• U.S.

The South’s Red-Hot Town

12 minute read

It was, I think, the hum. At Midday recently at Joe Ledbetter’s BrickTop’s restaurant in Nashville–a busy spot on West End Avenue near Vanderbilt University and the city’s Music Row–the Tennessee state commissioner of economic development was lunching nearby, at a table adjacent to the head of a private K-12 school. The rector of the city’s largest Episcopal church sat in one corner near the general counsel of a huge privately held technology company that migrated to town from the West Coast a decade ago; the head of a major private-equity firm was in a booth across the way, debating between the bistro chicken and the Cobb salad. Absorbing the scene, a visiting out-of-towner looked up from his iced tea and shook his head with an admiration that bordered on envy. “This place,” he said, “just sounds prosperous.”

So it did–and so does Nashville, where my family and I moved from New York in 2012. In the buzz, the visitor heard what Jay Gatsby heard when he listened to Daisy Buchanan, whose voice, Fitzgerald wrote, was “full of money.” Loud but not deafening, energetic but not frantic, the BrickTop’s vibe is a kind of running fever line tracking the upward mobility of a city so culturally and economically hot that parents at kids’ basketball games joke about how the only place to go is down. The story of Nashville’s current prosperity is a case study in how to make the most out of organic advantages. The specific factors behind its rise aren’t readily transferable, but the larger lessons about what works are. Chief among the takeaways from the Music City’s revival: culture is commerce.

Nashville has had the strongest employment growth of any large metropolis since the Great Recession. It was the second-fastest-growing U.S. city for most of 2013 and the only one in the top four outside of oil-booming Texas. The city’s cost of living, meanwhile, is cheaper than the U.S. average by over 13%. Office vacancies fell to 10.4% from 12.3%, among the 10 biggest declines in U.S. markets last year, according to CBRE, a commercial real estate firm. Foodies flock to nationally lauded new restaurants housed in shuttered factories, while well-to-do college graduates rent their first apartments in the Gulch, a former brownfield transformed into the first LEED-certified neighborhood in the South.

Middle Tennessee is one of at least a dozen red-hot but sometimes overlooked regions that have successfully pulled themselves out of the Great Recession and into a broad, rising prosperity. Though the ingredients for the booms are often similar, each region has a different recipe. So what’s Nashville’s secret?

Tommy Frist, a son of Hospital Corporation of America’s (HCA’s) founding Frist family, who left Nashville in the late 1980s but returned a decade ago to work and raise his own family here, ticks off “four buckets” that he believes contribute significantly to the city’s good fortune. There is employment stability in health care, entertainment, higher education and government. There is the wealth effect of ownership that extends deep into the ranks of some large enterprises, such as HCA, Ingram Industries and Dollar General, and those people and their money generally stay in middle Tennessee. There is a single metro government, thus reducing friction in governance and facilitating more private-public partnerships. And there is the more ineffable but no less real issue of livability. “Nashville is a soulful city in a way that Charlotte or Atlanta just don’t seem to be,” says Frist. “The vibe is cool, but it’s warm and comforting too.”

In some ways the current boom can be traced to a conversation at the Masters Golf Tournament that took place nearly half a century ago with legendary Nashville banker Sam Fleming. There Frist’s grandfather and father, Drs. Thomas Frist Sr. and Jr., and Jack Massey, who was part of the deal to buy Kentucky Fried Chicken from Harland Sanders, talked over the economic virtues of privatized hospitals built to accommodate the growing Sunbelt. They saw an opportunity to professionalize the management of, and attract capital to, a heretofore cottage industry.

They were right, and HCA was soon born. The Nashville Healthcare Council has published a “family tree” of more than 500 companies, many of them spun off from HCA, Vanderbilt University Medical Center and HealthTrust, a cost-management company partnered with 1,400 hospitals that is itself an HCA descendant. More than 250 health care companies remain in the city, including 13 publicly traded companies directly employing over one-eighth of the city’s workers and putting $30 billion into the local economy annually. HCA has bounced back from a massive health care fraud settlement, and the sector has experienced overall growth of over 63% since 2000 and employment growth of nearly 20% over the past decade.

Then there’s music, a primal element in the life of the city. In the 1960s, a young Columbia Records staffer named Kris Kristofferson flew a helicopter into Johnny Cash’s backyard in a Nashville suburb, recording demos in hand. In 1973 a drunk, depressed Willie Nelson left the downtown honky-tonk Tootsie’s late one night to lie down in the middle of a snow-covered Broadway hoping to get run over. “It was a town of characters for a long time,” says Don Cusic, a leading country-music historian and a music-business professor at Belmont University. “They haven’t disappeared, but it’s so corporate now.”

The shift from chaos to corporatism might be bad for adding to lore and legend, but it’s been fabulous for the bottom line. The music and entertainment industry provides $10 billion to Nashville’s economy annually, sustaining more than 56,000 jobs. “It’s like high school with money,” says Gary Overton, CEO of Sony Music Nashville. “We all know each other. We know the spouses. We know the dogs. Our kids go to school together.”

Taylor Swift’s story blends the old and new Nashvilles–she arrived because of the former and stays because of the latter. “I decided to move to Nashville when I was about 10 years old,” Swift tells Time. “I was obsessed with watching biography TV shows about Faith Hill and Shania Twain, and I noticed that both of them went to Nashville to start their careers. From that point on, I began relentlessly nagging, begging and pleading with my parents to take me on a trip there. When I was 11, my mom took my brother and me to Nashville on spring break, and we drove up and down Music Row.” By the time Swift was 13, she had a development deal and her parents made the move from Pennsylvania.

Swift has not considered decamping to Los Angeles or New York City as her star has soared. “Choosing to have my management company based in Nashville just made sense because my family is there as well as my record label,” she says. “I never think about moving home bases. It’s hard to describe why you consider a town your home base, except that when people ask me, ‘Where’s home?’ I don’t even think before I say, ‘Nashville.'”

Swift loves the Nashville code: the city leaves its stars alone. “The cool thing about spending time in Nashville is that no one knows when I’m there,” she says. “In New York and L.A., there are photographers waiting on the street, and it seems like every errand I run is photographed and documented. You don’t see as much evidence of me spending time in Nashville because I’m not being photographed at the grocery store.”

In the beginning, however, there was not music but education–and lots of it. Nashville’s first pass at branding was not Music City but the Athens of the South, a designation that recognized the high concentration of colleges and universities and a civic fondness for classical architecture. Beyond the aesthetics, the education sector is hugely significant. “It’s a really powerful, synergistic relationship,” says Vanderbilt chancellor Nicholas S. Zeppos, whose trajectory reflects Nashville’s culture of organic growth. Zeppos went to Vanderbilt to teach in the law school, rose to become provost and now presides over one of the hottest schools in the U.S. (A word of disclosure: I am a visiting faculty member at Vanderbilt.)

Nashville is home to more than 100,000 students and 21 higher-education institutions, with 60% of graduates choosing to stay in the area. The leader is Vanderbilt, the second largest private employer in the state. Middle Tennessee State University, which has more than 24,000 students, pumps over $1 billion of revenue and nearly 12,000 jobs into the Nashville area. Belmont, which hosted a presidential debate in 2008, has more than doubled its enrollment since 2000, and its music-business program serves as a pipeline to Music Row.

The political element in Nashville’s rise offers powerful evidence that reflexive partisanship is bad for business. Under the mayoralties of Democrats Phil Bredesen (who went on to serve two terms as governor), Bill Purcell and Karl Dean, Nashville has become the richest city in the most Republican of states. Part of the secret is that metro elections are nonpartisan. For the mayor and council members (there are 40 of them), there is a general election, and if you don’t get 50% of the vote, there’s a runoff. “It truly is nonpartisan–there’s no party labels, and people don’t talk about it,” says Dean, the current mayor. “Historically, the city is just very moderate.”

And very lucky in its political leadership. Purcell, Bredesen and Dean have given the city several decades of shrewd service. In the early 1990s, BellSouth (now AT&T) built the “Batman Building” as its regional headquarters in downtown Nashville. The building, the tallest in Tennessee, has become the anchor of the city’s skyline. Bredesen also pushed ahead with plans for what would become Bridgestone Arena, without knowing what team or sport it would field. “We just went ahead and almost like a leap of faith put up this really monumental and iconic arena,” says Steve Turner, a local entrepreneur and philanthropist.

To bring the NFL to town, Bredesen wooed Houston Oilers owner Bud Adams with the promise of a free, brand-new stadium, a $29 million relocation-fee sweetener and 100% of stadium-related revenue. A prominent family, the Ingrams, agreed to move one of its distribution facilities down the river to make way for what would become LP Field, home to the Tennessee Titans. At about the same time, Nashville changed its zoning codes, allowing residential projects in much of downtown that had been blocked off since the mid-1970s.

In 2010, with construction under way on the nearly $600 million Music City Center, Nashville offered huge tax incentives to attract a luxury hotel, eventually hauling in the $268 million, 800-room Omni. The hotel shares a lobby with the Country Music Hall of Fame and Museum, which will double in size in the midst of this year’s $100 million fundraising campaign. The expanded music shrine may bring even more visitors to town. The current tourist boom helped area hotels book nearly all their rooms on 31 weekends in 2013.

Generating growth is one thing. Sustaining it is another. Tennessee has no income tax–a great starter for attracting businesses and new residents but not a great finisher for raising large sums for public-sector investment, particularly for education, a longtime area of concern. One thing about prosperity is that it tends to put a city’s vices as well as its virtues on vivid display. Over 72% of students in metropolitan Nashville’s public schools are economically disadvantaged. Only a third of elementary- and middle-school students meet grade-level standards in math, and 2 out of 5 meet the grade level in reading. Nashville is now on the map for education-reform activists, largely because in 2010 Tennessee was one of the first two states to win a Race to the Top grant, receiving $500 million over four years from the federal government. Dean considers education one of his top two priorities for the future. (The other is transit, and his plan to connect the city’s east and west sides through a bus rapid-transit line has ignited fierce debate.)

On any given day at BrickTop’s, usually over deviled eggs and sugar bacon–a specialty of Ledbetter’s–there are reformers and politicians and bankers and artists and academics talking about all of this and more. Nashville has done a masterly job of assessing what’s right in front of it–the health care story, the music story, the higher-education story–and then figuring out how to use those stories to create appealing lives and livelihoods. And the city has managed all this with more than a little grace and graciousness; rough edges tend to be smoothed out by an ethos of manners and hospitality. Running into neighbors and new colleagues in the bar that connects the front door to the dining room, newcomers to town hear a common refrain. “We’re glad you’re here,” people say–words that ring true amid the buzz of good times and that help explain why so many folks are glad to be coming to a big civic party that shows every sign of having only just gotten started.

–With reporting by Alex Rogers/Washington

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Correction: The original version of this story incorrectly described the driving force behind the project that would become Nashville’s Bridgestone Arena.

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