(Editor’s note: This post was updated at 3:45 p.m. on December 5. A letter was added from Joe Reagan to top GLI investors. Further, due to technical problems, the first paragraph of the original story was deleted.)
Since Insider Louisville broke the story last Friday that GLI president and CEO Joe Reagan is a finalist for the top chamber position in St. Louis, we’ve heard from dozens of business leaders, entrepreneurs and executives.
If there is one theme running throughout almost every conversation and interview, it’s “Don’t be negative about Joe … they might read it in St. Louis.”
Reagan sent out an internal email to GLI staffers December 1 confirming he is one of two finalists for the top job at the St. Louis Regional Chamber & Growth Association.
“I’m glad for Joe that he is being considered for the St. Louis job and I think it would be good for him, for GLI and for Louisville if he decides to take it,” said Doug Cobb in an e-mail reply to an interview request.
Cobb was founding president and CEO of GLI from 1997 to 2000 after GLI was formed through the merger of city and county economic development efforts.
Formerly chairman and CEO of Appriss, Inc., a Louisville-based victim notification company, Cobb returned last year to Chrysalis Ventures, the Louisville-based venture capital firm he co-founded in 1993 with David Jones, Jr.
“I feel that GLI has lost its edge under Joe Reagan’s leadership,” Cobb wrote. “In my opinion, he has underperformed and is significantly overpaid. I think GLI would be better off with a new leader who would revive GLI’s entrepreneurial energy. “
Despite what you read in the Courier-Journal and Business First, our sources say the overwhelming sentiment in the business community is that Greater Louisville Inc., the Metro Chamber of Commerce under Reagan is a small organization with big salaries, and at best modest results.
Two executives – Reagan and Eileen Pickett, senior vice president of Community and Economic Development – are paid a almost $700,000 in total combined annual compensation including supplemental pay for Reagan from a private fund. This for overeeing a staff of about 50 people, say GLI insiders.
A number of sources pointed out that Reagan alone is paid more than twice the salary of economic development officials who preceded him, while Reagan has not gotten comparable results.
Steve Higdon, who succeeded Cobb as GLI president, declined to comment directly on Reagan, whom he recruited to GLI, or on GLI.
Now an executive with Faulkner Hinton & Associates, a Louisville developer, Higdon was UPS loaned executive to the Greater Louisville Economic Development Partnership in 1995 and 1996. There, he was involved in the area’s most ambitious projects including UPS’ $2 billion expansion at Louisville International Airport at Standiford Field that created the Worldport Air Freight Hub.
Higdon rated Louisville’s overall economic development record as mixed.
“If you go back to the Ross Boyle’s vision of keying on our strengths, then that’s medical and logistic and distribution,” Hidgon said, referring to the Boyle Report. The 1996 study that analyzed Louisville’s competitive strengths and recommended economic development officials key on medical research and logistics.
“If you go up and down the I-65 corridor, you see all these (logistics) companies,” Higdon said. “We have been very successful as a community bringing lots and lots of distribution-intensive companies, without a doubt.”
While the distribution sector has flourished, Higdon said, the city has not been successful in adding white collar office jobs.
“These are the jobs with high salaries that require young professionals to move here,” he said. Higdon acknowledging that Kentucky’s tax policy is an obstacle. But he added: “We need some fresh thinking and some new visionary leadership to figure out how transform this city into an economic hotspot, and increase per capita income.”
Research by Dr. Paul Coomes at the University of Louisville has found the state’s individual income tax burden is relatively high, making it hard to attract and keep well-educated class of people necessary to economic growth. Then, state government spends most of the tax revenue outside the urban areas where job creation is greatest: “State government absorbs most of the state and local public resources available statewide, but tends to spend the dollars in sparsely populated areas.”
That handicap aside, insiders’ repeatedly asked – and we’re paraphrasing here – “So what does Joe Reagan do to earn all that money?”
In the past 15 years, Louisville has been stuck trying to “figure it out” as other cities, especially Charlotte, NC, did figure it out, sources tell Insider Louisville.
Louisville economic development execs and government officials have, however, spent a lot of time touting initiatives, which even the Brookings Institution, the Washington, D.C. public policy think tank, finds suspect.
After a kerfuffle over how WFPL reporters interpreted “Responding to Manufacturing Job Loss: What Can Economic Development Policy Do?” one of the authors posted a summation on the New Republic magazine website.
Howard Wial stated (emphasis ours):
The report criticizes the overblown rhetoric that has been used on behalf of GLI and several other economic development efforts and does not find evidence that they have had major impacts on the overall growth pattern of the Louisville region. However, that doesn’t mean we think GLI and other economic development efforts are ineffective or misguided. In fact, one of the report’s most important conclusions is that GLI and similar organizations have modest but important roles to play in responding to manufacturing job loss. What’s important is to be realistic about what regional economic development policy can and can’t do.
Yet, Reagan and his supporters claim GLI is responsible for big economic coups such as the $1.2 billion expansion this year at Ford Motor Co.’s two Louisville automotive assembly plants.
It’s been a big year for GLI. The Ford announcement, obviously, has been huge. I mean that’s been one of the biggest job announcements in the country. So that’s been the result of collaboration between the state and city and the UAW and obviously Ford, but GLI was right in the middle of all that, making it happen.
One insider with knowledge of the Ford negotiations called Fischer’s remarks “laughable.” Ford executives have the clout to deal directly with federal and state economic development officials, said the source, crediting federal and state tax incentives and supplier proximity as the deciding factor in Ford investing here. “Joe Reagan and his people may have helped ( Ford process) some paper work,” the source said. “But I doubt it.”
Other insiders told Insider Louisville that they find invaluable the chamber of commerce piece of GLI’s mission – the networking and business advocacy
One longtime GLI ambassador, who describes himself as a corporate sales “foot soldier,” said GLI networking events and business referrals “have made it possible for me to make a good living; a really excellent living.
“Ninety-nine percent of my business comes from referrals from people I know through attending GLI events,” clients with whom he has built long-term business relations,” said the source, who asked not to be named because he belives GLI officials will retaliate.
“But the economic development side … is bullshit.
“I don’t think they’ve accomplished anything.”
A Brookings Institution report on how eight cities dealte with the national deccline in manufacturing jobs notes that between 1980 and 2005, metropolitan Charlotte saw a net increase of 393,000 jobs, a 96.3 percent increase in employment. The transformation of Charlotte from an economy over-reliant on textile mills to a financial services and technology center was led by two bankers, Hugh McColl and Ed Crutchfield, according to Brookings researchers. McColl and Crutchfield and others created Charlotte Regional Partnership, a public-private organization devoted to attracting firms (especially foreign ones) and investment to the 16 counties in the Charlotte region.
The Louisville story is completely different, according to the report.
Louisville gained jobs at a rate of 43.5 percent between 1980 and 2005, just under 1 percentage point above the national rate. Its inflation-adjusted average wage, however, rose by only 16.7 percent, nearly 12 percentage points below the national average. This combination of slightly above-average job growth and well below-average wage growth is a consequence of the long-term loss of high-wage manufacturing jobs and their replacement by lower-wage jobs, especially in transportation and warehousing (United Parcel Service (UPS) air freight), health insurance, health care, and higher education. In 1997, the Louisville Chamber of Commerce and the Economic Development Partnership merged to form GLI, the city’s umbrella economic development and business leadership organization. GLI was formed to implement a plan to turn Louisville from a “nice, average city” to an economic “hot spot.” But Brookings researchers say of Louisville’s major economic development strategies and policies since 1998, only two – the airport expansion and Metropolitan College, a partnership to help UPS workers get college degrees – appear to have “changed the economic trajectory of the metropolitan area.”
From the report:
Without these measures UPS probably would have left Louisville. With them, UPS became the center of a new logistics and distribution cluster in the metropolitan area. Other policies and strategies may have affected individual firms or industries, created favorable conditions for future growth, or had impacts after 2005, but the UPS-oriented policies were the only ones that had regional-scale economic impact between 1980 and 2005.
Joe Reagan sent out an update with his regular GLI news letter to top investors: