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Building Up Minnesota’s 4th Great Resource

May 30, 2012 By Lee Egerstrom, Economic Development Fellow

What do you do with an old high school in a rural town? Turn it into an advanced research laboratory. That’s what Ralco Nutrition Inc. did recently, and it’s pumping new life into Balaton, a small southwestern Minnesota city.

In addition to the research lab, the former high school will serve as a divisional headquarters for the company’s new agronomy/farming division.
To Balaton’s north, Willmar made a similar move with its former Minnesota State Hospital, now home to MinnWest Technical Campus, housing headquarters and research labs for 28 agriculture-related and bioscience firms.

For most of the past 150 years, rural Minnesota has developed by adding value and providing services for one or more of its three great natural resource sectors—agriculture, forestry and mining. While these exports tend to produce economic gains for local communities, a fourth resource returns little once leaving town: human resources.

Going forward, the new rural Minnesota must develop and retain this fourth great resource. In a new report for the Minnesota Extension Service, rural sociologist Ben Winchester finds further evidence from the 2010 Census that rural Minnesota is experiencing a “brain gain” of educated 30- to 49-year-olds even though total population in 36 of Minnesota's 80 rural counties continues to decline.

For decades, rural Minnesota has agonized over sending high school graduates off to college or urban jobs. Crunching numbers, Winchester previously found evidence in 1990 and 2000 Census data that younger to middle-aged people are actually seeking out careers in rural communities. In turn, they bring children back to rural schools.

His new report, “Continuing the Trend: The Brain Gain of the Newcomers,” specifically finds the trend continuing around rural city areas such as Willmar (Kandiyohi County), Marshall (Lyon County) and Mankato (Blue Earth County). Movement of 30-49 year olds slowed in the past decade, which Winchester attributed to external factors such as housing debt and the recession.

The opportunity exists for this population trend to regain momentum as the economy improves. “In rural areas, little changes make a big difference,” Winchester said in a statement releasing his study. “And these numbers certainly change the story.”

What Ralco is doing at Balaton and what agro-science firms at Willmar are doing could be considered Exhibits A and B for Winchester’s study.
Ralco, which is headquartered in Marshall, has grown into a multinational animal nutrition and pharmaceutical company. Jon Knochenmus founded and owns the company. His family hails from Balaton, which influenced the expansion decision.

More than a dozen of Ralco’s 120 employees have Ph.D. degrees, supporting Winchester’s “brain gain” findings. Balaton (pop. 643) is part of the Tracy-Milroy-Balaton consolidated school district uniting communities near Marshall. There is a brain gain coming to the town that lost its high school.

Meanwhile, look at the changes occurring at six-year-old MinnWest Technology Campus at Willmar. Joanna Schrupp, project assistant for the management company, said the college campus-like former state hospital complex has attracted companies that are highly science oriented.
The 28 companies now in residence have 355 employees, she said. Given the campus’ buildings and grounds available for redevelopment, the management company estimates MinnWest as being 55 percent developed.

Growth over time has come from both new residents moving in and from expansions by firms already there, Schrupp said. These companies played host to several hundred high school students on April 13 in what has become an annual Youth Science Retreat.

Winchester’s study provides information on what such developments and the people they attract do for communities. Data gathered from 99 newcomer households of 150 working age adults and 14 newcomer-owned businesses in west central counties found an average household income of $66,000.

New, expanded and relocated businesses spent $108,000 in the region, the study found, and the newcomer households generated $92,000 in economic activity in the west central region in 2009 and 2010.

Some statistics about rural America are misleading, Winchester insists. The number of Americans living in rural areas is shrinking as a percentage of total U.S. population, but only because populations in urban areas are growing faster.

The 30 to 49-age cohort is helping change quality of life factors in rural communities while bringing in talents to boost economic opportunities for local residents as well. At the same time, like all median statistics, the newcomers to rural Minnesota are not dispersing equally among all counties and communities.

Winchester noted that school consolidations reduced the number of Minnesota school districts from 432 in 1990 to 337 in 2010. This makes school properties like the former Balaton high school available for redevelopment. The same applies to empty storefronts in many towns, churches, and hospitals and, more recently, post offices for which entrepreneurs and developers will need to find new uses.

Balaton and Willmar show that this is possible. Winchester’s study shows talented people with families will choose to live, work and start businesses in rural communities when given the chance.

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