Minnesota: Enhances Its Capacity to Innovate

31 Oct, 2012

By Rachel Duran

Minnesota’s government leaders have a history of funding the state’s workforce training programs and higher education institutions. “When it comes to IT and engineering skills, you are in a state of 5.3 million people with a significant metro area agglomeration [Minneapolis-St. Paul] of talent and a number of companies and higher education institutions that continue to rank among the top in the country for producing this talent,” says Kevin McKinnon, director of business development, Minnesota Department of Employment and Economic Development.

“The question we are asked first, whether by companies themselves or their advisors or site consultants, is ‘do we have the quantity of qualified workers to fuel their growth?’” says Mike Langley, CEO, Minneapolis-Saint Paul Regional Economic Partnership, or Greater MSP Partnership. “We have the opportunity in our region and our state to give a strong response because the state has and will continue to invest in education.”

The high quality of educational attainment and the quality of the talent base is evident in the fact that Minnesota is home to 20 Fortune 500 companies, many situated in the Minneapolis-St. Paul metro. Companies include Ecolab, 3M, the Toro Co., Case-New Holland, New Flyer Industries Inc., and Polaris Industries Inc. and Arctic Cat Inc.  “We have so much capacity around the advanced manufacturing sector and engineering that it is impressive, and in many ways, it flies under the radar,” McKinnon says.

Combine the workforce element with the continued funding of transportation-related infrastructure, and the continued recapitalization of the Minnesota Investment Fund to support business investments, and the state exhibits a compelling business case.

In the past year, Minnesota companies have added nearly 30,000 new jobs, of which 5,000 were in manufacturing. The state’s unemployment rate is 5.8 percent, well below the national average. Just a few years ago, the Minnesota state government was running a budget deficit; today there is a surplus between $300 million to $400 million.

In addition to the above assets, Minnesota’s economic development officials’ rosters now include a data center sales tax exemption program, which took effect July 1. Qualifying companies that invest at least $50 million in operations and plan to build or improve a 30,000-square-foot facility in the first two years are eligible for a 20-year sales tax exemption on computers, servers, cooling systems and energy equipment software, as well as the energy used in the data center.

Industries And Innovation

Five 9s Digital LLC’s 138,000-square-foot facility in Eagan is among recent data center announcements in Minnesota. The company, a provider of real estate solutions to the data center industry, will invest between $75 million and $100 million in the project.

In other industry activity, Minnesota’s significant and diverse base of supply chain firms fuels the growth of the state’s manufacturing sector. “Our ag sector is doing well right now, particularly from an ag equipment manufacturing perspective,” McKinnon says. The state’s proximity to the oil industry activities in North Dakota and Canada have kept manufacturing companies busy, supplying tankers, trailers and equipment for pumps. What’s more, the increase in mining activities in northeast Minnesota means equipment and services are in high demand.

A supplier to the oil and gas industry is Chart Industries in Owatonna, located south of the Minneapolis-St. Paul region, which acquired a facility to further support its production of distribution and storage equipment for liquid natural gas, McKinnon says.

An additional manufacturing project has been Gerdau Long Steel North America’s $40 million expansion of its mill in St. Paul, where it added 50 jobs. And in July, Goodrich Corp. opened a new 50,000-square-foot sensors and integrated systems facility in Burnsville.

In the city of Cambridge, located 45 minutes north of Minneapolis, Waterworks Manufacturing and Cambridge Metals and Plastics is conducting a 35,000-square-foot expansion of their facility in the Southeast Industrial Park, where they currently occupy an 110,000-square-foot facility. “We obtained a $240,000 infrastructure grant from the state; it was a 50:50 match,” says Stan Gustafson, economic development director, city of Cambridge Economic Development. “We had to move some sewer pipes to allow for their future expansion. They also received a grant through our local college for training.”

Gustafson says manufacturers in Cambridge weathered the economic storm fairly well, and continue to operate with leaner processes. The region is well suited to support plastics and metal companies, wood products and smaller scale medical device production.

McKinnon says industry successes come down to the talent base and their skills, and their need to invent. “When you think of Minnesota’s business climate, you do not want to overlook the medical device industry,” he says. “The number of device manufacturers and companies engaged in the industry in the state is one of the largest centers in the world for this activity. We continue to foster that and work to maintain our position.”

Minnesota’s ag-related companies and economic development partners continue to strengthen the sector by exploring R&D and technologies in and around ag and food initiatives. This includes food security and the security, availability and quality of water. “We believe the state and our region owns a global leadership position in that,” Langley says. The metro was one of four U.S. metros selected by the Brookings Institution to be part of activities to respond to the Obama Administration’s goal to double exports. The other three metros were Los Angeles, Portland, Ore., and Syracuse, N.Y. Langley says the Greater MSP Export Initiative has assisted the metro in growing its export base, not only in goods but also with professional services.

Langley says the strong base of headquarters operations in the metro has strengthened the business service sector in the areas of IT, printing and publishing, legal and financial, and marketing and public relations. “We have nearly 60 active expansion projects and one-third of them are related to IT infrastructure, mission-critical facilities and data centers,” Langley says.

The Twin Cities are also home to one of the country’s highest location quotients for medical device companies, such as Medtronic, Boston Scientific and others. These companies are beginning to develop new products in the areas of medical pharmaceutical delivery and other technologies.  Langley points out a question mark surrounds the industry as the new federal health care laws go into effect, in terms of having an accelerating or dampening effect on the sector.

The laws will also play a role in the metro’s finance and insurance industry, which includes UnitedHealth Group’s headquarters, the world’s largest health insurer. “We are focused on understanding where the country and world are going in health care,” Langley says. “We are bullish because we have a large concentration of both providers and insurers and believe the MSP will have a voice in that global discussion.”

Talent And Education

In Minnesota, much of the research conducted in the state is done through partnerships between public or private sector partners and the University of Minnesota and/or the Mayo Clinic. The 2010 U.S. Sourcebook of R&D Spenders says Minnesota ranked No. 10 based on $6.5 billion in R&D expenditures by public companies; Medtronic spent $1.7 billion alone.

Among Minnesota’s research assets are the Industrial Partnership for Research in Interfacial and Materials Engineering, based at the University of Minnesota. The university’s Institute of Technology conducts research and problem solving in a variety of industries. The medical device sector finds support from the university’s Biomedical Engineering Institute, the Institute for Therapeutics Discovery and Development, and the Experimental Surgery Services unit.

Assets

McKinnon says the state features cost-effective transportation assets, which include an extensive rail system, and the country’s furthest inland sea port, located in Duluth. “When you throw these logistics assets together with our people, it makes for quite a [business] story for us in many ways,” McKinnon says.

In Cambridge, companies have access to two state highways, 65 and 95; the community is 13 miles from Interstate 35. The community offers shovel-ready land at the Cambridge Opportunity Industrial Park, which consists of 107 acres, with 39 buildable acres of level stable, sandy soil conditions that are certified shovel ready. Gustafson notes the cost of land is $1 with an approved development agreement including infrastructure on site and regional stormwater detention ponds. What’s more, companies can access the state-level Job Opportunity Building Zone (JOBZ) designation. Companies located in these zones receive tax breaks on personal and corporate income taxes. The program ends in December 2015. “It works out quite well, especially if you are looking at buying a lot of equipment, and if you buy it in the United States,” Gustafson says.

In International Falls and Koochiching County, officials are underway with infrastructure projects to prepare for future growth opportunities. Efforts include an upgrade of the city’s sewage and waste water treatment center, and the development of infrastructure and rail services to a site located near the Foreign Trade Zone No. 259, which applies in and around the Port of Ranier, which is three miles outside of International Falls. A developer plans to construct a 100,000-square-foot warehouse, which will be rail served, to spur activity at the site, and in the Foreign Trade Zone. The Port of Ranier is the busiest rail crossing in North America in regard to the number of containers and number of trains, says Paul Nevanen, director, Koochiching Economic Development Authority.

A future infrastructure related project centers a new border crossing office. The GSA and the U.S. Immigration and Customs Enforcement agency has selected a site for the new building but are held up in the process because they are dependent on federal funding to support the project. Officials have indicated they aim to begin the $110 million project in 2014.

In other development activity, Nevanen says the community was recently awarded a $650,000 grant to support the construction of a cold weather room to support low temperature testing for Jaguar Land Rover. Nevanen’s office currently manages the existing cold room testing facility, which primarily supports auto manufacturers.

Nevanen points out that while International Falls may be 300 miles from Minneapolis-St. Paul, his team is building awareness of the region’s location as a place to support supply chain needs. “We still have challenges in terms of distance to major markets,” he says. “We are looking for a customer that wants to be on the border or the middle of the country.” Consequently, the location would ideally serve data center operations that aren’t tied to geography. Nevanen says in addition to the cold weather to support lower costs to cool data centers, and redundant fiber optics, the region has the workforce to staff these operations.

Online

For more information on conducting business in Minnesota, visit:

www.positivelyminnesota.com

www.businessupnorth.com

www.greatermsp.org

www.opportunitycommunity.com

Rachel Duran

Rachel Duran is the editor in chief for Business Xpansion Journal. Contact her at rduran@latitude3.com.

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