HomeMy WebLinkAboutStillwater Economic Development Strategy Phase II (1986)STILLWATER AREA
ECONOMIC DEVELOPMENT STRATEGY
PHASE TWO
n OCTOBER, 1.986
STILLWATER AREA
ECONOMIC DEVELOPMENT STRATEGY
Phase Two
October, 1986
Sponsored by the
Stillwater Area Chamber of Commerce
Prepared By
JMA, Inc.
Economic Consulting Services
with Guidance from the
Business and Industrial Development Committee
of the
Stillwater Area Chamber of Commerce
Contributors To The Economic Development Strategy
The organizations and individuals listed below were contributors
to the Stillwater Area Economic Development Strategy. Their
financial support for this important project demonstrates their
interest in the future of the Stillwater Area.
Swager Bros.
Olsen Construction
Immuno Nuclear Corp.
Lux Realty
John Miller
Kolliners
Norris & Red Swager
The Salon, LTD.
Lake Elmo Business Assn.
Pizazz!
Washington Federal
Cosmopolitan State Bank
State Bank of Lake Elmo
Cub Foods
Press On & TS Enterprises
Stillwater Gazette
NSP
Heritage Ford
Stillwater Yacht Club
Poly Water
St. Croix Hospitality
Stillwater Inn
Lafayette Appraisals Inc.
Judd Orff & Assoc.
Blichfeldt Realty
Lake Elmo Inn
New Stillwater Project
Edward Simonet III
John Arkell Corp.
Lawson Raleigh & Marshall
Country Estates
SBRI Property Management
Stillwater Township
City of Stillwater
Robert Scott Development
First National Bank
Norwest Bank
First State Bank of Bayport
Oak Park Heights State Bank
UFE
Andersen Corp.
Piper Jaffray & Hopwood
Brookman Motors
Routson Motors
Bruce Folz & Assoc.
Aamodt's Apple Farm
Simonet's Furniture
Ray Kirchner
Winnfield Inc.
Realty World
River States Properties
STILLWATER AREA CHAMBER OF COMMERCE
BUSINESS AND INDUSTRIAL DEVELOPMENT COMMITTEE
Bill Buethe, Chairman
First National Bank
` Dan Croonquist
Piper, Jaffray & Hopwood, Inc.
Jim Francis
Multi -Print
Lori Johnson
Cosmopolitan Bank
n
Steve Keister
Keister and Keister
I
Nile Kriesel
Stillwater City Coordinator
Bob Lockyear
Washington Co. Planning Coordinator
Jack Lux
Lux Homes and Realty
John Miller
The Flynn Company
Agnes Ring
Cedar Corporation
Sharon Sachse
Only ShaRon
} Hank Sampson
Washington Federal Savings
I James Schaefer
State Bank of Lake Elmo
Lou Schley
Country Estates
Dr. Ray Swanson
Oakwood Animal Hospital
Alan Vandehaar
Edward D. Jones
David Wettergren
School District #834
Steve Zinnel
Norwest Bank
Debra A. Payson
Executive Vice - President,
• =
Stillwater Area Chamber of Commerce
Stephen S. Russell
Community Development Director,
City of Stillwater
i
i
TABLE OF CONTENTS
Preface . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . i
Stillwater Area Map . . . . . . . . . . . . . . . . . . . . . . . . . . ii
TARGET INDUSTRIES ANALYSES . . . . . . . . . . . . . . . . . . . . . . . 1
Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Growth Industries . . . . . . . . . . . . . . . . . . . . . . . . . 1
Inter- Industry Linkages . . . . . . . . . . . . . . . . . . . . . .12
Local Manufacturer Survey . . . . . . . . . . . . . . . .17
Services . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .18
Market Orientation . . . . . . . . . . . . . . . . . . . . . . . . .19
Summary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .20
IMPLEMENTATION PLAN . . . . . . . . . . . . . . . . . . . . .
. . . . . .24
Goals and Objectives . . . . . . . . . . . . . . . . . .
. . . . . .24
Organizational Structure . . . . . . . . . . . . . . . .
. . . . . .26
Selecting a Structure for the Stillwater Area . . . . .
. . . . . .30
Functions . . . . . . . . . . . . . . . . . . . . . . .
. . . . . .31
Representation . . . . . . . . . . . . . . . . . . . . .
. . . . . . 32
Staffing . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . 34
Economic Development Implementation Activities. . . . .
. . . . . .35
Budget and Funding . . . . . . . . . . . . . . . . . . .
. . . . . .42
Summary . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . .44
MAP .
IOLK
^-^~-`--`-~`--` -
PRAME
ST. CROIX
IS' ROBERTS
STILLWATER AREA
ii
VA 1 71.
^~~^~~^~~^~~^~
ICE
PfePared By:
TARGET INDUSTRIES ANALYSIS
Introduction
The purpose of the target industries analysis is to identify the types of
industries that could be attracted to or expanded in the Stillwater Area.
As the area's economic development program takes shape and gets underway,
it will be crucial to manage time and financial resources wisely. A "shotgun"
approach to economic development is inappropriate because there are simply
too many potential industries to consider. There are more than four - hundred
four -digit Standard Industrial Classification industries which could be considered
as targets. Within individual four -digit classifications, there may be more
than one - thousand firms nationwide. The number of potential contacts can
easily become overwhelming unless criteria are established to identify those
industries which are more likely to consider the Stillwater Area as a location
for new or expanded operations.
The techniques that have been used to identify targets for the Stillwater
Area include a growth industries analysis, an analysis of inter - industry
linkages, an assessment of service industry targets, and an analysis of market- oriented
targets. The growth industries analysis is conducted because, if the Stillwater
Area is going to experience economic growth, there is a good chance that
the local growth will be in industries which are growing nationally and /or
regionally. The analysis of inter - industry linkages is important because
it identifies targets based on the inputs (i.e., components, raw materials)
required by the major industries in the region. The linkage analysis also
identifies the products of the major industries in the region, some of which
go to final consumers, but most of which are intermediate products which
serve as inputs to another industry production process. Service industries
are comprised of some of the fastest - growing footloose types of economic
activity and offer numerous opportunities. The analysis of market - oriented
targets builds on the comparative economic base analysis to identify opportunities
to expand existing firms or develop new firms in activities that primarily
serve local markets.
The growth industries and linkages analyses focus on the manufacturing sectors
of the economy. This is because manufacturing industries are generally more
purely "basic" than non - manufacturing industries (although this is not always
true), and the economic impacts per new job created in manufacturing industries
tend to be higher than from new service or trade jobs. Service and trade
activities cannot be neglected, however, and the analyses of service and
market- oriented targets address opportunities in those activities.
Growth Industries Identification
The shift -share analysis completed during Phase 1 showed that Washington
County's economy has performed well in recent years. The county has a net
favorable industrial mix, but not by a wide margin. Nine of the thirteen
two -digit SIC manufacturing industries represented in the county are in declining
or slowgrowing industries nationally. Fortunately the Stillwater Area is
not overly dependent on these slow growth /no growth industries. Nevertheless,
because of the county's industrial mix, it is very appropriate for future
development efforts to include an attempt to develop and /or attract firms
in faster growing segments of the economy. This section identifies a number
of industries which are both rapidly growing and can operate in the Minnesota
economic climate.
Growth industries are identified based on tabulations of industries which have
grown the fastest in terms of employment and number of establishments.during
the late 1970's and the early 1980's in the United States as a whole and in
I Minnesota. Historical data are useful because they reveal growth trends as
they actually occurred. Industries that have been in a growth mode recently
are more likely to continue in such a mode than industries which have been growing
slowly or declining. The important thing is to identify industries which have
future growth potential. A number of agencies have prepared projections of
future industrial growth. For the United States, the U.S. Bureau of Labor Statis-
itics has prepared growth projections for manufacturing industries through the
I 1980's and into the 1990's. The Minnesota Department of Jobs and Training has
prepared similar projections for industries statewide and within the Twin Cities
Metro Area. The results of the tabulation of historical growth trends and the
review of available projections are presented in the following series of tables
I (Tables 1 -5).
U.S. Growth Industries - The manufacturing industries that added the most new
jobs between 1976 and 1983 are listed in Table 1.
TABLE 1
Source: County Business Patterns for years noted
�I
Manufacturing Industries Creating
- 2 -
I
the Most New Jobs in U.S.
1976 - 1983
'
Y
Percent
Jobs
SIC
Industry
Change
Growth
F I
3573
Electronic computing equipment
98.7
175,796
3662
Radio & TV communication equipment
45.9
150,732
2752
Commercial printing, lithographic
60.0
116,638
I
3679
Electronic components, nec
110.3
110,258
3674
Semiconductors & related devices
50.4
53,884
3721
Aircraft
18.3
38,590
3693
X -ray apparatus and tubes
176.6
27,921
I
3671
Electron tubes, receiving type
635.1
28,161
3728
Aircraft equipment, nec
26.8
27,797
3825
Instruments to measure electricity
42.5
27,238
3761
Guided missiles and space vehicles
26.1
26,179
'
2016
Poultry dressing plants
31.9
23,491
3599
Non - electrical machinery, nec
11.2
21,546
1 I
3724
Aircraft engines & engine parts
21.0
21,419
2331
Women's apparel
30.4
20,285
3841
Surgical & medical instruments
31.8
15,522
3678
Electronic connectors
66.0
14,805
I
3842
Surgical appliances & supplies
28.0
14,520
3823
Process control instruments
36.6
12,914
2013
Sausages & other prepared meats
21.5
12,334
Source: County Business Patterns for years noted
�I
- a
- 2 -
The list in Table I dominated by "high-tech" industries: at least ten
of the twenty industries listed are in electronics and/or aerospace fields.
The other industries on the list include lithographic printing (which has
become a "high-tech" industry in its own right), two medical instruments
industries, and some "low-tech" industries (poultry dressing plants, women's
apparel, and sausages and other prepared meats). These last three industries
are part of larger industry groups (Food and Kindred Products and Apparel
and Textile Products) which experienced declines in employment between 1976
and 1983.
Table 2 lists the twenty industries which are expected to be fast growing
and major sources of new employment nationally through 1995. Several of
the industries listed in Table 2 are also on the historical growth list,
indicating that they are in the middle of a long-term growth trend. These
industries include electronic components, computers and peripheral equipment,
scientific and controlling instruments, medical instruments, printing and
publishing, aircraft, and apparel.
TABLE 2
Manufacturing Industries
Expected to be Fast Growing and
Major Sources of New
Employment
in U.S. 1982 -
1995
Job Growth
Percent
Nationwide
industry
Growth
(in thousands)
Electronic Components
51.5%
289
Computers & Peripheral Equipment
62.2
266
Plastic Products
55.7
256
Fabricated Structural Metal Products
34.3
158
Scientific & Controlling Instruments
54.4
123
Misc. Printing & Publishing
18.1
121
Apparel
11.5
116
Medical & Dental Instruments
72.2
114
Construction, Mining & Oilfield Machinery 40.1
103
Misc. Millwork, Plywood & Wood Products
32.2
102
Misc. Fabricated Metal Products
29.9
99
Periodical, Book Printing & Publishing
36.3
90
Newspaper Printing & Publishing
20.2
90
Household Furniture
32.2
87
Drugs
41.2
82
Electrical Industrial Apparatus
39.8
82
Metalworking Machinery
25.4
81
Aircraft
12.7
80
General Industrial Machinery
23.6
68
Misc. Fabricated Textile Products
39.2
67
Source: Employment Projections for 1995,
U.S. Bureau
of Labor
Statistics, 1984.
3
Minnesota Growth Industries - Table 3 presents a list of four -digit SIC manufacturing
industries which added at least 500 new jobs in Minnesota between 1976 and 1984.
There is a considerable amount of similarity between the historical growth lists
of the United States and Minnesota (Tables 1 and 3). In fact, seven of the
ten top growth industries in Minnesota are on the U.S. list. Of the remaining
thirteen industries which have been important sources of growth in Minnesota,
nine have been growth industries in the U.S. as a whole. However, on a relative
basis, these nine have been more important to Minnesota than to the U.S. Four
of the industries which have been important sources of growth statewide actually
declined in employment nationally. These four are: Motors & Generators; Screw
Machine Products; Commercial Printing, Letterpress, and; Special Dies, Tools,
Jigs & Fixtures. Because these are declining industries nationally, certain
questions should be asked regarding their potential for future growth in Minn-
esota. These questions might include whether Minnesota is developing 'a market
niche or a specialty within these industries? If not, how long can these indus-
tries be major sources of growth in light of national trends?
TABLE 3
Source: County Business Patterns for years noted
4 -Digit SIC Manufacturing Industries
with Most Job Growth
1976 - 1984
SIC
Industry
Jobs
3573
Electronic computing equipment
14,632
2752
Commercial printing, lithographic
71153
3079
Misc. plastic products
4,381
3679
Electronic components, nec
3,133
3823
Process control instruments
3,184*
3662
Radio & TV communication equipment
2,161*
3825
Instruments to measure electricity
2,089
3621
Motors and generators
1,882*
2711
Newspapers
1,842
3842
Surgical appliances & supplies
1,832
2731
Book publishing
1,523*
3544
Special dies, tools, jigs & fixtures
1,063
3451
Screw machine products
779
3361
Aluminum foundries
709
3444
Sheet metal work
661
3661
Telephone & telegraph apparatus
651*
2751
Commercial printing, letterpress
649
3569
General industrial machinery, nec
599
2022
Cheese, natural & processed
556
2642
Envelopes
554
Source: County Business Patterns for years noted
Table 4 lists the twenty manufacturing industries which are expected to be fast
growing and major sources of new employment statewide in Minnesota through 1990.
There is a considerable amount of overlap between the historical and projected
future growth lists for Minnesota. Again this suggests that we are in the middle
of a long term growth trend for certain industries which include: electronic
computing equipment; printing & publishing; scientific & controlling instruments;
miscellaneous plastics products; radio, TV & communication equipment; aluminum
foundries, and; newspaper publishing.
TABLE 4
Manufacturing Industries Expected to be Fast
Growing and Major Sources of New Employment
in Minnesota 1982 - 1990
Industry
Percent Change Growth in
in Employment Jobs Statewide
Office & Computing Machines
Misc. Paper & Pulp Products
Printing & Publishing (exc. newspapers)
Misc. Electrical Machinery & Equip.
Misc. Machinery (exc. Electrical)
Optical & Health Services Supplies
Sawmills, Planing Mills & Millwork
Scientific & Controlling Instruments
Misc. Plastics Products
Ordinance
Misc. Fabricated Metal Products
Sugar & Confectionary Products
Paperboard Containers & Boxes
Radio, TV and Communication Equip.
Grain Mill Products
Newspaper Publishing & Printing
Metalworking Machinery
Primary Aluminum & Nonferrous Metals
Cutlery, Handtools & Other Hardware
Misc. Wood Products
24.8
9980
28.6
6700
14.4
5620
26.3
4820
19.2
4600
33.0
2900
34.5
2580
15.6
2300
28.8
2030
12.4
1590
21.6
1530
46.9
1140
27.7
1050
21.4
1030
10.8
980
9.1
960
6.1
880
23.1
710
19.3
680
22.9
560
Source: Minnesota Employment Outlook to 1990 Minnesota Dept. of
Jobs and Training.
Twin Cities Metro Area Growth Industries - The manufacturing industries which
have experienced the most employment growth during the late 1970's and early
1980's were identified in the economic analysis section of the Phase One report.
In terms of broad manufacturing groupings, non - electrical machinery, printing
& publishing, instruments & medical products, and paper & allied products experienced
the most growth in employment in recent years.
- 5 -
Table 5 lists the twenty manufacturing industries which are expected to be fast
growing and major sources of new employment in the Twin Cities area through
- 1990. The similarity between the lists in Tables 4 and 5 is to be expected
because of the Twin Cities' size with respect to Minnesota. Only four indus-
tries identified as top growth industries for the Twin Cities area were not
also identified as top growth industries for the state as a whole. These are:
fabricated structural metal products; metal forging & stamping; motor vehicles
& equipment, and; screw machine products.
TABLE 5
Manufacturing Industries Expected to Be Fast Growing
and Major Sources of New Employment in Minneapolis - St. Paul
Metro Area* 1982 - 1990
Growth in
Percent Change Jobs in
Industry in Employment Metro Area
Office & Computing Machines
30.9
9719
Printing & Publishing (exc. Newspapers)
24.8
5036
Misc. Machinery (exc. Electrical)
21.6
4248
Misc. Paper & Pulp Products
17.4
3601
Misc. Electrical Machinery & Equipment
28.0
3530
Scientific & Controlling Instruments
23.6
3368
Optical & Health Services Supplies
29.9
2155
Misc. Plastics Products
29.2
1834
Ordinance
10.7
1362
Sawmills, Planing Mills & Millwork
41.3
1340
Fabricated Structural Metal Products
26.5
1334
Newspaper Publishing & Printing
15.7
974
Metal Forgin & Stamping
27.0
753
Primary Aluminum & Nonferrous Foundries
29.0
689
Construction & Material Handling Machines
18.0
668
Motor Vehicles & Equipment
27.6
648
Grain Mill Products
8.3
588
Radio, TV and Communication Equipment
19.2
587
Paperboard Containers & Boxes
16.3
560
Screw Machine Products
41.1
542
* The Minneapolis - St. Paul Metro Area includes the counties of
Anoka, Carver, Chisago, Dakota, Hennepin, Ramsey, Scott,
Washington and Wright.
Source: Minneapo - St. Paul
ons To
itan Area
Minnesota Department of Jobs and
Training,
MW
Growth Industries Summary - An analysis of the preceding tables reveals that
six 3- and 4 -digit SIC industries occur most frequently and, therefore, should
be considered primary growth targets. These industries are:
2752 Commercial printing, lithographic
3079 Plastics products
3573 Electronic computing equipment
3662 Radio & TV communication equipment
3823 Process control instruments
384 Medical instruments & supplies
A set of secondary growth targets has also been delineated. These 3- and 4-
digit SIC industries should be considered very viable prospects for the Still-
water Area, although they occurred slightly less often on various historic and
projected industry growth lists. These secondary growth targets are:
242 Sawmills & planing mills
243 Millwork, plywood & structural members
264 Misc. paper products
271 Newspapers
273 Misc. publishing
336 Aluminum & nonferrous foundries
344 Fabricated structural metal products
354 Metalworking machinery
3679 Electronic components
381 Engineering & scientific instruments
The remaining industries identified as growth industries in Tables 1 -5 should
'—' also be considered as prospects, but promotional and other development efforts
should be concentrated on the primary and secondary growth targets.
Growth Industries Analysis
The following analysis gives a brief summary of the performance of the industries
identified as primary growth targets in the U.S. in recent years. Also, there
is brief discussion of the level of activity within these industries in Minn-
esota. The rationale here is that if firms in the industry are present in Minnesota,
it is reasonable to assume that they are able to reach markets, access raw materials,
and pay the wage rates, taxes, and other costs in this state and remain competi-
tive. If the firms are present in Minnesota, and especially if they are represented
in the Twin Cities area, it is reasonable to assume that they could be located
in Washington County and the Stillwater Area. This does not automatically mean
that firms in these industry groups will prosper in the Stillwater Area, but
rather that there is reason to assume that it is a good target for a detailed
feasibility study or concentrated prospecting efforts.
Electronic Computing Equipment - Only certain elements of this highly publicized,
rapid growth industry lend themselves to applications in the Stillwater Area.
However, the community's proximity to Minneapolis - St. Paul, which has a good
base in the research, development, and production of electronic computing equipment
should give the Stillwater Area an advantage over locations which are more distant
from concentrations of such activity. The Stillwater Area could be a good location
for firms in this industry which produce specialty products for use with standard
electronic computing equipment or for applications in specific industries.
- 7 -
It has become increasingly common for large firms within the industry to "out -
source" (purchase from outside firms) products and services rather than trying
to develop their own capability to produce unrelated products within the larger
firm. In these cases, the purchasing firm wants the supplier to be close at
hand for coordination, design, installation, service, and improvements. Fur-
ther, such special applications are not easily mass produced and, therefore,
are less susceptible to competition from foreign suppliers or from very large
firms which enjoy significant economies of scale (lower unit production costs
due to scale of operations).
Overall the long -term prospects for the electronic computing industry are good.
The U.S. Department of Commerce projects computer industry shipments to grow
slightly less than the historical average (since 1972) of 19 per cent per year.
Within the industry group Office & Computing Machines, there were 59 firms opera-
ting in Minnesota in 1985. Forty -seven of these firms were located in the multi- county
Twin Cities metro area. Within Electronic Computing Equipment (SIC 3573) speci-
fically there were 33 firms operating in the Twin Cities metro area in 1985,
but all of these were in the two central counties of Ramsey and Hennepin. Major
firms with operations there include 3M, Control Data, Cray Research, Honeywell,
Northern Telecom, and Sperry, although there are numerous smaller firms which
are usually more specialized.
Radio and Television Communication Equipment - This industry has a definite
relationship to and overlap with the electronic computing equipment industry
because of the frequent application of electronic systems to communications
and the computerization of telecommunications systems. Even at the 4 -digit
SIC level of disaggregation, the radio and television communication equipment
industry is a very diverse one. The industry's broad range of products includes:
communication systems and equipment (except broadcast); broadcast, studio, and
related electronic equipment; alarm systems, traffic control equipment, and
intercommunication systems; search, detection, navigation, and guidance systems,
and; electronic equipment not elsewhere classified.
This diversity is exhibited by examing a list of the products of firms in this
industry located in the Twin Cities. These products include closed circuit
monitors and data display devices (Ball Electronic, Anoka), electronic fire
detection systems (Detector Electronics, Minneapolis), local communications
networks for computers ( Network Systems Corp., Brooklyn Park), TV surveilance
systems (Photo- Security Systems, Minneapolis), temperature /pressure sensors
(Rosemont, Inc., Minneapolis), and sonar fish finders (Vexilar, Minneapolis).
Within the Twin Cities metro area there were 24 firms in 1985, with a relative
concentration in Minneapolis and the west side. Employment at these firms range
from just a few persons to several hundred. One reason for the large number
of smaller firms is the high degree of specialization within the industry, the
frequent changes in product design, and limited opportunity for long production
runs (limited economies of scale).
Nationally this industry is heavily dependent on the U.S. Defense Department,
with about 45 percent of 1985 production directed to military and related appli-
cations. In Minnesota, the industry appears to be less defense - oriented and
quite diverse.
The U.S. Department of Commerce feels that the long -term prospects for the radio
and television communication equipment industry are quite good. To quote the
U.S. Industrial Outlook "the major determinant of growth in this industry will
continue to be the procurement budgets of the U.S. Armed Forces." However,
the Outlook projects a growing demand within the civil sector for a broad variety
of products such as radio and television broadcast equipment, mobile and fixed
radio equipment, railway and highway traffic control equipment, fire and smoke
detectors, and alarm systems. Three emerging products - -- satellite communi-
cation systems, cellular radio - telephone systems, and fiber optics - -- are ex-
pected to experience very significant growth rates.
Process Control Instruments - This industry is part of the larger group of industries,
measuring and controlling instruments. The inter - relatedness and overlap among
process control instruments (SIC 3823) and other industries in the group which
have been identified as secondary growth targets must be stressed. This industry
has experienced respectable growth in recent years due to expansion in domestic
plant and equipment expenditures. Also, relatively strong foreign demand has
been an important factor in this industry's recent growth. However, the U.S.
edge in this industry, in terms of superior technologies, appears to be eroding
and increased imports and a decreasing export market can be expected. Still,
the U.S. Department of Commerce expects product shipments to increase at an
annual rate of 3 percent through 1990 for the industry overall. Prospects may
be better for certain specialties within the industry.
In 1985 there were 45 firms operating in this industry statewide. Twenty -nine
of these firms were located in the Twin Cities metro area, but only two of these
were outside of the two central counties. Within the broader industry group
(SIC 382), there were 110 firms statewide in 1985. Seventy -six of these were
in the Twin Cities metro area, including one in Stillwater (National Modulation).
Medical Instruments & Supplies - This industry group includes three 4 -digit
SIC industries, two of which should be considered as primary growth targets.
These are surgical and medical instruments (SIC 3841) and surgical appliances
and supplies (3842). Nationwide there are about three - thousand manufacturing
plants within this industry group, and most of these are relatively small operations.
Only about 36 percent of all plants in this industry have 20 or more employees.
There are relative concentrations of activity in this industry along the East
Coast, in California, and in the North Central Region, which includes Minnesota.
Performance in the industry has been a little sluggish during the past couple
of years, but the U.S. Department of Commerce expects production increases of
4 to 5 percent annually through 1990.
SIC's 3841 and 3842 produce a wide range of products and there is a high drgree
of specialization by individual firms. Surgical and medical instruments are
mostly non - electronic diagnostic and therapeutic devices in general use by the
medical profession. Surgical appliances and supplies includes products such
as bandages and dressings, sutures, sterilizers, prosthetic devices, respir-
atory equipment, and personal industrial safety equipment.
Technological advancements have been significant in this industry during recent
years. New products and production techniques are replacing old ones, and re-
search and development will continue to result in more product innovations for
the health care industry. Other major factors affecting this industry group
include the expanding ambulatory care market, the increasing importance of HMO's,
expanded medical insurance coverage, and an aging U.S. population. However,
cost - containment efforts by the government and the insurance industry have con-
strained this industry somewhat.
In addition to its strong growth potential and other positive features, this
industry would also complement the strong medical service sector in the Twin
Cities area, take advantage of proximity to the University of Minnesota, and
be in a good position to serve other major medical centers in the Upper Midwest
(e.g., Rochester, Marshfield, et. al.).
In 1985 there were sixteen firms in the Twin Cities area classified as SIC 3841
and 28 firms classified as SIC 3842. An indicator of the potential of the medical
products industries, as well as the electronics industries, for the Stillwater
Area is the establishment of the WR Medical Electronics plant in the old Connolly
Shoe Company building in downtown Stillwater.
Plastics Products - The plastics products industry has been one of the fastest
growing manufacturing activities in the United States over the past thirty years.
Plastics technology advancements, particularly in terms of strength and weight
advantages, have enabled many products and components formerly made of metals,
wood, or paper to be made of various plastics. There are more than 12,000 plants
in this industry nationwide. Most of these are independent plastics processors.
However, a large share of plastics plants are "captive" plants - -- facilities
which make plastics components for their own company use.
Major markets for plastics products include packaging, consumer goods, building
materials, electrical /electronic products, home furnishing, machinery and equip-
ment, and transportation equipment. The U.S. Industrial Outlook projects an
average annual growth rate of 4 to 5 percent through at least 1990. The subs-
titution factor, mentioned above, will continue to be important, but substitu-
tion will occur at a slower rate than the 1960's and 1970's. The success of
individual firms or sub - sectors of the plastics industry will be largely tied
to the success of the markets they serve, whether they are final demand (e.g.,
consumer markets) or industrial markets. To the extent that the plastics indus-
try is tied to another growth industry such as medical products or electronic
equipment, firms with such linkages should do well.
The plastics products industry is relatively "footloose," i.e. it does not gen-
erally have a market or a raw material orientation. In 1985 there were 270
plastics products firms in Minnesota, in addition to a large number of firms
which make plastics products but are classified otherwise. Within the Twin
Cities metro area there were 186 plastics products firms, and the remaining
84 had "outstate" locations. Plastics products activity in the Twin Cities
area is less concentrated in Hennepin and Ramsey counties than other primary
growth targets and there are two plastics products firms in Washington County.
One of these is UFE, Inc., a major employer in the Stillwater Area.
- 10 -
Commercial Printing (Lithographic) - Commercial lithographic printing is one
of several industries within the broader printing and publishing group that
should perform well during the next several years. Other related industries
which have been identified as secondary or tertiary growth targets include newpapers
and miscellaneous publishing.
Commercial printing, as with all of the primary growth tarets, has undergoone
significant change resulting from technological improvements. The U.S. Indus-
trial Outlook reports that the "printing process has become more technically
precise and automated, demanding the work orientation of technicians as opposed
to craftsmen." Microprocessors, lasers, and digitalization of text and graphics
have brought major technological change to the commercial printing industry.
Despite technological advances and corresponding productivity gains, commercial
printing has been, and should continue to be a major source of new jobs. This
is in part due to expanding markets.
Lithography, also known as offset printing, has become the preferred method
of printing for many applications because of high production speeds, relatively
low preparatory and plate costs, and ease of changeover between jobs. Litho-
graphy's gains have come at the expense of letterpress.
Lithography's future growth is tied to the level of advertising by U.S. business
generally, as well as the level of general economic activity. The U.S. Depart-
ment of Commerce projects an average annual growth rate of 4 percent through
1990. Expanding markets and continuing technological improvements will have
positive effects on the commercial printing industry. The increasing use of
electronic distribution of information may have long -term negative effects on
the industry, however.
Lithographic printing is a well - established activity
area, but the prospects for additional firms in this
In 1985 there were 124 such firms in the metro area.
ivity in the metro area, a related target industry is
(SIC 2795).
in the Twin Cities metro
industry should be good.
Given the level of act -
lithographic services
- 11 -
Inter - Industry Linkaqes
In addition to focusing on growth opportunities, it is appropriate to consider
other factors which might be the basis for targeting activities which would
find the Stillwater Area an attractive location. By studying linkages among
manufacturing industries, opportunities for new activity locally may be identified.
The Stillwater Area is centrally located within the two -state Minnesota/Wiscon-
sin region. A firm located in the Stillwater Area could easily serve firms
in these two states and the Upper Midwest via truck or rail routes which
are very accessible from this location. Current trends in inventory management
suggest the desirability of shorter delivery times for components and raw
materials. Components and raw materials required for use in a firm's manufacturing
process are called inputs. Products made by manufacturers which are then
supplied to other manufacturers are called outputs. The outputs of one manufacturing
process become the inputs of other manufacturing processes, except for products
purchased by ultimate consumers (final demand).
As an initial step in studying inter - industry linkages, the twenty largest
manufacturing industries in the Minnesota /Wisconsin region (based on employment)
were identified. A list of the twenty largest manufacturing industries in
the Twin Cities metro area was also prepared. These industry lists appear
in Tables 6 and 7, respectively.
Source: County Business Patterns
- 12 -
Table 6
Twenty Largest 3 -Digit Manufacturing SIC's
_
in Terms of Employment in Minnesota /Wisconsin
Region, 1984
Rank
SIC
Industry
Employment
1
357
Office and computing machines
36,500
2
275
Commercial printing
32,900
3
307
Misc. plastics products
23,300
4
262
Paper mills, exc. bldg. paper
22,900
5
362
Electrical industrial apparatus
22,000
6
202
Dairy products
21,900
7
201
Meat products
21,700
8
264
Misc. converted paper products
20,300
9
271
Newspapers
18,600
10
356
General industrial machinery
18,200
11
351
Engines and turbines
17,800
12
353
Construction and related machinery
16,500
13
346
Metal forgings and stampings
16,100
14
344
Fabricated structural metal products
15,600
15
243
Millwork, plywood and struc. members
14,800
16
371
Motor vehicles and car bodies
14,800
17
352
Farm and garden machinery
14,500
18
359
Misc. machinery, exc. electrical
14,400
19
367
Electronic components and accessories
14,200
20
358
Refrigeration and service machinery
13,800
Source: County Business Patterns
- 12 -
Table 7
20 Largest 3 -digit Manufacturing SIC's in Terms of
Employment in the Twin Cities MSA, 1984
SIC
Rank Code Industry
Employment
1
357
Office and computing machines
24,900
2
275
Commercial printing
10,400
3
348
Ordnance and accessories
91600
4
382
Measuring and controlling devices
9,400
5
358
Refrigeration and service machinery
5,900
6
356
General industry machinery
5,700
7
366
Communication equipment
5,600
8
367
Electronic components and accessories
5,500
9
359
Miscellaneous machinery except electrical
5,300
10
362
Electrical industrial apparatus
4,300
11
344
Fabricated structural metal products
4
12
369
Miscellaneous electrical equip. and supplies
3,700
13
208
Beverages
3,500
14
353
Construction and related machinery
3,400
15
243
Millwork, plywood and structural members
3,200
16
265
Paperboard containers and boxes
31000
354
Metalworking machinery
3,000
384
Medical instruments and supplies
3,000
19
349
Miscellaneous fabricated metal products
2,800
20
346
Metal forging and stampings
2,700
Source: County Business Patterns
The next step was to identify the major inputs required by these manufacturers
using the national input- output tables as the basic source. The principal
inputs (based on dollar volume) for each of the twenty -eight largest manufac-
turing industries in the two -state region and the Twin Cities area are ident-
ified by SIC in Table 8. Titles for these industries are provided in Table
9.
It is clear from examining these two tables that not all of the inputs or
supply industries are suitable targets. First, there are more than sixty
manufacturing industries serving as principal suppliers to the region's industrial
base. This is too many to target effectively. Second, some of the input
industries are not appropriate for the Stillwater Area due to raw material
requirements (e.g., logging, sugar refining, plastic resins), agglomeration
economies (i.e., the clustering of several plants within one industrial group,
such as steel production or paper mills), or other factors.
The list of principal inputs was narrowed by several criteria. Supply indus-
tries which are highly resource - oriented (e.g., petroleum, logging, agriculture)
were dropped from further consideration. Supply industries which serve high
growth industries were retained as targets for further consideration, as
were supply industries in which the region is a net importer. The resulting
list of target industries which appear to offer potential based on supply
relationships is in Table 10.
- 13 -
Table 8
Stillwater Target Industries Analysis
Inputs Data Base
Inputs to Largest Manufacturers in MN/W1 & Twin Cities Metro
MAJOR INDUSTRY GROWTH INDUSTRY IN TOP 20 PRINCIPAL INPUTS (Name or SIC)
SIC TITLE us MN Tc MN/WI TC 1 2 3 4 5
1
201 Meat Products
N N
N
Y
N
Meat animals
2011
Poultry & eg
50/51
265
2
202 Dairy Products
N N
N
Y
N
Dairy farms
2026
2022
50/51
265
3
208 Beverages
N N
N
Y
Y
3411
3221
50 /51
2087
2061 -3
4
243 Millwork, Plywood & Str.
Y Y
Y
Y
Y
2411
2421
2435 -6
50/51
Railroad
5
262 Paper Mills, ex. bldg paper
N N
N
Y
N
261
2411
2421
291
491/493
6
264 Misc. Converted Paper Prod.
N Y
Y
Y
N
262
2821
307
50/51
2642
7
265 Paperboard Containers & Boxes
N Y
Y
N
Y
263
265
262
Railroad
50/51
8
271 Newspapers
Y Y
Y
Y
N
261
48
50/51
5810
4311
9
275 Commercial Printing
Y Y
Y
Y
Y
262
50/51
2893
2641
2791
10
307 Misc. Plastics Products
Y Y
Y
Y
N
2821
307
286
50/51
265
11
344 Fabricated Struc. Metal Prod.
Y N
Y
Y
Y
3312
3353 -5
3731
3469
15 -17
12
346 Metal Forgings & Stampings
N N
Y
Y
Y
3312
50/51
3599
3423
345
13
349 Misc. Fabricated Metal Prod.
Y Y
N
N
Y
3312
50/51
3353 -5
332
307
14
351 Engines & Turbines
N N
N
Y
N
3519
332
50/51
3462
3312
15
352 Farm & Garden Machinery
N N
N
Y
N
3312
50/51
3523
3519
332
16
353 Construction & Related Mach.
Y N
Y
Y
Y
3312
50/51
3531
332
3566
17
354 Metalworking Machinery
Y Y
N
Y
Y
3312
3544 -5
50/51
3599
332
18
356 General Industry Machinery
Y N
N
Y
Y
3312
50/51
302
3621
3562
19
357 Office & Computing Machines
Y Y
Y
Y
Y
3592
50/51
3674
3675 -9
307
20
358 Refrig. & Service Mach.
N N
N
Y
Y
3621
50/51
3312
3585
3353 -5
21
359'Misc. Mach., ex. electrical
N Y
Y
Y
Y
3599
3312
332
50/51
3353 -5
22
362 Electical Industrial ApparatusY
N
N
Y
Y
3312
50/51
3357
3622
307
23
366 Communication Equipment
N Y
Y
Y
Y
3675 -9
3674
50/51
307
Real Estate
24
367 Elec. Components & Acc.
Y N
N
Y
Y
3675 -9
50/51
307
3674
3356
25
369 Misc. Elec. Equip. & Supp.
N N
N
Y
Y
3332
50/51
3357
286
3694
26
371 Motor vehicles & Equipment
N N
Y
Y
N
3714
3465
3312
50/51
332
27
382 Measuring & Cont. Devices
Y Y
Y
Y
Y
50/51
36759
307
3312
345
28
384 Medical Instruments & Supp.
Y N
Y
N
Y
50/51
307
3339
221 -2
3469
Table 9
Manufacturing Industries Serving as Principal Suppliers
to Largest Manufacturers in Minnesota /Wisconsin and pain Cities
SIC Supply Industry Title SIC Supply Industry Title
2011 Meat packing plants
2022 Cheese, natural and processed
2026 Fluid milk
2061 Raw cane sugar
2062 Cane sugar refining
2063 Beet sugar
2087 Flavoring extracts and sirups
2210 Weaving mills, cotton
2220 Weaving mills, synthetics
2411 Logging camps and logging contractors
2421 Sawmills and planing mills
2435 Hardwood veneer and plywood
2436 Softwood veneer and plywood
2610 Pulp mills
2620 Paper mills, except building paper
2630 Paperboard mills
2641 Paper coating and glazing
2642 Envelopes
2650 Paperboard containers and boxes
2791 Typesetting
2821 Plastics materials and resins
2860 Industrial organic chemicals
2893 Printing ink
2910 Petroleum refining
3040 Rubber and plastic hose and belting
3070 Misc. plastics products
3221 Glass containers
3312 Blast furnaces and steel mills
3320 Iron and steel foundries
3332 Primary lead
3339 Primary nonferous metals, nec
3353 Aluminum sheet, plate and foil
3354 Aluminum extruded products
3355 Aluminum rolling and drawing, nec
3356 Nonferrous rolling and drawing, nec
3357 Nonferrous wire drawing & insulating
3411 Metal cans and shipping containers
3423 Hand and edge tools, nec
3450 Screw machine products, bolts, etc.
3462 Iron and steel forgings
3465 Automotive stampings
3469 Metal stampings, nec
3519 Internal combustion engines, nec
3523 Farm machinery and equipment
3531 Construction machinery
3544 Special dies, tools, jigs & fixtures
3545 Machine tool accessories
3562 Ball and roller bearings
3566 Speed changers, drives and gears
3585 Refrigeration and heating equipment
3592 Carburetors, pistons, rings, valves
3599 Machinery, except electrical, nec
3621 Motors and generators
3522 Industrial controls
3674 Semiconductors and related devices
3675 Electronic capacitors
3676 Electronic resistors
3677 Electronic coils and transformers
3678 Electronic connectors
3679 Electronic components, nec
3694 Engine electrical equipment
3714 Motor vehicle parts and accessories
3731 Ship building and repairing
- 14 -
Table 10
Potential Manufacturing Targets
Which Are Inputs to the Region's Major Industries
SIC Industry
265 Paperboard containers and boxes
307 Misc. plastics products
345 Screw machine products
2791 Typesetting
3423 Hand and edge tools, nec
3469 Metal stampings
3599 Machinery, except electrical, nec
3674 -79 Electronic components and accessories
The major industries operating in the Minnesota /Wisconsin region and in the
Twin Cities area are also producing goods which become inputs for other manufacturing
industries. A firm operating in the Stillwater Area would have good access
to products supplied by these major industries. Again, using the input- output
tables, the principal outputs of the major industries were identified. To
further narrow the resulting list for use in targeting, those which purchase
twenty percent or more of their intermediate inputs from one of the twenty -eight
major industries were selected as viable targets. These target industries
are listed below.
Table 11
Potential Manufacturing Targets Which Are Purchasers
of Outputs of the Region's Major Industries
SIC Industry
2013
Sausages and other prepared meats
2017
Poultry and egg processing
2021
Creamery butter
2022
Cheese, natural and processed
2065
Confectionery products
2641
Paper coating and glazing
2642
Envelopes
2643
Bags, except textile bags
2645
Die -cut paper and board
2647
Sanitary paper products
2648
Stationery products
2649
Converted paper products, nec
271
Newspapers
272
Periodicals
2732
Book printing
274
Misc. publishing
275
Commercial printing
276
Manifold business forms
2782
Blankbooks and looseleaf binders
311
Leather tanning and finishing
3519
Internal combustion engines, nec
3524
Lawn and garden equipment
3572
Typewriters
3573
Electronic computing equipment
3579
Office machines, nec
3719
Motor vehicle parts and accessories
3761
Guided missiles and space vehicles
- 15 -
The lists in Tables 10 and 11 identify thirty -five 3- and 4 -digit SIC
manufacturing industries which could be targeted by the Stillwater Area.
Thirty -five is too many to target effectively, so additional screening is
necessary. Four criteria will be used to identify primary targets based on
inter - industry linkages. These criteria are:
1) Low sensitivity to labor costs;
2) High percentage of shipments by truck;
3) Average employment size per plant of 100 or less, and;
4) All major inputs available within one day's trucking distance.
1) Low Sensitivity to Labor Costs - Labor costs include wages as well
as non -wage costs such as worker's compensation, unemployment
compensation and other costs which are labor - related. Wage rates
for production workers in the Stillwater Area are lower than those
in the central cities of St. Paul and Minneapolis, but not by a
significant margin. Wage rates in the Stillwater Area are
generally higher than in the Wisconsin counties just east of the
Stillwater Area, and these higher wage rates are an attraction
for Wisconsin workers. Andersen Corporation, in Bayport, is the
largest manufacturing employer in the Stillwater Area, and it is
known for its excellent pay for production workers. In some
respects, Andersen's pay structure is a standard against which pay
at other manufacturers is compared. Minnesota is known for its
high workers comp and unemployment comp taxes. These, too, must
be considered as labor costs.
Labor cost sensitivity was determined by dividing total labor
compensation by value -added (using the Annual Survey of Manufac-
turers as the source of information). Industries with a low
percent of labor cost to value- added, placing within the bottom
quartile of all industry types on the suspect list, were retained
for further investigation.
2) High Percentage of Shipment by Trucks - Although the Stillwater
Area does have rail service, it does not have much industrial
land which is served by rail available for new industrial develop-
ment. Trucking is taking on increasing importance as a shipper
for most manufacturing industries. For the near -term future
(five years or less) most available industrial land in the
Stillwater Area will not have rail access, so only those indus-
tries which rely extensively on trucks for incoming and outgoing
shipments were retained for further investigation. Industries
which, on average, have 80 percent or more of their shipments by
truck made the cut (source of information: Census of Transporta-
tion).
3) Employ less than 100 persons per plant - Research by Dr. David
Birch of MIT has shown that the vast majority of new jobs come
from firms with less than 100 employees. Besides offering
greater growth potential, smaller firms will provide greater
stability for the Stillwater Area. Smaller firms diversify the
lnfl
economy*(a key goal for the Stillwater Area) with fewer workers
engaged in the manufacture of a single product or group of
products. Using information from County Business Patterns
industries with an average of 100 or fewer workers per plant were
retained for further investigation.
4) Major inputs available within one day's trucking distance -
Industries in the Stillwater Area generally are able to procure
their inputs within 500 -600 miles of the community, or roughly
one day's trucking distance. For an industry from one of the
linkages lists to be considered a good target, most of the major
raw materials necessary in the manufacturing process must be
available within one day's trucking distance. This turned out
not to be an effective screening criterion, because virtually all
of the industries are able to obtain their major inputs from
within a radius of roughly 600 miles.
The three industries which met all of the criteria are: Cheese, natural and
processed (SIC 2022); Converted paper products (2649), and; Manifold
business forms (2761). These industries should be considered as primary
targets. It is worth noting that two of the industries identified as
primary targets in the growth industries analysis also meet all of the
screening criteria. These three are: Fabricated structural metal products
(SIC 344) and Medical instruments and supplies (384).
Industries which met three of the four criteria and, therefore, should
be considered as secondary targets are listed in Table 12.
Table 12
Secondary Targets
Based on Inter - Industry Linkage Analysis
SIC Industry
2065
Confectionery products
2645
Die -cut paper and board
2721
Periodicals
2741
Miscellaneous publishing
3524
Lawn and garden equipment
3572
Typewriters
3573
Electronic computing equipment
3579
Office machines, nec
3811
Engineering & Scientific instruments
3843
Dental equipment & supplies *
* Also identified as primary or secondary target
in growth industries analysis.
Local Manufacturer Survey
As a supplement to the inter - industry linkage analysis, a survey of Still-
water Area manufacturers was conducted. The purpose of the survey was to
- 17 -
identify inputs purchased by local manufacturers, as well as the origin of
these inputs and the mode(s) of transportation used to ship the inputs.
Local manufacturers were also asked to identify their outputs, locations
of principal markets, and modes of transportation used for shipment.
Finally, local manufacturers were asked to suggest products which are
purchased as inputs which they feel might lend themselves to production
locally.
Of the dozen manufacturers who received the survey questionnaire, six
responded. The following products /industries were identified as those
which might lend themselves to production locally:
SIC Industry
275 Commercial printing
3211 Flat glass
3079 Plastic components, plastic
pails and bottles
The feasibility of establishing operations locally to provide inputs to
Stillwater Area manufacturers can only be determined through detailed
analyses which are beyond the scope of this study. However, follow -up
contacts with local manufactuers are recommended as part of the proposed
economic development organization's work program. Through these follow -up
contacts additional information can be obtained to evaluate the feasibility
of activities listed above. However, all three do appear to have some
potential and merit further study.
Services
Service activities, in general, have been a major source of employment
growth in the U.S. and in Minnesota during the past twenty years. Many
local economic development organizations are taking note of the importance
of service activities in terms of job and income generation. Consequently,
services are being targeted and assisted more by local development groups.
However, not all service industries are attractive as targets for economic
development. While most services are expected to continue to serve as
significant sources of growth for the next ten years, many service indus-
tries pay wages which are below average and in which there are high rates
of labor turnover. Service industries do offer considerable economic
development potential, but only those service activities which are, or have
the potential to be, largely or entirely "basic" (i.e., serving markets
outside of the local area) should be targeted for the Stillwater Area.
Several specific types of services are already considered part of the
Stillwater Area's economic base. These industries were identified in the
economic analysis that was completed as part of the Phase One report. These
industries include local passenger transportation, water transportation ser-
vices, electric services, commercial banking, security and commodity
services, advertising, physicians and dental services, amusement and
recreation services, libraries /information services, and local government.
While it is evident that these activities are serving some markets outside
of the immediate Stillwater Area, in most cases the majority of the markets
of these activities are local. Exceptions would be electric services,
amusement and recreation services, and libraries /information centers.
Services which are predominantly local market - oriented should not receive a
lot of attention by a local economic development organization. The U.S.
Department of Commerce, in its 1986 U.S. Industrial Outlook highlights
several service industries which are becoming increasingly "basic," at
least on interstate or international levels. These include advertising,
accounting, architecture and engineering, banking and financial services,
education and training, employment services, health care, franchising,
insurance, consulting of all kinds, leasing, transportation, computer
services, and communication.
There is a tendency for firms that are in these service industries which
are becoming increasingly basic to concentrate in large urban centers.
There are exceptions to this "rule," and the Stillwater Area should concen-
trate on finding those exceptions in including service industry targeting in
its economic development program.
A recent study of service industries in the State of Washington showed that
small firms are just as likely as large firms to have export sales, and that
most services exporting firms are young and had local startups. This
finding may be significant for the Stillwater Area, which is somewhat
isolated or removed from the major urban nodes of Minneapolis and St. Paul
and, therefore, less likely to attract a large service firm. As a strategy
in targeting service firms, the Stillwater Area may do best to attract
small, specialized service firms to the community or to encourage start -ups
by people already in the community. The principals of small, specialized
service firms are likely to be well - educated, professional types to whom
the Stillwater Area and the lifestyles available there are very appealing.
The Stillwater Area should take advantage of the "quality of life" factor,
which could be more important to new or small service firms than for
manufacturing businesses.
Market Orientation
The Phase One report included an economic analysis of the Stillwater Area
which serves as the basis for identifying market - oriented activities which
offer opportunities for expansion. Using the comparative economic base
analysis technique, employment levels in market - oriented activities (trade,
services, construction, etc.) in the Stillwater Area are compared with
those of similar communities in eastern Minnesota and western Wisconsin.
The assumption is that the Stillwater Area should be able to support similar
levels of employment in these market - oriented activities as is true for
similar places. Where the levels are significantly below the average for
comparable communities, there may be opportunities to expand existing
firms or develop new firms.
The comparative economic base analysis technique is not without its weak-
nesses, but it is an improvement over similar techniques which compare a
place to the nation as a whole. In the analysis conducted during Phase
=VOM
One, the Stillwater Area is compared with Red Wing and Hastings, Minnesota
and Hudson, Wisconsin. Overall, the Stillwater Area compares quite favor-
ably with these other communities in terms of market - oriented activities.
There are no apparent glaring gaps (i.e., market- oriented activities which
are absent in the Stillwater Area but which would be expected to be there).
There are, however, a number of activities in which employment levels in
the Stillwater Area are below the four - community average. This is an
indication that there may be room for additional employment in these
activities, either through expansion of existing firms or through the
addition of new firms.
The activities which have below- average employment levels in the Stillwater
Area include: verterinary services; radio and television broadcasting;
motor vehicle and automotive equipment wholesale; electrical goods whole-
sale; miscellaneous non - durable goods wholesale (includes farm supplies,
tobacco products, paints and supplies, and a wide variety of other non -dur-
ables); new and used car dealers; women's ready -to -wear stores; furniture
and home furnishings; security and commodity services; insurance agents,
brokers and services; laundry, cleaning and garment services; photographic
studios (portrait); nursing and personal care facilities, and; hospitals.
There are many factors which might influence the level of employment in a
particular market - oriented activity. By comparing the Stillwater Area to
similar communities, the unwanted influences may be minimized but they
can't necessarily be eliminated. For example, veterinary services appears
to have potential for expansion in the Stillwater Area. In discussing this
opportunity with a local veterinarian, however, it was learned that there
are several veterinary offices located just outside of the Stillwater Area
as defined. These veterinarians just outside the Stillwater Area are
probably serving markets inside the Stillwater Area, at least to some
degree, so the potential for expanding in this activity may not be real.
Local economies are very dynamic in terms of market- oriented business
activities. This is especially true in areas with growing populations
(i.e., expanding local markets). The market- oriented opportunities ident-
ified above for the Stillwater Area are not likely to remain as oppor-
tunities for long. The market system is remarkably efficient and, if there
is a large enough need, some entrepreneur will step in and fill that need.
A comparative economic base analysis can be useful in identifying oppor-
tunities, but it should be updated periodically to reflect changing con-
ditions. If a particular activity is identified consistently in successive
analyses, it is very likely that there are factors (other than purely local
market factors) influencing the results.
S_ r
The Target Industries Analysis identifies the types of economic activity
which could be attracted to or expanded in the Stillwater Area. These are
the activities toward which those responsible for marketing should be
concentrating their efforts.
- 20 -
Emphasis has been placed on identification of manufacturing targets because
manufacturing industries are generally more purely "basic" than non- manufac-
turing industries (although this is not always true), and the economic
impacts per new job created in manufacturing tend to be higher than from
new service or trade jobs. However, opportunities for non - manufacturing
business development have been analyzed, too.
The growth industries analysis identified specific manufacturing industries
which are growing rapidly (job growth) and which can operate in the Minne-
sota economic climate. Recent growth trends and growth forecasts for
manufacturing industries in the United States, Minnesota and the Twin
Cities region were analyzed. Industries which appeared on historic and
future growth lists most frequently and which are already represented in
Minnesota were identified as primary growth targets? These are:
Commercial printing, lithographic
Plastics products
Electronic computing equipment
Radio and TV communication equipment
Process control instruments
Medical instruments and supplies
A set of secondary growth targets was also delineated. These industries
should still be considered viable prospects for the Stillwater Area,
although they appeared less often on historic and future growth lists.
These industries are:
Sawmills & planing mills
Millwork, plywood & structural members
Misc. paper products
Newspapers
Misc. publishing
Aluminum & nonferrous foundries
Fabricated structural metal products
Metalworking machinery
Electronic components
Engineering & scientific instruments
An analysis of inter - industry linkages was conducted to identify manufac-
turers which could locate in the Stillwater Area because of input- output
relationships with major manufacturers in the region. Thirty -five specific
industries were identified as potential targets based on inter - .industry
linkages, but a group of this size is too large to use targeting effec-
tively. Additional screening was done to narrow the list. Primary targets
resulting from the inter - industry linkage analysis are:
Cheese, natural and processed
Converted paper products
Manifold business forms
- 21 -
Secondary targets based on the inter - industry linkage analysis are:
Confectionery products
Die -cut paper and board
Periodicals
Miscellaneous publishing
Lawn and garden equipment
Typewriters
Electronic computing equipment
Office machines, nec
Engineering & scientific instruments
Dental equipment & supplies
As a supplement to the inter - industry linkage analysis, a survey of Still-
water Area manufacturers was conducted to examine input requirements of
local industries. The following products were identified as those which
might lend themselves to production locally:
Commercial printing
Flat glass
Plastic components
Plastic pails and bottles
Service activities have been and should continue to be a major source of
economic growth nationally and in Minnesota. The Stillwater Area should
target those service activities which are, or have the potential to be,
largely or entirely "basic" (i.e., serving non -local markets). Service
industries which are becoming increasingly basic include advertising,
accounting, architecture and engineering, banking and financial services,
education and training, employment services, health care, franchising,
insurance, consulting of all kinds, leasing, transportation, computer
services, and communication. As a strategy in targeting service firms, the
Stillwater Area may do best to attract small specialized service firms to
the community or to encourage start -ups by people already in the community.
The principals of small specialty service firms are likely to be well -edu-
cated, professional types.to whom the Stillwater Area and the lifestyles
available there are very appealing.
Market - oriented activities which may offer opportunities for expansion in
the Stillwater Area were identified using the comparative economic base
analysis technique. Market - oriented activities which have below- average
employment levels in the Stillwater Area include:
Veterinary services
Radio & TV broadcasting
Motor vehicles & auto equipment wholesale
Electrical goods wholesale
Miscellaneous non - durable goods wholesale
New and used car dealers
Women's ready -to -wear stores
Furniture and home furnishings
Security and commodity services
- 22 -
Insurance agents, brokers and services
Laundry, cleaning and garment services
Photographic studios (portrait)
Nursing and personal care facilities
Hospitals
Because local economic conditions tend to be very dynamic, especially in
growing areas, the comparative economic base analysis should be updated
periodically to show current opportunities.
- 23 -
IMPLEMENTATION PLAN
Introduction
The implementation plan lays out a course of action for the Stillwater Area
to follow. As the final step in the economic development strategy, the
implementation plan builds on the findings and recommendations of the three
analyses which precede it. The plan begins with the statement of economic
development goals and objectives, which provide a framework for what the
community wishes to accomplish.
The fifth goal deals with establishing an effective economic development
"system" in the Stillwater Area, which will require the creation of a new
organization. Alternative organizational structures are analyzed and
recommendations for the formation of an economic development organization
are provided. A description of implementation activities is also provided,
with'recommendations on specific activities in which the new organization
should be involved. Emphasis is given to information /clearinghouse,
planning /research and marketing functions. The critical issue of industrial
land is also addressed.
Goals and Objectives
Taking into account the results of the economic analysis, the Stillwater
Area's potentials and constraints, and the target industries analysis, the
next step in formulating an economic development strategy is to identify
goals and objectives. Goals and objectives provide the framework for the
overall strategy. Goals are statements of purpose or desired ends toward
which effort is directed. A goal expresses a general aim about what the
Stillwater Area should strive for in terms of its economy for the next
several years. Objectives are somewhat more specific, measurable types
of actions that relate to the achievement of a goal.
At the head of the list of goals is an overall goal for economic develop-
ment. It serves as an "umbrella" statement which covers all of the sub-
sequent goals and objectives. Beyond the overall goal, individual goals and
objectives are not prioritized or in any special order. All of the goals
and objectives are important and, although some may be more important than
others, they all interact to form the basis of the Stillwater Area's
strategy for economic development.
OVERALL GOAL - Encourage the economic development and vitality of the
Stillwater Area.
Goal 1 Business retention.
Objectives
la. Establish and maintain a good business climate in the
Stillwater Area.
- 24 -
lb. Identify activities and areas within the community
which are in need of assistance or improvement and
direct efforts to these activities /areas.
lc. Establish lines of communication between those organ-
izations that can provide needed assistance and:those
that require such assistance.
Goal 2 Economic diversification.
Objectives
2a. Identify those types of economic activity which are
desirable from social and environmental standpoints and
for which the Stillwater Area has a comparative advan-
tage.
2b. Encourage the attraction of new business and industry
of types not currently present in the community.
2c. Assist existing Stillwater Area firms in their diversif-
ication efforts.
Goal 3 Economic expansion.
Objectives
3a. Assist existing businesses and industries in their
expansion efforts.
3b. Attract new business and industry which is appropriate
for the Stillwater Area.
3c. Encourage broad -based business development, which
includes industrial, commercial, and tourism - related
activities.
3d. Assist local entrepreneurs in the process of new
business formation.
Goal 4 Guide economic growth and development to those parts of
the Stillwater Area that want it.
Objectives
4a. Plan for and provide attractive new sites for various
types of economic activity, including manufacturing,
retail, service, wholesale, distribution and warehouse.
4b. Plan for and provide the public facilities and infra-
structure necessary to support diverse economic
expansion.
- 25 -
4c. Plan for'and encourage redevelopment and revitalization
of existing commercial and industrial districts in the
Stillwater Area.
Goal 5 Establish an effective economic development "system" in
the Stillwater Area.
Objectives
5a. Establish a broad -based organization with planning and
implementation responsibilities to address the goals and
objectives listed above.
5b. Open and maintain channels of communication and create
working relationships among agencies involved in
economic development in the Stillwater area.
5c. Present a coordinated, unified front and a positive
image to existing and prospective business and industry.
5d. Initiate and implement the specific programs and
projects which are necessary to make the Stillwater Area
competitive in retaining and attracting economic
activity.
5e. Avoid duplicated and overlapping efforts by various
agencies and organizations.
5f. Streamline channels of communication and provision of
assistance to business and industry.
Organizational Structure
There are several alternatives available to communities interested in
creating an organization responsible for the implementation of an economic
development program. The Stillwater Area must take into consideration the
purpose of the economic development program, the involvement and interest of
those currently active in economic development, and the governmental
structure of the area when deciding on an organizational structure. There
are three major types of organizations to implement economic develop-
ment programs. They are classified as public, private- for - profit, and
private non - profit. Although it is rare for a community to use an organiza-
tional structure in its pure form, most tend to fall into one of these major
categories. The following sections describe the organizational structure
for these three types.
Public - The first alternative is the publicly sponsored economic develop-
ment program. To create such an organization the governmental unit (munici-
pality or county) establishes an entity which is responsible for all or some
economic development activities within their jurisdiction. Such an entity
would take the form of a committee, council, task force, or commission. In
- 26 -
some cases the public group is comprised solely of public officials (elected
and staff), but the importance of private sector representation and input is
usually recognized.
The principal functions of a public organization involve coordination,
information gathering and analysis, and limited technical assistance.
Public organizations are almost always advisory.in nature, intended to be
part of the legislative process of local government. These functions are
important because of government's role in providing key services, as well as
its role as regulator. Another advantage is the requirement that certain
public funds (grants) be provided through or administered by a public
organization. However, such requirements can be met through contractual
agreements between local governments and private organizations. The
principal advantages of public organizations are the facilitation of
communication to government decision makers and the establishment of a
positive image for economic development by local government. Another
advantage is that it is perceived as allowing more citizen involvement in
economic development.
There are several shortcomings with the public organizational structure.
First and foremost, public development groups tend to be largely advisory.
Their implementation powers generally relate to the provision of utilities
and services and certain types of financial assistance. Public development
groups are often unable to move quickly or operate within a short time-
frame, which is often necessary for economic development projects. Public
economic development groups are seldom the final decision making authority
and actions must be taken by the local legislative body before some projects
are able to move ahead. In the business environment, these delays may
discourage business people who are interested in expanding or relocating a
firm in the community. Other drawbacks are state requirements regarding
open meetings and public disclosure of financial statements and business
plans. Although citizen involvement should be encouraged, problems have
resulted when residents become too involved. Business owners prefer to
maintain a level of confidentiality which is not available as a result of
such government regulations.
In the Stillwater Area, a public economic development organization could be
formed by any municipality individually, two or more local governments
participating cooperatively, or by the county. However, no formal public
economic development group has been established in the Stillwater Area,
except for the Washington County Housing and Redevelopment Authority. The
Washington County HRA has special implementation powers specified by state
statute. The HRA has worked with several municipalities in the Stillwater
Area, particularly in providing financial services (Tax Increment Financing
and Industrial Revenue Bonds). This has been and will continue to be a
necessary role, but the HRA probably cannot be the general purpose economic
development organization which is needed in the Stillwater Area.
If Washington County decides to get actively involved in economic develop-
ment, the Stillwater Area is likely to benefit. However, because Washington
County is large and encompasses several other communities which are in-
terested and involved in economic development, a county - sponsored economic
- 27 -
development group would not be able to concentrate enough on the Stillwater
Area's needs.
Because of the inherent disadvantages with a purely public economic develop-
ment organization, the formation of such a group in the Stillwater Area is
not recommended. But this is not to say that the local governments should
not be integrally involved in the local economic development program. At a
minimum, local government participation is needed to facilitate decisions
within respective jurisdictions (e.g., zoning issues, utility extensions,
etc.). Because of the broad range of issues and impacts that must be
considered in an economic development program, the local governments in the
Stillwater Area should be involved at a policy- making level jointly with the
private sector, but should not take the lead role.
Private -for- profit - Private organizations formed to make a profit may also
provide the structure for the implementation of a community's economic
development program. This type of organization gathers private investors
who work toward improving the area's economy in a manner which is profit-
able to the stockholders /investors. This category allows greater flexi-
bility and an increase in the number of financing alternatives available.
Projects can be reviewed without the problems of disclosure and the time
frame necessary for governmental "council" approval. This type of organ-
ization is not financially dependent on any governmental funds and may work
well as a development catalyst.
There are a number of difficulties which private- for - profit economic
development organizations have experienced, and which have kept them from
taking on the role of implementing a general community economic development
program. A private group may not be responsible for or obligated to working
in close association with the governmental units. This has, in some cases,
led to a lack of accountability in economic development projects being
carried out. Because such an organization is not associated with a govern-
mental unit and is working for a profit, the private- for- profit structure
does not take on the role of the community's economic development center.
Businesses may find it difficult to bring in problems and potential projects
if members of the organization are viewed as competitors.
One of the most significant problems which has occurred is the ability of
such an organization to achieve a profit while meeting the community's
economic development needs. An organization's own goals may not always mesh
with the community's broader goals for economic development. Goals can
often conflict which may result in the loss of new investment and /or new
jobs. In addition, given the increasing intensity of competition for new
investments, it may be impractical if not economically impossible to, in
fact, "turn a profit" on such ventures. Realization of this fact will
quickly dampen enthusiasm and interest in economic development which will,
of course, translate into ever diminishing levels of success.
The private- for - profit structure is generally best - suited for organizations
with limited functions or limited geographic scope, rather than broad -based
economic development programs. For example, a for - profit group may be
appropriate to develop and manage a business incubator facility. Business
incubators have become important elements in many community economic
development programs, but to be successful, they require skills and exper-
tise which a general purpose economic development organization may not have.
Profit - making structures also often work well when they focus on the needs
of a limited geographic area, such as a downtown.
Private Non - Profit - The third basic organizational alternative available to
the Stillwater Area is the development of a private non - profit corporation.
An economic development corporation can qualify for tax exempt status under
Section 501(c)(3) of the Internal Revenue Code of 1954, and this has been an
extemely popular structure for economic development groups for many years.
The private non - profit organization offers many of the strengths of the two
preceding formats, with few of their weaknesses. They avoid problems
associated with local government structure and bureaucracy and they usually
benefit from extensive private sector participation.
One of the advantages of`such an organization is budgetary. Due to the
non - profit status of such an organization, donations and contributions from
private sources may expand the amount of funds available to meet operational
expenses. This structure also enables a group to contract for services and
receive grants from government agencies or foundations. Any earnings
resulting from activities cannot be distributed to shareholders. Rather,
they must be re- invested in new projects supported by the group and its
strategy.
Because the organization is not motivated by profits, all businesses can
feel free to contact the organization for any problems or needs. This fact
may make the private non - profit alternative the most effective structure for
an effective business development program. Although a private non - profit
organization is autonomous from local government, they usually maintain
legal and financial ties and are generally responsive to the community's
economic development needs.
An example of a private, non - profit in the Stillwater Area is St. Croix
Growth, which is an association of local lenders. SCG's purpose is to
assemble financial packages on a "pooled- resource" basis when projects meet
established criteria. Again, SCG's goals are, in general, in conformance
with those of broad -based community economic development. They offer
specific services and resources which may be necessary to make certain
development projects move ahead, but SCG's functions are limited and it
would not be good to house a community economic development program within
that or a similar organization.
The term "private" is actually somewhat misleading because, in most cases,
for such a group to operate successfully, public involvement is essential.
Perhaps a more appropriate term is "quasi- public," because local government
leaders usually serve on the governing board and it is not unusual for a
large portion of annual operating revenues to come from local government
sources. Despite the involvement by public officials, the governing body of
the typical non - profit economic development organization is comprised
primarily of local business leaders. The blend of private and public
membership and participation generally works well in accomplishing mutual
- 29 -
goals. A non - profit organization makes sense for many communities because
they are able to do planning and establish policy, as well as to implement
the plans and programs they adopt.
The primary weakness of the private non - profit is one which is not unique
to that organizational type. Problems can arise if quality personnel are
not placed in the positions created. The organization must be headed by an
enthusiastic individual with a business background, familiarity with
government programs and an ability to work with business leaders in the
community. The governing board of a private non - profit organization must
also be willing to actively participate in the activities of the area's
economic development program. Again, problems can occur if council members
are not familiar with the business environment or are motivated by political
convictions. Developing a good "team" for economic development which works
closely with area governmental units can be a difficult task.
Selecting a Structure for the Stillwater Area - The selection of the "best"
organizational structure for an economic development program.in the Still-
water Area should be based on needs. Several of the basic needs have
already been identified:
1. No general purpose economic development organization exists in the
Stillwater Area. Such an organization is needed to take the lead
in economic development activities, to serve as an initial contact
or starting point for persons /firms interested in the Stillwater
Area for development projects, to market the Stillwater Area for
development, and to coordinate efforts among existing entities.
2. Planning and implementation functions are both needed within one
organization. The ability to carry out plans once they are
formulated is essential. Too much separation of planning and
implementation in economic development often leads to delays and
uncoordinated, disjointed results.
3. There is a need to approach economic development on an area -wide
basis. Stillwater, Bayport, Oak Park Heights, Lake Elmo, and the
surrounding townships are, in many respects, one community.
Economic development that takes place within the jurisdiction of
one of these local governments will benefit the other parts of the
Stillwater Area. For an individual municipality in the Stillwater
Area to initiate an economic development program would be prohib-
itively expensive. An area -wide effort avoids duplication,
distributes costs in relation to benefits, and takes advantage of
economies of scale.
Because of these basic
fit organization struct
public organization is
planning, gathering dat
weak in implementation.
implementation, but is
needs, neither a purely public nor a private- for -pro-
ure is well- suited for the Stillwater Area. The
good for establishing governmental policy, doing
a, and conducting research and analysis, but it is
The private- for - profit organization is strong on
not
benefits or in approaching
as effective in planning for community -wide
economic development comprehensively.
- 30 -
For these reasons, it is recommended that the Stillwater Area's economic
development acitivities be handled by a private non - profit organization
This organization should establish itself as the lead agency for economic
development and strive for a position as a highly visible, central coordin-
ating agency for economic development in the Stillwater Area. The organiza-
tion should be area -wide in scope, with representation from both the private
and public sectors from throughout the community, but the leadership should
be from the private sector to gain the support and confidence of the
business community. Although the organization should function as a general
purpose economic development group, it should not try to be everything or do
everything in terms of economic development. In fact, at least at the
beginning, the functions of the new group should be limited to information
gathering, planning, and marketing. The organization should make use of
existing resources and agencies, assuming a role within a particular
activity area only when no other entity exists to do so.
Within the private non - profit category, there are a number of options to
consider. Two viable options for establishing an organization are to expand
within the Chamber of Commerce or to create an independent entity, which may
or may not have an affiliation with the Chamber of Commerce.
- Within Chamber of Commerce
This would essentially broaden the Chamber's functions to establish a formal
economic development program. This could take the form of continuing the
existing Business and Industrial Development Committee or establishing a new
committee or a council with the Chamber as the sponsoring agency. This
option takes advantage of the impetus and current activities of the B & ID
Committee and the Chamber's area -wide scope. The amount of autonomy given
to such a committee is a decision for the Chamber, but autonomy will be
necessary for the organization to be effective.
- Independent of Chamber of Commerce
An independent organization, which may still be affiliated with the Chamber
for administrative purposes, is a format used in many communities. Policy-
making boards are separate and autonomous, although interlocking board
memberships help to assure coordination.
Functions - The purposes and functions of the proposed non - profit corpora-
tion will be explained in the organization's articles of incorporation. The
organization's principal purposes and functions will be to work toward the
goals and objectives presented earlier in this narrative. More specif-
ically, the organization should be empowered to:
a) receive funds and property (real or personal) by gift, grant or
otherwise;
b) purchase or lease real and personal property;
c) sell, exchange or otherwise transfer real and personal property;
d) borrow money;
e) invest its funds;
f) provide services on a contract basis; and
g) participate and work jointly with other organizations or indi-
viduals to work toward common goals.
- 31 -
The representative structure will be of particular.importance in estab-
lishing the new organization. Representation is discussed.in' the next
section.
Representation
The business and affairs of the proposed non - profit economic development
corporation will be managed by a Board of Directors who represent different
functional and geographic areas of interest. The make -up of the Board of
Directors of the proposed corporation is presented in Figure 1. The
proposed organization will have representation from three broad sectors
within the Stillwater Area. There will be public, private, and at -large
representatives. The Board as proposed, is large enough to represent the
necessary interests within the Stillwater Area, but not too large to be
unwieldy.
Figure 1
Proposed Representation
Stillwater Area Economic Development Organization
Functional /Geographic
Area of Interest
Number
Who Appoints?
Public Sector
School District
1
School Board
Washington County
1
Board of Commissioners
Each General Purpose
local government
in Stillwater Area
8
Local Government legislative body
Private Sector
Manufacturing
3
Chamber of Commerce
Lending Institutions
1
St. Croix Growth
Real Estate
1
Chamber of Commerce
Stillwater Development
Corp.
1
SDC
Other business
3
Chamber of Commerce
At Large
Residents of the
Stillwater Area who
have expressed in-
3
Economic development organiza-
terest in the pur-
tion itself
poses of the devel-
ment organization
------------------ - - - - --
------------------------
---- - - - - --
---- - - - - --
-------------------------------------
-------------------------------------
Total
22
- JZ -
- Public Sector
As explained above, public sector participation and cooperation in the
economic development process is essential to achieve success. The public
sector (general purpose local governments and the school district) stand to
gain from the economic development process in terms of a diversified and
expanded tax base. The public sector must also provide essential utilities
and services to support economic development. For these reasons, the
public sector should have representation on the new organization.
As proposed, each general purpose local government in the Stillwater Area
will have one representative. Independent School District No. 834 will have
one representative. The school district's role is necessary because of the
importance of educational services as an influencing factor in business
location decisions and its areawide jurisdiction. Washington County, also
an important provider of government services in the Stillwater Area, will
have'one representative.
- Private Sector
A minimum of nine of the twenty -two representatives in the economic develop-
ment organization will be from the private sector (i.e., appointed directly
by non - government entities). Recognizing the importance of manufacturing as
basic economic activity and, generally, as a driving force in local economic
development, three of the private sector representatives will be from local
manufacturers. Local lending institutions and real estate brokers will each
have one representative. The Stillwater Development Corporation, recently
formed to address development and redevelopment issues in downtown Still-
water, will have one representative. Other business interests will have
three representatives. These three should be from retail, service, whole-
sale, or other activities not specified above.
The Stillwater Area Chamber of Commerce will have an important role in
appointing representatives to the Board of Directors. Seven of the nine
private sector representatives would be selected by the Chamber. The
remaining two representatives would be appointed directly by the groups
they represent.
- At -Large
The third group of representatives may be from either the public or private
sector. The only requirement is that the representatives be residents of
the Stillwater Area who have expressed interest in the goals and objectives
of the economic development organization. This is the smallest of the three
groups of representation, but, as proposed, it is a very important one
because the Board itself selects the people it feels can best fill the
positions. This gives the Board some flexibility by allowing it to choose
persons with expertise, interest, and other qualifications which may be
lacking among the other nineteen representatives, to emphasize a particular
sector of the economy, or to involve other key members of the community's
power structure.
- 33 -
Details regarding the organization of the corporation should be provided in
the articles of incorporation and the by -laws of the new group. It is
recommended that representatives have staggered three -year terms. This
provides continuity among board members, yet three years is long enough for
a board member to learn about the organization's activities and to make a
substantial contribution. The schedule of appointments for a staggered
arrangement might be as follows:
Public Sector: 4 appointments in the first year,
3 in the second year, and
3 in the third year.
Private Sector: 3 appointments each year
At- Large: 1 appointment each year
While a twenty- two - member board is not too large to meet and conduct
business as a group, it will be advisable to create an executive committee
which will consist of a smaller number of members (say five or seven). This
committee can call a meeting to conduct general business or address a
special issue, if necessary, rather than call a meeting of the entire
board. However, the organization should avoid becoming too reliant on an
executive committee. To do so might defeat the purpose of the group's
representation structure. Regular meetings of the entire board will be
essential, and frequent meetings of the full group will be very important
during the first year of the organization's existence.
One means of establishing the cooperation and coordination among the
various entities involved in the local economic development process is
through interlocking memberships. An example of the use of interlocking
memberships is the inclusion of members of the Stillwater Development
Corporation and St. Croix Growth on the Board of Directors of the proposed
organization. Interlocking memberships work best when they are the result
of formal agreements between or among organizations. Again, the by -laws can
address the issue of interlocking memberships, but their use is strongly
encouraged.
Staffing - The organization's ability to accomplish the stated goals and
objectives will be extremely limited without a person or persons who can
implement the work program adopted by the organization's Board of Directors.
The individuals serving on the board will, in most cases, have full -time
jobs and other responsibilities which will limit the amount of time they
will be able to devote to the development organizations's work.
There will be times when it will be necessary for the board members to be
very active in the affairs of the organization. For example, during the
group's start -up period, board members will have to devote a lot of time to
get things off and running and headed in the right direction. Also, there
will be some projects and programs in which the active participation of
board members will be critical (e.g., visits by representatives of business
prospects, negotiation on deals, fund - raising). However, the organization
will not be able to implement a substantial economic development work
program without staff.
- 34 -
The costs of establishing a staff position to serve the organization are
likely to comprise the majority of the group's annual budget. The ability
-- to hire a full -time professional staff person will depend on the resources
available to the organization, but the hiring of a full -time economic
development professional is recommended, if sufficient resources can be
raised.
Although other options exist, hiring a full -time staff person is the
preferred alternative for several reasons. It will enable the new organ-
ization to get going and become active and doing things faster. The
proposed new development organization will have a certain amount of "catch-
ing up" to do because other communities in the region already have organiza-
tions and programs in place. Establishing a full -time position will enable
the Stillwater Area to "catch up" faster. With a full -time staff person
there is always someone there to field calls, and with a full -time position
the organization should simply be able to do more than with other staffing
options.
Two other staffing options are establishing a part -time position and
contracting with another organization (e.g., HRA, consulting firm) for
services. These are likely to require a smaller budget than a full -time
position. Given the amount of work involved in getting organized and
operating a program to meet the needs of a community the size of the Still-
water Area, the new organization may not be as effective as it could be
with a part -time staff or with contracted services.
During the past'ten to fifteen years a professional specialty in economic
development has evolved as local organizations have become more active in
seeking new development and in business retention and expansion. If the new
organization proceeds as recommended and creates a full -time staff position,
there are several qualifications that should be given consideration.
Experience in local economic development, with demonstrated results will be
critical. A minimum of two years experience is preferred. Good work
experience is probably more important than formal training, but educational
background should be considered. Degrees in business administration,
economics, planning, marketing, and finance can provide a good background
and some of the essential skills. However, none of these degrees indi-
vidually will provide a well- rounded education for an economic development
professional. A number of institutions and organizations offer professional
training in industrial and economic development, and development finance,
leading to recognized certifications. Specialized training and a certifica-
tion is a "plus," but not an essential qualification.
other qualifications which will be important are:
- good communications skills, oral and written
- good organizational skills, ability to do many things at once
- experience working for a board with diverse representation
- ability to work alone, with little direct supervision, but within
policies and programs set by board
- knowledge of how businesses make location and expansion decisions
- knowledge of business financing and familiarity with government pro-
grams and development tools
- 34 -
Economic Development Implementation Activities
There are several levels of activity in which an economic development
organization can get involved. Some development groups take a relatively
passive role in the economic development process, merely gathering facts and
figures and key data items required by businesses. There is a genuine need
for someone to fill this role in most communities, including the Stillwater
Area. At the other extreme are those organizations which have multiple -ac-
tivity implementation roles which might include operating a business
incubator facility or taking equity positions in start -up businesses.
The following list of economic development implementation activities is
intended to demonstrate the wide variety of roles which organizations can
and do perform. An individual organization might limit itself to one
activity or group of activities, or several types of activities. Generally,
though, a local economic development organization is involved in at least
two types of activities: information /clearinghouse and marketing. The
extent to which an organization becomes involved in other activities
depends on local goals and objectives, financial resources, political
acceptance, and other factors.
on the following list, those activities which the new economic
organization in the Stillwater Area should consider taking on
with a " +". Following the list, the activities recommended fo
organization are explained further.
Information /Clearinghouse
• Statistical data
• Profiles /brochures
• Industrial /Commercial property inventory
• Maps
• Inter - agency coordination
Planning/Research
+ Sponsor prepare economic development strategy
Sponsor /conduct special studies
Marketing
• Distribute promotional materials
• Seek /contact prospects
• Coordinate prospect visits
• Media advertising
Coordinate marketing trips
• Mailings to prospects
Displays at trade shows
Financial Assistance
Coordinate /package loans (e.g., SBA)
Revolving loan funds
Industrial revenue bond packaging
Tax increment finance packaging
Special loan funds (start -ups, retention)
development
are indicated
r the new
- 35 -
Land write -downs
Assistance in getting private financing
Technical A ssistanc e to Busines
Provide /coordinate management /skills
+ Business retention contacts
Lobby for improved business climate
Roundtables on business climate
Business consultant referrals
Market research for local firms
Sponsor exporting /gov't. procurement seminars
Business planning
Labor training programs
Entrepreneurial Development
Distribute small business training manuals
Sponsor entrepreneurial training programs
Feasibility analysis assistance
Ombudsman for new business
Lobby for lower capital costs
Sponsor business incubator
Sponsor venture capital companies
Real Estate
Downtown /industrial district redevelopment
+ Industrial /commercial site selection /planning
Land banking
Industrial /commercial site financing
Industrial park management
Industrial park ownership
Industrial malls
The activities on which the new organization should concentrate its efforts
are principally in two of the functional areas on the above list: Informa-
tion /Clearinghouse and Marketing. However, the new organization should
have an on -going Planning /Research function, and should be involved with
some activities in the functional areas of Technical Assistance to Business
and Real Estate. These activities are described below.
Information /Clearinghouse Activities - These are, perhaps, the most basic
of economic development activities, but they are essential. Businesses and
investors will require detailed factual information about the Stillwater
Area before making a decision to locate or expand in the community. A
basic profile or fact sheet on the Stillwater Area will include key facts
and figures about the community. A basic profile or fact sheet on the
Stillwater Area will include key facts and figures about the community.
The existing profile of Stillwater is a good example of the type of profile
needed, but a new profile must be areawide in scope and must be kept current
(updated at least annually).
To complement the profile, a brochure on the Stillwater Area should also be
developed. The brochure should be "flashier" than the profile, and more
- 36 -
promotional in nature. The brochure's objective is to highlight the
Stillwater Area's key attributes with photographs, graphics, and carefully
worded copy.
The profile and brochure are key items, but more detailed and extensive
information should be gathered and made available to those w o may request
it. Information on the local labor market, utilities, tr portation,
financial resources, labor training, taxes, zoning, and o er items should
be kept in a central location for quick and efficient stribution. The
local employer - employment data base developed for economic analysis in
Phase One should also be kept up to date. That data base will have many
uses by the organization.
Another key activity will be an inventory of commercial and industrial land
and buildings. This inventory should be developed with the cooperation of
local realtors and land owners. This inventory should be linked with or
part of the inventory of industrial land being developed by the Saint Paul
Chamber of Commerce for the East Metro Area.
Inter - agency coordination will also be an important activity, because the
new organization will not be everything to everybody. The new organization
must work closely with other organizations and individuals, especially in
the areas of financial assistance and most real estate activities. The
new organization must be able to make direct referrals and bring people
together to make decisions. The coordination role extends beyond the local
level. It should also involve coordination with the Metro Council, Minne-
sota Department of Energy & Economic Development and others.
Marketing - One of the principal roles of a new economic development
organization in the Stillwater Area will be marketing. It will be necessary
to do some broad -based marketing to inform a large audience, at least within
the Twin Cities Metropolitan Area, of the virtues of the Stillwater Area and
the community's interest in economic development. Marketing efforts of this
type, sometimes called the "shotgun" approach are good for establishing
initial awareness, maintaining a desired level of awareness, and creating
an image of the Stillwater Area among residents and business persons in the
Twin Cities region. However, relying solely on a shotgun approach would
probably be a mistake.
Rather, as explained earlier in the introduction to the target industries
analysis, it has become increasingly common for development organizations to
concentrate their marketing efforts on specific types of activities (e.g.,
product /service line, size of firm, growth industries, etc.) or on limited
geographic areas. After identifying specific firms within the target
industries (lists provided as supplements to this report), there are five
basic levels of recruitment:
1. Primary targets located in the Twin Cities region;
2. Primary targets located elsewhere in Minnesota;
3. Secondary targets located in Minnesota;
- 37 -
4. Primary targets located in neighboring states (Wisconsin,
Illinois, and Iowa); and
5. Secondary targets located in neighboring states.
The names and addresses of the firms on the lists were obtained from current
manufacturing directories for the respective states. This is the best data
base available, but it is not perfect. Problems with mailing addresses are
inevitable, but they should be limited to a relatively small percentage of
the firms listed.
The first form of contact should be a written communication. There should
be a cover letter which explains that the firm contacted is a target
industry for the Stillwater Area. The letter should express the community's
interest in economic development and briefly list the Stillwater Area's
attributes. Enclosed with the letter should be a profile and /or brochure
on the Stillwater Area. The purpose of the written communication is to make
an initial contact, to let the firm know the Stillwater Area is interested
in working with them.
The second form of contact should be over the phone. This should be a
follow -up call timed to come a week to two weeks after the initial written
contact. The purpose of this call is to make sure the firm received the
mailing and that it reached the person to whom it was addressed. The
follow -up phone call also "personalizes" the communication and reinforces
the initial expression of interest in the firm. Although the call should
be cordial and brief, the caller should attempt to find out if the firm has
any plans for expanding or relocating. An invitation should be extended to
visit the Stillwater Area.
Following the phone contact, it will be important to maintain contact,
written or by phone, with the firms every few months to remind them of the
Stillwater Area's interest in them. What must be avoided at all costs is a
perception that the firm is being pestered. A file, which only need be one
sheet of paper, should be kept on the contacts made with .the firm, including
dates, means of contact, person /s contacted, and any relevant comments.
This process is likey to generate a few viable prospects in the short -term,
and a few more in the long -term (if the contacts are maintained), but most
of the firms contacted will never express any interest in the Stillwater
Area. The process can be frustrating because it can take a long time to see
real results, but it usually does lead to results.
An important part of the marketing function will be the establishment of a
"contact" committee, a committee of the new economic development organiza-
tion. The responsibility of meeting with business prospects and others
interested in investing in the community should not rest entirely with a
staff person. Rather, a small group of community and business leaders must
be in place to meet in confidence with prospects to discuss sites, financing
r equirements, and This small group must - be able to respond
quickly. Although it may not be able to make final decisions on its own, it
must be able to bring a deal far enough for the organization as a whole to
act on and /or make direct connections with others who are part of the
economic development "system."
- 38 -
The target industries analysis results can also be used to identify activ-
ities which merit further study on the part of existing firms and local
investors. Marketing to firms outside the Stillwater Area is essential,
but it will be important not to overlook potentials offered by'people and
businesses already located in the Stillwater Area. The majority of new
industrial development at the local level comes from within. That is to
say that a very large percentage (some studies say up to 80 percent or
more) of new investment and new jobs comes from sources already in the
community.
It will be important for the results of the target industries analysis to
be presented to the community's existing manufacturers and those per-
sons /firms who are in a position to invest in new activities. Firms within
those industries identified as targets, or within related industries, should
be interested in exploring expansion or diversification prospects. Repre-
sentatives of these industries should also be helpful in "refining" the
results of target industries analysis because of their knowledge of their
business. For example, they should be able to offer insights into which
niches are most promising within a broader three or four -digit SIC group.
Feasibility studies will be necessary to properly assess the potential of
specific targets. Such studies may be done by existing industries /investors
or the economic development organization may take a lead role if local firms
or individuals are not interested in a target which seems promising.
Technical Assistance to Business - At least initially, the new organiza-
tion should limit its activities in this functional area to a business
contact program. The organization's staff person, along with a limited
number of persons from the organization's board should call on each of the
Stillwater Area's manufacturing firms (and other firms in selected "basic"
activities). The first objective of this effort is to open channels of
communication and inform local industries of the organization's program.
Secondly, information is solicited about the industries so that the organ-
ization becomes better informed about the companies in the Stillwater
Area, and an attempt is made to identify any problems or needs the firms
may have which the organization may be able to assist with. The overall
goal of the business contact program is to keep the existing industries in
the Stillwater Area and, if possible, to help them expand.
Industrial Land - A critical issue for economic development is the Still-
water Area's need for industrial land. This is an issue which should
be of top priority for the new organization. To understand why the problem
is not readily solvable, it is necessary to briefly examine the past
history.
The Stillwater Area developed along the St. Croix River and as a trade and
service center. Manufacturing was present but largely in wood - related
products. As the economy evolved, the demand was more for commercial
- activities- and residential-sites especially as the Twin- Cities - residents
began to discover the attractiveness of the Stillwater Area.
Consequently, much of the city's most recent development has been in
response to the major sources of demand - -- housing and commercial. Since
- 39
the early 1970's, these two activities have dominated the urban growth
pattern of the area. At a time when most midwestern communities were
actively concentrating on gearing up for the extensive growth in manufac-
turing that had been occurring, much of Stillwater Area's attention was
given to providing subdivisions and commercial sites to accommodate its
growth.
For several reasons, this is an overly simplistic synopsis of actual events
but yet it adequately and accurately set the stage for the discussion of the
issue at hand. Simply put, the area did not have a general awareness of
industrial development needs as it planned and implemented its growth.
Now as more members of the community are desirous of pursuing more manufac-
turing and other industrial development, they find the sites to accommodate
these uses hard to find and those sites that are available are relatively
expensive. This puts the area at a decided economic disadvantage in this
arena. The objective, then, is to identify land suitable for industrial
purposes and then to make this property available to the market as quickly
as possible.
Currently, the only industrial park in the Stillwater Area is the one on
the north side of Highway 36 east of the Highway 5 interchange (see map).
It originally emcompassed about 300 acres and the remaining vacant land is
owned by several separate individuals.' It is strictly a private venture.
Development in this "park" ranges from a mini - warehouse to a motel to a
proposed mall to a manufacturing plant. Costs per acre range from about
$25,000 to over $100,000 for the land.
With prices of $2,000 to $20,000 per acre for industrial land in the
neighboring communities' industrial parks (most of which are subsidized by
local governments), it is not too difficult to understand why the Stillwater
industrial park has not realized many manufacturing based locations.
Consequently, the owners, seeking a return on their investments, have
"opened" the industrial park to whomever can pay the fare. Hence, the
industrial park is, in actuality, a commercial park.
The mixed use that has evolved as a direct result of the economic pressures
on the private owners may also be contributing to the disinterest of
manufacturing firms in the industrial park. In an era when most industries
are becoming increasingly selective in the types of uses they want to be
near, the Stillwater arrangement is disadvantageous to most manufacturing
concerns. A recent survey of Wisconsin manufacturing firms that established
new plants in the early 1980's found that land price and zoning are among
the top concerns in selecting new sites. From these actions, then, the
Stillwater Area really can not respond to the needs of most manufacturing
firms. To correct for this deficiency in the area's development base, an
industrial park is being--encouraged.---In this instance, manufacturing -based
activities are being exclusively targeted. A "no frills" industrial park is
being recommended that would ideally offer land at more competitive rates
($15- 25,000 /acre) with restrictive covenants precluding mixed -use develop-
ments.
Several sites have been considered, but the one that offers the greatest
appeal would be the site on the south side of Highway 11 36" bounded by
Highway 11 5" on the west. In essence, the proposed site is "just across the
road" from the existing park.
There are numerous advantages to this site, not the least of which being
that the two parks can be marketed, advertised and offered together. It
would give all prospective industries the view of a well - orchestrated
development scheme with a high -end commercial /office park to the north and
an efficient, cost - competitive industrial park to the south. The synergism
should help both sites be more successful.
There is a major problem with the proposed new site. The large site (it
may be as large as 640 acres) is not within the Metropolitan Urban Service
Area which means it cannot be extended sanitary sewer service. The most
realistic timetable suggests the MUSA would be amended /extended to include
the proposed park by 1992. While this appears an extensive time lag, the
five years can be used to assemble the acreage, plan the park, design its
improvements, and formulate the marketing strategy. Well- invested, this
time delay can mean the park will be off and running in 1992 with its
success imminent. The process could be accelerated by appealing to the
Metro Council for a USA boundary amendment and, probably, expanding the
municipal treatment facility.
Nonetheless, the time delay associated with the MUSA designation means the
optimum solution to the lack of manufacturing investment is a long -term
one. Obviously, the area desires to be attractive to these types of
activities well before 1992. Short -term actions are needed to permit the
area to effectively capture new manufacturing investment, income, and jobs.
One item to concentrate on is to find and acquire smaller sites that are
suitable for light manufacturing purposes. About 40 acres may be sufficient
to accomodate the level of interest until the MUSA extension is obtained.
Not only would this serve as a stop -gap until the optimum solution can be
activated, but would also serve as an indicator of market demand conditions
for low -cost industrial land in the area. This will provide valuable
insight into the sizing and phasing of the larger industrial park. A
preliminary investigation of potential sites suggests that it may be
difficult to find a site of suitable size. Smaller parcels may exist in the
Stillwater Area, but there are advantages to establishing a large develop-
ment.
Another possible short -term solution is to re- assess the zoning ordinance
with respect to the existing industrial park. The current zoning is too
permissive and this may discourage the type of investment the area is
pursuing. Land within the "park" that is currently developed should be
rezoned into more specific classifications reflective of actual uses. Then
those areas which are largely vacant should be-reviewed-
The ordinance governing the use of these vacant areas should be considerably
more restrictive eliminating most non - industrial uses permitting only
manufacturing, office, research and support service uses. This will
- 41 -
effectively establish an "industrial preserve" which will do much to remove
the negative influence of the competing land use pattern on the location
decision. Hence, the attractiveness and value of the property should
increase.
While such specific rezoning will not address the exclusionary influence of
the relatively high price of the property, it should eliminate the issue of
"no control over who's going to be my neighbor." Consequently, the current
industrial park would become more attractive to the high image, high "tech"
firms of the Twin Cities; those firms for whom land acquisitiion costs are
not likely to be a signifcant factor in choosing a new location.
Therefore, there appears to exist an economic opportunity to justify the.
process of rezoning the existing industrial park. Doing so may not only
improve the Stillwater Area's ability to attract manufacturing firms.•but may
also aid in the owners' decision to "move their property.
Once the issues of additional acreage and rezoning have been agreed upon,
the Stillwater Area needs to consider more effective methods.of marketing
these facilities. It is quite important that those responsible to market
the sites are also those who have the authority to negotiate on the terms
and conditions of sale, or at least that there is a very close linkage.
This will improve the effectiveness of the overall effort. Elsewhere in
this report the issue of what "structure" is appropriate is discussed. It
is necessary to point out that whatever organizational structure is adopted
that this organization be prepared ultimately to acquire, own, develop,
market and sell land and to administer the total industrial development
program. Anything less than this will reduce the effectiveness of the
effort.
Budget and Funding - The budget requirements for the new economic develop-
ment organization largely depend on the staffing alternative selected. If
the organization proceeds as recommended and hires a full -time economic
development professional, an annual administrative /operational'budget of
$50,000 - $60,000 will be required. This is a large amount of money for a
community the size of the Stillwater Area. However, many other communities
of similar size have established programs with budgets in the same range.
The principal line items in the budget will relate to the staff position
and to marketing efforts (particularly profile /brochure development,
advertising, and other expenses related to making contacts with prospects).
Based on evaluations of budgets of other local economic development organi-
zations, these line items may comprise,75 to 80 percent of the annual
budget. Administrative costs may be kept to a minimum by sharing office
space, clerical support, and other expenses with the Stillwater Area
Chamber of Commerce. This would help to maintain the desired affiliation
with the Chamber. Similar shared administrative cost arrangements are
common and can be beneficial organizations: - - -- - --
Funding the organization's operational budget will require commitments from
both the private sector and local governments in the Stillwater Area. A
50/50 split in funding is common, although proportional contributions vary
- 42 -
J
Map 2
Lands Zoned Industrial Park
— — jP--C Industrial Park - Commercial
-------- • -• - -- JP4 Adustrl l _Pork Industrial
��tr►•� Industrial Park - Commercial
J
I
o .00 soo �
Taken from City of Stillwitir Official Zoning Map
widely. It will be important to get multi -year commitments for funding, if
possible. This is critical for at least two reasons. First, the newly
formed organization will have many other concerns to address as it gets
started. To worry about funding too much would require the organization
to spend less time and effort on its principal objective: economic develop-
ment. Second, while there will be visible results and benefits from the
new organization's efforts in the short -term, major benefits are likely
only in the long -term. The new organization should not be judged too
critically if it is unable to accomplish major feats in a short period of
time.
It may be possible to obtain financial support from other agencies and
organizations. For example, Private Industry Councils are providing
limited funding for local economic development, especially for activities
which will lead to the creation of jobs for the unemployed.
Summary - This part of the Stillwater Area Ecomomic Development Strategy
started with a listing of goals and objectives. These goals and objectives
provide the framework for the overall strategy. The goals deal with
business retention, economic diversification, economic expansion, and
guiding economic development to those parts of the Stillwater Area that want
it.
The fifth goal deals with the need to establish an effective economic
development "system" in the Stillwater Area. An objective relating to this
goal is to create a broad -based economic development organization with
planning and implemenation responsibilities in the Stillwater Area.
Several types of organizations were considered. A recommendation was made
that a private non - profit corporation be established as the lead agency for
economic development in the Stillwater Area.
The Board of Directors for the new organization, as proposed, would consist
of twenty -two members from throughout the community. Ten members would
come from local government (including the county and school district), nine
members would come from the private sector, and there would be three
"at- large" members. The new organization should have a full -time economic
development professional to direct its work program.
The principal implementation activities of the new organization are in the
functional areas of Information /Clearinghouse and Marketing. The marketing
activities should concentrate on using the results of the target industries
analysis. The issue of industrial land in the Stillwater Area must also be
a priority for the new organization. A two prong strategy for industrial
land is recommended. The existing "industrial park" should be marketed as
a high -end commercial /office park, and a new "no- frills" industrial park
should be established south of Highway 36 and east of Highway 5.