Surprises Galore at the Edge of Nowhere

SIOUX FALLS, S.D. — In the Lone Star State where I live, there is no shortage of “braggin’ rights” about the valor, vision, pride, and perseverance of Texans. To be sure, the mystique of Texas is promulgated with a certain amount of swagger. It’s pretty much a cottage industry here.

Baseball pitching legend Jay Hannah “Dizzy” Dean was not a Texan but he should have been. He was fond of saying, “It ain’t braggin’ if ya can back it up.”

South Dakota, where I have been this past week, is a curious place in that in many ways, it really can back it up, but where there is scant tradition of bragging. I theorize that this is due to the fact that most of these people come from German/Scandinavian/Lutheran stock. They place much value on work, and will celebrate and suffer quietly.

There is strength and humbleness that resides here, even if most people believe they have it better than other parts of the country. You just don’t crow about it. You put your hands on the plow, do the best you can, and save your money. Providence protects.

Apparently so. The Great Recession was little more than a blip in South Dakota, where the unemployment rate was 4.3 percent in March compared to the national rate of 7.6 percent.

Meet Dennis

Now it’s not every day that you actually get served by a governor. I’m talking about being literally served.  I was among a group of site selection consultants who ate lunch with Gov. Dennis Daugaard, who walked around the table handing out plates, stopping and talking to every person with an outstretched hand.

There is something different about this man, a modesty that I found compelling. He seemed  not smitten by power, almost normal. I like that. I like that a lot.

His background may provide some clues as to his manner. Daugaard was raised on a family farm near Garretson, South Dakota by his mother and father who were both deaf.  Sign language was the main method of communication at home.  Like many in the area, his family stock was from immigrants from Denmark, Norway, and Sweden. He went to a one-room country school.

After attending the University of South Dakota, Daugaard would periodically hop a friend’s egg truck bound for Chicago to attend law school.  While there in the big city, the future governor drove bus to pay for his schooling.

Last fall, South Dakota recently made the cover of Barron’s, the Dow Jones financial weekly, as the best-run state in the nation. The state earned the top spot due to its low debt by keeping spending in check and responsible pension funding. Most governors would puff up and take full credit. Not Daugaard.

“This is great news and a reflection on governors and legislatures, long before me, who understood the importance of debt avoidance, sound financial decisions, and making only commitments that can be kept,” he said.

Not More Taxes, More Taxpayers

While he is a true believer that South Dakota does offer a superior business environment with low taxes, greater productivity and a reasonable regulatory climate, Gov. Daugaard was hesitant to be boastful about it while visiting with companies in California.

“I felt somewhat guilty pointing out the differences,” he told the consultants.

Keep in mind that South Dakota has no corporate income tax, no personal income tax, no personal property tax, no business inventory tax, no inheritance tax. The overriding philosophy: Not more taxes, but more taxpayers. Business has taken notice and people are migrating to this right-to-work state.

Sioux Falls, the state’s largest city with a population of about 156,000 and an MSA of 232,000, picks up about 2,500 new residents annually and has historically driven most of the state’s population growth.

One of the recent transplants was Jason Engle, the CEO of Legacy Electronics Corporation. He moved his company from San Clemente, Calif., to Sioux Falls in 2011 so as to reduce costs and be able to compete with Asian companies that also made high-density memory modules and printed circuit boards.

He said his company has realized a cost savings of about 30 percent by making the move to South Dakota.  Soon after the company began operations in Sioux Falls, the governor came calling.

“He made a point to specifically introduce himself to every employee. He would stop, shake their hand, look them in the eye, and ask questions of each one of them.”

Later one of the Legacy employees received a two-page handwritten letter on governor’s office stationery. It was signed “Dennis.”

We Get Sh-t Done

On the city website, he is referred to as “Mayor Mike.” With a background in marketing, Sioux Falls Mayor Mike Huether is none too shy about calling attention to his city.

“We should make the top two or three with every project you have,” he unabashedly told the assembled site selection consultants.

My experience is that a company will often have pretty good ideas on where it needs to be, as was exemplified by an email that I received from a CEO on Friday. My job, of course, is to refine those ideas and then find the best place, based on a whole lot of tailored criteria, where the risks are minimized and the chances for success are optimized.

I’m sorry to report to Hizzoner that Sioux Falls will not always make the finalist list. There are certain practicalities specific to a project that will simply prevent that from happening. I know it’s hard to imagine, Mr. Mayor, but sometimes your city will not be the best fit.

But I do believe the mayor, truly I do, when he passionately states that red tape doesn’t stand much of a chance in his city, with expedited permitting guaranteed. “We get shit done,” he said.

I only wish there were more like him.

Said Matt Healy, operations manager with Glanbia Nutritionals, now building a cereal ingredient processing plant in Sioux Falls: “The city and the state have been remarkably supportive. They have been exactly who they said they were.”

Separating the Wheat from the Chaff

As a site selection consultant, I tend to remember statements like that by Healy. Often it is not what you say about yourself that resonates with me, but what others say about you. I will take all with a certain grain of salt, knowing full well that there are underlying truths and half-truths about every place under the sun. My job is to separate the wheat from the chaff.

Probably what surprised me more than anything about Sioux Falls was the size and scope of the financial services and health care/medical research industries.

Citibank set the stage in 1981 for bigger things to come when it moved its credit card operations center to Sioux Falls prompted by a change in state law. Fast forward to today and the state now ranks No. 1 in the country in total bank assets valued at $2.5 trillion. Yes, it’s true, about 18 percent of the country’s total bank assets reside in South Dakota.

Now who would have thunk?

Jerry Nachtigal, senior vice president of public affairs for Citibank, said the bank’s workforce in South Dakota, which numbers about 3,000, is 15 percent more productive in comparison to the bank’s other operations around the country.

Engle, the CEO at Legacy, noticed that as well.

“People who come to work in South Dakota genuinely want to work. They enjoy working and they give it their all. And that is a breath of fresh air from an employer’s standpoint,” he said.

Health care was also a huge surprise. There are two dominant players, both engaged in medical research the likes of which I have never seen in a community without a major research university.

Sanford Research, part of Sanford Health, the largest rural, not-for-profit health organization in the United States with a presence in 111 communities, eight states and three countries, is housed in state-of-the-art facilities at the Sanford Center.

I was simply wowed by what I saw in this 300,000-square-foot building, which formerly housed Hutchinson Technology, a computer parts maker that shut down in 2009. Today, much of the focus is toward finding a cure for Type 1 diabetes and breast cancer. Space does not permit me to tell you about a Sanford sports complex now being built, but it will be key component to Sioux Fall’s quality of life picture.

I was equally impressed with the Avera Cancer Institute, which was designed with the input of patients in mind and opened in 2010. This was a feel-good place, where hope was purposely brought into play. If I lived in Sioux Falls, I think I would come here just to eat lunch and be inspired. This place touched me in a way that I cannot fully explain.

Avera is the health ministry of the Benedictine and Presentation Sisters, 300 locations in eastern South Dakota and surrounding states. They are good folks doing incredible work.

Living on the Fringe

Slater Barr, president of the Sioux Falls Development Foundation, tells the story of a reporter with The Economist who proclaimed that Sioux Falls was “in the middle of nowhere.”

To prove to the contrary, Slater proceeded to show the reporter a population density map of the United States. That elicited a modified response from the reporter who said that Sioux Falls was on the “edge of nowhere.”

But being a “fringe city” on the edge of greater population density does have it benefits, exemplified by growth that has taken place. To be sure, the site selectors wondered aloud if the labor market was too tight to support a large project.

My take on the people of South Dakota may be somewhat in error. They may not be that humble crew after all. While at the airport waiting for my return flight home, I walked into a gift shop and spied a hunter’s ball cap. It was florescent orange with a camouflaged brim. Embossed on the crown were the words “South Dakota,” below which was a drawing of pheasant in flight.

And then the most memorable proclamation: “Big Cock Country.”

I bought that cap and took it home to Texas, where I hope to muster up the courage to wear it one day. Well, maybe not.

I’ll see you down the road.

Dean Barber is the president/CEO of Barber Business Advisors, LLC, a site selection and economic development consulting firm in Plano, Texas —http://www.barberadvisors.com He can be reached at 972-767-9518 or at dbarber@barberadvisors.com

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