Owatonna: At the Crossroads

Owatonna: At the Crossroads

The southern Minnesota city is experiencing a business development boom. It's not by accident.

On Nov. 5, the voters of Owatonna approved a $104 million bond issue to construct a new high school. For this southern Minnesota city, the vote signifies something more than an up-to-date school building. It also represents a major investment in their community’s economic future.

Owatonna’s businesses understand the crucial importance of that investment. Contingent on the referendum’s passage, several companies have pledged a combined $30 million toward the school’s construction. The donors include Wenger Corp., which manufactures a variety of products for arts performances; architectural glass manufacturer Viracon; and Mayo Clinic Health System-Owatonna. The largest contribution comes from Federated Insurance, at $20 million. Federated also purchased and donated the nearly 88-acre plot of land at the southeast corner of the city on U.S. Highway 14 where the high school will be constructed.

“We’ve believed for a long, long time that quality education is a major factor in attracting people to live and work in the Owatonna community,” says Jeff Fetters, Federated’s chairman and CEO.

In a sense, the new high school represents the culmination of a remarkable development boom that Owatonna has been experiencing in the past year:

  • The largest project in the current wave is the 354,000-square-foot facility that big-box retailer Costco has been constructing. The new structure will serve as Costco’s distribution center in the Upper Midwest.
  • Plymouth-based HVAC system manufacturer Daikin Applied is building a 150,000-square-foot warehouse and distribution center. This will nearly double the company’s existing 200,000-square-foot Owatonna facility.
  • Blooming Prairie-based Minimizer, which produces polyethylene heavy-truck fenders, broke ground on a new headquarters and manufacturing facility in November.
  • Bushel Boy Farms, whose headquarters is in Owatonna, is constructing a 175,000-square-foot research and development facility.
  • Revol Greens, located a few miles north in Medford, is quadrupling the size of its climate-controlled greenhouse, where it grows salad greens for a variety of markets.
  • Rise Modular, a Minneapolis-based startup that designs modular units for apartments and hotels, will begin manufacturing its products early this year in an existing facility in Owatonna’s industrial park. They create modular units, or prefabricated sections of a building, designed to be interconnected into a finished structure.

These projects are notable for several reasons, the greatest of which may be the variety of industries involved. For a city its size, Owatonna’s economic base is remarkably diverse and includes both homegrown companies and ones based elsewhere.

“We have so many different kinds of businesses that we tend to weather recessions better than a lot of communities,” says Keith Raney, vice chair of the Owatonna City Council and chair of the city’s Economic Development Authority. In many respects, the new high school will provide a significant strengthening of that foundation.

(Left to right) Troy Klecker, community development director; Kevin Raney, city council member; Thomas A. Kuntz, mayor; and Brad Meier, president and CEO of the Owatonna Area Chamber of Commerce & Tourism.

Building on its strengths

Owatonna “is a very business-oriented community,” says Brad Meier, president and CEO of the Owatonna Area Chamber of Commerce. Evidence, he says, lies in the more than 40 industries in the city’s industrial park, “where a lot of entrepreneurism has created a lot of opportunities. Thirty percent of our workforce is in manufacturing, which is more than double the state average.”

The city’s manufacturing firms are as diverse as they are numerous. In addition to Viracon and Wenger, the portfolio includes firms such as Climate by Design, which makes HVAC-related industrial products that remove unwanted moisture from production facilities, and the splendidly named Sputtering Components, which designs specialty equipment for making thin films used in the production of solar cells, electronic display panels, and numerous other applications.

Population growth

Owatonna’s growth has long predated its current development boom, more than doubling after World War II.

Source: U.S. Census Bureau *Estimated

Soon, Minimizer will be adding to Owatonna’s manufacturing base, though the company is making the move with some reluctance. Blooming Prairie has been the company’s hometown since its founding in 1984. But as demand for Minimizer’s sturdy truck fenders has been growing, its existing production space has become inefficient, vice president Jim Richard says. Its current 53,000-square-foot footprint is split between three separate addresses and seven different buildings, he notes. They want a more unified facility, and there isn’t suitable land for one in Blooming Prairie.

So Minimizer began looking elsewhere in the region and found what it was seeking just 20 miles away. Owatonna “was as close to Blooming Prairie as we could get,” Richards says. There was land available in the city’s industrial park, where Minimizer is building an up-to-date 120,000-square-foot facility. Richards also cites Owatonna’s “positive attitude toward business—specifically, manufacturing” as a factor in the move.

Another positive attribute: proximity to Minimizer’s current location. Owatonna “was actually the least disruptive to our employees,” Richards says. All told, “it was evident that it was where we needed to be.”

Rise Modular, meanwhile, chose Owatonna as the location of its very first manufacturing operation. A few years back, company founder and CEO Christian Lawrence was planning the development of a large apartment building in the Twin Cities metro using modular construction. Discovering that the nearest supplier of modular units was more than 1,200 miles away, Lawrence saw an opportunity to build high-quality modular in the central U.S.—units that can be used for residential buildings and hotels up to five stories tall.

But Lawrence needed the right kind of production space. He found it in Owatonna’s industrial park, where an existing building was available. With almost 150,000 square feet of floor space, a clear height of 37 feet, land for expansion, and access to I-35 and Hwy. 14, “the building checked all the boxes,” Lawrence says. Production is planned to begin this February.

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A team effort

The arrival of new businesses and the growth of existing ones haven’t happened by chance, though.

“We’ve really taken a team approach to economic development,” Owatonna community development director Troy Klecker says. He’s also a member of Owatonna Partners for Economic Development, a 10-member group that includes representatives from the Owatonna Area Chamber, the city, Steele County, Owatonna’s publicly owned utilities provider, and the city’s business development center (which functions something like a business incubator). Meeting weekly, the group discusses ongoing projects as well as strategies for spurring economic development, such as tax increment financing (TIF), loans, and grants.

The recent boom suggests this approach is bearing fruit. “When we can have $100 million worth of projects approved at one council meeting—Costco, Daikin, Rise Modular, and Minimizer—that says a lot about the team we have in place, the hard work they’re doing, and Owatonna’s location,” says Thomas Kuntz, Owatonna’s mayor since 2004.

Owatonna’s economic development collaborative makes use of the city’s many selling points.

One of the biggest is its location, at the crossroads of Interstate 35 and U.S. Highway 14. Highway 14 is as much of a main drag through Southern Minnesota as Interstate 90, which runs more than 30 miles to the south. That’s particularly true of the stretch between Rochester and Mankato. (Owatonna is roughly equidistant between those two cities.) The proximity of these major thoroughfares—along with a lack of the kind of congestion the Twin Cities metro often experiences—provides significant logistical advantages.

The accessibility of Minneapolis-St. Paul International Airport via I-35 is another selling point. So is Owatonna Degner Regional Airport, whose 5,500-foot-long runway can accommodate 737s as well as corporate jets. The local airport “was one of the things that Costco looked at when they came in,” says Greg Kruschke, Owatonna community development manager.

(Front to back) The owners of Revol Greens: Jay Johnson, Steve Amundson, Brendon Krieg, and Marco de Bruin.

Economic development leaders also cite Owatonna Public Utilities as a marketing tool. Having a local provider of water, electricity, and natural gas “allows us some additional flexibility to work with industries,” Kruschke says.

Armed with these advantages, the City of Owatonna has been marketing itself more vigorously in the past few years. In 2014, leaders began seeking relationships with Twin Cities-area industrial brokers. They’ve also been attending the annual national gathering of site selectors and brokers every August in Chicago. In addition, Owatonna is a member of the Minnesota Marketing Partnership through the Minnesota Department of Employment and Economic Development, which conducts international recruiting efforts.

The objective, Kruschke says, is to “get the word out that Owatonna has land available. You take a Costco project that needed 150 acres of relatively flat land with sewer and water connections—there aren’t a lot of places south of the metro that have that kind of land close to an interstate.”

Raney believes that “a lot of developers considered Owatonna pretty far away from the metro area. Greg and Troy [Klecker, city community development director] have done a great job in talking to developers, telling them: ‘Hey, we’re no farther away than Rogers is. And if you need to get to the metro area, 35 is a much easier commute than 94, especially at peak times.’ ”

Companies old and new

Another attraction for new and expanding companies is the fact that the city already has a durable, thriving business base.

While the city’s manufacturers might get most of the attention, it’s worth noting that agriculture remains one of the area’s major industries. In addition to the region’s farmers, there is Bushel Boy Farms, founded in 1990 and now expanding its hydroponic tomato-growing operation. A newer entrant in the area’s agribusiness sector is Revol Greens, which began marketing its greenhouse-grown lettuces in February 2018. It began with a 2.5-acre facility, but with contamination recalls linked to lettuce grown outdoors in California and Arizona, the company is experiencing “strong demand from the marketplace in all aspects—retail, food service, restaurants, hospitals,” says partner and sales manager Brendon Krieg. This spring, Revol Greens is beginning an expansion program that, in time, will increase the size of its growing area to 10 acres.

Owatonna’s second-largest employer, Federated Insurance, also has roots in the area’s agricultural economy, established in 1904 by area farmers and implement dealers (along with other businesses). In addition to its downtown offices, Federated now operates a second campus on the site of a former shopping center on the south end of town.

Federated’s expanded corporate presence over the years isn’t its only expression of hometown loyalty. “Giving back to the community is a major part of Federated,” Fetters says, citing his company’s numerous philanthropic activities, including raising $38 million over the past 15 years for Big Brothers Big Sisters’ youth mentorship program. “The high school was just another way that we wanted to give back,” he says.

One of the city’s largest employers is Viracon, which is celebrating its 50th year. Its specialty is architectural glass for tall commercial buildings. “You can go into any major metropolitan area in North America and roughly half of the monumental buildings completed in the past 20 years have Viracon glass,” company president Kelly Schuller says.

In 2013, the company had been looking nationwide for a suitable second location. Its ultimate decision: to stay home. The Owatonna area is a “good source for good people, good employees,” Schuller says. And its location provides logistical advantages for serving the entire North American market.

“We’ve invested close to $100 million in the [Owatonna] campus since 2013,” Schuller says. Viracon has added “next-generation manufacturing capabilities,” including the nation’s largest glass-coating machine. These technical innovations have allowed Viracon to increase the maximum size of the architectural glass products it fabricates. To handle the expanded production, the company has also added a couple hundred employees.

Entrepreneurs who aspire to join Federated and Viracon in the city’s business pantheon can tap the help of the Owatonna Area Business Development Center, a 501(c)3 whose facility includes not only offices, but 35,000 square feet of manufacturing space as well. “We’re here for entrepreneurs who started in a garage and are ready to take the next step,” says Bill Owens, the center’s executive director. Startup manufacturers can lease as little as 800 square feet while taking advantage of the building’s 22-foot-high ceilings and four loading docks. As of mid-November, there were eight companies operating in the manufacturing area, with eight others occupying office space.

Owens says that, in general, tenants operate there for a few years before moving to other, usually larger, quarters. HVAC industrial products maker Climate by Design is one homegrown entrepreneurial success story and a business center “graduate.” Another is FoamCraft, maker of protective cases and packaging, which moved into the center in 1998 before shifting to its own building seven years later.

In addition to providing space and amenities to local entrepreneurs, Owens offers business consulting. (He worked in banking for 25 years before stepping into his current role in 2015.) He provides expertise on topics like loan application preparation, business finance, acquisitions, and expansion.

As businesses of all sizes grow within its limits, Owatonna faces several challenges. Perhaps the largest is, where will all of these employees live?

What’s next?: Housing and workforce development

“Continuing to grow housing will be important for us as we grow the community,” Meier says. Efforts to improve the number of housing units in Owatonna “have had some success,” he adds. Developers have already been building—and have plans to build more.

Owatonna has double the state average employment in manufacturing work. More than 30 percent of the population works in manufacturing across more than 40 industries.

One particularly active developer is Hamilton Real Estate, a Rochester-based commercial real estate firm and developer operating throughout Southern Minnesota. Four years ago, company founder and CEO Mac Hamilton hadn’t considered building in Owatonna. Then he attended a presentation conducted by the city’s economic development agency and discovered Owatonna as “a progressive community with a growth agenda.”

Hamilton’s first project in Owatonna was South Pointe, an apartment building near Federated Insurance’s southern campus. All of South Pointe’s 37 units were leased by the time it opened in August 2018, Hamilton says.

The old Owatonna Power Plant has served as the Owatonna Public Utilities headquarters since 2015.

A year later, Hamilton opened 111 Vine Street, a higher-end apartment project that, at five stories, “became the tallest building in Owatonna,” he says. Located in downtown, the 54-unit complex opened in June. Also last summer, Hamilton development South Pointe II opened across the street from the original South Pointe, with 28 market-rate rental units. Both 111 Vine Street and South Pointe II are fully occupied. Following these successes, Hamilton is now looking to develop more rental properties in the area.

And there’s definitely a demand. In 2017, Owatonna-based Lasson Management, manager of a variety of rental properties, hotels, and cooperative housing throughout Southern Minnesota (including the southern Twin Cities metro), took on the management of Park Place on Allan, a 66-unit property built by Ellendale-based Redline Development Group. “The rents there were considerably higher than what Owatonna was used to paying,” Lasson president and CEO Jack Spitzack says. But to his surprise, “it was filled up very quickly.” Spitzack now is involved in a couple of new local projects including Merchant Square (36 units of market-rate rental) and Riverwood (71 market-rate units, with more to follow). He expects both to be completed by the end of this year.

To Spitzack, the success of projects like Park Place on Allan proves that new construction can work for market-rate housing. “For a long time in Owatonna, all you would find were projects subsidized with tax increment financing or other sources of subsidization such as tax credits. A strong job market, low interest rates, and pent-up demand have changed that.”

Though not unique to the city, workforce development, like housing development, is another challenge. Growing the workforce “is at the top of everybody’s list throughout the state,” Owatonna Area Chamber’s Meier notes.

Distribution warehouse at Gopher Sport.

In 2017, Anisha Zak was hired by Rochester-based nonprofit Workforce Development Inc. (WDI) as the first workforce entry coordinator for Steele County. Her position was created through a partnership between WDI, the Owatonna Area Chamber, and the United Way of Steele County. “More and more of our students aren’t going the traditional four-year college route,” Zak says. “So we wanted to be a resource to [Steele County] students to help them enter the workforce or go to technical school or get into the trades—and retain them locally.”

In her first two years on the job, Zak has worked with about 250 students and high school graduates. “Sometimes I’m helping students find a career path,” she says. “Maybe they know that they want to go to college, but they don’t know what they want to go for. Or maybe they know exactly where they want to work, but they just want to do a job shadow or tour the business. Or some want a full-time position with benefits once they graduate from high school.”

Zak serves as “the connector between our business community and our schools. So if I’m not meeting the students, I’m meeting with our local businesses,” she says, asking them about job shadowing, tours, internships, and entry-level job opportunities for students.

Local businesses are responding. “Most students aren’t able to work full time,” Zak notes. “So businesses are creating part-time jobs where they can come in and work.” Manufacturers, for instance, can offer work in places other than on the shop floor—they need graphic designers, marketers, sales reps, customer service providers, and engineers.

Last year, Zak helped spearhead the first annual Steele County Works Signing Day, which “recognized the students who made the choice to go to work after they graduated from high school,” Zak says. “We had nine students and nine businesses represented.” Zak hopes to double that this year—and help high school grads understand that a four-year college degree isn’t their only career option. (One option, of course, is Riverland Community College in Owatonna, part of the Minnesota State system.)

Source: City of Owatonna

Source: City of Owatonna. *Manufacturing

Graduating to the next level

Preparing students for whatever career path they follow is, of course, a high school’s central mission. And with the passage of the referendum in November, Owatonna’s high school, now with about 1,500 students, will soon be charting a new course of its own.

Before the vote in November, Owatonna voters had turned down funding for a new high school several times since 1992, including a referendum rejection the previous May. What changed? Independent School District 761 Superintendent Jeff Elstad believes that “the community has started to recognize the wear and tear on a building that’s nearly 100 years old.” (While the current structure, which opened in 1921, has been added onto and remodeled over the decades, it wasn’t good enough.) The business community’s support was also a crucial factor. Local employers, Elstad notes, believe a new high school could do more to prepare students for the work world.

For his part, Elstad believes that education “has evolved, particularly in the areas of our career trades and many other vocations—moving away from a system where a lot of the learning was books and paper and hypothetical situations.

“It’s really moving to a more inquiry-based, problem-based model that includes a lot more relevant and authentic experiences—more hands-on for students—that I think better informs and prepares students for whatever decisions they’re going to make beyond high school,” he says. Examples of such business-proposed “authentic experiences” include carpentry, plumbing, electrical, welding, metal fabrication, agricultural science, and food science.

Fun in Owatonna

  • The Kaplan’s Woods Parkway is a 225-acre woodsy park in the southwest corner of the city, which includes ski and bike trails, plus a boat launch on Lake Kohlmier.
  • Owatonna is the hometown of several well-known musicians, including Sean Tillman (better known as Har Mar Superstar) and Adam Young (who leads an electronic project called Owl City).
  • One of the main attractions at the Reptile and Amphibian Discovery Zoo located on I-35 is heartthrob singer Justin Bieber’s pet snake, an albino boa constrictor with the very Minnesotan name of Johnson. Johnson became an Owatonna resident after being purchased by a memorabilia collector.
  • The city’s biggest event is the Steele County Free Fair, the annual county fair that attracts 300,000 people each August.

To accommodate new career-education programs, “we believe the new building has to have flexible and movable furniture—flexible spaces that could be a fabrication lab one quarter and a health lab the next,” Elstad says. He says the district also understands that they’re going to have to start putting in more up-to-date equipment and technology to keep up with the industry. In some cases, he says, they’ll also be creating partnerships with businesses so they can bring active practitioners into classrooms to co-teach with staff teachers.

As for the new building’s look and layout, that’s something the community will help determine this year. Rather than a “contrived or cookie-cutter version of what a high school could look like,” Elstad says the Owatonna public school district is using a “community design model,” drawing from the insights and desires of local residents. This approach, he adds, “gels partnerships between business, the school district, and other civic organizations as well as with parents and other community members.” Elstad hopes construction will begin later this year, making the new building ready for students by August 2023.

As Mayor Kuntz notes, the new high school will serve as an economic development engine—and not only by educating the city’s workforce. It also could help attract people from elsewhere seeking professional or manufacturing jobs—jobs that Owatonna can provide. City leaders understand that part of attracting newcomers involves attracting families, and education is a key component (along with amenities such as recreation).

“The quality-of-life aspect has become much more important for economic development,” community development director Klecker says. “With as many jobs as there are all over, people can choose where they want to live and be able to work pretty much anywhere.”

Andrew Cowell, president of Owatonna community bank Profinium Inc. and chair of the Owatonna Area Chamber, highlights all of the outside investments coming into Owatonna from Minimizer, Rise Modular, and Costco. “It’s pretty tough to ask outside dollars to come into your community when your community isn’t willing to invest in itself,” Cowell says. “And the only way that I know that a community can truly invest in itself is through a new school.”

In November, Owatonna passed a bond referendum to build a new state-of-the-art high school.

Rolling out the sidewalks

Owatonna’s most famous building is the National Farmers’ Bank, which has stood majestically at the corner of Cedar and Broadway since 1908. The renowned American architect Louis Sullivan created the mighty structure across the street from Central Park, Owatonna’s main square. Now home to a branch of Wells Fargo, it’s one of numerous historic buildings in the city’s commercial historic district as named by the National Register of Historic Places. But, for all the attractive structures, downtown Owatonna has been a less-than-lively venue after business hours.

“Downtown revitalization has been a priority for the City Council,” Owatonna community development director Troy Klecker says. The city has supported several projects designed to inject new energy into the city center, including purchasing dilapidated downtown properties to encourage their redevelopment. One of those properties was the rundown Arnold Hotel, which had been vacant for more than a decade before being demolished by the city so that Arrow Ace Hardware, which had outgrown its previous location, could build a larger store at that location. Consequently, in 2018, Arrow’s former space became the new home of Torey’s, a fine-dining restaurant previously located off of I-35 that had been considering a move downtown. The city provided help to both business moves through tax-increment financing.

Torey’s isn’t the only after-hours hospitality venue downtown these days. In November, Mineral Springs Brewery had its grand opening, the culmination of almost two years of planning by its five founders. It was a carefully considered business decision. “All the market signs were strong,” says co-founder Bill Cronin. “In the Steele County area, there are almost 40,000 people and no brewery.” Surveys by the chamber and others showed that a brewery was always in the top five lists of what people wanted in Owatonna.

Since opening, “it has exceeded our expectations,” Cronin says. “We put a heated tent over our patio because we know we don’t have enough of a footprint to handle all the people coming in. … The patio has been full.” (The brewery’s beers, by the way, are named for local geographic features and historic residents.)

Later this year, Mineral Springs will be joined by Foremost Brewing Cooperative, a brewpub. According to Foremost co-founder Roger Warehime, the inspiration came during public meetings conducted under the aegis of Owatonna Forward, “a grassroots effort to bring people together and share ideas.” In 2016, Warehime was asked to lead a series of Owatonna Forward public input sessions.

“One of the comments was ‘It would be nice to have something to do downtown after 5 p.m.,’ ” Warehime recalls. Plus, “the idea of a brewery or brewpub came up in almost every session.” Talking with other group leaders, he realized that there was a business opportunity. This inspired more thought, including making the project a cooperative, which would “align it with our community.”

So a group of nine local couples invested in an LLC to buy the building to rent to the brewpub, which will include a kitchen when it opens this summer or fall. The two-story building it will call home was constructed at the turn of the last century. Not a brewer himself, Warehime and his colleagues will tap the skills of Owatonna beer-maker Terrence Flynn. And they all look forward to joining Mineral Springs downtown. “We’ll complement each other well,” Warehime says.

Gene Rebeck is TCB’s northern Minnesota correspondent.