The folks at the Charlotte Chamber can’t explain it. Down at the government center, they’re mystified. And the Charlotte Observer? They haven’t written a word about it, even though the Chamber sent the paper a press release weeks ago.
Outside those halls of power, few people know that Charlotte’s new business recruitment numbers have plunged to their lowest point in 15 years. Yes, you read that right.
It’s no anomaly, either. It’s part of a trend I first noticed in 2001, when the number of new firms that opened their doors or relocated to Charlotte dropped 21 percent — from 855 to 676 — in a single year. Back then, and in the years that followed, the Chamberites had a lot of good explanations for the ongoing decline in new businesses. The corporate world was recovering from the dot.com bust. The recession had taken a toll. We’d recover from the slump, they assured us. Really, we would.
But the truth is, this decline started before the dot.com bust or the recession. Annual new business numbers peaked here in 1994, when the county added 1,052 new firms in a single year, and it has steadily declined ever since. In 2005, the number of new businesses locating here was half that, at 562.
Don’t get me wrong. Most cities would kill to pick up 562 new businesses in a single year. According to the Charlotte Chamber, those firms added 5,667 new jobs last year and invested $853 million in the local economy. So the Queen City isn’t exactly in a downward spiral.
But the trend is disturbing. A few weeks ago, eyebrows went up at the government center when Mecklenburg County’s annual report indicated new business recruitment for 2004 fell 27 percent from the year before. Why this was news to anyone, I don’t know, because those numbers were released by the Chamber — and reported in this space — more than a year ago.
Hopefully it won’t be another year before the politicians see the 2005 numbers, released last week, because when you look at the two years together, another disturbing trend emerges. Despite the booming economy, the number of new businesses moving here has declined by more than 20 percent for two years in a row.
Last week, I asked Tony Crumbley, the Chamber’s vice president of research and economic development, what’s going on. “Wish I had an answer for you,” he said. “I would have thought after the recession we would have seen a surge. That surge didn’t happen.”
Maybe we’re a less entrepreneurial society now, he theorized. Maybe fewer people were laid off here in recent years, so fewer people started businesses. Or maybe businesses are locating in surrounding counties now.
“Could it be the taxes here?” I asked. It’s a question that always sends Chamber types into orbit, but I had to ask. After all, the John Locke Foundation just ranked Charlotte the highest taxed city in the state as a share of personal income for the fifth year in a row. And taxes just turned up as the No. l cause of worry for small businesses with fewer than 99 employees, in a recent survey of 400 businesses by the city and the chamber.
“No, any way you look at our taxes, they aren’t high,” said Crumbley. “We have a very fair tax base in Mecklenburg County when you compare services.”
Government “services” are always a difficult thing to compare from city to city but I do know this: The biggest service local government provides is education, and while Wake County’s taxpayers pay $500 less per person than Mecklenburg’s do, its schools consistently post significantly higher scores on state tests than ours do. Its roads aren’t littered with pot holes and its crime rates lag far behind ours.
But who am I to judge? I’m sure we’re getting something better for all that dough. I’m just not sure what it is. Business owners apparently aren’t sure, either.
But there has to be some rational explanation for why Charlotte was attracting 200 more new businesses a year in the wake of the dot.com boom and more than 100 additional businesses a year during the recession. The only major change around here that I can come up with is the multiple, double-digit tax increases of the last eight years. But maybe I’m missing something. Whatever the case, may I suggest, if it’s not too controversial, that we at least consider how our tax rate might be affecting business recruitment before we jack up the taxes again?
Tara Servatius’ new radio talk show, “Citizen Servatius,” airs Sundays from 11am to 1pm on WBT-1110AM.
This article appears in Feb 8-14, 2006.
