Des Moines Register
06-10-07
Businesses help spark rural revitalization
IOWA’S RURAL ECONOMY: INCREASED INVESTMENT BRINGS OPTIMISM
Now, finding ways to attract and keep young workers presents challenge for
small towns
By DONNELLE ELLER
REGISTER BUSINESS WRITER
Elkader, Ia. — This northeast Iowa town of fewer than 1,500 residents is the right
place for Chris Kavars and his family — cars sit unlocked, neighbors volunteer
their time, and Kavars’ children play about every school sport available.
It’s also the right place for Kavars’ high-tech start-up — good highways, highspeed Internet access and workers with strong technical skills will help offset
disadvantages the company’s rural location might create.
“We’re committed to this area,” said Kavars, who’s ramping up production of
sophisticated sensing equipment with partners Les Davis and Ron Green. “All of
us want to help the town grow.”
Many Iowans have renewed optimism about the state’s rural economy —
sparked largely by about $7.5 billion in planned investment in ethanol and
biodiesel plants.
Renewable fuels projects receiving state incentives since 2003 are expected to
generate at least 2,679 jobs that pay about $43,000 annually. Industry studies
put jobs created and spun off from biofuels at 53,000.
Despite the excitement, however, some experts fear renewable fuels
development — large in capital investment and relatively small in job creation —
will not overcome the trends working against the state’s rural economy. “It’s not
enough to offset even the last five years of deterioration,” said David Swenson,
an economic scientist at Iowa State University. He calculates biofuels’ direct
and spin-off jobs to reach nearly 9,000.
One of the biggest challenges rural Iowa faces is people — retaining and
attracting workers, especially young ones.
Rural Iowa lost about 67,000 residents from 1980 to 2000, the most recent
census data shows, while urban areas have added nearly 80,000.
Workers have followed jobs. For example, nearly two-thirds of the 38,500 new
jobs created in Iowa have been in the Des Moines metro area since 2000, Iowa
Workforce Development data shows. Complicating the migration of workers is
the retirement of baby boomers.
Iowa’s manufacturers anticipate a need of up to 90,000 workers in the next five
years to replace retiring boomers. Statewide, employers anticipate a work force
shortage of about 150,000 by 2012.
The loss of factory workers is especially troublesome for rural areas that depend
heavily on the industry.
Manufacturing employs about 129,000 workers in rural Iowa vs. 102,000 in cities,
according to Iowa State University’s Center for Industrial Research and
Service. About 27percent of all jobs in rural Iowa are in manufacturing.
A look around many rural factories reveals workers in their 40s and 50s, said
Peter Hong, chairman of the Iowa Council on Advanced Manufacturing.
“There are jobs going unfilled at this point, positions that require some highly
educated and skilled workers,” said Hong, chief executive of Positech, a maker of
high-tech handling equipment in Laurens.
Building community
Elkader is a good example of rural Iowa’s possibilities, according to Dave Lyons,
chief business development officer for the Iowa Farm Bureau Federation.
It’s attracted entrepreneurs like Kavars and Davis and high-end lighting
manufacturer Adam Pollock, who moved his business to Iowa from California six
years ago. Homegrown manufacturing success E-Ject Systems is expanding,
and owner John Moyna also added to the area’s recreational opportunities with a
new RV park.
Both Kavars and Pollock have enrolled in the Farm Bureau’s new three-year rural
development program, called Renew Rural Iowa. The farm advocacy group, with
150,000 members, will offer six seminars this year and intensive mentoring to
growing rural businesses.
Pollock is working with Farm Bureau to develop a new five-year plan for his
business. And Kavars, Davis and Wisconsin-based partner Green plan to expand
production of their electronic sensing company, called Reference, over the next
two years.
In all, Reference will have five products, called Sensr, that can be used in several
markets. For example, Sensr can help a manufacturer calculate whether a radio
will withstand rough use on the battlefield — or determine whether sensitive
laboratory equipment was dropped during transportation. “Our question is: How
fast do we want to grow?” said Kavars, who must weigh with his partners
whether to seek investors or grow from operating receipts.
Farm Bureau has sunk $5 million into a capital investment fund that now has
nearly $13 million to help growing businesses in towns of less than 10,000. Farm
Bureau is hoping for the same kind of spark generated from its $5 million
investment seven years ago in biofuels.
The rural revitalization goal, said Lyons, is to “add the zero — take a company
with $100,000 in sales to $1 million or $1 million to $10 million.”
Mark Edelman, director of the Iowa Community Vitality Center, said
entrepreneurship and local leadership are key to Iowa’s rural success.
“Most communities point to a homegrown company as one of its biggest
employers,” Edelman said.
But few rural communities focus development efforts on business start-ups, he
said. They take more time, technical assistance and often are riskier
investments. “We ask leaders: What are you doing to support the entrepreneurs
that are likely to be your major employer in a couple decades?” said Edelman,
who sees more revolving loan and capital investment funds and accelerators pop
up across the state to support new companies.
Concern about job opportunities prompted Iowa Farm Bureau’s effort, Lyons
said.
“Ninety percent of Iowa farmers manage their risks with off-farm income,” Lyons
said. “If there aren’t good off-farm jobs, it takes away a valuable tool.”
Take biofuel projects off the table, Lyons said, and Iowa is dismally low in
capturing capital investment, ranking near the bottom nationally.
State records support Lyons’ view. Renewable fuels projects account for about
71 percent of the $10.6billion in capital investment from projects supported with
state incentives, an Iowa Department of Economic Development analysis shows.
And while investment proposed for rural areas is nearly double the investment
planned in cities — $6.8billion vs. $3.8billion — cities are expected to see 18,944
new positions — about 4,600 more jobs than in rural areas.
Nothing to lose
In 2001, Pollock moved his lighting business, Fire Farm, from the San Francisco
area to Elkader, believing he would sell off the inventory and try something new.
Instead, he decided to give the business another shot, impressed with the
workers who were helping him as he downsized. “There weren’t a lot of jobs” as
local, state and national economies reeled from the terrorist attacks. “I had
nothing to lose,” said Pollock, who closed the showroom and began hitting trade
shows for the hospitality market. He has built a client list of casinos, hotels,
resorts and restaurants around the world that want high-end, large-scale
customized lighting and reliable delivery and installation.
“It’s a hard place for China to enter,” Pollock said. The company’s niche market is
supported through an online and catalog business — lighting can cost as little as
$100 for its unique “stock items” and $5,000 to $25,000 for custom-made
designs.
In 2005, Pollock also started running a fulfillment operation for his cousin, Jonah
Staw, a partner in a fast-growing company called LittleMissMatched that sells
mismatched clothing, shoes and other items.
Access to high-speed Internet makes rural manufacturing and the fulfillment
operation possible, said Pollock, who employs a total of 20 workers.
“Not to devalue cities, but it gives manufacturers choices,” he said.
Hong, who leads the Laurens manufacturer, said online communication helps the
company overcome travel challenges. “It’s no longer a business advantage, it’s a
must-have,” he said.
Attracting workers
Nestled in scenic bluffs along the Turkey River, Elkader is pushing against the
demographic trends that are emptying many small Iowa towns.
“The inability to be attractive to or retain young adults is an indication of past
performance ... and handicaps future economic growth,” said Swenson, the ISU
economic scientist. “Rural areas don’t have that core work force that would turn
around and be attractive to new firms.”
Swenson said he expects Iowa’s population to continue concentrating into
“regional centers” — typically hubs with retail trade and medical and professional
services of 10,000 or more.
He points to Carroll County, which saw more than 700 new jobs added primarily
in the county seat of Carroll from 2000 to 2004. Overall, though, the county lost
nearly 400 residents. “The jobs are supporting a three-, four-county area,”
Swenson said.
Hong said one of the challenges facing communities as baby boomers retire is
exposing young workers inside and outside Iowa to rural career opportunities.
That’s one reason the state manufacturing council is working closely with middle
and high schools and community colleges to prepare students for the high-tech
jobs available in rural Iowa.
A state initiative to provide 150 internships next year with small businesses will
also help expose students to small-town life, leaders say.
Hong, also the mayor of Laurens, said the vitality of rural Iowa is important for
cities.
Rural manufacturers, for example, often are significant suppliers to large
employers, such as Deere & Co. and Rockwell Collins, and if rural companies
move to cities, increased competition for labor, land and other resources would
drive costs higher for all businesses.
“It’s not a healthy model,” Hong said. “If my costs increase 25 percent, then how
do I compete in a global market?”
Elkader has managed to attract new residents from across the country, such as
Frederique Boudouani and Brian Bruening, business and life partners from
Boston who’ve taken over a local landmark restaurant. And Adam Niewoehner, a
mechanical engineer, returned to his hometown after college to work for
Reference.
“I wanted to stay in Elkader, but if not Elkader, northeast Iowa, and if not
northeast Iowa, then in Iowa,” said Niewoehner, an Iowa State graduate.
Niewoehner loves biking and running in the area’s hilly terrain and being close to
his family — parents, sister, grandparents and “about 25 cousins. ... I do anything
wrong, it gets home before I do,” he joked.
Bruening, originally from eastern Iowa, said he and Boudouani grew tired of the
cost and work required to live in a large city.
They talked a long time and visited Elkader several times before deciding to buy
the former Keystone restaurant, now called Schera’s. “It’s a small town and a big
gamble, but people are ready for something different and new,” Bruening said.
The men are expanding the restaurant’s Algerian offerings, in honor of
Boudouani’s French-Algerian roots.
Ed Olson, the town’s retiring economic development leader, said the city has built
on its culture and history, working hard to restore its 1903 opera house and save
its movie theater. It’s a Main Street community, and the smallest city to receive a
state cultural district designation.
“I see an excitement for rebuilding rural Iowa and it pleases me,” Olson said.
“These small towns are precious to Iowa. They give the state its personality, its
character.”
Reporter Donnelle Eller can be reached at (515) 284-8457 or deller@dmreg.com