Labor availability makes the business headlines, but metro areas also deal with other issues

David Fettig | Editor

Published January 1, 1998  | January 1998 issue

When asked to name the major business issues for the coming year, most city officials throughout the Ninth District put labor availability at the top of the list—as discussed in "Metro Outlook '98. But there are other issues looming for the districts' Metropolitan Statistical Areas (MSAs), including upgrading infrastructure, business development, downtown revitalization and—for one metro area—flood recovery.

Generally speaking, one issue that all metro areas in the region need to deal with in the near future is how they intend to grow, according to Mark M. Zandi, chief economist at Regional Financial Associates in West Chester, Pa. With steadily increasing populations in recent years—much of which is coming from neighboring rural areas—and with the concomitant growth in their business sectors, metro areas have begun to focus their attention on upgrading airports, roads, and sewer and water lines. "These cities have to ask, 'What do we want to be when we grow up?'" Zandi says. "It's a very difficult question."

For La Crosse, Wis., the answer to that question is, in part, to be a city with a new north-south traffic corridor, says Tim Tracy, president of the Greater La Crosse Area Chamber of Commerce. "We need a good infrastructure to keep the economy going."

And Tracy says that a new north-south route through La Crosse is critical; such a route will link the south end of town, where the city is encouraging development of light-industrial businesses, with Interstate 90, which runs across the north end of town. Additionally, the route will connect the downtown retail area with the mall area and create a shopping corridor, he says. "It's a key element to our future," Tracy says. The local debate about the proposed road has been ongoing throughout the decade and may finally come to a referendum later this year, Tracy says.

In Eau Claire, Wis., the steady growth of recent years has put a strain on the city to keep up with demands on infrastructure, says Mike Schatz, Eau Claire economic development specialist. "It stretches your resources," he says. "You have to make tougher choices." For example, Schatz says, industrial parks place increased demands on local water supplies and can also raise concerns about wastewater discharge. "It makes you think: Do we keep up the pace or do we slow down?"

Keeping the growth alive

In district metro areas like Billings and Great Falls in Montana, and Duluth-Superior along the Minnesota and Wisconsin border, the answer to that question is easy: Keep growing. There is less concern in those cities about labor availability and more about generating economic development. Unemployment rates in those cities are around 4 percent and have not approached the 1 percent to 2 percent rates that other district MSAs are experiencing.

The same is true in Marquette, in the Upper Peninsula (U.P.) of Michigan, which is not large enough for MSA status but is generally representative of issues facing UP communities. "Will the economy continue to grow?" That's the big question facing Marquette, according to Harry Guenther, director of the Bureau of Business and Economic Research and Cohodas Chair in Banking and Finance at Northern Michigan University (NMU).

Guenther is concerned about a lack of vision for Marquette, which is recovering from the closure of the nearby K.I. Sawyer Air Force Base. He says Marquette and the UP must question how much it can continue to depend on natural resource-based industries, like mining and timber. People still tend to rely too much on the promise of those industries when, in fact, their importance is waning, he says.

On the bright side, Guenther says that UP employment has increased up to 15 percent in the 1990s, due to growth in service industries. Marquette employment growth has remained flat over that time, but that is still positive considering the closure of K.I. Sawyer, according to Guenther. Commercial construction, particularly in the hospitality industry, and institutional building, such as at the university, should help spur growth in the near future for Marquette, he says, but the key will be the development of K.I. Sawyer.

Dennis West, president of Northern Economic Initiatives Center, and Kathryn Polansky, president of Shorebank BIDCO in Marquette, agree that the reuse of K.I. Sawyer is key to Marquette's economic prospects. In addition, West and Polansky say that the community must determine some way to take advantage of the skilled students produced at NMU and the local community college, as well as Michigan Tech University in Houghton. Too many talented young people are leaving the area because of the lack of opportunities, West says.

"Unless we look at those kinds of jobs, I don't think we're going to see any growth here," Polansky says about the need for high-tech and other skilled labor positions. She says the area population is getting older as more and more youth leave for employment opportunities. "They all go to Detroit," she says of the area technical and engineering graduates. "It's scary."

Billings is relatively flush with available labor, largely due to steady population growth in the city and Yellowstone County throughout the 1990s, says Butch Ott, president and CEO of the Billings Area Chamber of Commerce. Ott adds that the economy is also more diversified than 15 to 20 years ago when the area was rattled by troubles in the oil and gas industries.

Like other Ninth District MSAs, Billings has been focusing attention on its downtown district. A two-year revitalization has just been completed, including a $6.5 million art museum as an addition to an existing facility. According to Billings Chamber data, total retail sales have been down in recent years from a high in 1993, and the downtown project—including refurbished retail space—is meant to address that decline. "It hasn't got to a crisis yet," he says. "We wanted to address this now before it's too late."

Revitalization of the downtown area is also a major issue for the coming year in Great Falls, according to Tim Ryan of the High Plains Development Authority. A larger retailer recently announced that it was closing, and there is concern about the vitality of the district, he says. Ryan says the city is trying to determine what type of retail establishments will be successful downtown while also encouraging development of downtown residences. One old building is in the process of conversion to condominiums, he says, and it is hoped that the new housing will spur other development.

In Duluth-Superior, development is also the key word—business development. "It's the same thing every year. We need new higher-wage jobs," says Tom Cotruvo, manager of Business Development for the city of Duluth. And downtown Duluth may be a part of the strategy, he says. The University of Minnesota at Duluth is considering downtown as the location for a "technical village," Cotruvo says, where university programs and like-minded private industry could cluster.

Cotruvo cites the area's ample workforce and the computer science program at UMD as two reasons why Duluth-Superior will try to promote the growth of high-tech industries. "You don't have to be in the Twin Cities for high-tech," he says. Cotruvo is also hopeful that Duluth's aviation industry, anchored by Northwest Airlines and Cirrus, will continue to grow.

Dale Lewis, president of Park State Bank in Duluth, says this is a crucial time for the area. Population has declined by 3 percent since 1990 and recently bank deposit growth has not kept up with inflation. She says Duluth-Superior would love to have the low unemployment rates that are causing problems for other district cities. "We're struggling to keep jobs up here," she says. "We need growth."

Receding floodwaters bring growth

The floods of '97 wreaked particular havoc on Grand Forks, N.D., and its neighbor across the border, East Grand Forks, Minn. Both cities are still making decisions about flood protection issues for the future and are trying to determine which sections of town will be spared or rebuilt, and many businesses are still uncertain about their prospects. Still, Bob Gustafson of the area Chamber of Commerce expects 1998 to be a "banner year."

Gustafson cites the construction of at least five new schools in the coming two years, along with a $70 million city center beginning this spring and "an awful lot of commercial construction," as the reason behind his optimistic forecast. He says the mild winter through early January has been a boon because the cities could complete the demolition and excavation of destroyed downtown properties and begin redevelopment.

There are some concerns in the area—the university's enrollment is down about 7 percent this year and Grand Forks Air Force Base faces the deactivation of some Minuteman III missiles—but Gustafson is mostly optimistic. "In the next three to five years I see nothing but tremendous growth—rebirth," he says.