 March 2018. 28. Bureau of Economic Analysis, Per Capita Personal Income, www.bea.gov/, accessed 5 March 2018. 29. National Association of Realtors, Metropolitan Median Area Prices and Affordability, www.nar.realtor/, accessed 5 March 2018. 30. Ewing Marion Kauffman Foundation, 2016 Kauffman Startup Activity Index, www.kauffman.org/, accessed 26 February 2018. 31. US Patent & Trademark Office, Utility Patent Data, www.uspto.gov/, accessed 5 March 2018. 32. CB Insights, Venture Capital Investment, www.cbinsights.com/, accessed 16 January 2018. 33. Bureau of Labor Statistics, American Community Survey, www.census.gov/programs-surveys/acs/, accessed 5 March 2018.

Southern Heartbeat - Lessons From Nashville, Tennessee 5

ABOUT AUSTRADE

The Australian Trade and Investment Commission (Austrade) contributes to Australia's economic prosperity by helping Australian businesses, education institutions, tourism operators, governments and citizens as they: • develop international markets • win productive foreign direct investment • promote international education • strengthen Australia's tourism industry • seek consular and passport services.

Austrade provides information and advice that can help you reduce the time, cost and risk of developing international markets. We also administer the Export Market Development Grants scheme and offer a range of services to Australian exporters in growth and emerging markets.

W austrade.gov.au

E [email protected]

@AustradeUSA

Disclaimer Copyright © Commonwealth of Australia 2018

This report has been prepared by the Commonwealth of Australia represented The material in this document is licensed under a Creative Commons by the Australian Trade and Investment Commission (Austrade). The report is a Attribution – 4.0 International licence, with the exception of: general overview and is not intended to provide exhaustive coverage of the • the Commonwealth Coat of Arms topic. The information is made available on the understanding that the • the Australian Trade and Investment Commission’s logo Commonwealth of Australia is not providing professional advice. • any third party material • any material protected by a trade mark While care has been taken to ensure the information in this report is accurate, • any images and photographs. the Commonwealth does not accept any liability for any loss arising from reliance on the information, or from any error or omission, in the report. More information on this CC BY licence is set out at the creative commons website: https://creativecommons.org/licenses/by/4.0/ legalcode. Enquiries Any person relying on this information does so at their own risk. The about this licence and any use of this document can be sent to: marketing- Commonwealth recommends the person exercise their own skill and care, [email protected]. including obtaining professional advice, in relation to their use of the information for their purposes. The Commonwealth does not endorse any Attribution company or activity referred to in the report, and does not accept Before reusing any part of this document, including reproduction, public responsibility for any losses suffered in connection with any company or its display, public performance, distribution, dissemination, communication, or activities. importation, you must comply with the Attribution requirements under the CC Cover image: Nashville skyline. BY licence.

Using the Commonwealth Coat of Arms

The terms of use for the Coat of Arms are available from the It’s an Honour website (www.itsanhonour.gov.au).

Printed May 2018.

Southern Heartbeat - Lessons From Nashville, Tennessee 6