When a “company town” loses its company, no magic formula for recovery

Successful towns cite community effort, persistence

David Fettig | Editor

Published April 1, 1993  | April 1993 issue

What do you do when you live in a town of about 3,000 in the Upper Peninsula (U.P.) of Michigan that has lost 800 jobs over 10 years from the gradual demise of a single employer?

"You've got to laugh a little," says Roy Mayry of the U.P.'s Luce County Economic Development Corp., "Or you'll cry all the time."

Mayry is referring to the town of Newberry and the closing of a state mental health center, which meant the loss of its last 270 jobs in the fall of 1992. Ten years ago the center, which has anchored the area's job base since 1920, employed 800.

While many small cities and towns across the Ninth District are familiar with the economic hardship caused by a decline in a natural resource-based industry like agriculture or mining, other communities must also struggle with more localized economic crises, such as plant closings or mass layoffs.

Often, a small town with little economic diversity will have grown dependent and complacent on a single large employer. In the extreme, the loss of that employer may spell the economic doom of the town, or such a loss may inspire business development that would otherwise have not occurred. In this issue of the fedgazette we review the efforts of some Ninth District communities to counteract the impact of a major economic hit.

When a crisis hits, employees come first

Unfortunately, small towns can apply no magic formula to respond to an event like a plant closing, according to Glen Pulver, professor emeritus at the University of Wisconsin in Madison, who has written extensively on the issue of economic development in rural areas. "Economic development is something you do all the time, rather than waiting for a strike to hit," he says.

But in the wake of such a hit, communities must first respond to the needs of those who lost jobs, officials from across the district say. Counseling, training, job banks and similar services are important in the immediate wake of a major closing. "The problem is that there are so many issues at one time—emotional issues," says Don Norrell, Eau Claire city manager, and those emotional issues not only affect individuals, but the entire community, he adds. Eau Claire has lost about 1,700 jobs over the past two years, but still continues to grow.

At the same time that a community aids unemployed workers, it should focus its initial economic development efforts—if applicable—on the revitalization of the former plant and/or equipment, officials say. In Jackson, Minn., which lost a Unisys plant in the mid-'80s as part of that company's nationwide cutbacks, city officials did not waste time fighting with Unisys about its decision to leave, as did many other communities throughout the country. Rather, the town succeeded in quickly acquiring the building at a bargain price and even encouraged Unisys to aid in the marketing of its former plant.

In Aberdeen, S.D., Imprimis Technology's 1989 closing left 800 jobless, but within six months two electronic parts manufacturers moved into the former Imprimis building, which was ideally suited to their needs. Those two companies, along with a third new electronic parts manufacturer that opened in another location, together employ about 300, many of whom are former Imprimis employees. With its existing plant and skilled workers, Aberdeen Mayor Tim Rich says the city marketed itself to prospective new businesses with the slogan: "No assembly required."

There is no dearth of available light-industrial and office space in Williston, N.D., which suffered a severe economic blow when oil prices tumbled during the '80s. During the oil boom, Williston's population grew by over 5,000 in five years, to about 17,000 in 1982. Today, while the price of oil has about halved from a peak of $38 per barrel, Williston's population has fallen to about 13,000.

Another sign of the city's decline is the amount of special assessment debt left for the city after shops and office buildings were built and then quickly abandoned. About $13 million in abandoned obligations has been left for the city's remaining taxpayers. To pay off the debt and relieve the city's property owners, residents passed a one-cent sales tax increase effective from 1991 to 1996. Seventy-five percent of the funds raised through the tax increase will go toward property tax relief, with the remaining 25 percent dedicated to a jobs fund.

The jobs fund, which is leveraged with money from other sources, has been used to help finance such new Williston businesses as Advantage Line, a telemarketing firm with 70 full-time and 75 part-time jobs; and Dakota Catalyst, an industrial firm that employs 40 and hopes to hire 50 additional workers in coming years. Williston's job fund supplied $50,000 of low-interest financing to Advantage Line's $500,000 start-up costs, and $250,000 of Dakota Catalyst's $7 million package.

The jobs fund also helped establish a hog farrowing operation in Crosby, about 70 miles north of Williston, as part of Williston's effort to create jobs throughout the area. "If there's growth in Crosby, there will be impact in Williston," says Tom Rolfstad, executive director of the Williston Economic Development Partnership.

As for Newberry, Mich., the loss of the state mental health center has also left the town with an existing site to fill. But in this case, there is no large manufacturing plant or streamlined electronics facility to market to another business. Rather, Newberry is left with a 100-acre facility that includes 57 low-rise buildings consisting of 1.5 million square feet, not to mention a large kitchen and dining room, recreational facilities, movie theater and small farm.

A state study on the use of the Newberry site is expected this spring, and Mayry says the community has hopes that a large-scale senior living center can be established. A similar project in Ontario, Canada, where a former mining town has lured seniors from around Canada to its quiet, low- crime area, has proved successful, according to Mayry. "If they can do it in Elliot Lake, Ontario, surely we can," he says.

Also, in late March, Luce County voters approved a five-year property tax hike to raise over $800,000 for development of Newberry's industrial park and for other economic development efforts.

It's easier to retain businesses ...

Sometimes plant revitalization isn't an issue, as in Havre, Mont., which learned this summer that the Burlington Northern diesel shop, which employs about 900, will cut 190 jobs, with up to 100 additional job cuts likely in the near future. Also, this summer an Air Force radar base near Havre, employing 53, will close.

"What we're most interested in is to try to retain businesses that are already here and help them to grow," says Tony Preite, executive director of the Bear Paw Development Corp. of Northern Montana, reflecting a goal mentioned by all city officials contacted for these stories.

And, like other communities, Havre responded by calling a city meeting to seek involvement in committees or task forces. Those committees work on such topics as employee assistance, business retention and expansion, business recruitment and tourism and recreation development. In a nutshell, Preite says, Havre's citizens had to answer two questions: "Where are we, and what can we do?" To help answer those questions, committee members report regularly to the mayor's office and a newsletter that summarizes committee activity is circulated to all committee members.

Preite says that the best thing Havre has done over the years is maintain and develop its infrastructure. He says the city of about 10,000 could absorb an additional 3,000 people without incurring additional infrastructure costs, and he hopes that the city's readiness helps encourage business expansion and start-ups.

... than to lure them

Most cities do not pin their hopes on luring outside businesses to their communities, but all include those efforts in their economic development strategies. Sometimes those efforts are misguided. In retrospect, Mayor Tim Rich says that Aberdeen's attempts to draw high tech companies from California was largely a waste of time. In some cases, the community was told bluntly not to bother with California companies, Rich says. Those companies prefer California, its climate and their proximity to high-tech research facilities, Rich says he was told. "Why do you think we're here?" one California company asked.

"Attracting businesses from the outside is least likely to pay off," says the University of Wisconsin's Pulver, "Unfortunately, much of the money goes into this." The best economic development program is to build human and social infrastructure, Pulver says, referring to education and increased community involvement in the affairs of economic development.

Ron Shaffer, an economics professor at the University of Wisconsin, says that an economically viable community is characterized by a slight level of dissatisfaction, a positive attitude toward experimentation, a high level of intracommunity discussion and a history of implementation. These characteristics reveal that even an economically successful town is not willing to rest on its laurels, he says.

"A slight level of dissatisfaction may seem an unusual quality for an economically viable community, but it identifies the unwillingness of economic actors in the community to accept current economic conditions as immutable," according to Shaffer. "Significant economic actors in the community ... are asking 'what if?'"