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John Thompson

Elizabethton Bureau Chief
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Community Heritage

Thesis captures quick fall of Depression-era Elizabethton

September 2nd, 2013 12:00 am by John Thompson

Thesis captures quick fall of Depression-era Elizabethton

Old postcard of the Carter County Courthouse and monument.

ELIZABETHTON — The story of the good times of the Roaring ’20s being followed by the hard times of the Great Depression is national in scope, but in the Tri-Cities, the disastrous decline was felt hardest in Elizabethton, where the great rayon boom of 1925-30 was followed by the city defaulting on its bond payments in 1931-34.
A thoroughly researched story of the time can be found in a 1938 master’s thesis in economics, “The Social Effects Produced Upon Small Towns by Rapid Industrialization,” by Elizabethton native John Fred Holly at the University of Tennessee.
The thesis was placed on the Internet last week at the request of Joe Penza, the archivist for the city of Elizabethton. Penza also has a hard copy in the Elizabethton/Carter County Public Libray.
The thesis examines the boom that hit Elizabethton with the coming of the American Bemberg rayon plant in 1925-26 and the coming of the American Glanzstoff plant in 1927. Holly then shows the slower but more sustained industrialization that transformed Kingsport. Because Elizabethton’s story is more sudden in its decline and fall, and the fact that Holly is from Elizabethton, the story makes for more compelling reading and provides many insights into life in Elizabethton following the bust.
Holly said there had been industrialization in Elizabethton on a smaller scale, especially a timber boom centered on Laurel Fork that fostered furniture and other wood-based industry. That industry had played out just before the rayon boom hit.
Holly said the businessmen of the chambers of commerce of Elizabethton and Johnson City played a key role in landing Bemberg. There was a lot of publicity about the economic boost the plant would bring, which quickly inflated to stories that eventually there would be as many as five plants employing 40,000 workers and that Johnson City and Elizabethton would merge into one large industrial center for the South.
“The common acceptance of these and similar statements led to the attitude that the plants were necessary to the development of the city,” Holly wrote. Most of the citizens were highly in favor of the plants coming to the city.
City and county leaders quickly began negotiations with Bemberg leaders, and local public support led to concessions that were highly advantageous for Bemberg.
Those stories seemed to be coming true, as first Bemberg was built and then came the announcement that Glanzstoff would be building another large plant next door. Local leaders promised to defer taxes on the plants for 10 years and to extend public utilities to the plants.
The leaders acquired and sold 179.5 acres of land to Bemberg for $9,600. They also promised to construct highways, railroads, a 10-inch water main and sewers to the plant.
In return, Bemberg agreed to construct a rayon plant costing $1.5 million to $2 million and employing at least 1,500 workers.
Construction began on the plant in September 1925 and manufacturing began in October 1926. In May 1927, another agreement was reached with Glanzstoff to build a plant costing in excess of $5 million and employing at last 2,000 people.
The local leaders provided Glantzstoff with an even sweeter deal than the one provided to Bemberg. One difference was the cost of land. Glanzstoff was sold 235.7 acres at a price of $82,829. The higher price reflected the real estate boom that was in full swing.
“With the announcement in 1925 that there was a possibility of the establishment of a rayon plant in Elizabethton, land speculation became the paramount interest of the citizenry at large. Bankers, real estate operators, merchants, doctors and all became so enthusiastic that practically all of the land within a few miles of Elizabethton was held under option before the plant officials made any decision as to the location of the plants,” Holly said.
When the location became known, three areas became hot for sale and subdivision. The best location was the Major Reynolds tract, which stood between the city and the plants. The others were the Lilly Addition and the Biltmore Addition.
As the plants began hiring, there was a great concern for the need for housing. Holly said the plants did not want to get into the housing business. The industrialists thought that if the city would develop roads and sewers in the undeveloped land near the plants, the workers would build their own houses.
For that reason, the plants asked the city to extend its corporate limits by one mile to the west, to the undeveloped land. That was a gigantic move for the city, which increased its size from 1 square mile to 4.5 square miles.
Since the city had promised not to tax the factories, Holly said the city wanted to borrow money to pay for improvements on the undeveloped land. That was a problem, Holly said, because the assessed value of all the city property was $1.15 million, with outstanding bonds of $585,500.
Since the proposed issue would exceed the assessed evaluation of the combined city property, the city took the bold step of replacing the conservative county tax assessor by hiring a city tax assessor, who assessed the property at the boom-time rates. The result was the city’s total assessments shot up to $4.1 million in 1927 and $6.3 million in 1928.
Under those evaluations, the bonds were issued and the city went to work building streets, sidewalks and sewers. The result would be streets and sewers extended to cow pastures and small forests. Farmers were using their new sidewalks to herd the cattle.
While the city was spending the money on roads and sewers to nowhere, Holly said it was neglecting many other areas. He said the city did not offer any recreational areas to its citizens other than one undeveloped park. Schools, police and fire departments barely increased above pre-boom levels.
Holly said the real estate boom was based on a false premise. It was thought that the many thousands of new workers would build homes near the plants. They had not considered the new automobile. Buses and taxis made it possible for many of the workers to choose to remain in the old homesteads where they were born and raised.
Holly’s thesis also reports sharply rising increases in crime, divorce and personal bankruptcy during the period, but there is not adequate data to determine how much of the increase was caused by rapid industrialization and how much was caused by the Great Depression.
The worst problem for the city was that it went into default on the repayment of its bonds after the Depression hit. Part of the problem was that the city was not taxing its most valuable properties, the plants. Another problem was that it was collecting less than half the taxes owed by its citizens.
The poor collection rate was not caused by the Depression. Holly shows it had existed since at least 1920. It also caused the city’s expenditures to exceed its revenues each year, because it was budgeting based on the taxes it was levying rather than how much it was collecting.
Holly’s thesis is well written and provides a contemporary view of the boom and bust. He interviewed many of the government and business leaders of the time and provides delightful personal opinions in many areas such as the relationship of taxis and crime at the time. This is a scholarly article that many people in the Tri-Cities will enjoy reading.
To download Holly’s thesis in PDF form, go to http://bit.ly/18vHLn2.

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