Dean Barber

Cool in the North Country

In Corporate Site Selection and Economic Development on August 17, 2014 at 6:49 am

DULUTH, Minn. – “Supposing is good, but finding out is better.”

So wrote Mark Twain, a statement that should serve as a working motto for all corporate site selection consultants or anyone with a curious mind.

I came here to find out. And I left with some distinct impressions. Should I ever return to Duluth on behalf of a client company in the search of an optimal location for future operations or in any other capacity, I will undoubtedly learn more.

Peter Drucker said it most aptly when he declared, “My greatest strength as a consultant is to be ignorant and ask a few questions.”

That’s why I try to do. Finding out really is better.

Deep in the Woods

Still, I did not foresee actually driving over bear scat in an all-terrain four wheeler as a part of my familiarization tour of Northeast Minnesota last week.

We ventured deep into the woods on a beautiful day looking at what ostensibly was or could be a site for a data center. Owned Lake County to the north of Duluth, this secluded 120-acre tract had been repossessed for unpaid taxes.

But both Tim Comerford, an energy specialist and senior vice president with New Jersey-based Biggins Lacy Shapiro & Company, and I agreed that what we were looking at was in reality a big piece of woods and not yet a viable site.

It might become a viable site for a data center, but it’s not there yet.

Recognizing the Truth

Our host, Brian Hanson, president and CEO of APEX, the regional economic development organization, seemed to appreciate our input.

“Looks like we’ve got some work to do,” he said, climbing behind the wheel of the ATV that would take us back to a dirt road. At a meeting later that day in Duluth, Hanson referred to the site.

“There are some serious issues that we have to deal with at that site, but that is why we are doing this. (Hosting site selectors.) We’re not just going to talk about the issues, but get the documents and get the work done.”

Tim and I were lucky enough to be assigned by the Minnesota Marketing Partnership to Northeast Minnesota. Other site selection consultant were assigned to other regions of the state.

We immediately recognized that Hanson was a seasoned professional who not only had a deep understanding of his community but a proponent of regionalism and playing nice with others to get things done.

The Importance of Research

Most importantly, Hanson, whose company-member funded organization represents seven counties in Northeast Minnesota and three counties in Northwest Wisconsin (population 400,000; 280,000 in the MSA), recognized the importance of research to his organization’s success in industrial recruitment.

Research is used in two ways – as a way to assist a prospective or existing company looking at investing in the region and also in determining a targeted approach to recruitment.

On point one: “We’re focused on the investment and the business case, which often means helping the company fill in blanks – what’s it going to cost, what can I expect with labor costs and taxes with a facility in our region. We help fill in those blanks so that they have a compelling business case and can make an informed decision on whether to invest.”

On point two: “We need to know is going on in our region, know what we need and understand the trends. Research enables us to connect to our member companies and gives us a targeted approach and not a shotgun approach.”

A Good Win

Hanson said research was the key to identifying and contacting 25 aviation MRO (maintenance, repair and overhaul) companies to fill the void left when Northwest Airlines pulled out of a 189,000-square-foot repair facility in 2005.

“And we talked to all of them. At one trade show, we had eight appointments with MROs, but that involved hundreds of hours of research.”

Eventually, Oklahoma City-based AAR Corp. showed interest in the building that had sat empty for seven years and was costing the city the tune of $15,000 a month to heat and maintain.

As a skilled workforce was vitally important to the company, the community tried something a bit different – a two-day job fair before the company actually committed.

“We said that if you agree to put your name on it, we’ll have a lot of people there show up. And that was exactly what happened,” Hanson said.

The community reached out to aircraft mechanics in a three-state area and about 325 attended, with about the same number sending in resumes. At a dinner after the first day, a senior AAR executive told local economic developers, “We’re in.”

AAR now employs about 300 people at its facility in Duluth.

Let’s Make a Deal

A former boss once told me, “A good idea without money is still just a good idea.”

So when I come across an economic development organization that is flush with money and eager to make something happen, I cannot help but to take note.

By most accounts, the Iron Range Resources & Rehabilitation Board, a state agency insulated with independence, can sink as much if not more financial resources into a project than the Minnesota Department of Employment and Economic Development (DEED).

IRRRB has $148 million in the bank dedicated to the economic development. Its funding source is a $2.50 cents per ton excise tax on iron ore mined in the Mesabi Iron Ore Range, a narrow 100-mile band that traverses the northeast part of the state.

But it’s only in a jurisdictional area in NE Minnesota where IRRRB can make its full weight felt. Still, no other region of the state has anything like an IRRB, which I liken to a regional economic development organization on steroids.

Said Commissioner Tony Sertich, which oversees the agency: “We have money, and we want to make a deal.”

Earlier this year, IRRRB provided $21.2 million in funding to Segetis Inc., a company that makes plant-based solvents that are petroleum substitutes and which plans to build a $105 million plant in Hoyt Lakes, about 60 miles north of Duluth.

“Segetis is on the leading edge of the biochemical economy and will add value to our timber and forest products economy,” said Sertich.

Resources and Manufacturing

Timber, water, iron ore – all were clearly evident to me from the air and from the ground during my tour of Northeast Minnesota. Space does not allow me to elaborate on each of these resources with any depth.

I will say that the historic connection between the iron ore mines, which produce a lower grade ore called taconite, and Duluth remains intact with ore boats up to 1,000 feet in length, referred to as “lakers,” coming in and out of Duluth harbor with great regularity. It is a sight to see on the largest freshwater lake in the world.

We toured Joy Global, a manufacturing plant that came on line in 2012, in the town of Virginia, which builds earth moving equipment for the nearby mining industry.

We also toured Cirrus Aircraft, a cutting edge aviation manufacturer that incorporates a parachute in the design of its aircraft. The company says 95 lives have been saved as a result. It is based at the Duluth International Airport.

Despite the fact that I don’t much care for traveling in small aircraft, I actually began to like the Cirrus that transported me from Minneapolis to Duluth and back. There is a passion at Cirrus about their planes that is hard not to notice and respect.

Beers from the North Coast

And finally let me say that there is a passion about beer in Minnesota, which is I find wholly commendable and a sign that the people here, about one-third of whom in Duluth are of Scandinavian ancestry, are a most civilized breed.

When I first spoke to Brian Hanson on the phone prior to my trip, I told him in response to his questions that I hoped to eat fresh lake fish and sample the local craft beer. Being the ever boastful Texan, I said, “You know, we have 13 craft beers here in the Dallas-Fort Worth area.”

His response was low-key and modest, typical of people from the North Country. “Yes, we have eight.”

Dallas-Fort Worth area has a population 6.5 million. Duluth — 86,000. Go figure.

Indeed, Fitger’s Inn, where I was staying, had been the site of a brewery since 1885. Beer was still being made on the premises.

At nearby Canal Park Brewing Company, I met brewmaster Badger Colish, who gave a wonderful tour of “Gus,” the company’s 15 barrel, three-vessel brewing system that produces a “Northcoaster” style of delicious brews.

I sampled the Nut Hatchet Brown, which won a silver award at the 2014 World Beer Cup. T’was mother’s milk to me.

Badger and I soon discovered that besides enjoying beer, we are both Martin guitar aficionados, so a brotherhood was formed then and there. I wish I could have stayed longer.

The Coolness Factor

All of this confirmed in my eyes that Duluth is one cool town, as the young hipsters were in evidence. And there is a lot to be said for that.

Yes, it is true. Minnesota does have some competitive issues regarding both taxes and permitting. In its 20014 State Business Tax Climate, the Tax Foundation ranks Minnesota 47th – just above New York, New Jersey and California.

But if you have a cool place, a place where young people want to live, well, that’s your future pipeline to talent. And smart businesses will tune into that.

So Duluth is cool. (How can the hometown of Bob Dylan not be?) Minneapolis is also cool. This is confirmed by Outside Magazine, which recently ranked both cities as top 10 cities for outdoor recreation.

But Duluth, with 6,834 acres of city parkland, 178 miles of wooded trails, and 16 designated trout streams, came in as No. 1.

“In Duluth, you know you’re alive,” says Don Ness, the 40-year-old mayor.

Brian Hanson said he is on his mountain bike hitting the trails multiple times a week. And Brian is not young, which demonstrates there is hope, even for oldsters like me.

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 based in Plano, Texas. If your company needs an optimal location for future operations anywhere in North America, we can help. If your community needs to improve its competitive standing, we can help. All requests for information are considered confidential.

If you liked what you saw here, invite me to speak at your next meeting.

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