Economic Development Committee Presentation

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Economic Development Committee Presentation
Presentations by Dr. Roderic Hewlett Targeted
Industry Study Terry Aldrich Quality of
Life Jerry Stai Bond Financing
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Issues

• Highlighted by Out-migration, Population Decline,
  and Regional Economic Distress by US DOC
  (12/98).
• Out-migration/population loss leads to
• Depleted human capital (brain drain).
• Increasing fiscal pressure on local governments.
• Limited development potential.
• Restricted access to markets, limited access to
  best-practices technologies, loss of competitive
  resources to competing high-growth regions.
• Loss of human capital reinforces long-term
  out-migration trends.

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Issues Continued

• Boom and bust trends based on short-term
  reactions to OPL and dependence on extractive
  resources or commodity resources.
• Out-migrants tend to be technical, managerial,
  and executively prepared (those with skills that
  require out-migration to garner high returns on
  human capital).
• Dependence on aged economic models.

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The Trends (Population)
Based on projections from North Dakota State Data
Center at NDSU
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No Change 0-13.1
Less than 0
3x U.S. Rate 39.6
2x U.S. Rate 26.4-39.5
U.S. Rate 13.2-26.3
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Non-metro Farming-Dependent Counties, 1989
Farming Counties
Other Non-Metro Counties
Metro Counties
Counties with 20 percent or more labor and
proprietors income from farming, 1987-89
annualized average
Source Bureau of Economic Analysis
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United States County Size Distribution, 1998
10,000 or more (Green)
0 to 5,000 (Red)
5000 to 10,000 (Light Green)
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Gain 5 or more (Green)
Net Domestic Migration Rates Per 100 Persons in
the United States by County 1990 to 1999
Gain 0-4.9 (Aqua)
Loss 0-4.9 (L. Purple)
Loss greater than 5 (D. Purple)
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Why Target Industries?

• Identifies industrial opportunities that can be
  achieved as well as leveraged.
• Focuses scarce resources.
• Sends a strong signal to companies and
  organizations within the identified industries
  and site selection organizations of regional
  support.
• Not limiting.
• This portion, and only this portion, of the
  strategic plan is funded by Minot Area
  Development Corporation (MADC). However, the
  research was conducted by MSU College of Business
  without input or restrictions from MADC. All
  funds were used for economic development
  activities and no individuals received payment or
  expense reimbursements.

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Methods

• Many potential methods exist, however, we began
  with an applied bottoms-up or deductive
  approach and validated the results through a
  top-down or inductive approach.
• Analyzed industries currently in North Dakota
  that have above mean wages using data from the
  most recent (2002) County Business Patterns US
  Census Bureau, US Dept. of Commerce.
• Compared data against representative border and
  regional states.
• Due to limitations in current North Dakota law
  (restrictive corporate farming) analyzed the
  non-farm sector (excludes commodity-based
  farming).
• Researched what is happening in other areas, both
  domestically and internationally, within these
  industries that can be transplanted in this
  region method, industries, and knock-on
  opportunities.

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Methods

• Target industries that meet the base criteria
• Achievability.
• Leveragability.
• Above average wage structure resident in North
  Dakota- increase mean and median wages.
• Enhances quality-of-life or as a minimum does not
  damage quality-of-life.
• Future oriented life expectancy of industry is
  growth oriented and expected to exceed a twenty
  five-year horizon.
• Taps current human capital and provides a high
  potential to attract human capital to the region
  encourage net in-migration.
• Creates the potential for industrial clustering
  in the region.

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Clusters

• Networks of interconnected businesses that
  collaborate, typically aligned within an industry
  and grow collaboratively rather than
  competitively.
• Large communities
• Biotechnology and telecommunications in San
  Diego.
• Polymers in Akron.
• Computer hardware and software in Austin.
• Automobiles in Detroit.
• Aerospace in Wichita.
• Small communities
• Software in Fargo.
• Wireless technology in Mankato, MN.
• Automated technologies in Alexandria, MN.
• Recreational transportation equipment
  manufacturing in NW Minnesota.
• Agricultural cluster in Connecticut.

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North Dakota Industries That Pay Higher Than
Median (2001)

• Mining 48, 531
• Utilities 56,645
• Construction 31,903
• Manufacturing 31,618
• Wholesale 33,237
• Transportation Warehousing 29,769
• Information 32,227

• Finance and Insurance 34,482
• Professional, Scientific, and Technical Services
  33,112
• Mgmt of Enterprises 40,177
• Government 27,283

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Change Our Business Model

• North Dakota clusters
• Customer resource management data mgmt,
  knowledge mgmt, technical services, research
  beyond call centers.
• Energy.
• Natural resources and mining.
• Value-added agriculture, specialty crops,
  bio-technology.
• Transportation and distribution.
• International trade portal and rural development
  services.
• Federal services and goods procurement.
• Specialty manufacturing, i.e., health equipment,
  etc.
• Recreation and tourism.

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Quality of Life

• a multi-faceted component of economic growth and
  development

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What defines quality of life?

• Quality of life is truly different for each
  individual
• Six values factor into each individuals
  definition of quality of life
• Prosperity
• Freedom
• Equality
• Diversity
• Ownership
• FUN!

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What difference does it make?

• Research illustrates that quality of life issues
  help
• Recruit and retain human capital.
• Quality education provides a skilled future work
  force
• The safe environment of the region is an
  important asset as businesses consider
  possibilities for location / relocation.
• Available, affordable healthcare is essential to
  the regions workforce and to their families

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What difference does it make?

• Arts, cultural and recreational events and
  attractions enhance the quality of life through
  entertainment and add dollars to the economy.
• Tourism and agri-tourism bring people and to
  our region.
• Preservation of our natural resources helps to
  retain the beauty of our northern prairie for
  residents and encourages tourism.

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How can we effect change to enhance the quality
of life?

• Identify Key areas
• Education
• Community Character and Growth Management
• Community Culture and Character
• Safety
• Healthcare / Wellness
• Rural Areas
• Recognize successes
• Carefully craft goals, objectives and strategies

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Education

• A greater percentage of ND high school students
  graduate than their peers in 48 states.
• Goals and strategies for this key area have been
  developed beginning with Early Childhood (0-5)
  and continuing through adult education.
• Participant included
• Bruce Brooks, past PTA President, Lorna
• Van de Streek , school administrator and the
  finding of the NVCI
• Regional Education Task force meetings

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Community Character and Growth Management

• Minot is ranked as one of the 10 best small
  Cities
• North Dakota workers spend 97 minutes less time
• commuting than do their counter parts across the
• country
• Strategies for this key area cover
  transportation, downtown
• revitalization, planning, preservation of
  resources and
• more
• Participants included
• Donna Bye, City Planner, Minot, Darrell
• Michalenko, Transportation

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Community Culture and Character

• The economic impact of the nonprofit arts and
• cultural industry is 8.7 million dollars.
• Goals and strategies for this key area include
  arts,
• culture, recreation, events, attractions, and
  tourism
• Participants include
• Sarah Otte-Coleman, State Tourism Director
• Leo Brunner, Director of Parks, Minot Park Dist.,
  Terri Aldrich
• Executive Director Minot Area Council of the Arts

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Safety

• North Dakota has the lowest violent
• crime rate in the nation.
• Goals and strategies for this key area include
• topics from neighborhood awareness to drug
• prevention.
• Participants include
• Jon Squires, Minot Fire Dept.,
• Sgt. Jason Olson, Minot Police Dept.

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Healthcare / Wellness

• North Dakota has fewer deaths from infectious
• diseases than any other state
• North Dakota is ranked 1 in healthcare by
• HealthGrades-Hospital Quality in America
• Goals and strategies for this key area include
• healthcare screenings, community education,
• and more.
• Participants include
• Elizabeth Eckert, PhD, Wellness Images
• Penny Hamilton, First Dist. Health Unit
• Nancy Mosbaek, PhD RN

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Rural Areas

• The beauty of our northern prairie has helped
• tourism to grow 568 since 1990.
• Goals and strategies for this key area include
• citizen participation, development of
  attractions,
• marketing, and preservation of the prairie
• environment.
• Participants include Jude Iverson, Director,
  Garrison Economic
• Development, Gene Goven, farmer

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Quality of LifeQuality of Place

• The goals, strategies and objectives we have
  crafted reflect our desire to effect change that
  will enhance the quality of life of our region.
  We will begin to create an image and reality with
  which locals, visitors and potential residents
  can be proud to associate.

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Bond Financing as a Vehicle for Economic
Development

• Bonds provide long-term capital for financing
  buildings, fixtures, equipment, renovations and
  improvements necessary for economic growth
• A governmental entity acts as a conduit providing
  no specific backing (this would not affect the
  borrowing capacity of the governmental entity)
  however, they can pledge support

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Economic Development Loans

• Funds from the bonds finance loans to established
  businesses
• Due diligence process to assess the viability of
  the business
• Secured by projects revenues, first mortgage on
  real property and a first security interest in
  personal property

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Economic Development Loans

• Further secured by an irrevocable letter of
  credit from a bank furnished by the business
• Financial covenants include debt/net worth ratio,
  debt coverage ratio, and current ratio
• Loan repayment of principal and interest

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Bond Terms

• Fixed-rate bond issues are often sold with a
  combination of serial bonds, which come due in
  consecutive years
• Or, term bonds are usually retired over the
  course of several years via a process known as
  mandatory sinking fund redemption

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Credit Enhancement of Bonds

• Credit enhancement refers to a financial
  institutions ability to make principal and
  interest payments on a scheduled basis
• Reserve appropriations-a percentage of the bond
  proceeds usually equal to one years principal
  and interest requirements
• Letter of credit from a bank
• Insurance policy which allows the bonds to carry
  the credit rating of the insurance company in
  return for a premium paid up front

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Bond Repayment

• Loan repayment of principal and interest from the
  operations of the business
• Reserve funds
• Letter of credit
• Insurance policy
• Political subdivision at their option and subject
  to approval of elected officials

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Bond Financing as a Vehicle for Economic
Development
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Thank You