Friday, November 30, 2012

Duluth showing signs of economic revival (With Audio)

AAR Vice President Danny Martinez speaks inside the company's Duluth hangar, the size of a football field, on Nov. 16, 2012. Martinez says the company chose to put its new operation in Duluth because of the facility and the local workforce. The regional economy includes Cirrus and several other aerospace-related firms. (MPR Photo/Dan Kraker)

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DULUTH, Minn. — A giant aircraft maintenance hangar at Duluth International Airport that has sat idle for six years is springing back to life this week, a sign that the region's economy is on the upswing. 

 AAR Corp. is servicing jets from Air Canada in the facility, originally built in the 1990s for Northwest Airlines.

"When we're up and running, there should be three aircraft in here at all times coming and going on a regular schedule," AAR Vice President Danny Martinez said.

After years of economic struggles and budget deficits, Duluth may be poised for a new era of prosperity. The city has announced several major industry investments in the area, the unemployment rate has dropped to 5.9 percent and the local economy is diversifying.

Business and civic leaders are more optimistic about the city's future than they've been in decades, and they point to the aircraft hanger as a sign of improving economic conditions.

When fully operational the facility will employ 225 workers. Martinez said the building was only part of the reason the company chose Duluth for its new facility.

"There was a lot of experienced folks here that we could bring on, and that's a unique combination," he said.

 The aircraft hangar is among a number of strong signs for Duluth's economy. In September, Mayor Don Ness announced another major new project: a new downtown office tower to be anchored by the clothing retailer Maurice's. The company plans to add 100 jobs in Duluth over the next few years.

In praising the project, Ness, 39, said the announcement marked "an exciting day in the history of our community."

The mayor's sunny outlook stems in part from his youth, when the sun seemed to have set over Duluth.

In the early 1980s, the city's unemployment rate soared to nearly 20 percent, then the second-highest the nation, notes University of Minnesota economist Jim Skurla.

Skurla recalls that on a billboard along Interstate 35 out of town someone even posted a billboard with a now infamous message: "The last one out, please turn out the lights."

Those memories are still vivid for Ness.

"I grew up in a Duluth that was very different, when Duluth was one of the 10 most distressed cities in the nation — super-high unemployment rate, a sense of pessimism all around us," he said.

 Ness credits his predecessors with laying the foundation for the revival he sees today. He said the city took advantage of the scenic power of Lake Superior by building a lake walk and creating the Canal Park tourist district that helped revitalize its downtown.

More recently, Ness has battled with retired city workers to cut the cost of their health care coverage, and erased huge multi-year budget deficits. He said those steps have helped foster a newfound sense of optimism.

"Companies like Maurice's don't invest $30 million in downtowns of small cities unless they sense the confidence that's here now, that we have something special here, that you can't create in the suburbs," Ness said. "We're starting to translate those advantages into economic development, into job creation, into a sense of confidence that leads people to make important investments."

But it's a slow process and not all change is positive. Although the unemployment rate in the Duluth Metropolitan statistical area which includes Superior, Wisconsin and St. Louis County, the unemployment rate is the lowest it's been in four years, the region has 5,000 fewer jobs than in 2008.

New jobs are on their way, but in August, Georgia Pacific closed a hardboard plant and laid off 141 workers.

 "Duluth has always had this tradition of taking two steps forward, then one step back," said Skurla, director of the Bureau of Business and Economic Research at UM Duluth.

Duluth's economy has always been dominated by the three "Ts": taconite, timber and tourism. But Skurla said that is slowly changing, spurred in part by new entrepreneurship.

"We've always said kind of as a joke that Duluth was always an economy of workers. We worked for the steel industry; we worked for different industries here that have disappeared," he said. "And entrepreneurism wasn't built into our genes initially, our DNA."

Today, however, Duluth has a more diverse economy, with strong health care, education, and professional services sectors.

"A lot of the business growth that you truly in the back office see, but don't hear about a lot, is those of us that are adding one or two or three jobs continually, every month," said Bill Bennett, CEO of LHB, an engineering and architecture firm that employs 205 people. "It's not the home run."

Bennett said his company has added 40 employees in the last two years alone. For him, a big challenge for Duluth is attracting a talented workforce.

Historically, local companies have hired people with connections to Duluth, Bennett said.

But some are growing so fast they have to reach beyond that group.

"We bring in a lot of folks to be educated here in the Twin Ports, then unfortunately we hand them that degree, they pack their bags and leave," said Brian Hanson, president of the economic development organization APEX. "That's a tide we need to stem."

That remains one of the top priorities for Ness. After decades of struggle, the mayor said the city can now afford to focus on things like arts, culture and outdoor recreation.

Those efforts, Ness said, could help keep its college graduates and attract other workers Duluth needs to fuel a growing economy.

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