Index: Duluth Special Report
If you’re like a great many Minnesotans who live south of Duluth, you may think of it as a beautiful place to visit, with a lot of fun things to do. You might also think of it as the state’s own notch on the Rust Belt, an aging industrial city that hasn’t quite recovered from the closing of the U.S. Steel mill in 1981. You might remember the big June 2012 flood. And you probably think of Grandma’s Marathon.
In fact, Duluth has scraped off the rust. The Lake Superior city has quietly become a mecca for new businesses, and has a wind at its back worthy of a nor’easter off the big lake.
The city is now home to numerous thriving industries—not just in tourism, but also aviation, engineering, health care, and other sectors. Case in point: Duluth-based women’s clothing retailer Maurices, which now employs about 400 in the city (75 of whom were hired in the past year), will be expanding into a new office building soon to break ground on Superior Street, downtown Duluth’s main thoroughfare. Maurices plans to add 150 employees to its current base once it makes the move. Duluth also has a large colocation data center opened in December 2011, operated by Iowa-based Involta, along with two annual high-tech conferences.
In the first quarter of 2013 alone, Duluth was ranked number one in Minnesota for business expansion outside of the Twin Cities metro. The Department of Employment and Economic Development’s Business Expansion Report noted that the city had five out of 42 expansion projects in the state.
That’s not to say that the city has shed its industrial past. Duluth is home to several notable manufacturers—names that have expanded in recent years include M. E. Global, a foundry that produces specialty drilling equipment for mining, and Moline Manufacturing, which makes customized baking equipment for large food companies. It also has a center served by four Class I railroads and a global port that ships out iron ore, coal, and grain throughout the Midwest and overseas and brings in heavy equipment from all over the world for use by the robust mining and energy companies in the north.
Indeed, Duluth has become an energy hub. It’s the home of Minnesota Power, a top regional utility. Canadian pipeline company Enbridge employs more than 230 in the city and more than 700 total in the Duluth-Superior area, and the natural gas and petroleum business in North Dakota and Canada has spawned a major boom for Duluth-based engineering firms that specialize in pipeline design and maintenance, as well as the environmental permitting that transport systems require.
There’s another old-school industry that has been showing vigor—brewing. Along with Lake Superior, the city’s grand old man of craft breweries, founded in 1994, and Fitger’s, a brewpub housed in the beautifully restored Fitger’s brewery complex, so many new breweries and brewpubs have been opening that Mayor Don Ness cheekily crowned Duluth Minnesota’s craft-beer capital. One of its newest is Bent Paddle, which in May opened a taproom that’s packing them in despite, or perhaps because of, its industrial location.
Meanwhile, the city’s downtown is lively. Canal Park remains a charming magnet for both tourists and locals, and Miller Hill Mall, with more than 100 stores, is celebrating its 40th anniversary in August and adding Dick’s Sporting goods, which will make it even more of a regional retail destination.
Duluth certainly has earned its reputation for a city for play—Outside magazine named Duluth runner-up (behind Kununurra, Australia) as its 2013 “adventure hub.” But this is also a city that works.
Leading for Vitality
Why is Duluth thriving? Many point to the mayor. First elected in 2008, Ness is credited with helping get the city’s public-employee pension costs under control. But he’s also been a tireless and youthful promoter of the city’s business climate and its burgeoning arts and culture scene, embodied by the new Zeitgeist Arts complex on Superior Street.
“It’s his leadership that makes this town successful—I truly believe that,” says Christopher Eng, director of the city’s department of business and economic development, and executive director of the Duluth Economic Development Authority (DEDA). “His commitment to getting this city back on track is amazing.”
Perhaps Ness’s biggest boost to Duluth was creating the mayor’s economic development coalition. The coalition brings together representatives of Duluth’s main players—DEDA, the Duluth Seaway Port Authority, the Duluth Area Chamber of Commerce, regional economic development alliance APEX, Minnesota Power, the Duluth International Airport, the Minnesota Department of Employment and Economic Development (DEED), St. Louis County, and the Northspan Group, a regional economic research and analysis organization. Meeting once a month, these entities incubate projects that add to the city’s economic vitality.
Chatting over a bowl of Italian sausage soup at Va Bene Berarducci’s Caffe, a casually elegant Italian restaurant on Superior Street, Ness recalls his tenure on the City Council before his election to the mayor’s office in 2008. “The thing that jumped out at me was that we had a lot of economic development agencies and a lot of people whose job it was to promote economic development in this region,” Ness says. “But everyone had their own agenda and was going on their own path. And worse, there was a lot of competition for the credit when there was a positive project.”
When he became mayor, Ness vowed to end those turf battles. Now, the players share information about potential projects while “respecting who’s the lead on a project,” he says. If boosters are battling each other, a community can appear dysfunctional, “and businesses don’t invest in communities that feel dysfunctional.”
The members of the mayor’s economic development coalition bring distinctive capabilities to the table. DEDA, for instance, can help businesses with financing for expansion or relocation. In 2010, DEDA used about $2 million in tax-increment financing money and turned it into the Build in Duluth grant program. That money has allowed businesses to leverage $27 million in new investment over the last two years. DEDA financing can “help close the gap” that banks can’t fill, Eng says. DEDA also helps find sites that are project-ready for development.
Another major economic development player is APEX, which describes itself as a “private sector-led business development engine” for northeastern Minnesota and northwestern Wisconsin; its members help businesses looking to relocate to or expand in Duluth and the surrounding region. APEX, whose membership grew more than 10 percent in the last 12 months, now has 65 members. Most are businesses; other members include the University of Minnesota’s Duluth campus (UMD), the Duluth Seaway Port Authority, and the Blandin Foundation.
“The [mission] that consumes more than half of our time is the role of attracting business here,” APEX CEO and President Brian Hanson says. “That’s something we’re uniquely suited to do.” Other economic development partners “have resources for businesses to move on when they get here. We do the marketing and the bringing of businesses to this region. They close the deals.” APEX members help sell Duluth by providing useful services and insight. For instance, an engineering-firm member can create a computer-aided design mockup to show how a new building might look on a site.
APEX played several crucial roles in attracting AAR Corporation, an Illinois-based aviation service provider with a fast-growing jet maintenance business. It opened its fifth and newest facility in the former Northwest Airlines maintenance building on the Duluth airport campus. Though Northwest ceased using the facility when it declared bankruptcy in 2005, DEDA, which obtained the building from the state of Minnesota, had kept the nearly 200,000-square-foot structure in good condition, with the scaffolding, electrical systems, and foam suppression equipment all in place. After inviting AAR executives to Duluth, APEX members led them through the Northwest site and talked about updating to the lighting and fire suppressant systems, upgrading the parking lot, and attracting qualified employees. As Hanson notes, CEOs of large regional employers add a special credibility regarding local business conditions.
“The facility was there,” says Greg Dellinger, AAR’s director of recruiting. “We were inspired through Mayor Ness and the folks he put together to take a close look at it.” There were other facilities across the country AAR could have moved to; the crucial difference, besides the enthusiasm of the city, APEX, the airport authority, and the Duluth Area Chamber of Commerce, was access to workforce. Jet maintenance requires FAA-certified airframe and power plant mechanics (A&Ps). With the help of APEX and the city’s workforce development office, AAR found that there were some of the former Northwest workers still in the area, as well as some former A&Ps who’d left the area but still had connections here. “And they wanted to come back,” Dellinger says.
Another key factor: Jet maintenance is labor intensive, and in general “there’s a very strong anti-manual-work bias across this United States,” Dellinger says. Not so in Duluth and environs. In addition, the city and APEX helped broadcast that AAR is a great place to work—“we have good jobs with good benefits,” Dellinger says. “They drove applicants to our career site.”