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Building on tomorrow: Detroit Lakes sees economic boom

Photo by Dr. Drone Aerial Images

Editor's note: We live in a time of rapid change — change that does not entirely skip over small Minnesota towns like this one. Today, more than ever, people here in this community are bypassing our neighbors' small shops in favor of an internet search and an out-of-town buy. Consumer preference is changing; we are changing. However, we are not powerless in this evolution. We, as a community, can decide how we want to navigate these new times to create a place we'd still want to live 10, 20, 50 years from now. We can take the easy one-click step that is good for the moment, or we can step another direction where we are all just a little bit more calculating and conscious of who we give our dollars to and what we want our town to be like.

Small town retail is not dying, it's just changing. That is the message from economy experts at the West Central Initiative, an organization that works to strengthen the economy in nine west-central Minnesota counties, including Becker County. Small town retail has been a focal point recently for the organization, which has been holding seminars on the region's retail picture.

"We were finding the negative narration that small town retail is dying," said Jill Amundson, an associate planner with WCI. "I want to emphasize that that is not true."

Retail sales are a powerful driver of local economies. According to state figures in 2016, retail-only numbers generated approximately $501.1 million in Becker County, a 20.6 percent increase over five years. That isn't the same across the region, though. Although the business district in Perham has remained strong, Otter Tail County overall saw a decrease of 4.9 percent over five years.

A big boom in DL

Detroit Lakes may have been stunned this year by the loss of the venerable Norby's Department store, which anchored the downtown business community for over 100 years — but it looks like the large, iconic Norby's building won't stay vacant for long.

The building is being purchased and plans are in the works to turn it into a mixed retail and residential complex, with businesses on the main floor and apartments above, said Detroit Lakes Community Development Director Larry Remmen.

"It was sad to see Norby's close," he said. "It was a major department store in the community and a big part of our economy, with a long history in Detroit Lakes. But plans are to re-use it..."

Online shopping and other technology are constantly disrupting traditional brick and mortar stores, making business an ongoing challenge, but many owners are finding a way to walk the tightrope, he said.

"Businesses are adapting," he said. "They're working on having an online presence and a physical presence. Things are changing, and businesses that are successful are embracing it."

Shopping isn't going away anytime soon, and brick and mortar stores have an advantage in being able to provide immediacy, face-to-face customer service and a good experience for shoppers.

"People still want to 'test drive' the merchandise," Remmen said. "People like to be in a store and feel a physical presence."

Of course, it's hard to be too gloomy when the local economy is doing so well.

"Detroit Lakes has been booming," Remmen said. "We've had a tremendous amount of development this year — over $50 million in building permits so far."

That compares to projects valued at $29 million at this time last year and $22 million two years ago.

In fact, you have to go back to 2007, before the Great Recession struck, to find a comparable year, with about $51 million in building permits, he said.

"We've had residential, commercial, industrial, we're all over the place," Remmen said. "We've had 52 residential homes built this year, a 30-unit affordable housing unit going in on Pelican Lane (near the women's crisis shelter), and a 76-unit assisted living facility, called Pelican Landing, also on Pelican Lane," he said.

Accessories Unlimited is building a new 15,000-square-foot building, with 25 new jobs, in the North Industrial Park. They're moving from the Lake Park area. They build accessories for Bobcats, skid steers, that kind of thing."

The Midtown development on south Washington Avenue will replace the former Burnside's and Quality Bait buildings. The 11,000-square-foot project will have retail on the ground floor and three stories of residential units. "Like McKinley Plaza, only a little smaller," he said.

The growth is due to strong city leadership, he said.

"We've been very proactive and very progressive," he said. Growth is not unusual, "but this is just a banner year," he added. "A lot has been happening."

The city has been encouraging more housing and business development, and has been assisting businesses that ask for help, he said.

The city economic development toolbox includes tax increment financing, a revolving loan fund, several loan pools and even Opportunity Zone status for investors.

"So we have a war chest for providing funding for business," he said. "Our funding is gap funding, designed to fill the gap if commercial loans fall short. Loans can be up to $250,000, usually at 4 percent interest over 20 years, with a five-year balloon payment due for refinancing to pay off the loan and free up money for the loan pools, he said.

Ideas from around the region

According to the Small Business Administration, small businesses employ about half of all private-sector employees, and have generated 65 percent of net new jobs over a 17-year span.

With so much at stake, local governments employ various methods to assist businesses, from holding or promoting community events to beautifying downtowns to finding ways to create a better business climate. Within the past few years, Detroit Lakes and Alexandria have redone its downtown streets and sidewalks to make them more pedestrian-friendly, while Wadena and Park Rapids have pursued partnerships with outside groups.

The City of Wadena Economic Development Authority was created in 1991 to improve economic conditions. Toward that end, it promotes local businesses while seeking to fill empty storefronts. In 2017, it partnered with the Buxton Group, a nationwide developer that has worked with more than 750 cities of all sizes on developing retail recruitment strategies.

The business services firm has been hired to analyze how shoppers spend their money in the area and determine who is shopping at a given store. In doing so, the group says it can identify items that current retailers could be selling in their store and suggest new businesses that may do well in Wadena.

"I see this as a very great marketing opportunity for this community," WDA Executive Director Dean Uselman said.

In Park Rapids, the city's chamber, business and lodging associations, the county and two foundations banded together to fund a branding project. Working with a Dallas-based branding and marketing agency for 10 months resulted this past summer in a brand for the area: Heartland Lakes. Butch De La Hunt, president/CEO of the Park Rapids Lakes Area Chamber of Commerce, said the Heartland Lakes branding has brought new opportunities to highlight all the region has to offer.

"We've got to continue to promote the region and the great assets we have and say, 'Hey, if you live here, shop local, support your local businesses. If you visit here, support the neighboring communities,'" he said. De La Hunt points out that without that support, area businesses cannot survive. "Once they're gone, it's harder and harder to re-establish them."

The Alexandria Lakes Area Chamber of Commerce is working on raising awareness of supporting local businesses in a couple of ways. One strategy involves educating a generation that has grown up with online shopping.

During presentations to high schoolers, Executive Director Tara Bitzan said the chamber shows students "how their money turns over in a community, and if you buy local that money goes into paychecks for local people who turn around and spend their money in other local places."

Among those presentations was an educational video on the impact of doing business locally that was produced last year by the high school DECA team.

Bitzan received a lot of positive feedback and stories of how students changed their thinking and their spending behavior based on what they learned through these efforts.

"Now that we have gotten our message across on a smaller scale," Bitzan said, "we intend to ramp up that education model and move forward with a community-wide marketing campaign."

She is referring to a "Do Business Local" program designed to encourage residents to spend more of their dollars in town. The marketing program will include print and radio advertising, signs in storefront windows, social media campaigns and presentations.

"Our goal is education," Bitzan said. "Most people don't stop to think about the impact that sending their money out of the community has on the local economy. It is convenience that they think about."

Going online

While e-commerce remains a relatively small part of retail sales — less than 10 percent in 2018, according to the U.S. Department of Commerce — it is growing rapidly. National sales figures show that e-commerce sales are increasing at nearly three times the rate of total retail sales.

E-commerce sales increased 14.5 percent from the third quarter in 2017 to the third quarter in 2018, compared to a 5.3 percent gain in total sales during that same period.

However, this past June, a U.S. Supreme Court decision required sales tax to be charged on more online purchases will help brick-and-mortar retailers in their battle with online competitors.

"We've been fighting for this for 20 years," said Bruce Nustad, president of the Minnesota Retailers Association. "There's a sense that some fairness in the sales tax arena will at least level the playing field."