Just when you feel like you've got things figured out, everything changes.  

We believe strongly that the rules of economic development have changed dramatically over the past five years.  In the past, it was about creating jobs.  Generating tax base.  Business incentives.  Cheap labor.  Cheap land.  Access to natural resources.  Actually, pretty simple stuff. Today, economic development is far more complex.

What Has Changed?
Two trends that have shaken the foundation of the traditional economic development world: 1) changes in the workforce and 2) the technology revolution.

Demographic Changes.  Despite recent increases in the number of unemployed, demographics clearly show that our region will have a substantial labor shortage in the next decade.  Bottom line, there just aren't enough people.  Minnesota created more jobs in the recent past than we did Minnesotans (births)!  We can keep all our kids home, and put all our unemployed to work, and we still will not have solved the labor shortage issue.  Listening to our companies also gives you a clear sense of the change.  Nearly 70 percent of northwest Minnesota companies plan to grow sales in the next five years, and plan to do it with the same or fewer employees. 

Technology.  Technological advances over the past decade have changed everything -- including economic development.  What has changed?  Two key things:

• First, technology has changed businesses' locational decisions.  In the past, companies were focused on four-lane highways, access to natural resources, and in a large market area.  In many cases, companies simply couldn't locate in rural areas.  Now, technology has opened doors for rural communities.  Location decisions are now being focused on workforce, technology, and quality of life.  This change is a tremendous opportunity for us.
• Second, technology has changed who our competition is.  No longer are we competing with our neighbors (except during high school football games).  Now our competitors are communities world-wide, and those who were our competition may now need to be our partner.

The New Model for Economic Development

At the HRDC, we have developed a new model for economic development that guides our efforts throughout the region.  The following pyramid gives you a sense of that model. 

On the top of the pyramid we have very traditional economic development activities….incentives, infrastructure, workforce training, etc.  It's important to note that we are not suggesting traditional economic development activities aren't important.  Quite the contrary.  A community needs to become great at providing traditional economic development services.  But traditional economic development activities are not enough to build a successful region.

The HRDC has been focusing its economic development efforts on what we are calling "positioning activities" which are showing in the bottom of the pyramid.  We need to become the best at:

• Talent.  For most businesses, it's about the resources not natural resources.  We have to figure out, in this Region, how to raise the education and skill level of our workforce.  In Tupelo, Mississippi, the poster child for successful community economic development, they started by declaring "education = jobs."
• Technology.  Technology has created huge opportunities for rural areas -- that is if they have access to it.  Communities without access to advanced telecommunication services have a very long row to hoe.
• Quality of Place.  People can chose to live virtually anywhere they want.  Why here?  Why the Headwaters Region?
• Innovation.  Creating a culture that supports and nurtures innovation and entrepreneurship is critical.

Be the best at these -- Knowledge and Skills, Technology, Quality of Place, and Innovation -- and you will set yourself apart.

The final element to effective community economic development is what we are calling "Leadership Alignment”. From our experience, finding communities with strong leadership alignment is very rare.  It's hard work, but it is the key to sustained community success.

What is leadership alignment?  It's ensuring that your community's economic development efforts are based on a foundation of clear community vision and strong, committed leadership.

• Community Vision.  Too many communities have no idea who they want to be when they grow up.  They have what we like to call a "fuzzy identity."  Ask ten people what their community aspires to be, and you will likely get ten different answers.  Successful communities in the future will need a laser-like focus on who they want to be, and how they will get there.
• Leadership.  We don't mean just any leaders, we need "stewards."  Stewards are:

“Special leaders committed to the long term well being of their communities. They cross boundaries, take an integrated approach, and build coalitions for action.  They have 360 degree vision, recognizing the interdependencies between the economy, the environment and social equity.  Stewards operate at the center of tough issues, not on the edges.  They are risk takers.  They are passionate and energetic.  They are people of vision."

The Challenge . . . .

Being great at traditional economic development activities will get you in the game; excelling in knowledge and skills, innovation, technology and quality of place will set you apart; and having laser-like focus, leadership alignment and committed stewards will put you over the top. 

That’s what the HRDC is striving for in our region.  The annual report will help you see some of the key “positioning” work we are doing throughout the region.

The HRDC, through Bemidji Leads!, has focused a great deal of ambition over the past year to building this region’s talent pool.  One goal is to connect Bemidji State University with the Region, placing 100 students in internships each year. The Bemidji Area Chamber of Commerce is among partners in this endeavor.
An even bolder plan is on the drawing board. The plan envisions a Bemidji Student Leadership Center to develop and engage students in civic leadership. Here, students would receive leading edge leadership training and participate in ground-breaking, civic leadership initiatives (learning plus real life application).

A seed also has been planted to create a portal site that would become a “virtual Welcome Wagon.” Visitors to the site would find some general information about the Bemidji community, links to other websites and opportunities for interaction. The website also could invite community involvement with a description of civic engagement opportunities and information on how to become engaged.

The Bemidji Institute would identify the region’s knowledge resources and bring them to bear on the challenges and opportunities for economic growth. The institute would respond to identified needs and pursue emerging opportunities. A feasibility study was funded this spring.

Dr. Jim Bensen, president emeritus of Bemidji State University and a member of Bemidji  Leads!, said the Bemidji Institute is moving along and looking for traction. Before he retired as BSU president, Jim established the university’s Center for Research & Innovation. The CRI now provides education and training and has become a custom college. While that is needed, he feels BSU needs another jump start on economic development and design. “With college funding so tight, there is some activity, but so much more is possible. We felt as a community we could go forward and leverage the work already being done at BSU… and develop new knowledge to make our industries better. It’s always good to plow new ground.”

The steps that need to be taken before the Bemidji Institute becomes reality are to: 1) create an action team of regional experts from within industry and higher education to guide the process and staff the team, 2) identify knowledge assets at Bemidji State University, 3) complete a sector-based needs and opportunities assessment for private industry in northern Minnesota and beyond, 4) review university and community-based innovation centers in other parts of the country that could serve as models, 5) identify and assess operational options (services, facility, staffing, etc.), 6) identify potential funding sources to develop and operate a center long-term, 7) select a model and funding options, and 8) develop a feasibility assessment and action plan.

The HRDC and Bemidji Leads! recognize education is the foundation to achieve long-term goals from economic growth and prosperity to community leadership  and the community needs to share in the commitment to student success.  

A Students First Initiative will help secondary students understand their potential and their options and receive support from adult mentors. Currently, a Students First staff team is collaborating with an advisory team to write an operations plan with agreed upon goals and objectives and a map for implementation.

Some objectives the teams are discussing are:

1. Increasing the number of students going on to post-secondary education
2. Increasing student connections to community life
3. Retaining talent in Bemidji
4. Increasing high school graduation rates
5. Increasing students’ awareness of their individual strengths, goal-setting, career options, post-secondary planning and options
6. Connecting students with another caring adult.

Beginning with the Class of 2013, the goal is for every student to have access to a talent plan and community coach. By the spring of 2011, Bemidji Leads! staff hopes to implement a pilot project with a smaller number of students, possibly recruiting seventh grade participants and matching them with success coaches in eighth grade.

At Work on New Models of Economic Development

White Earth Economic Development Strategy

Over the past year, the HRDC worked closely with White Earth Office of Economic Development (WEEDO) and the Tribal Council throughout the planning process. The approach that was chosen by the Tribal Council and WEEDO was characterized by the inclusion of leadership and the community, with an emphasis on long term results, and fostering the environment to sustain economic development projects.

Thanks to leadership from the Tribal Council and WEEDO, White Earth’s new Economic Development Strategy addresses long-term, systemic challenges that will better position the community for success. The White Earth Tribal Council adopted the plan last November and is now on the path of creating a brighter future. Furthermore, the plan has provided a vehicle for future economic development in White Earth by opening the doors to additional federal grants and funding.

There are a lot of good reasons that people are getting hooked on Lake of the Woods County. “Get Hooked for Life,” is the new marketing campaign recently kicked off by Lake of the Woods County. 

Lake of the Woods County faces several challenges in creating economic prosperity, notably a shrinking labor pool, a traditional natural resource and recreation-based economy, and remoteness. One thing is for sure though, a number of people think there is no better place to live and work than Lake of the Woods. The question was how to reach them and develop a connection?

To answer this question the HRDC partnered with Anchor Marketing of Bemidji to develop a brand based on the unique assets that make up Lake of the Woods. The “Get Hooked for Life” brand was chosen and is creating a lot of excitement. The campaign is utilizing social media, a photo contest, e-mail blasts and other strategies to get the message out.

The brand is intended to maintain and create long-term relationships between individuals and the Lake of the Woods community. The outcome will be better relationships between the community and individuals, which will lead to new residents and returning alumni, bringing talent and ideas to the area and with them the prospect a brighter economic future.

The HRDC is laying the foundation for the region to become a center of production for renewable energy goods and services, as “green” becomes mainstream.

The Headwaters Renewable Energy Collaboration is a region-wide renewable energy project led by the HRDC. The goal of this initiative is for the Region to become a leading center of production for renewable energy goods and services.

Over the past year the HRDC has worked on a number of strategies for becoming a leader in the “green” economy. With the assistance of a committee consisting of individuals and organizations with a common interest in setting the Region up for success in the growing bio-energy industry, we are creating strategies to take advantage of our opportunities and to overcome challenges necessary to create growth this industry in our region. For more information on everything from energy efficiency, grant opportunities to commercial scale renewable energy projects check out http://www.cleanenergyresourceteams.org/

Northern MN Tribal Economic Development Commission

As you are all aware a key challenge confronting Indian Country is creating sustainable economic development and building wealth for tribal members. The HRDC is excited to help address these issues by working with the Northern Minnesota Tribal Economic Development Commission (NMTEDC). The NMTEDC is comprised of economic development leaders from the Leech Lake, Red Lake and White Earth Reservations, with the goal of developing cooperative economic development efforts and other mutually beneficial projects on behalf of the three Tribal Nations and regional partners.

Over the next year the HRDC will work closely with the NMTEDC and other partners to develop a sustainable organization with a strategic direction for creating prosperity. The NMTEDC will allow the Region’s three Reservations to create new economic opportunities and cumulatively improve the quality of life by finding ways to partner on shared economic development challenges an opportunities. By working together and finding or forming partnerships, the tribes have the potential for a home run.

Accelerated changes are taking place in the food habits of many Americans.  There is a greater awareness of where food comes from and how it gets to the dinner table. The HRDC see this as not only an issue about health, or taste, but as a new economic development opportunity for rural communities.  

Northern MN has the opportunity to be an emerging leader in the innovative agricultural and rural economic development efforts that serve the goals of the local foods movement. This project is aimed at establishing a relationship between growers and consumers in northern Minnesota. We feel this strategy makes sense for health, social and economic reasons.

 A diverse group of partner’s is working to identify and analyze business opportunities based on meeting the growing demand for local food and local food products.  We hope the results will be a substantial increase in economic transaction between local producers and consumers, the development of effective collection, distribution, and processing systems for local food, and the growth and development of local foods related businesses.  For more local foods resources please visit http://www.localfoods.umn.edu/hfsc.

Headwaters Regional Finance Corporation sits with an asset base of $3.8 million with current loans outstanding of $2,340,794.  Through its 30-year history the RLF has been a valuable tool in the region’s economic tool chest to effect business growth and prosperity.  In these challenging economic conditions the HRFC has experienced a significant decline in new loan volume, consistent with that of local lenders.  The limited commercial activity in the region of the past year appears to have found their needs met by the temporarily enhanced SBA programs brought about through the stimulus packages.  Similar to other lenders, much time was spent with a handful of existing borrowers to work through loan modifications to accommodate cash flow issues resulting from the economic environment.

This fiscal year saw seven new applications, of which three were funded and one is approved awaiting funding for a total of $396,500.  Currently, the portfolio has 23 active EDA loans and 3 flood loans.  As a result of our funding 487 jobs have been created or saved among the current businesses in the portfolio and 3,533 have been created or saved throughout the loan fund’s history.  The geographic distribution of the active portfolio is considered a reasonable representation for our region with most of the loan volume in our more populated counties.

As we manage through these short-term challenges brought on by this recession, we see great value in working to position the RLF for further success upon the economic rebound.  Some of these positioning activities include continued relationship-building with our valued partners throughout the region, attentiveness to our existing borrowers needs, responsible collection activities on problem loans, and assessment of policies to competitively position the RLF while meeting the financing needs of small businesses in the region.

New loans funded:

Zachiea Properties IV, LLC  - Mahnomen $40,000 (Funding for infrastructure to the new Subway restaurant)

New Horizon Resort – Waubun  $6,500 (Renovations and fixtures for cabins)

EXB Solutions, Inc.  – Bemidji  $50,000  (Working capital line of credit participated with NMF and JEDC)

Pending:

$300,000 loan to a Mahnomen County large truck repair shop for expansion