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Economic Development Committee Presentation

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Title: Economic Development Committee Presentation


1
Economic Development Committee Presentation
Presentations by Dr. Roderic Hewlett Targeted
Industry Study Terry Aldrich Quality of
Life Jerry Stai Bond Financing
2
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.

3
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.

4
The Trends (Population)
Based on projections from North Dakota State Data
Center at NDSU
5
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
6
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
7
United States County Size Distribution, 1998
10,000 or more (Green)
0 to 5,000 (Red)
5000 to 10,000 (Light Green)
8
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)
9
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.

10
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.

11
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.

12
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.

13
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

14
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.

15
Quality of Life
  • a multi-faceted component of economic growth and
    development

16
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!

17
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

18
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.

19
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

20
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

21
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

22
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

23
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.

24
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

25
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

26
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.

27
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

28
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

29
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

30
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

31
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

32
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

33
Bond Financing as a Vehicle for Economic
Development
34
Thank You
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