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The Future of the Mid-Sized American City: An Interview with Tim Kelly (Part 2)

Tim Kelly currently serves as the 74th Mayor of Chattanooga, Tennessee. He was elected in 2021 as an independent and is in the first year of his 4-year term. After graduating from Columbia University as a John Jay Scholar, Kelly returned to Chattanooga to run his family’s auto dealership. He subsequently earned his MBA from Emory University, entered the start-up scene with his apps Zipflip and SocialBot, and helped found the Chattanooga FC soccer team. In addition to his business ventures, Mayor Kelly has served on the boards of many local and philanthropic organizations, including the Chattanooga Chamber of Commerce, The Benwood Foundation, and Chattanooga 2.0.

JH: Now that government-run broadband internet has become a major progressive goal, it’s interesting that the city where it’s strongest in the United States is in a county controlled by Republicans, who don’t always agree that it should be a public enterprise. So how has the dialogue shifted? How is it different in Chattanooga around EPB [Chattanooga’s electricity and broadband provider] than it is on a national scene?

TK: Well, I grew up with a business background, and I would have probably described myself before coming into office as a moderate Republican. I’m not sure they exist anymore. But I think when you study economics, if you’re really a student of the market, you realize the market doesn’t always function well. I am very happy to let the market function until it doesn’t. I think the job of the government is to adjust. And what I’ve found in this increasing gulf, back to the earlier point between major markets and the rest of the United States, is that it’s the government’s job and the non­profits’ job to make the necessary adjustments to help the market function more efficiently. And one thing we’ve found—I don’t care whether you’re talking about air service or internet service or the hotel market—Chattanooga often gets overlooked. Back during the Corker administration, we were trying to get a Ritz-­Carlton or somebody to build a hotel here to be able to leverage that for business recruitment, and we couldn’t do it. So the city itself, with a Republican mayor, went out and built a hotel to be sort of a marquee hotel, then found a private company to come in and run it under contract. We interfered in the private market because the private market was not functioning well. And I think what you’re going to find more and more is that many businesses strive toward monopoly. Let’s face it, that’s what happens. 

The market may function perfectly well for New York and Atlanta, and then the top 30 markets in the United States, but it doesn’t function well for the rest of the country a lot of times. And I don’t think that’s a Republican or Democrat thing—it’s a question of making the necessary adjustments to make sure that it does function well for my constituents in Chattanooga. And that does not mean handing the keys to a multinational corporation with well-paid lobbyists who really don’t give a damn about Chattanooga. Again, I think cities like Chattanooga need to look at things like municipal fiber to correct the market, if you will, and create a competitive advantage that they can leverage. Because, back to The New Geography of Jobs, un­amended, where the market will take us is large metros with all the high paying jobs and the vast majority of the wealth. And a lot of flyover country with light manufacturing jobs, and in the case of Chattanooga, a little bit of tourism. That is a very dystopian future. I think that is, to a great extent, why we have the political environment we have today, and it needs to change. 

JH: The public-private partnership style that the Corker Administration used—is that a model for other development? If a city government sees a need unfulfilled, is their first look to contract it out to a private corporation?

TK: Yeah. Part of localism is realizing that. The shorter answer is local companies are really the answer. Starbucks is a good example. Not picking on Starbucks—they pay great fair wages—but they don’t leave anything behind. If you buy a cup of coffee in Starbucks instead of from a local vendor, they’re not sponsoring your kid’s little league team. What mid-sized cities need to do is focus on the circularity of the local economy. The first preference is to find a local business that could fill that need in the market. But a lot of times, that’s either an access to capital issue, which we found many, many times, because the banking system is also going to haul it out and consolidate. Or it’s basically a training and resources issue. So my preference is always to let the market function, but if it doesn’t, yes, I think the cities can and should intervene, and it’s just the way that Senator Corker did back in the day. Stand up, fill the gap as need be. And that worked out great. That eventually got spun out into the private market, and it’s now functioning as a privately owned hotel. I don’t think government needs to be in the business of running those things in the long term, but in the case where it needs to jump in and correct a problem, I think it should. 

JH: In that case, could you see, in the long term, the fiber program in Chattanooga being privatized? Or should that always be run by the city government? 

TK: That’s a great question. I would never say never, but I think it’s very difficult to imagine how that would ever make sense. We have a private water utility here for reasons that are somewhat ponderous to me. And if you’ve got a situation where you have a utility that has been granted a monopoly, I think that’s a great place and a really appropriate place for government to be. If you’re getting outside the boundaries there, you are getting into muddy territory because no private business really wants to compete with the government. In the long term, that’s not a good recipe for functional capitalism, but in this case, I think fiber clearly is a utility. I think the federal government has taken that view, and I hope it’s something that does spread across the country eventually. 

JH: In a broader scope, what are the greatest challenges you see, besides the ones we’ve already talked about, that mid-sized cities are facing as far as preventing being hollowed out further?

TK: Well, there are a lot. Covid-19 has tipped the scales back the other direction to some extent. Again, it goes back to the nature of work and where people want to be. And so there are tons of challenges, air service is one. When Reagan deregulated airlines, I think there were some good things about that, but there were some bad things. We really struggled to have sufficient air service here to be able to attract the companies that would probably like to move here, but just can’t from a practical perspective. So we need more direct air service, just because it’s just highly impractical. We’ve lost a lot of deals because people can’t get in and out of here on a predictable and routine basis. The same is true of railroads. We don’t have rail service here at all, highly ironically. Here we are, the Chattanooga Choo Choo, and we do not have passenger rail service at all, whereas larger metros enjoy that. So it’s those structural things. 

We also don’t have any investment banks in Chattanooga. I did a Young American Leaders Program at Harvard a few years back and it struck me that we were the smallest city in the cohort. And so many of the structural advantages that they have in terms of the amount of venture capital—in terms of the amount of investable capital and investment banks—we don’t have in Chattanooga. We’ve got some here and there, and we’ve got some really great citizens who are very invested. But if you really look at the numbers in terms of investable wealth, it’s a drop in the bucket. I talk to my friends in Boston and their kids go to school with the guy who is, I don’t know, in charge of philanthropic giving for Bank of America. In those cities, there are more interactions like: “We’ve got this great program for schools.” “Well, fine, we’ve got $100 million to invest.” That stuff doesn’t happen here at scale, so we really have to scrap. And that’s where I think it starts: with a really, really cold, hard awareness that frankly, we better get our act together and really start realizing that without a great deal of intention and focus and policies that support localism, the future is pretty grim.

*This interview has been edited for length and clarity.