St. Cloud Area: Strength in numbers

Business leaders work together
when problems hit three counties

The final blow came in 2002. After laying off workers in 1999 and 2000 from a peak of 4,500, Federated Department Stores wanted to close Fingerhut, at one time St. Cloud’s largest employer, unless a buyer could be found.

Business leaders sprang into action. They recruited buyers for the company, eventually enticing Tom Petters and Ted Deikel to buy and restart part of the catalog operations. Deikel and Petters are keeping the 1.2 million-square-foot warehouse and shipping facility that Fingerhut built, says Tom Moore, president of the St. Cloud Area Economic Development Partnership. Fingerhut got a catalog out prior to the Christmas rush, and the new owners are planning a second catalog and may hire people.

CompuCredit Corp. of Atlanta purchased Fingerhut’s accounts receivables and are leasing the building that housed the collections operation. “We were concerned that CompuCredit would come in, handle the Fingerhut receivables and leave,” says Moore. Instead, it has just over 700 employees and is shifting business to the St. Cloud facility, he says. “They’re the white knight that came into town.”

More than six groups co-hosted a conference last August to attract businesses to expand or start in the St. Cloud area. And public and private officials revved up their efforts to keep existing companies happy, with personal visits to CEOs and assistance with expansion in two new business parks.

The blow was not as devastating as it could have been. “The Fingerhut closing isn’t perceived as being the huge downside that it was initially,” says David Leapaldt, president of Grooters Leapaldt Tideman Architects in St. Cloud.

Quick action on several fronts — it’s a hallmark of economic development activity in the St. Cloud area, say business owners and service providers there. The Partnership itself began in 1985, at another time of economic crisis in St. Cloud. A major employer of 500 said it was closing up shop, taking the city by surprise. “As a result of that, community and business leaders said this shouldn’t happen. We should be in closer contact,” Moore says.

Today, the Partnership has 22 organizations as members, including five cities, three counties, five public utilities, St. Cloud State University and St. Cloud Technical College, St. Cloud Opportunities, a coalition of the five largest banks in St. Cloud, and the Initiative Foundation. Dues start at $7,500, an annual fee that comes with a board seat. Entities that pay more get more seats. “Basically there’s an agreement that we won’t cross boundaries to attract a company. We’ll exhaust all the resources to keep them in their jurisdiction,” Moore says.

“I credit the group with bringing the right organizations to the table to work on economic development issues from a regional perspective rather than a local perspective,” he adds.

A recent triumph is the expansion by Antioch Printing, which makes materials for photo albums and scrapbooks, says Marshall Weems, head of the Housing & Redevelopment Authority in St. Cloud. Antioch broke ground last fall for a 320,000-square-foot complex at St. Cloud’s  I-94 Business Park.

A second business and industrial park, the Airport Business Park, sits on 350 acres just north of the St. Cloud Regional Airport. “It’s our most ambitious endeavor to date,” says Henry Fischer, business and community development manager for East Central Energy and one of the park’s partners. The other three are the city of St. Cloud, the St. Cloud Housing & Redevelopment Authority, and St Cloud Opportunities.

The park is ready for occupancy, Fischer says, and offers a free-site provision through tax increment financing. Immediate prospects are business customers already in the St. Cloud area that need additional space.

Fischer says people in the area routinely drive an hour to work each way, including into the northwest edge of the Twin Cities.  “So we’re trying to do kind of a reverse commute program, to work with communities to attract complementary businesses to our service area,” Fischer says.

Living wages

Fischer emphasizes technology and manufacturing jobs. “Our main focus is to look at what we can do to help create high-technology, living-wage, head-of-household jobs,” he says. So do most other resource providers in the area.

The Initiative Foundation in Little Falls, for example, has distributed $30 million since beginning in the 1980s, about half in the form of business loans and about half in the form of grants to non-profits.

“We’re interested in quality jobs. When we make a loan we’re looking right now at about $12 or $13 an hour, and if that’s not there then it’s not the kind of deal we want to do,” says Kathy Gaalswyk, president of the Initiative Foundation. “St. Cloud is heavy in the services, and typically service industries are lower wage. That’s where we need to diversify the economy and develop the manufacturing sector.”

One recent example: an eyewear manufacturing company in St. Cloud to which the foundation loaned money to help purchase assets. “We’re generally in for a third of the project cost, and we want to see the bank for the other half, and then equity from the owner,” Gaalswyk  says.

A new technology fund started by the foundation, with $2 million in initial funding, will target loans and grants to companies that either provide technology or that can become more competitive by using technology.

Technology is a weakness in the area, says Mark Partridge, professor of economics at St. Cloud State University. “Concentrations are considerably below the Twin Cities, but below comparable areas too. We’re well below Fargo; well below Sioux Falls, South Dakota,” he says. Partridge says he’s pessimistic about attracting those jobs because St. Cloud doesn’t have “the cultural amenities that pull in high-tech workers.”

Partridge continues: “2000, 2001, 2002 — it’s been a rotten three years.” Local manufacturer SPX announced in mid-March a layoff of another 150 to 200 workers. “They were close to 700 workers locally a couple of years ago. They’re going to be down to 200,” he says. And Electrolux, which makes freezers in St. Cloud, is going to idle 100 workers for a while, he says.

He cites the financial sector as strong, with Dutch insurance giant ING in particular hiring employees to do backroom operations in its recently purchased St. Cloud operation. Health care has provided a regional boost. With the dollar losing value, times could get better for manufacturers as well.

“I think from this low bottom we’re going to start turning around mid-2003,” Partridge says. “I think most of the layoffs are over, and local manufacturers still outperform the state and the nation by a lot.” He tempers his prediction by saying that if the national economy takes a major downturn, St. Cloud will follow suit.

Professors such as Partridge make up one of the largest resources for business owners in the area, many local sources say. “I think there’s a tremendous opportunity for someone starting a small business,” says John Babcock, a partner in Rinke-Noonan Law Firm in St. Cloud. “We have a lot of resources at St. Cloud State University. There there’s the St. Cloud Technical College, people coming out of there starting their own businesses or going to work for someone. I think the climate is really good.”

St. Cloud State boasts one of only two accredited business schools in the state, the Herberger School of Business, named after the family that ran a retail chain of the same name, which sold to an out-of-town retailer and moved headquarters in recent years.

The Harold Anderson Entrepreneurial Center at St. Cloud State actively fosters entrepreneurial activity. The late Harold Anderson, founder of Anderson Trucking Service Inc. in St. Cloud, gave the center $1 million and put his name on the door.

Ken Maddux, executive director of the center, ticks off business owners with ties to the center and the university. Jay Johnson of FENA Design Inc., now in Plymouth, says he relied on mentors at the university to grow his wheelchair-manufacturing company. One-time student Jenny Nies started an aquarium servicing business called Aqua Clear.

More established businesses access services at the center as well, including Anderson Trucking, where the next generation of leaders are among those taking succession planning courses.

Rollie Anderson, president of Anderson Trucking, says his father supported the center as a way of giving back. “He was an entrepreneur in the pure sense of the word,” Anderson says. “He felt that if there hadn’t been certain opportunities along the way, such as education, he would not have been successful.”

His 30-year-old son and 27-year-old nephew are both interested in the business. “I tell them they’re a little crazy, but I at least provide an opportunity. They have to want it,” he says.

John Ellenbecker, mayor of St. Cloud, says much of his time lately has been reactive, such as dealing with Fingerhut, Electrolux and SPX shrinkage. He also says his city has been hurt by out-of-town corporations making decision about operations there. “So we’ve tried to target companies that have a local ownership. But we don’t hesitate to bring in a good stable business from the outside also,” he says.

He shares his views on the city’s role in economic development. “The city is responsible for ensuring that we have adequate infrastructure in place to grow businesses,” he says.

A runway has been added to the St. Cloud airport. Now Ellenbecker is working to attract a competitor to Northwest Airlines that flies non-stop to Chicago, where Bankers Systems, for one, flies often.

The city has a $1 million grant and will try to attract a “travel bank” of $3 million from local businesses who would use the service. Then they’ll try to recruit an airline using the travel bank as bait.

A big problem for St. Cloud, like other cities, is cuts to local government aid, part of Gov. Tim Pawlenty’s budget-balancing plan.

“We took this very, very seriously last year. I imposed a hiring freeze early in the process last year, and we were able to create a $2.2 million surplus in 2002,” Ellenbecker says. “I took part of that money and applied it to our tax base, and so our tax levy did not go up one dollar. Then we took the remaining $1.6 million and put it in reserve.”

Now, however, the city’s cut could reach $2.5 million for 2003, and $5.8 million for 2004. “Part of my problem is getting the local businesses to realize the impact of that,” Ellenbecker says. “Property taxes will go up and services will go down. It will be a struggle.”

Wish list

Teresa Bohnen, president of the St. Cloud Area Chamber of Commerce, acknowledges the challenges but emphasizes a large-scale, business-led effort to stimulating business growth.  She points to Norm Coleman, former mayor of St. Paul and now one of Minnesota’s U.S. senators, as a man who energized business leaders to work together to attract business.

Bohnen’s wish list:

First, “We want to fully develop downtown,” she says, pointing to a number of open spots. Getting the right mix is tricky, she says. Adding retail means needing more business people downtown to support it.

Second, she wants a complete expansion of the St. Cloud Civic Center, which has been remodeled. Larger plans were shot down by the Minnesota Legislature last session.

Third, riverfront development. “We’ve got the beautiful Mississippi River right in downtown, and not one place where you can go to eat a meal,” Bohnen says. “If they can do that in St. Paul, where it was such a mess, we can do it here.”

Fourth, a big events center like the Fargodome in Fargo, North Dakota. “Someplace is going to get that in central Minnesota. I want it to be us,” Bohnen says.

All efforts are likely to be helped by increased activity from a number of private service providers, both locally based and companies headquartered in the Twin Cities and elsewhere. Bremer and Wells Fargo banks are active in the area. Gray Plant Mooty, a Minneapolis law firm, just bought Hall & Byers, a long-time St. Cloud firm. Briggs & Morgan has many clients in the area, although not a local office.

Av Gordon of Briggs & Morgan in Minneapolis acknowledges that service providers that are not headquartered in central Minnesota encounter resistance. “I have never bought a non-U.S. automobile. I believe in buying U.S. if you can. In the same way if I was in a small town, I would say, let’s leave the business here,” Gordon says.

Still, expanding opportunities in central Minnesota mean businesses there need connections throughout the region and the country.  “Smart business people for a long time have know than when you have a business that can be located anywhere, there are major advantages to going outside of the Twin Cities area. And if you locate a business there, you have to have businesses to serve them,” Gordon says.

A homegrown service provider is Granite Equity, a new fund started last year to invest in companies in central Minnesota. So far no company has been funded, says Rollie Anderson, one of the partners. He outlined the fund’s targets.

“Our first preference would be central Minnesota, $2- to $5-million in revenue, profitable, and again companies that have an opportunity to grow but inadequate funding,” Anderson says.

His involvement in the fund is both for philanthropy and profit, a dual goal expressed by many area business leaders.  “I would put it at 50-50. One is to help support the business community here, two hopefully we can make a little bit of money,” Anderson says.