State lawmakers from Southeast Minnesota are pushing to create a $25 million revolving loan fund to spur business and entrepreneurial activity in the region’s towns and cities.

The legislation is similar to a request made during last year’s session but with one marked difference: Supporters now come armed with economic data that they say bolsters their argument.

A regional study, paid for by a legislative appropriation, looked at an eight-county area in Southeast Minnesota and projected huge economic losses for the area if it failed to tackle a regional housing shortage.

The potential cost: $4 billion in lost economic activity over the next two decades, said Brenda Johnson, executive director for the Southeastern Minnesota League of Municipalities. Without sufficient housing, it will be difficult to find the workers to fill the jobs of the future.

Supporters and lawmakers argue that a revolving loan fund will help galvanize a construction industry that was decimated in the last recession. It could also ameliorate the region’s workforce woe, that is too few workers for the jobs available.

“It’s a demographic issue,” Johnson said. “The Baby Boomers are getting grayer and heading towards retirement or are already in retirement. And it’s going to open up thousands of positions, and we don’t have enough people.”

$500,000 maximum

The legislation seeks to spur start-ups and business expansions across a range of industries outside Rochester, including agriculture, manufacturing, technology and child care. Under the bill, businesses and developers could tap the fund for up to 25 percent of a project’s cost and max out at $500,000. Cities and counties could also take out loans to help bridge the costs of community projects.

“This really takes advantage and builds upon what’s happening in the Rochester area,” said state Sen. Jerry Miller, a Winona legislator who is carrying the bill in the Senate. “The whole idea of this bill is to promote economic growth in the 11-country region surrounding Rochester.”

Lawmakers emphasized that the “evergreen” fund would be a one-time appropriation, meaning there would be no fiscal “tails.” But prospects for the bill took a dip with the latest fiscal forecast, which showed a diminished surplus.

“It’s great idea, but the budget forecast didn’t help us,” said Rep. Greg Davids, a Preston representative who is carrying the bill in the House.

DMC-related

The initiative is an outgrowth of Destination Medical Center, the $5.5 billion economic initiative that largely focuses its benefits on Mayo Clinic and Rochester. The Southern Minnesota Economic Diversification Fund broadens the focus by targeting millions to cities and towns in the 11-county region outside the Med City.

“There was concern after DMC about a little too much focus on Rochester and what about the rest of Southeast Minnesota,” said state Sen. Dave Senjem of Rochester. “How are they going to grow? And what can we do to keep those communities strong as opposed to just bedroom communities?”

John Wade, former chairman of the Journey to Growth regional economic initiative, noted that at least 40 percent of the area’s economy is directly tied to heath care. J2G seeks to grow and diversify the regional economy.

Wade said the fund could benefit the region by encouraging developers to manufacture their products outside Rochester. The city has limited industrial space, and the fund could nudge them to locate their facilities elsewhere nearby.

Johnson said the bill introduced last year was more “conceptual” in nature, presented to the Legislature as something “we think we need.” The economic study affirmed and created certainty around those needs.

Johnson said the fund could be a “very powerful tool” for smaller cities, allowing them to secure gap financing for infrastructure projects that are “a hair out of reach.”

Legislators’ challenge

The bill has secured the backing of legislators from across Southeastern Minnesota. But one challenge will be getting legislators from outside the region to support it. Supporters argue that projected economic growth measured in billions would benefit not only Southeast Minnesota but the entire state. And it would provide a model that other regions could use if it works.

Given the recent economic forecast and contest for scarce public dollars, project might need to “scaled,” lawmakers said. That means that while the full $25 million might be out of reach, a $5 million downpayment would give the project life.

“I’m personally hoping we get something out of this,” Senjem said.

Johnson said there is a five-to-10 year window to capitalize on the opportunity, but windows do close.

“Five years from now, we need to have money flowing and projects done, We need to have more housing started and more daycare facilities in operation,” Johnson said. “Right now, we’re already short on these things to an extreme.”

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Reporter

Matt, a graduate of Toledo University with a bachelor’s degree in English literature, got his start in journalism in the U.S. Army. For the last 16 years, he has worked at the PB and currently reports on politics and life.