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HomeMy WebLinkAbout10-16-96 ECONOMIC DEVELOPMENT COMMITTEE AGENDA Wednesday, October 16, 1996 8:00 a.m. Army Reserve Center 4655 North Lexington Avenue 1. Call to Order 2. Approval of Minutes from September 18, 1996 meeting 3. County Road E Banners 4. Marketing Brochure 5. Council Comments 6. Committee Comments 7. Adjournment If you are unable to attend this meeting, then please contact Julie at 633-5676. MINUTES CITY OF ARDEN HILLS,MINNESOTA ECONOMIC DEVELOPMENT COMMITTEE MEETING WEDNESDAY, SEPTEMBER 18, 1996 8:00 A.M. ARMY RESERVE CENTER 1. CALL TO ORDER The meeting was called to order at 8:05 a.m. 2. ROLL CALL Present were: Dan McCallum, Chair; Ray McGraw, Vice Chair; Arnold Lindberg; Steve Freimuth; Tom Goblirsch; Ted Brausen; Council Liaison, Beverly Aplikowski; and Kevin Ringwald, Community Development Director. Others present were: Tom Steele, Finance Committee Liaison and Julie Tostenson, Department Secretary. Absent were: Terry Nagle, Jeanne Winiecki, Tom Andreason and Brian Fritsinger, City Administrator. 3. APPROVAL OF MINUTES Minutes from the August 21, 1996 meeting were approved, following a motion made by Ray McGraw and seconded by Tom Goblirsch. 4. MARKETING BROCHURE Dan McCallum presented the alterations to the cover of the marketing brochure, that were suggested at the August, 1996 EDC meeting. Ray McGraw made a motion to leave the cover of the marketing brochure as stands. Motion carried 6-0. 5. BANNERS Ray McGraw and Ted Brausen surveyed 13 businesses along the County Road E business area for their support in the banner replacement. Three (3) of the businesses had no response. Five (5) of the businesses said the banners identified the area as the downtown area. Five (5)business said the banners don't identify the area as a downtown area. In summary, the business that were surveyed along County Road E were in a split in their support for and their contribution to the banners. It was suggested that additional businesses should be surveyed in the area to accurately determine support for the replacement of the banners. Ray McGraw and Ted Brausen said they would do more surveying and report back with their findings at the next EDC meeting. 6. COUNCIL REPORT Council Liaison Aplikowski stated that the Council was going to be making a decision of the Quad Ice Arena by September 30, 1996. The City is scheduled to interview Architectural firms for the new City Hall. The City is looking into a Joint Maintenance Facility for the Public Works area. It would be combined with the National Guard, Ramsey County and the City of Arden Hills Public Works on the arsenal property. Council Liaison Aplikowski requested the comments from the EDC on the proposed locations for a new City Hall. Ted Brausen stated that they should have the City Hall in the downtown area of Arden Hills (Count Road E). The City should consider looking at MSI claims building, Carroll's furniture, and/or other possible buildings in the downtown area. Steve Friemuth stated that the City should lease a building and wait out for the arsenal property to build the new City Hall. The City should not hire an architect firm without having the land. Ray McGraw stated that the City should have the Public Works Facility on the Arsenal Property. He stated that it would not be a good idea to have a Joint Public Works Facility, because they would want to share things, but not share in the responsibility. 7. MISCELLANEOUS The Law Firm of Hansen, Dordell, Bradt, Odlaug & Bradt has relocated at 3900 Northwoods Drive in the Northwoods office complex. • The Planning Commission recommended approval of Welsh Companies • proposal in the Gateway Business area. The recommendation included some upgrades to the exterior of the building, which Welsh Companies has agreed to. The building would be office 20 percent office and the other 80 percent would be manufacturing/warehouse. Subsequent to the Planning Commission recommendation, the institutional investors in the building have raised concerns regarding the percent office requirement. Their concern is regarding the turn over issues the possibility they may not be able to obtain an occupancy permit, if the building's office percentage temporarily drops below the required 20 percent. The issue has not yet been resolved but the applicant and staff are confident that a mutually satisfactory answer can be worked out. 8. COMMITTEE COMMENTS Ray McGraw stated that he wishes to discuss the City's Pavement Management Program with the EDC at a later date. Tom Goblirsh stated that the business need more information on the signage requirements in the City. The businesses may not have an understanding how the process works and the City might find it beneficial to do a mailing on signage or put something into the City newsletter. Arnold Lindberg stated that the City should not be designing a new City Hall, if they don't have the land. Ted Brausen stated that he concurred with Mr. Goblirsch's comments on signage. Also, he understood that the City was considering changing police services from Ramsey County to New Brighton, and wished to state his opposition to such a change. Tom Steele stated that the EDC was starting to move forward for the first time and was pleased to see this progress. Dan McCallum stated that he will continue to work on the marketing brochure. 9. ADJOURNMENT Meeting adjourned at 9:00 a.m. CITY OF ARDEN HILLS ® MEMORANDUM DATE: August 15, 1996 TO: Economic Development Committee FROM: Kevin Ringwald, Community Development Director SUBJECT: Banners The EDC at their August of 1996 meeting requested that the businesses along County Road E be queried as to their support and potential contribution to the replacement of the existing banners. EDC members McGraw and Brausen volunteered to act as liaison with these businesses and to report back to the EDC on their findings. The initial findings were reported back to the EDC at the September 18, 1996 meeting of the EDC. Of the 13 businesses surveyed adjacent to County Road E: three (3) of the businesses had no response; five (5) of the businesses said the banners identified the area as the downtown area; and five (5) of the businesses said the banners don't identify the area as a downtown area. • In summary, the business that were surveyed along County Road E were in split in their support for and their contribution to the banners. It was suggested that additional businesses should be surveyed in the area to accurately determine support for the replacement of the banners. Ray McGraw and Ted Brausen said they would do more surveying and report back with their findings at the next EDC meeting. is CITY OF ARDEN HILLS • MEMORANDUM DATE: October 16, 1996 TO: Economic Development Committee FROM: Kevin Ringwald, Community Development Director SUBJECT: Marketing Brochure Chair McCallum and Staff will be preparing the internal portions of the marketing brochure. It is anticipated that it will be available for review at the November 20, 1996 meeting. • . 4 CITY OF ARDEN HILLS MEMORANDUM DATE: October 16, 1996 TO: Economic Development Committee FROM: Kevin Ringwald, Community Development Director 4.— SUBJECT: Monthly Report 1. Welsh Companies. The City Council on September 30, 1996 approved the Welsh Companies development proposal (Planning Case 96-12) in the Gateway Business District. As you will remember the Welsh Companies proposal (Phase I)was for a 154,237 square foot industrial building ($6.5M to $7.OM) on the"Binger"property, which is located at the northeast corner of Round Lake Road and Butcher's Street. The Staff had previously mentioned some concern on behalf of the institutional investors in the project regarding the office build out requirement of 20 percent. The City Council in its approval addressed this by lowering the office requirement to 8 percent for this building and looking at the overall development in the GBD to be at least 20 percent • office. The Staff is working with Welsh Companies on the development of Phase II of this project (Pentair property). Welsh Companies would like to start construction on Phase II (approximately 120,000 square feet) in February or March of 1997. As always, the Staff will keep the EDC informed on development activities in the GBD. 2. Minnesota's Brownfield sites becoming greener. The September 30, 1996 issue of the Minnesota Real Estate Journal contains an article written by Martha Brand. The article discusses the state's involvement in fostering development on polluted sites (brownfields) in Minnesota. 3. Why Minnesota will Skip the Next Recession. The October of 1996 issue of the Twin Cities Business Monthly contains an article written by Kate Peterson. The article discusses how the states farm businesses will cushion the state's economy during the next recession. 4. In a Solid State. The October of 1996 issue of the Twin Cities Business Monthly contains an article written by Allison Campbell. The article discusses the health of the state's manufacturing sector. i 10 Iwnfi QCUs nNi Page L5 ENVIRONMENT Minnesota .fields are becoming gweeneri f 'r STATE MAKES STRIDES IN FUNDING DEVELOPMENT ; MREJ MF PHOTO —by Martha Brand— Martha Brand public water supply. time,there has been continued progress proposed,the uncertainty could prolong Last year,the Legislature recognized in answering the"how clean is clean" the transaction such that in certain situ- that remediation standards need to question at the MPCA.(For example, ations, the unremediated brownfield reflect the risk for the particular use n the past several years,public how the MPCA determines whether a could not compete with a similar green- proposed for the property and amended and private developers have brownfield property requires remedia- field site that could be developed quick- the state Superfund statute to require the turned urban properties contaminated lion,and the cleanup goals that should ly. MPCA to consider the"planned use"of by historic commercial or industrial be used in such remediation). The large number of people involved the site in setting remediation standards. activities into These developments have and will in the process—MPCA staff,environ- This means that if a brownfield is an GUEST downtown rest- positively affect the timing of many mental consultants,lawyers and repre- industrial area and the projected new dential develop- brownfield transactions, the cost of sentalives from all of the interested par- use of the property is industrial and not COLUMNIST ments, retailing rcmediating some of these properties ties(the seller,the buyer,the develop- residential, the MPCA may set the centers and urban and the certainty of the remediation er,the lender)in some cases also signif- remediation standard at a level which industrial expansions. These brown- process.All these factors will continue icantly increased the cost of the trans- reflects the risk to an industrial and not fields.and the many others that remain to make it easier for brownfields to action. a residential user of the property. undeveloped.are located near available compete for redevelopment with green- In addition,in the past,there was a Of course,the owner of the property labo forces, transportation networks fields. perception that the MPCA was continu- (or the developer or purchaser)is free town office space. The limes are changing ing to rely,at least as a starting point in to remediate the property to a more eless.many brownfields have Historically,it was difficult for a pro- negotiations,on the Superfund statuto- demanding residential or unrestricted le competing with greenfrelds ponent of development of a brownfield ry goal of permanent remedies for soil use standard if it so chooses. in development arena due to con- property to predict the standards that the cleanup and either"non-degradation"or By the time the Legislature imposed terns of developers and lenders about MPCA would use to determine whether drinking water standards for groundwa- this change, the MPCA had already acquiring liability for existing contami- identified contamination needed further ter remediation. started developing a Risk Based Site nation, funding the investigation and investigation and the cleanup goals that For brownfield properties where the Evaluation Manual,which will contain remediation needed to develop brown- the MPCA would impose for identified developer proposed a continued indus- guidelines for evaluating risks to human fields,and the lack of certainty regard- contaminants.There were two reasons: trial use after the remediation,there was - health and the environment on contami- ing the assessment and remediation Firs[,while the methodology used by a concern that use of these relatively nated properties. This movement standards that the Minnesota Pollution MPCA to determine the goals was based pristine bench marks would result in towards risk-based assessment and Control Agency(MPCA)might impose. on commonly accepted risk assessment remediations that were not based on remediation standards had begun In addition,there has been concern by practices,the MPCA often did not begin actual risk to human health and the nationally several years previously with some that remediation standards were the process until site-specific informs- environment and were more costly than the development of the Risk Based Cor- overly conservative and inconsistent lion was presented to the agency. necessary. rective Action guidelines(RBCA)for with the real risks to human health and Second,these goals were often the For brownfield properties with limit- the remediation of petroleum associat- the environment posed by the contami- subject of case-by-case negotiation ed groundwater contamination, there ed with petroleum tanks. nation and the proposed use of the site. between the MPCA staff and represen- was concern that the MPCA would not In Minnesota,this approach has been Minnesota has made great strides in tatives of the brownfield.The lack of consider the fact that groundwater under used by the Tanks and Spills Division at the areas of liability protection and early certainty and the negotiations the property was contaminated by the the MPCA for some time.It has result- funding for brownfields development in made it difficult for property owners or histoaCal industrial use of the entire ed in contaminated soils and groundwa- the last several years.Some of these developers to assess in advance whether area,that the community was by ordi- ter being left in place in those situations accomplishments were discussed in a particular brownfield could be eco- nance on a public water supply and the where this course of action presents an MREJ staff writer Edic Gros.sfield's nomically redeveloped. For those contamination contributed by the acceptable risk to human health and the article. "Diamond in the Rough," brownfields where development was brownfield property did not affect the continued on=1 page (MREJ, 12.11-95). During this same • Pag.16 PAt1,1S CAI S pt h '+n tea ENVIRONMENT continued from preuiour page sites that are more green than brown and is in the process of being redeveloped cases. environment. move them out into the transactional into a retail shopping center that was This suggested change in MPCA pol- On the Superfund side(Lo"for non- World to better compete with green fleId badly needed by the community. icy has created some uncertainty in the petroleum contaminants),the for is Properties. Part of the reason for the successful transactional world.If deed notations or formalizing the same basic risk-based In addition, sometime in the next development of this site is the fact that restrictive covenants were required,it approach that it had been usin g infor. year,the MPCA hopes to publish risk- the MPCA took into account the actual could have implications for all parties based remediation goals that will allow risks posed to p g molly prior to the"planned use"amend- g P people using the site and to a transaction as such restrictions ment. owners and potential developers actual- to the environment in setting the trite- could affect the value of the property Generally,for each contaminant(sot- ly to calculate the cost of remediating a ria for determining what contamination and the ability of the property to attract vents. PCBs, metals), the MPCA is Property to a specified use.This will needed to be remediated and the stan. financing. In these cases, the parties identifying the pathways by which the have several consequences. dard to be used in the remediation. will need to evaluate whether the possi- specified contaminant may migrate,and First,it will help land owners better As a result of this risk-based ble lower costs of a limited cleanup out- the human and environmental ate a determine a price for brownfield sites. approach,the MPCA will require some balance this possible effect. tors" (industrial workers, residential Often, these properties have been sold soil remediation,but will not require Summary users,children,fish,etc.)that may be too cheaply because the cost of the that the groundwater at the site be reme- MPCA's "formalization" of risk- users,c it the contaminant.It is then remediation is not known,and the worst dialed as it might have several years ago based assessment and remediation will working toward setting general risk- is feared. under the stricter "non-degradation" Second,it should lower the develop- standard.The extra cost of gundwater based remediation goals that can be lion costs of remediating actions.lIt has the potential r to lead to and develop- cleanu would have been considerable. less costly assessments of brownfields, modified in specific cases for different P planned uses. ing brownfields,because it will remove Similarly, under the risk-based reduced transactional costs and remedi- What does this mean for brownfields? many of the costs associated with nego- approach to cleanup, the MPCA is ations which reflect the actual risk of The continued movement toward tiating remediation standards.Finally,it allowing some contaminated soils to the proposed use of the site. risk-based assessment and remediation will streamline the time frame for reme- stay on site,although institutional con- In certain cases,however,the devel- standards can only help brownfields. diating many brownfields,thus allow- trols may be used to prevent these soils oper or buyer(or even the seller)might The MPCA has recently issued Draft ing brownfields to compete more readi- from being disturbed. ly with greenfields when timing is an want to remediate the site to an unlim- Site Screening Evaluation Guidelines as g Caveat emptor iced use to avoid a deed restriction or part of its overall development of the issue. For certain projects,there may be a another form of institutional control. Risk Based Site Evaluation Manual. The"Northeast Retail Site"located in price to using this new risk-based Even in these cases, however, the When finalized,these guidelines will northeast Minneapolis is an example of approach and remediating to a specific increased certainty and reduced time help brownfield property owners and how the use of risk-based assessment use.There is the possibility that the line for the remediation will benefit help b ers fi quickly determine with and remediation standards can positive- MPCA may require institutional con- brownfields development. P q y ( ly affect development of a brownfield trols to make sure that if a contaminant Martha Brand is an attorney at relative certainty and low transaction site.The Northeast site is the location is remediated to an industrial use,the Leonard, Street and Deinard, Min- costs)which contaminants found at a of the former Johnson Street Quarry use of the property does not change to neapolis,where she specializes in env i- site are at such low levels that future Dump.The wastes at this site include residential.The MPCA has released a ronmental law. investigation and remediation of these municipal contaminants will not be required.With P garbage and -demolition draft policy paper on the use o i comment,data,owners and developers will debris,abandoned drums,and petrolil which controls for internal comment, be able to remove the stigma from those um,solvent and PCB contaminated soil. which reportedly would require the use Yet,despite this contamination,the sift of deed restrictions in at least some • v ECONOMIC OUTLOOK mncsoia business owner David Melberg uun cite plenty of reasons for optimism Matiout the future of the slate's economy. Like most entrepreneurs.Melberg recognizes that a balanced state budget,a highly educated work force,it Twin Cities venture-capital pool Wh rivaling that of any metropolitan area this size in the nation,and a wide variety of healthy in- dustrial sectors provide Minnesota with a solid shield against the recession that many econo- mists predict will hit the nation in the next two to five years.What many may not realize is that the industry Melberg joined in 1971 is probably inneso a the best weapon in the arsenal Minnesota has to draw on to defend against the next economic downturn. A Hector-based farmer who grows corn.suy- bcans,and sugar beets,Melbcrg exemplifies the carefully diversified,financially astute,and for- ward-looking players who dominate the state's agriculture sector today.Heiberg funnels his crops through seven"closed"cooperatives in M t which he's an investor.Through such opera- . . " lions,farmers pool money to build facilities where value is added to their raw commodities. Rattling off a lengthy anti eclectic list of prod- ' ucls generated by the cooperatives,Melberg ca- sually describes the demand for the soybean- ' meal-fed specially fish he and other investors f are planning to raise through the MinAqua co- 6d' operative."Tie tilapia,which used to be called the African perch,doesn't have its own distinc- • tive taste—it's not fishy.Chefs like that because they would rather add their own flavor,with Cajun spices for example,and not have to cover I Up the fish taste,"he says. In addition to his growing knowledge of culi- nary preferences.Melberg probably has a better understanding of options and futures than most . M kbrokers.And he keeps as close an eye on changing international pulilical and economic dynamics as any other exporter in the state. Coupled with the slate's concentration of leading fool processors and agribusinesscs. farmers like Melberg—equipped with sharp business skills,constantly improving technolo- gy.and it recently overhauled,market-oriented federal farm bill—make up a robust industry Our lapmers—who today run diverse,efficient,high-tech operations— poised to take advantage of rapidly growing de- mand for food.With one in four workers in the and ag related industries are poised not only to plow under the next recession slate directly or indirectly dependent on the that blows across the prairie,but are positioning their businesses sector for their jobs.Minnesota agriculture to feed a growing global marketplace. promises Ili propel the state's economy well in- to the next century. No smal By Kate Peterson "I"hc Minnesota Department of Agriculture esti- 34 OCTOBER 1996 TWIN CITIES BUSINESS MONTHLY • r mates that agriculture accounts for 17 percent nesota farmers enjoyed a , of the state's total industrial output.22 percent boom created by rising ex- x,,- v« of total exports,and 20 percent of jobs.And port demand,generated in though agriculture is a declining portion of the large part by increased economy—primarily because other sectors have grain imports by the then- grown at a relatively quicker pace—it is"still Soviet Union.The rural huge in terms of output,in economic impor- economy hummed.and the lance."explains Edward Lotterman,an agricul- Twin Cities.though it may tural economist with the Federal Reserve Bank have been hit by the 1974- of Minneapolis. 75 recession.enjoyed some Agriculture plays a unique role in the state's ripple effects. economy.While Minnesota is not entirely de- Lotterman explains that pendent on agriculture,and thus subject to its states like Michigan and ups and downs•the industry plays a large Ohio,with their heavy de- enough role that major trends have a significant pcndence on the auto and influence on the whole state.That means that steel industries,were-hit booms in agriculture have traditionally buffered much harder by the 1974- r. the state's economy,even when the rest of the 75 recession than was Min- nation faces recession.And major downturns in nesota,where agriculture, agriculture have aggravated the impact of a na- a key industry,saw rapidly Lional recession on Minnesota as a whole. rising income. In fact,he In the early to mid-1970%,for example,Min- suggests,the architecture of rural America reveals the boom times in agricul- ture.with periods of sn co- Those people leant new construction co- inciding with periods of ris- Minnesota state Agriculture eommissi—or Gene Mugoson says the who approach ing farm income.And the business component of farming is critical. last major burst of con- struction, he says, took farming as a place in the mid-1970%. But in the early to mid-1980k,when the fall Jucers rank among the lop in the nation in a • business and financial crisis hit the Midwest.the effects were remarkable variety of commodities. fin felt throughout Minnesota.Large urban al- The recently released"Minnesota Agricul- cial institutions with heavy concentrations of tural Statistics"report,a joint publication of are aggressive agricultural loans suffered along with rural the U.S.Department of Agriculture and the lenders.The legislature passed a mandatory Minnesota Department of Agriculture,shows at managing it mediation bill,which meant that before lenders that overall.Minnesota ranks seventh in the could foreclose on a farm they had to partici- nation for total agriculture cash receipts—sev- pale in a mediation session. club in livestock and livestock products,and as such can Though the intent of mandatory mediation eighth in crops.Among crops.slate producers was to stem the tide of losses that rippled are first in suear beets:second in green peas: SNYcVV Vf u�!t�� throughout the state,in the eyes of many.the third in soybeans,spring wheat.oats,sunllow- law further damaged weak banks and stymied ers.flax,and sweet corn:and fourth in corn agriculture lending.Cash-strapped farmers and barley. put together, a stopped buying cars.building homes and farm The same depth and diversity prevails in buildings,and investing in equipment.Car deal- livestock and dairy production.in which Min- topnotch ers,construction companies,and implement nesota is second in turkeys and American dealers felt the impact. cheese:third in pigs•hugs.and mink pelts: fourth in sheep:and fifth in cattle. operation that A Solid recovery As Tom Cashman,executive vice president Since the 1980s,the slate's agriculture sector of the Mankato-based Northwest Agri-Dealers �� stand � has bounced back and appears as strung as Association,points out,the diversity"makes it ever.Unlike many western and midwestern a more solid economy,nut just for agriculture. states,where one or two commodities donli- but for the whole economy." test of time. nate agriculture,leaving the entire sector vul- Minnesota's healthy mix of ag products con- ■ nerable to periodic downturns.Minnesota pro- tributes to overall economic stability through PHOTOGRAPHS BY ERIC AGHEESSEHS - TWIN CITIES BUSINESS MONTHLY OCTOBER 1996 35 • ECOMOAMC OUTLOOK i the income generated by a wide variety of sup- A business, Don Mengedoth-president of Fargo-based porting industries. Front transportation and not just a way of life Community First Bankshares,Inc.,a bank hold- banking to insurance and construction,agricul- A tar cry from the American Gothic-depicted ing company with a heavy concentration of lure generates a significant amount of income industry of yesteryear,farming.agribusiness. agriculture loans,believes he's dealing with a for major Minnesota industries. and food processing,like other industrial sec- solid core of agricultural borrowers today. Transportation,for example,is a key benefi- tors,have employed major technological ad- "There is a much stronger group of survivors:' ciary of the state's agriculture activity.Jerry vances and sophisticated business management he says of those who made it through the 1980s. Fruin,a professor in the Applied Economics practices in recent years to improve productivi- "Farmers now,from our view,are much more Department at the University of Minnesota's ty and efficiency.Development of technologies capable managers.They understand markets College of Agriculture,says that in a typical like laboratory-engineered,pest-resistant crops and the marketing of their products thoroughly. year Minnesota exports almost a halt-billion and satellite-guided fertilizer application tech- Generally,farmers have been good at produc- bushels of grain. niques have changed the face of agriculture in lion.Now;they are better at managing the busi- "That will require trucks to get it to the ele- recent years,and for those producers who test ness end." vators;semis,trains,or unit trains to take it utilize these advances.they enhance opportuni- Farmers also are in much better shape finan- from the elevators to the West Coast,Duluth- ty and profitability. cially today."From 1955 to 1995,farm balance Superior,or river ports;barges to get it to the "Minnesota is a leader in commodity areas sheets improved dramatically."explains the export ports;and ultimately,ocean-going ves- because we have some really creative,innova- Fed's Lotterman."Farmers got burned in the sels to get it overseas."Fruin says tive producers who are leaders in their fields. 1980s.and farmers who survived put a great Fruin says 67 percent of the Minnesota They are doing some phenomenal things with deal of effort into paying down their debt and barge industry's activity is comprised of agri- improving the efficiency with which their prod- building up their equity.Farm finances general- culture-related traffic,and 31 percent of total ucts are produced:'says Minnesota State Agri- ly are on a much better footing than they were rail cars going to,from,or through Minnesota culture Commissioner Gene Hugoson. 10 or 15 years ago." are involved in agriculture or basic forestry. Henry Mertens,a semiretired farmer whose Hugoson believes the business component of farming is critical."Sonic people are still argu- ing that farming is not a business,it's a way of life.But farms have to operate as businesses," he says."Those peple who„What's really uncertain is whether, as a business and are aggressi epat managintgt it as such can successfully put logelher a topnotch a future Congress will step in to undo operation that will stand the test of time:' i Like other business owners,isomers are also 1 the decision made by this Congress to tanttas good financial management.nt.Mertens is a cofounder of a movement started last Minnesota year to get government out of agriculture.” Minneso the public's perception of[arming. ta Agriculture 2010,a coalition of vir- tually every commodity organization in the slate.describes its mission as"keeping Min- And though northeastern Minnesota is less operation near Blue Earth includes corn and nesota an agricultural leader in a complex world dependent on agriculture than any other re- soybeans as well as a 1,5110-sow farrow-to-finish economy." The group has sponsored a pion in the state,it is nonetheless strongly tied production facility.describes the importance of statewide magazine-and radio-advertising cam- to the sector through shipping.According to technological know-how."There's always going paign highlighting the role of agriculture in the Davis Heiberg.executive director of the Sea- to be somebody else who can supply it at a low- state's economy and the sector's commitment to way Port Authority of Duluth,"Agriculture, er cost.The survivors will be the ones who can environmental responsibility,and has an ac- ted by bulk grain.is more than 90 percent of produce at the lowest cost.and they have to he companying Web site on the Internet. our overseas trade.You can't overstate the im- able to take advantage of technologies.Eco- portance and significance of agriculture to the nontics is a vicious teacher,'he says. Adding value,adding income port's business."Heiberg notes that ag-related Bankers and economists also say the strong One way the Minnesota agriculture industry has shipping accounted for$67 million worth of finance and management skills of those farmers demonstrated its growing business acumen is port commerce last year.That means,if all the who survived the financial crisis of the 1980s through increased efforts to add value to corn- products shipped were loaded on standard IS- are a key reason Minnesota's agriculture sector modities before they leave the state,thus stabi- whcelcrs,the trucks would stretch,bumper-to- has prospered in recent years and why they ex- lizing income and generating more of it."It's humper,down Interstate 35 from Duluth to pest continued health in the industry for years evidence of the knowledge and improved man - Monterrey,Mexico. to come. agement in the industry,"Mengedoth says. 36 OCTOBER 1996 TWIN CITIES BUSINESS MONTHLY i 'if het" ha 's 1914te3y to he Rile stal,� it's com. The IWHY 11PIP411lic UPOW111 in UlObal is l�"hici aLy apising 11,0ju je;ad [lEma . That means Anirallicall fi;efl Upains----pirilt,%hiallY col"11--11vill he C0i11111gt8itjf,,s 11just alieci ed.rr "Value-added operations provide production percent,with a total of$172.7 million spent on diversity on the farm and have gone back to stability.increase income,and reduce trans- turkey feed.Roughly 15 percent of the state's grandpa's ideals" portation costs." corn and soybean crops are being used in pork Minnesota is also home to a variety of co- )11 the most natural way to add value to production. operatives that add value by transforming crops crops is by feeding them to livestock.Minnesota Many of the farmer-owned cooperatives in into marketable goods.From Cozen peas and turkeys.for example,consumed 14 million the state are involved in livestock production. sweet corn to artificia J made Ca il- bushels of soybeans and 25 million bushels of George Dahlman,a Coal and agribusiness ana- flour and recycled newspapers,production oss the corn last year,raising the market prices re- lyst at Piper Jaffray,says the value-added cooip- itiesare of the la acrompan cs are taking the ceivcd by farmers an estimated 3 percent to l0 eratives are simply embracing oyed by many strategy large com- value-added movement even further.Kathy panies for years."They put Vrabcck,business team leader of Green Giant's the flour mills and the New Business Division,says,"It's the value- i'- corn-processing facilities in added side of vegetables that's providing all the ry4 the supply-rich areas,then growth in the vegetable market."Green Giant, move that product down one of Minneapolis-based Pillsbury's major the line."Dahlman says. brands,defines a value-added vegetable prod "if you take big hog opera- uct as something other than plain frozen vegeta- lions and put them in the isles used as side dishes. middle of where feed sup- Given the growth potential.Green Giant plies are,you gain sonic ef- places significant emphasis on developing val- ficiencies. If you think ue-added items.On the heels o[its success with about it from a transporta- Pasta Accents,a frozen vegetable-pasta-sauce °•' lion Dint of view,it makes combination•and Create-A-Meal,a frozen veg- o-t P sense." etable and sauce product that,in combination Melberg agrees. "My with meat,constitutes a one-dish meal.Green grandfather used to raise Giant has just introduced Veggie Nuggets:The oats—the fuel of the(arm. batter-covered vegetable and sauce product is He'd feed the oats to the positioned to draw customers from the popular y'-T�., horses.then he'd raise corn French-fry and Tater Tot market. or barley on the fields Similarly,agriculture giant Cargill has a facili- plowed by the horses. ty near Savage where a multi-staged processing Then he'd feed that to the operation transforms corn into a totally pigs,cattle,and chickens biodegradable commercial-grade plastic.The and sell the meal and product,a polylactic-acid plastic,has been used eggs;'he explains.reflect- for some time on a limited scale.For example, ing on the evolution in it's been used in surgical sutures because it de- Agrleulture is-huge in terms of output,in economic importance"for farming over the last cen- grades in the body and does lion ot[have taste has the state,say.!aware letterman,an agricultural economist with tury."We've conic full cir- moved.In the past,p P the Federal naeer.e Bank of min—poiis. cle In realizing the value of been in small volumes at high costs.Cargill is TWIN CITIES BUSINESS MONTHLY OCTOBER 1996 37 ECOMINC OUTLOOK I attempting to develop a high-volume,low-cost 1970s."The Russian purchases could not be years on average,the federal government estab- i operation,and if it succeeds,it would create a sustained because they were borrowing the fishes conservation,research,and trade-promo- significant increase in the demand for corn. money from us to pay for the shipments.But tion programs,and until this year,price sup- the countries in Southeast Asia arc paying ports for certain crops. A rapidlX expanding cash."He adds,"China has made a decision This spring,Congress passed and President farmers market that they will focus on high-value industrial Clinton signed the Federal Agriculture Im- World population rose from 2.5 billion in 1950 products.As they earn money from those areas, provemcnt Reform(FAIR)Act of 1996.The to 5.3 billion in 1990,and some analysts predict they have the cash to buy food." law,a dramatic departure from previous federal the earth's population will double again by Agricultural producers in the U.S.and Min- farm bills,restructures existing farm programs 2050.At the same time the global population is nesota are well-positioned to take advantage of over a seven-year period,making fundamental expanding,income in developing countries is the growing demand.American farmers and changes in price-and income-support policies .rising,and consumers are demanding higher- processors"are the most efficient producers of for crop,commodity,and dairy products.Over quality,protein-rich diets. about any agriculture product in the world,"ex- the next seven years,as price supports are Optimism about a significant role for Min- plains Piper Jaffray's Dahlman,noting that the phased out,farmers will receive payments nesota in supplying expanding markets seems outlook for meat is particularly strong because based on their past production levels. unanimous.Agricultural players across the "consistently,the U.S.produces the highest- Optimism about the bill is widespread."The spectrum,from independent farmers to acade• quality meat in the world." government is getting out of agriculture,and I mics to corporate executives,share optimism Dahlman adds,"In the areas that want more think it's time for that to happen,"Mclberg about the possibilities that population growth meat—Western Europe and Japan—population says."1'm excited." and changes in dietary preferences will bring. density is high.There is no room to put in large Mengedoth thinks the new law will further Don Berg,vice president of procurement at Land-O•Lakes.sees export growth as one of the key reasons the Minnesota dairy industry, Aspeople in the Pacific Rim get � which had been declining until recently,will continue to bounce back in the coming years. "As major civilizations start to change,their jobs that pay cash, the first thing cultures change and the start to look at differ- ent types of foods.We see China as a major long-term growth market for livestock and they want is a better diet." dairy,"he says. Mclberg explains."As people in the Pacific Rini get jobs that pay cash,the first thing they animal production units. Moreover.they al• fortify the industry."It will reinforce the strong want is a better diet.They've had a rice-and- ready have their share of environmental prob- managers as far as their being able to compete beans diet.But they are replacing beans with lems.The wider,more open areas of the U.S. in the global market.And the period of subsi- meat.When you've got a billion Chinese,even will be attractive places to build livestock pro- dies will allow those who aren't as strong to try adding a little meat makes a big difference." duction units.There are opportunities like that something else,"he says. Ford Runge,a professor in the Applied Eco- in Minnesota as well." "The biggest thing it does is send a signal that nomics Department in the University of Min- Dan Pearson,a public-policy analyst at farming is a business and farmers need to treat nesota's College of Agriculture,says the bene- Cargill,sums up the situation."We really are in it as a business."says Hugoson."As the market fits go beyond the livestock producers."If there a time of unprecedented opportunity for U.S. creates demands,it allows farmers to respond is a single commodity that's likely to be the star, agricultural exports.The reason is,we have to those demands rather than farming to com- it's corn.The really dynamic growth in global such a solid demand base in regions around the ply with certain acreage requirements mandat- commodities is principally arising from feed de- world with rapidly developing economies." ed by Washington." mind.Thal means American feed grains—grin- Runge agrees and believes the demand The acreage requirements Hugoson refers to cipally corn—will be the commodities most af- growth extends beyond the Pacific Rim."There were determined by the USDA each year based fected." is a very,very strong global demand surge that on projections of supply and demand.In the Lotterman agrees that corn will benefit from includes not just the Far East,but also domestic past,farmers receiving subsidies from the feder- growing demand for meat,pointing out that demand and Latin America,"he says. al government agreed to limit the number of earlier this year.spot prices and near-month fu- acres on which they planted certain crops as di- lure prices for corn were higher than wheat."I Public policy issues rected by the USDA. think that's the first time in the history of the Since the 1930s.American crop farmers have Runge supports the elimination of acreage re- world that that's been true" been cushioned from the often uncontrollable quirements as a condition for participation in Cashman of the Agri-Dealers says the Pacific and unpredictable ups and downs of farming by farm programs,but disagrees with the new law's Rim-based demand differs significantly from federal price supports.Through"farm bills," payment scheme,which is not tied to market the Russian- based demand increase of the early which are reviewed and reauthorized every five prices.He believes a payment mechanism that 96 OCTOBER 1996 TWIN CITIES BUSINESS MONTHLY 1 - • , 7 is countercyclical—one that companies in here farming the pays more when market prices land.But we also don't need to are low and less when they are have such tight regulations high—makes more sense.He that compliance is too tough. also thinks the notion that gov- That's exactly what keeps the ernment will get out of agricul- small farmers out of business." ture entirely at the end of the Many also have expressed seven-year transition peritxl is concern alwut local ordinances far-fetched. that restrict the growth of pro- As Runge's colleague James duction agriculture,particular- Houck,chairman of the Ap- Iy livestock,because of the plied Economics Department odor and waste issues raised in the College of Agriculture by such production. At the at the University of Minneso- same time,Hugoson thinks ta,points nut,the seven-year stringent slate-level environ- time frame gives lawmakers mental requirements give Min- plenty of time to change their nesota farmers an advantage. minds about the direction of "Minnesota has been very ag- farm policy."What's really un- gressive,early on,environ- certain is whether a future mentally,"he says."Our slan- Congress will step in to undo dards are higher than other the decision made by this Con- states,but that allows us to gress to get government out of survive the expansion of feder- agriculture,"he says. al standards.When we have Despite disagreeing with the people in compliance with a policy change.Runge believes state standard,they can count the transition-period payment on that standard being in place scheme will generate a wind- for the long-term and they fall for Minnesota farmers in won't have to build new sys- the next seven years. tems to comply as the federal Feelings about state and lo- government raises its stan- cal policies are not so positive. dards.Other states will." • "Public policy is probably the Despite concerns about the one thing that could kill agri- policy matters,decided enthu- cullure in Minnesota,"says siasm alxnl the future of agri- Agriculture 2010 cofounder culture prevails.Melberg says, Mertens. "If people ask me whether I'm "Our goal is to increase pub- encouraging my kids to go into lic awareness of production farming,I say,'Yes.In what agriculture,"he says of the other business do your cus- movement."As they under- tomers come back three times stand more about production a day?"' agriculture,they'll have a bet- And as Don Handahl,a vice ter perception of it,and we'll president at Jennie-O,ob- get better public policy,"a rcf- serves,"We have been build- erence to concerns shared by ing for years here,"describing many in the agriculture com- Minnesota's agriculture sector. munity about environmental "It's like a freight train—it's and corporate-farming laws going to take a lot to slow it that could limit the future down.It's rolling."■ growth of the industry. "There are laws against cor- Kate Peterson works in public porate farming in Minnesota, affairs for the Rowland Com- and that's good," Mertens party in St.Patti and lives in says."We don't need the big Duluth. TWIN CITIES BUSINESS MONTHLY OCTOBER 1996 39 ti • • Q:How do econa Tists de(me to ul rate goes up and job opportunities disap- )lecessIfX/! pear. Income gains.including wage gains,are ECONOMIC A:There is no written definition of recce- leaner. By and large,there are tougher times. OUTLOOK lion.The general rule of thumb is two In the past,blue-collar workers have been hurl consecutive quarters of economic decline. a lot more than white-collar workers because of When's The National Bureau ri Economic Re- the Hot buying in sales of big-ticket big-ticket items.if people search in New ti'urk[a private thinklankj are nut buying the big-ticket items,businesses is the unofficial judge of when recession lay off the workers who produce them. begins and ends.They look at a variety of For people on fixed incomes,like retirees,it's the factors,including employment.but there had because income goes down.Historically. is no set rule. many of retirees go through"rate shock:'They huv CDs in the mid-'80k and the rate could be Next r-When do you expect the next as high as IS percent:in the rcent.c of a reces- recessial? siun it could he as low as?percent. A:There is a good possibility of a rcces- There are some benefits too.Interest rates go expansion ion developing in 1997 or 1998.Why'! dow n.so if you're borrowing to buy a home secession� ne reason is simply age.The economic and you still have a juh,you're in hewer shapes is getting old,so you have to The inflation rate is lower,so everything you play probabilities. buy,from groceries to metals,is going to go up Norwest Corporatlon's chief -There is really no rule other than an at a slower rate. economic expansion dies of old age.But The share of personal income saved tends to economist defines,explains, historically,since World War 11,a reccs- actually increase during a recession.The pie is and predicts a recession. siun has occurred every four or five years. shrinking,but the share of the pie saved is in- But it's more than that.This economic creasing. In total dollars and cents,personal expansion began in 1991.Since then,we saving declines,but people with jobs tend w By Kate Peterson have exhausted all the pent-up demand save a bigger portion of what they earn because for houses.cars,and furniture.In general, they are afraid of losing their jobs. economic growth is supported by sales of In the middle of a recession is usually a good these big-ticket items.In economic reccs- time to buy stocks,but people are afraid stock sions,that's the area that suffers. prices will drop,so they look for something A.'.6, Why does it suffer'?These items are in- safer,like CDs. ..: terest sensitive.And interest rates,incluJ- •CC ing mortgage rates.have risen and could IYIfIY�8o�fared n ? march upwards because of inflation. reCe8Ei0I18 best news about inflation is behind A:Stinncsota has fared very well,with the ex- The us.One reason is that labor costs,espe- ccphon of the Twin Lilies.The Twin Cities ac- cially benefits,are likely to go up,not counts for 55 percent of the jobs in the state. down.As they increase.the Fed will hike And the Twin Cities tends to follow more interest rates to hold down inflation.That closely the national economic trends.Greater will hurt interest-sensitive areas of the Minnesota tends to follow its own pattern. economy. Greater Minnesota represents a shock ab- `•' The global economic condition is anoth- sorter for the Twin Cities economy.We have �- er reason[that we could(ace recession in some ups and downs,but nothing like the na- ,$�'•� 1997-981.Our economy is much more tional ups and downs.We've had more stability globally dependent now than it has ever in recent%cars. i been.Japan is coming out of a five-year recession/depression.While it is growing. Q:HOW does an economy puff { the level of economic activity is very slug- Itself act of a recession? gish.European economies also are just A:Another reason you go into recession is that, trying to come out of economic recession. as sales go down,businesses keep inventories While they are growing,don't expect anv down.so production drops.One economic the- major growth there.The point is,our ex- ory says you reach a point where production is Dr.Sung Won son.,chief.....mi.t i., ports to them will not be strong. so low and inventory stocks are so low,simply Norwest C—pored—'The Twin Citie.tends to maintain existing sales,you have to start pro- to ioHow mo clo.etr the national economic Q:What are Me practical ducing again. t.end..Q—t.,Mi...eota tend.to toil.w lee elfects of recession? When you start producing again,that gener- own p.tt. .' A:Clearly,first of all,jobs.The unemploy- ates more jobs and more sales. ■ 40 OCTOBER 1996 TWIN CITIES BUSINESS MONTHLY • ECONOMIC OUTLOOK wouldn't say there's been growth,"says one economic developer,but he doesn't mention suffering,either. Manufacturing in his area has not been stellar,just steady. And like many around the Twin Cities and the state. he's trying to figure out ways to improve the prospects for manufacturing. Local squalls and doldrums in certain sectors aside.during the past five years Minnesota's manufacturing climate has been sunny and better than the nation's as a whole.From 1990 In a to 1995,while manufacturing employment dropped 1.2 percent nationally and 24 states recorded decreases,Minnesota's manufactur- ing employment increased 6.2 percent,accord- ing to the U.S.Bureau of Labor Statistics. The forecast?Changeable,but mostly fair. Although unanticipated irreversible shifts— as from mainframe to personal computers— and the existence of long-time underemployed people can seem as inevitable as thunder- storms in August,manufacturing is not like the Be assured that manufacturing will continue steady weather;it can respond to efforts to improve n nurture fa control it. Participants in growth in Minnesota.What exactly gets produced, Minnesota Manufacturers Weck,October 14 however,Is still up for discussion. through 18,certainly will be trading experi- ences and sharing advice.Technical school/pri- vate business partnerships can train better By Allison Campbell workers.Government regulations may help or hinder. Regional developers try to recruit thoughtfully and productively. Recruiting and clustering "You can't really plan to specialize,but once You start attracting companies in certain areas, they tend to cluster,"says Gene Donley,consul- tant with Project 20011,the economic develop- ' ment arm of the city of Fergus Falls.In his west- `' - central Minnesota city,Banner Engineering,an FrB electronic sensor manufacturer,uses circuit hoards from nearby Quality Circuits."With a n strong wind and a good arm,you could throw a rock from one to the other."he says.'thoughl- ful recruitment will nurture more connections. ........... .;,: says Donley,who is trying to bring into Fergus s4n Falls a laser-cutting and punch operation that w! would work with at least four companies. Fergus Falls is just one of many localities out- `t'%'" side the Twin Cities area that have experienced growth in manufacturing during the past five years."[Nlearly two of every three new and cx- oY._,`9 �i pansion jobs in manufacturing occurred in greater Minnesota"during the third quarter of 1994,according to the"Business Tracking Sys- tem"published by the Minnesota Department The Minneapolis Community Development Agency points to Seward place as a model of Trade and Economic Development.People rehabilitation project that now centrib,tes to the state's msnutactaring sector. in greater Minnesota,says DIED Commission- t 42 OCTOBER 1995 TWIN CITIES BUSINESS MONTHLY - PHOTOGRAPH BY JAMEY GUY • SHARE OF JOBS BY INDUSTRY* ;If the country,in Du- in,the greatest potential for future competi- 1994 luth,most of the growth liccness were four industry sectors:printing and in jobs has been in the publishing:computers and software:medical service sector." says devices:and machinery and metalworking.(The Services Toni Cotruvo,the city's federal Census of Manufacturers notes that the . . ... ._ .____.. _... ...: ._..___ business developer.For slate's leading industry groups,which account future development, for 44 percent of 1992 employment,were indus- Trade Duluth looks h)avia- trial machinery and equipment,printing and lion,he says.Ivlin ieso- publishing,fabricated metal products•and elec- ManufacturinA ... ta's longest runway pro- tronic and other electrical equipment.)The - -- notes Duluth an advan- Twin Cities is the fifth-largest printing and pub- Government Cage:he also expects lishing center in the nation,and the sector is the Northwest Airlines among the strongest local industries rated by Finance,Insurance maintenance base to national market share:more than N)percent of and real estate - continue expansion. its$5 billion in sales is earned outside the met- ' - - And some aviation jobs ropolitan area.Minnesota has 1,700 printing Transportation _ will be in manufactur- and publishing establishments,employs 53,(NNI and utilities Region _.... .,.. mg al Cirrus Ucslgn,an m the industry.and pays them$1.3 billion.lJun- aircraft designer that s'ersily of Minnesota economist Wilbur Maki Construction _ has been building pro- projects the industry will add 14.(XX)jobs by the 0 5 10 15 20 25 30 totypes.This fall.Cirrus year 2(NN). Percent of total employment will start building its Although.since their glory days,Minnesota's E,cwa�na nv,eaMmM manufacturing facility mainframe computer manufacturers have same:eureaud LaCw Sl..'Ic of Minnesota Dear of ECm Sxw-ry and aims to start pro- downsized and laid off thousands,the report duction in spring 1997. says that many former employees have become software developers.From 1987 to 1993,the er Jay Novak.learned from the farm crisis of Manufacturing facts softss'arc industry in Minnesota grew more than the 1980s that a more diverse economy is a In 1992,Minnesota passed its pre-recession 73 percent:it now emplovs more than 20,000 stronger economy:"People in small-town Min- peak of 400.(")manufacturing employees:in people at$769 million in wages and earns more nesota"—like those in Fergus Falls—"became May 1996,the stale had 424,800 employed in than$850 million in annual revenues.Although better recruiters of business." manufacturing,according to U.S.Bureau of La- software is categorized as a service industry,not In southern Minnesota,Marshall has in- bor Statistics,compared with slightly more than as manufacturing,electronic publishing and creased manufacturing jobs based on its agricul- 400100 in retail trade and more than 700,(M01)in multimedia products are challenging that defini- tural resource.Three manufacturers—specialty services.(Minnesoua also tracks the state's more lion.­IV[Publishing now sells more of the CD- foods producer Schwan's Sales Enterprises, than 2 million jobs through its Department of ROM version of the Muvo Medical Book than Inc..Minnesota Corn Processing,and poultry Economic Security.) Mayo sells lot]the hardcover book."write the • processor Iicartland Food Company—have ex- An innovative spirit,strung research capabili- ­T Win Cities Industry Cluster"analysts. paneled during the last two years,says Cal liar- ties,sound transportation and teleconimunica- While Minnesota's medical-device industry nett.Marshall city assessor and secretary of the Lions infrastructures,and a traditionally steady employs tens of thousands of workers•benefits local economic development board.Barnett employee work ethic are among the contribu- from the tradition of entrepreneurship and in- shows pride in the area's progress,but notes tors to the solid state of Minnesota's manufac- notation among Minnesota physicians,and is that potential future price increases for the raw luring.according to the"Tw"in Cities Industry cultivated by the venture capitalists who spe- materials could hurt the area's major manufac- Cluster Study."published in 1995 by the Uni- cialize in medical companies,the study paints a turers and perhaps cause cutbacks in produc- versity of Minnesota and the Metropolitan picture of it somewhat clouded future.To mini- tiun and thus employment. Council.In addition,a diverse economy makes maze costs.firms open plants in such other areas -We're constantly trying to develop diversity the slate more resilient in terms of manufacturing."Barnett says with in the face of change: frustration in his voice."It's something you it corporations act During the farm crisis, have to work at." as s incubators and In the Mankato area,the Valley Industrial venders for small ones: Corporation has joined with business and goy- and the demands of in greater Minnesota learned ernments to foster growth.The result from 1991 ternational corpora- te 1996 was 571 commercial and industrial jobs lions such as 3M drive created and it$10 million increase in the local suppliers It)the highest that a diverse economy is payroll. levels of quality. Manufacturing jobs in Duluth,on the other Chosen by the hand,have not notably increased."Like the rest study's authors as hav- a strong economy■ TWIN CITIES BUSINESS MONTHLY OCTOBER 1996 43 • • Ir ECW M96 ounAcK as South Dakota:to produce goods outside the some ` n ad bloc- JOB GROWTH IN LARGEST INDUSTRIES Fnod and Drug Administration-approval yuag• soured. In addition, r mire,companies set up operations abroad. sonic former heavy in- 1988 -1 994 Machinery and metalworking,however,show dustry sites have been i sonic lasting power.Twin Cities'companies converted from pollut- Employment in thousands manifest a cooperative-competitive attitude, ed or abandoned 450 and competitors often call on each other for "brownficlds"to us- help with a problem or for subcontracting a able industrial parks, task.Specialization is very high,as is quality. like Texaco's former 400 "Firms know they can depend on other suppli- tank site at Interstate ers to fulfill their subcontracting needs."the au- 35E and Shepard Services thors note."so they are not forced to make in- Road,which is now the 350 vestments in equipment that would be underuti- Crosby Lakes Business lized if it were employed within the company Park.The city could I alone." have"fined the site �^ Retail and Wholesale Trade Lack of skilled labor poses one of the largest three times,"Strand 300 problems faced by area employers,note the au- says,the demand was thorn of the"Twin Cities Industry Cluster so high. Study."The labor shortage potentially blocks Unfortunately,man- 250 further growth:Minnesota's unemployment ufacturing emplov- Manufactln'Ing rate has been less than 4 percent since early ment has been lighter 1995,and the Ninth District Federal Reserve as well.Although as 200 Bank projected in July that the rate would hov- recently as 1987 manu- er around 3.3 percent through the end of 1997. facturing was St.Paul's largest job sector,with Shortages:employees and land 49,906 jobs.the city's 150 Despite the increasing number of manufactur- Planning and Econom- 1988 189 90 191 182 '93 '84 ing concerns in rural and small-town Minneso- is Development staff ta,the Twin Cures area still stands as the state's estimates manufactur- Source:Minnesota DoV of Economic Security j manufacturing stronghold.Hennepin.Ramsey, ing jobs for 1995 at Anoka,and Dakota counties account for about 35,300,the lowest figure for the last five%ears. equipment.But fabricated-metal employment • 57 percent of Minnesota's manufacturing em- ('these statistics include 3M jobs at its Maple- increased 7.4 percent from 1994 to 1995,med- ployment.according to the 1992 census.But the wood headquarters.)The decline in mail ufac- ical•inslrument employment increased 6.3 per- metropolitan area's manufacturing scene also is turing jobs,according to Mark Vander Schaaf cent in that period,and commercial-printing mixed. of the St.Paul PED,corresponds to rising pro- employment 5.4 percent. Manufacturing has been lightening up in St. ductivity—which means fewer workers are re- In Minneapolis also,one of the major restric- Paul.says Michael Strand,vice president of quired for the same output—and to the national tions to manufacturing growth is the lack of marketing and communications for the St.Paul shift away from manufacturing employment to good land,says Terrell Towers,director of the Port Authority,as heavy manufacturers like services.Indeed.St.Paul's service-sector jobs economic-development division of the Min- Amhoist and Whirlpool have left and such light increased by an estimated I ISM.to 65,4110,in neapolis Community Development Agency. industry and high-technology companies as 1995.He also notes a shift of many jobs from Out of 4,000 industrially zoned acres,1,000 Minnesota Wire&Cable and Endocardial So- urban to suburban and rural areas. acres are underutilized,typically because they From 1994 to 1995, need pollution cleanup.The MCDA touts Se- manufacturing employ- ward Place,at East 26th Street and 26th Av- From 1994 to 1995, ment in the 13-county enue South,as a successful land rehabilitation; metropolitan area,ac- it took more than 10 years,public investment of cording to the Minneso- $10.1 million,and private investment of$9 mil- manufacturing employment la Department of Eco• lion to retain 272 jobs and create 140.Many of nomic Security,grew in these are manufacturing jobs,and most have in the metro area grew all but tour sectors:pa- gone to Minneapolis residents.But more needs per and allied products, to be done.Towers says:"If a company calls to- food and kindred prod- day and wants 20 clean acres of land,we don't ucts,in all but four sectors■ men industrial equip- have er men industrial and computer Nevertheless,manufacturing has increased in 44 OCTOBER 1996 TWIN CITIES BUSINESS MONTHLY • • Minneapolis since 1990.Tow- tinued progress in high tech- ers says,citing as evidence that nology,variable national eco- "the use of our funding pro- nomic cycles,and increasing grams is on the increase."Al- globalization. In the early though that's the best evidence 1990s,the storm clouds that that he currently has,the city threatened manufacturing in of Minneapolis this year sur- Minnesota included declining veyed 680 businesses in depth employment in some high- on 72 questions on topics from wage,high-value-added indus- employee recruiting to city set- tries,antiquated equipment at vices.The businesses—primar- some companies,and the drift ily medical products,printing outside the state of manufac- and publishing,computer soft- turing operations of some Min- ware and hardware,and ma- nesota-based companies like chining and metalworking— Valspar,as Frederick Zimmer- were chosen on the basis of man,professor of manufactur- their strength and potential for ing systems engineering at the future growth."The survey University of St. Thomas, will help us identify ways to pointed out in the April 1994 nurture companies,'Towers issue of Twin Cities Business says.The biggest surprise from Monthly.In 1996,manufactur- the survey's preliminary re- ers still face problems in Min- sults,he says,has been the nesota,Zimmerman says.AI- large number of firms that said though there are still topnotch business was going well. plants,like Sheldal in North- And"I don't see[manufac- field and Hutchinson Technol- turingl going backwards," ogy,he says that in the core Towers says."It's steady and cities,"there are a lot of plants improving."In August,prelim- where we need the jobs most inary results from the survey that have not been kept up to showed that more than 50 per- date so they can compete inter- cent of the companies sur- nationally.... It's the kind of vcyed plan to add jobs;howev- problem that shows up in a ve- er.42 businesses are consider- cession.Nobody closes a plant • ing relocating part or all of during a boom time." their operations because of the Zimmerman is less con- lack of available employees. cerned about an increase in manufacturing jobs than the Preparing for tomorrow quality of those jobs and In May.the Minnesota De- would prefer to see growth in partment of Finance released high-value-added industries. employment projections show- He notes that"manufacturing ing an expected 13 percent includes the production of growth in new jobs in Min- junk mail—that's growing."As nesota by 2001. Although Minnesota slips in high-value- more than half of those jobs added manufacturing,he says, will be in the service industry, the results will be a less-pros- the report predicted that man- perous manufacturing sector ufacturing growth statewide and,ultimately,a less prosper- will continue to"significantly ous society. outpace the national average." Greater scrutiny of the fi- Nevertheless,change will be nancial industry should be car- part of Minnesota's manufac- ried out,Zimmerman says, turing future,because of con- with an eye to how it promotes TWIN CITIES BUSINESS MONTHLY OCTOBER 1996 45 • • amoac i ECOMMIC i high-value-added manufacturing."It's good at required skills or for specific firms.Members of speculation,"he says of the financial industry, the Printing Industry of Minnesota trade associ- I "but I'm not sure it's building a strong economy alion and others ha argued that high-school for he future of the United States." education should nove t focus only on four-yem Quality of the work force is another concern, colleges,that technical fields should also be pre- Zimmerman says.And since 1994,shortages of sented as attractive alternatives to young people. �� In addition, more e need a higher-grade students should be c ter trained in sciennce e and technology,Zim- ' education system where says,not we get better output," timestas i s educate six n nyscientsts and engineers as the says one expert. need states. need a higher-grate ed- ucation system,where we get more output.- Libor and skilled labor exacerbate this problem. With some adjustments,the future of Mlin- Better education is part of the solution.Em- nesota's manufacturing still might not be clear, plovers,local economic development officials, but it is bright. ■ ', and educators in such localities as St.Cloud and Alexandria have jointly developed technical Allison Campbell is managing editor of t college-company programs that train workers in Mpls.St.Paul magazine. I ' I h, I I i 1 A.— I l