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Developing Dakota: State Takes Roll in Promoting Economic Growth
Post Date: Apr 25 2016

By Minot Daily News
Distracted briefly by an oil boom, North Dakota's economic development focus is back on track.

The emphasis on diversification and value-added industry that has been primary since the oil bust and agricultural downturn of the 1980s hasn't lost relevance, according to Bank of North Dakota President Eric Hardmeyer.

"But when you have a boom like we had, that tends to take a lot of energy and oxygen," he said. With the oil industry slowdown, the Bank of North Dakota is regrouping and examining how to update its economic development programs to accomplish its diversification mission.

"North Dakota had been working its way down that path pretty well. Because of that, we are in a better place than we were in the '80s and '90s certainly," Hardmeyer said. "We have a much more diversified economy today."

He sees more value-added projects developing on both the agriculture and energy side in the future. In terms of state support programs, restructuring may have to occur to deal with the new paradigm of today's economy, he said.

Hardmeyer said bank officials are re-examining existing programs and visiting with community and economic development leaders around the state "to really understand the issues that they are dealing with and to proactively deal with them by coming back with maybe a slate of programs designed to take on the new economy."

Fact Box

Future metropolitan area?

Minot's growth trend has the city on course to achieve metropolitan status within the next four years, according to North Dakota's census director.

Kevin Iverson, who manages census data in the North Dakota Commerce Department, said Minot could achieve the designation of a metropolitan statistical area sometime between 2017 and 2020. Minot is designated as part of a micropolitan area that includes Ward, Renville and McHenry counties. For a micropolitan area to become a metropolitan area, there must be a core city with a population of 50,000.

The last estimate from the U.S. Census Bureau showed Minot with a population of 47,997 as of July 2014. Estimates also show Minot's micropolitan area grew by 1,855 residents from July 2014 to July 2015 to 79,814. The 2015 population estimate for the city of Minot hasn't yet been released.

One of the advantages of a metropolitan designation is the amount of statistical data that becomes available for planning and other uses. Fargo, Bismarck and Grand Forks are metropolitan areas.

Iverson also noted that North Dakota's economy of the past several years has drawn younger people to the state and encouraged more youth to stay, causing the average age in the state to drop by more than two years to just under 35 years in 2014. That has meant more young families, a demand for child care and crowded schools, especially at the younger grades.

Even with the slowdown in oil activity and tougher times in agriculture, estimates are that North Dakota gained about 17,000 people through natural increase and in-migration in 2015.

The Commerce Department reported the slowdown in oil activity and drop in agricultural commodity prices contributed to a $2 billion hit to North Dakota's Gross Domestic Product between 2014 and 2015. Officials say that's a small decline in what has been a $55 billion economy. In comparison, North Dakota's GDP in 2005 was about $25 billion.

"Now is one of those reflection points, where you really take a look at what you have and say, 'Are we meeting all the needs? What does it look like now? What should we have in place?'" Hardmeyer said.

"We are out there right now really trying to get the lay of the land," he added. "We have been directed by the Industrial Commission to go out there and begin that work, so we have. We have started that work with the idea we are out in front of this. If we need new programs, new money, we at least have an idea of how to go forward with a legislative agenda."

A program that has been a mainstay since the 1990s has been PACE, which is geared value-added and manufacturing jobs. The state followed up with Flex PACE to provide assistance beyond just manufacturers and job creation and respond more to what communities believe are essential services. The state also has beginning entrepreneur and venture capital programs that have been successful.

Each of the state's various business assistance programs have had an impact, and that's especially true of those that have been around a while, such as the North Dakota Development Fund, said Paul Lucy, director of economic development in the North Dakota Commerce Department.

"It has been kind of a stalwart program," he said of the Development Fund. "The Development Fund is a gap financing program.

As companies or projects are looking for financing, many times there's a variety of different reasons you may not be able to get all the financing with a typical commercial lender. The Development Fund can come into those projects and fill a gap."

Tax incentives and programs that target investors can't be overlooked, he added.

"Those programs that motivate the private sector to invest in those entrepreneur companies are programs that we might not see immediate results in terms of significant impact, but I truly believe that long-term for the state of North Dakota, those are some of the critical programs that we really need to have in the state," Lucy said.

Tax credits are another way the state supports businesses, including breaks on sales tax for equipment purchases and for increasing manufacturing automation to stay competitive. Expanding opportunities and creating demand for more skilled labor through automation results in higher wages, Lucy said.

North Dakota already has risen from 38th among states in per capita income to ninth in 2015, down somewhat from sixth place in 2014, according to the Commerce Department. The state's 5.1 percent income growth from 2007-2015 led all states by far.

Job training programs, another form of state assistance, have been used extensively by businesses to find employees for those more skilled, better-paying jobs.

"Any business that comes into the state, what's the biggest question they ask? Can we get the workforce? We have more people exiting the workforce than we have coming into it in the state," said Kevin Iverson, state census director.

North Dakota has a large number of baby boomers and a correspondingly small percentage of youth in their teens to replace boomers when they retire. During the time those teens were born, North Dakota was experiencing an out-migration of the young people who were starting families. That will require an in-migration of workers, beginning in about 2020 to 2022 to cover that gap, Iverson said.

Lucy said North Dakota's core industries, particularly in energy and agriculture, are so important that the state will be relying on them for decades, if not centuries. At the same time, diversification helps survive down times, and North Dakota has seen new ideas and companies coming forward that would not have been dreamed about 25 or 35 years ago, he said.

It is in tough times that the state sees more innovation and value-added projects, he said.

"If North Dakota wants to continue to grow, have a strong economy, the key to that success will all hinge on our ability to continue to diversify," he said. "There are a number of new things happening across the state. It's really an exciting time for North Dakota."

Hardmeyer agrees these post-boom years can be exciting.

"This has been painful in a lot of ways, but I think we are really set up for a really bright future," he said. "With the infrastructure in place, the fact that we know how to get the oil and all the gathering systems, I think we are in a really good place now to move forward with new initiatives."

Developing Dakota: State Takes Roll in Promoting Economic Growth - Minot Daily News
 
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