If you build it, will business come?
It's not a big deal. So far, it's brought two full-time jobs and a couple of part-time jobs to St. Charles, but the 2015 relocation of Active Tool & Die is just the kind of business development needed in Southeast Minnesota. And thankfully, a business park made the development happen.
"We are blessed to have the finest health care institution in the world," said John Wade, chairman of Journey to Growth, a regional initiative working to build a framework to promote economic development and diversity in the region surrounding Rochester. "The question is, what are we going to do to capitalize on that, and grow and diversify the economy."
With Destination Medical Center dominating the business growth talk in and around Olmsted County, it can be hard to spot the little successes that are helping to keep area communities afloat in growth. But those little successes are as vital to a sustainable economy.
Wade said health care, dominated by Mayo Clinic, represents 40 percent of the local economy. But eventually even the Mayo Clinic's survival hinges on having diversity throughout the region.
"We need to be a location that people want to come to," Wade said. "It's a mosaic, and if we get all the pieces right, it's be a much more beautiful painting."
One piece of that mosaic is a provider of precision tools and machined parts that has been located in St. Charles since 1997. But, said co-owner Darin Ihrke, when Active Tool & Die saw the need to expand, there were many options available.
"There's a good chance we might have moved (from St. Charles)," said Ihrke, who owns the company with his brother Brent. "We looked at other towns."
Creating space for growth
Fortunately, the company did not have to move far from its old location in downtown St. Charles. In 2012, the city of St. Charles began work on the Chattanooga Innovation Park, a business park along Interstate 90.
Following the loss of North Star Foods, the St. Charles Economic Development Authority along with the city council started looking for a way to attract new businesses and provide room for expansion for existing businesses. The result was the business park, a $2.1 million investment by St. Charles in the future of the city, said City Administrator Nick Koverman.
The 32.5-acre site is currently home to Active Tool & Die, and the city recently sold a 4.09-acre parcel to Envirolastech Inc., a manufacturer of plastic building materials that hopes to break ground later this summer.
The business park in St. Charles is just one of many throughout the region. From the 200-acre Elk Run business park in Pine Island to the 8.5-acre Preston Industrial Park, cities invest millions in the hope of attracting new industry or retaining existing industry. For example, the Preston Industrial Park cost $800,000 to develop, $350,000 of which came from a state grant for business development infrastructure, said Cathy Enerson, economic development director for Community and Economic Development Associates.
That compares to the $2.315 million Pine Island spent to run the east frontage road from Goodhue County Highway 11 to Bioscience Drive at the Elk Run interchange along with utility trunk lines. The city also spent $414,080 on a utility loop to the new elementary school that is located in Elk Run's land west of U.S. Highway 52, said Pine Island City Administrator David Todd.
Unlike business parks owned wholly by their cities, Elk Run is a public-private mix. The development is owned by Woodland, Calif.-based Tower Investments which works with the Pine Island's economic development authority to market the development to potential buyers.
"Rochester is growing," said John Pierce, a senior vice president with Tower Investments. "Mayo's DMC has the promise for tremendous more growth."
While the first plot sold from Elk Run was to American Waterworks, a Pine Island company looking to expand, Pierce said Tower still sees a bioscience focus for Elk Run.
"Elk Run would be an ideal location for a research park to compliment the excellent work already being done at the Mayo Clinic," he said.
Internal business growth
Elk Run is still waiting on its first construction groundbreaking for a new business, many business parks in communities surrounding Rochester have fared better. Like Elk Run and the Chattanooga Innovation park, many business parks in the area have started with expansion rather than attracting new industry.
The city of Spring Valley invested $1.7 million in its two adjacent business parks, with half of that money for infrastructure coming from federal grants. Enerson said five lots in the 142-acre industrial area have been developed. Big pieces of that development came from growth of existing businesses.
SATA DanAm and Kappers, two long-time Spring Valley businesses both expanded by staying in the city. Due to the growth from expansion, combined the companies employ about 85 people, Enerson said.
"They wanted to grow, and we didn't want them to leave," Enerson said. "In order for them to grow, they needed a place to expand. We're not to far from the border, and we want to keep our jobs in Minnesota."
The expansion of Bluff Country Manufacturing in Preston meant the retention of 10 full-time jobs, Enerson said. Those 10 manufacturing jobs work as multipliers in a community. Each manufacturing job helps create service jobs within the community, Enerson said.
Filling a need
As land becomes more scarce in Rochester — and the price of that land skyrockets — industrial areas surrounding the city will become more vital. The average cost per square foot of industrial property in Rochester is $5, Enerson said.
"But there's not much industrial land to buy or sell," she said.
That compares to about $3 per square foot in Stewartville, $2.35 in Spring Valley and an asking price of 80 cents to $1 in Owatonna, Enerson said, adding that in Owatonna, "They're willing to give the land."
That's essentially what happened in St. Charles. The 4.09 acres sold to Envirolastech went for $1 for the whole tract. The reason is simple. The tax revenue created by Active Tool & Die was $15,642 for 2016, said Koverman, the city administrator. The property tax for Envirolastech would be roughly twice that. And that's before the city counts the residential property tax for the workers who live in St. Charles.
When Envirolastech signed its deal with St. Charles to purchase the land at the I-90 business park, the city proudly touted its win, noting that its park beat out Elk Run and industrial land in Zumbrota to land the building materials manufacturer. But for Wade, any win for Southeast Minnesota is a win as far as his organization is concerned.
"Journey to Growth is as excited if Byron, St. Charles or Chatfield or Red Wing has growth as we would be for Rochester," Wade said.
For the region and Journey to Growth, it's all about diversifying that economy. But for the smaller cities, industrial-business parks are part of the lifeblood that keeps those cities alive.
"We want to know about the jobs and the tax base that would be created," Enerson said. "It takes decades. It's a long-term commitment to put in an industrial park."