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.”

AAR, the city, and APEX cast a wide net to reach possible A&Ps in a two-week period. The effort attracted interest from about 400 FAA-certified techs nationwide, which helped convince AAR the workforce was available. The city helped AAR find its first customer; the state and St. Louis County also provided financial assistance.

Getting AAR to Duluth was a team effort. “It took so many agencies, all contributing their piece of it, to create a very robust and competitive proposal that won the competition with cities across North America,” Ness says. AAR’s Duluth facility opened in January; as of mid-June it employed 200, and the company is planning to hire about 25 more.

Companies seeking to build their businesses in Duluth also often tap the resources of another economic development partner, the Duluth Seaway Port Authority. Maintaining the city’s international port is in and of itself a major contributor to Duluth’s economic vitality, but the Port Authority also develops industrial sites. In addition to sites at the Duluth port, it developed the Airpark, an industrial park near the airport that is home to 40 companies with more than 700 employees. The Port Authority owns four buildings at the Airpark that are leased to tenants, as well as several remaining parcels of land, ranging from one to five acres, all available for immediate development.

The Port Authority plays a lead role in many economic development projects, and a supporting role in others, according to Executive Director Adolph Ojard. Its sites are home primarily to industrial firms. “We’ve been true to our industrial roots. We see that as the proper role for us to play,” says Jeff Borling, director of industrial/economic development.

One business the Port Authority has helped expand in Duluth is Altec HiLine, an Alabama-based manufacturer of bucket-lift devices for various industries. Altec HiLine, which has had a facility in Duluth since 2002, was leasing space owned by the Port Authority; with its business growing, the company needed more room. DEDA worked with the Port Authority to free up some space occupied by A. W. Kuettel & Sons, an industrial HVAC and metal fabrication company; the Port Authority then helped Kuettel move to a larger space in the Airpark. DEDA put together a package of financing from state and local sources for the Altec HiLine expansion, which will result in 85 new jobs, nearly doubling the company’s workforce. APEX helped with logistics for the moves and expansions; St. Louis County helped with the Minnesota Investment Fund application to DEED. “There was a role for everyone in that one,” Ojard says.

In addition to the members of the mayor’s economic development coalition, Duluth and the surrounding region—a region that plays an essential role in the city’s resurgence—have been boosted by other organizations, including the Northland Foundation and the Arrowhead Resources Development Council.

Thanks in large part to these cooperative efforts, the city has added more than 2,700 new jobs this year. “Not only have we bounced back—we’ve diversified,” DEDA’s Eng says. “We’re at the point where we need people to come back to Duluth to fill these positions.”

Eager To Come Back Home

One of those who has returned is Sheryl Filby Williams, senior hydrogeologist at the Duluth office of Minneapolis-based Barr Engineering Company. Williams worked in Barr’s Minneapolis headquarters until 2003, when she jumped at the chance to return to her hometown. Barr opened its Duluth location in 1996 to accommodate a single employee. That office now has more than 90 employees, 35 of whom have been hired in 2012 and 2013.

“Duluth is experiencing a resurgence, and that’s good for us,” Williams says. Barr’s Duluth office has seen growth in all its practice areas, including mining, power, fuels, and natural resources management. The fuels sector, which is focused on pipeline development and management, has, in part, been driving increased hiring in this office, she says. “Some local industries that we’re working for have expanded significantly. Our clients have grown, and we’ve been really fortunate to grow with them.”

For Barr to grow, it needs to attract engineering and scientific talent. Williams says that Duluth has been a big part of that attraction. “I love when people come to Duluth and they ask me, ‘Why are you living here?’ ” she says. Williams points to the great quality of life, affordable homes, short commutes, and outside activities. “There’s a cultural scene, an outdoors scene, an academic scene,” she notes. “And it’s really attractive to entry-level employees as well as mid-level employees.”

Williams’ specialty is brownfield restoration. “Duluth has a really strong industrial past. Inside the city, we don’t have a lot of opportunities for expansion,” she says, “so reusing our brownfield sites is really important as the city continues to grow.” Williams has worked on a number of brownfield projects, including the Atlas Cement site and remediation of several waterfront locations. Another was the cleanup of a location that has become home to one of the city’s fastest-growing and most distinctive companies.

The headquarters of Good Sheet, located on a 4-acre site in West Duluth that once was home to a casket manufacturer, house two manufacturing companies—Epicurean, which manufactures cutting boards and other products from pressed wood fiber, and Loll Designs, which makes furniture from recycled plastic. Working with Barr Engineering and renowned Duluth architect David Salmela, Hawks Boots cofounders Greg Benson, his brother Dave, and their friend Tony Ciardelli converted the shabby grounds and building into a stylish headquarters and manufacturing space called Hawks Boots.

In developing its building, Greg Benson says the city of Duluth “was just so helpful.” For instance, the city aided the company in getting grant money to clean up the four-acre campus, whose soil was loaded with chemicals left over from the casket production days. Both Epicurean and Loll are thriving. Epicurean’s products are now sold in more than 60 countries; Loll, whose biggest customer is Room and Board, has a separate West Duluth manufacturing space near the waterfront. Now the Good Sheet team is looking for larger manufacturing space.

In addition to the city, the team obtained crucial assistance from UMD’s Natural Resources Research Institute. Though the institute focuses on the mining and forestry industries, it also provides product development and testing for other types of businesses. “They’ve helped us quite a bit with manufacturing processes,” Benson says. “They came in and actually worked with our business.” The institute helped Loll test its products for performance and durability, along with implementing lean manufacturing techniques.

Benson says that the Hawks Boots location has many advantages, including nearby trails for lunchtime runs and cross-country skiing. “To me, that sums up Duluth,” he says. “You can do outdoor activities without having to drive for two hours. It’s right here.”

Loll and Epicurean embody two traits found in abundance among Duluth entrepreneurs—a focus on made-in-the-USA (most of the company’s components are produced by American firms) and an environmentally conscious sensibility. There are numerous other “cottage manufacturers” that tout their made-in-Duluth bona fides, including outdoor-gear companies Duluth Pack and Frost River, and power-sports clothing firm Aerostich.

“There may have been a time in the ’60s or ’70s when this town was very dependent on a couple of industries and a couple of major employers,” APEX’s Hanson says. When the U.S. Steel plant shut its gates, “it may have seemed as though the town was closing down.” When Georgia Pacific announced it would close its hardboard plant last August, more than 100 jobs were lost. The decision was tough on the plant’s employees, Hanson says, but notes that it wasn’t a “crushing blow” to Duluth “because there are so many options for skilled manufacturing workers.”

Keeping Young Talent

The city’s optimism is now strong enough to withstand the loss of a long-established employer or a 100-year flood. The pessimism that seemed to rule among the locals not so long ago is fast receding.

“Young people have a different perception of what Duluth is, what it means, what the culture is, than when I graduated from [the University of Minnesota Duluth] in 1997,” Ness recalls. “There was a sense that Duluth was a dying community, that there wasn’t anything that appealed to or catered to young people in their 20s and 30s.

“Fast-forward to today. Young people in their 20s and 30s are excited and engaged in mountain biking, the Homegrown music festival, and the nightlife here that didn’t exist before. They’re excited about the prospect of living in Duluth.” Ness acknowledges that the area needs more jobs for those young people. But as more workers reach retirement age and new employment opportunities arise, those jobs are coming.

Ness sees Duluth as the Upper Midwest equivalent of places such as Asheville, North Carolina; Burlington, Vermont; Bend, Oregon; and Flagstaff, Arizona—“cities that have natural beauty, outdoor recreation, strong arts and culture, college cities, and a ‘healthy living’ ethos that encourages biking, hiking, and local foods.”

At the same time, Duluth remains a city of industry, where manufacturing, heavy equipment, and engineering continue to play key economic roles. All these factors provide what Ness describes as “a strong sense of place” that can help make Duluth “people’s first choice,” whether they’re employee, employer, or entrepreneur.

Gene Rebeck is TCB’s northern Minnesota correspondent.