Mitchell economy’s grade: B-Mitchell’s economy needs more high-paying manufacturing and professional service jobs, according to a study released Thursday morning. Sioux Falls v. Sioux City case study illuminates model.
By: Tom Lawrence, The Daily Republic
Mitchell’s economy needs more high-paying manufacturing and professional service jobs, according to a study released Thursday morning.
But a thriving farm economy and solid retail and tourism-related businesses mean the area is on the rise after some challenging years, according to consultant Ralph Brown, of Vermillion. The annual total income now tops $1 billion divided among more than 16,000 workers in Davison and Hanson counties, Brown said. The two counties make up the Mitchell Micropolitan Statistical Area, which is used in economic reports from the government.
Brown said the area’s economy is driven by export-based businesses. That means they send products and services out of the area and bring new dollars back.
Manufacturing, construction, industrial, medical, information services and other high-tech, professional jobs bring the most new dollars into the community, he said.
Brown said retail and tourism businesses have a definite value, especially for locals who rely on them to provide an enjoyable quality of life.
For the most part, Brown said, Mitchell’s economy is in good shape: “I’d say B-minus.”
Brown said Mitchell is like the rest of the state and the nation as they emerge from the so-called Great Recession that struck in 2008.
“They’re not at their peak at the moment,” he said. “There’s room for improvement, room for growth.”
Brown examined personal income for the Mitchell Economic Development Corp. The data came from the U.S. Bureau of Economic Analysis and is from 2010, but it is still valid, Brown said. Sales and property taxes were not evaluated, he said, since they are byproducts of personal income.
The personal income among 22,869 people in Mitchell and in Davison and Hanson counties was $975 million in 2010, with 16,762 employed, according to the study. Bryan Hisel, the executive director of both the Mitchell Area Chamber of Commerce and Mitchell Area Development Corp., said he is confident the income has now topped $1 billion.
The average income in the area was $38,787, with farm owners leading the way by far, making $132,777 annually. There are 615 farm owners in the area.
The economy is based on $490.7 million in salaries and wages to workers in the private sector; $84.7 million in farm income and wages; and $74.5 million in government salaries and wages.
‘Don’t recruit barbers’
The study sought to answer four questions:
* What forces drive the Mitchell economy?
* Which industries comprise the Mitchell economy?
* What is the basic/non-basic breakdown of Mitchell’s economy?
* How do we grow Mitchell’s economy?
Industrial, manufacturing and high-level services like medical and information technology-based businesses are the drivers of the economy, Brown said, while the population-based businesses circulate money through the community.
Farming; people who work for federal, state and local governments; retail workers; and other jobs also contribute. In addition, people receiving Social Security, other “transfer payments” such as Medicare and Medicaid and welfare, bring money to the area, as does money from dividends, interesting earnings and other forms of income.
Tourism “contributes” money to the local economy, but it is outside dollars, not outside people, that are the linchpin.
“The driving force, the impetus, the push, comes from forces outside the community which is transmitted to the local community,” he said. “What we want to do is grow those parts.”
Brown said population-based jobs will follow the trends.
“Don’t recruit barbers,” he said, using that job as an example. “They’ll come on their own.”
The booming agriculture industry has been a key contributor to the local economy.
“Farmers have done well until this year,” Brown said, referring to the extended drought. “Thank God for crop insurance.”
But he said the past few years have poured a lot of money into the bank accounts of the 615 people who own farms in the area. There is solid proof of that, he said.
“Every farm housewife now has a granite countertop in her kitchen,” he said.
Brown was asked how much tourism actually impacts Mitchell. That has been a sticking point in discussions about potential publicly funded upgrades to the Corn Palace.
Tourists are from out of state and are infrequent visitors, he said, while regional visitors are in the city and area fairly often.
While the city is best known as the home of the Corn Palace, the people who work there and in other tourism-oriented jobs have low incomes, Brown said. But he said he didn’t want to assail the tourism icon.
“I don’t want to get into any battle here about the Corn Palace,” Brown said.
Corn Palace Director Mark Schilling, who attended the presentation, said he agreed with Brown and found the information helpful.
“I don’t think this bashed the Corn Palace,” Schilling said. “You have to look at what the study was looking at as far as economics.”
He said industrial jobs and businesses that offer higher wages employ mostly full-time employees, while the Corn Palace and other tourism businesses provide work for people looking for part-time employment. Schilling said he has eight full-time and about 40-part-time workers. The figure includes teens and college students.
“You have to have a good balance and opportunities for part-time workers as well as full-time workers,” he said.
Retail business in Mitchell has historically been tied to events at the Corn Palace, such as basketball tournaments, state Rep. Tona Rozum said. She said a jewelry store she worked at thrived when such events were in the city.
Brown said he relies on available sales data, so he cannot confirm that. But he said Mitchell’s retail sales are boosted by its tourism attractions.
Mitchell is first in the state among the 11 largest cities in taxable retail sales per capita, with $24,010, according to a chart he called the “Retail Pull Factor.” Rapid City is second at $23,344. Small towns in tourism areas have higher factors, he said, with small populations but a lot of visitors. Hill City in the Black Hills is a prime example, Brown said.
He said the most surprising discovery was the large factors government payments play in the economy. About 18 percent of the income in the area comes from such payments. But cuts in government spending on social programs would not have a major impact on the local economy, Brown said.
He said the thriving retail economy is no surprise to him, since he has studied it previously.
‘Tale of Two Cities’
Brown, 68, is a South Dakota native who grew up in Aberdeen and taught economics at Northern State University and the University of South Dakota for more than 30 years. He said he has been a longtime student of the state’s economy, has conducted numerous studies, advised governors and other leaders, and is the author of several articles on the topic. He was paid $4,500 to conduct the study.
Brown spoke to a few dozen people, including Mayor Ken Tracy, Mitchell Schools Superintendent Joe Graves, Dakota Wesleyan University President Bob Duffett, several city officials and staffers and other community leaders at the amphitheater in the Mitchell Technical Institute Technology Center.
Hisel was “invaluable” in assisting him with the study, as was Roger Musick, the chief executive officer of Innovative Systems, and Jacki Miskimins and Hannah Walters, respectively the current and former directors of the Mitchell Convention and Visitors Bureau, Brown said.
Musick has been showing a presentation on the local economy to people in the community for several months, and he and Brown shared ideas and thoughts during a question-and-answer period at the end of the 100-minute presentation.
Musick pointed to changes in Sioux Falls and Sioux City in the past 50 years. It’s a topic Brown explored in an article titled “The Tale of Two Cities: Sioux Falls and Sioux City.”
Both cities were heavily reliant on industry, including John Morrell meat-packing plants. Sioux Falls made decisions to grow and diversify, Musick said, and it had a “huge, long-term impact,” while Sioux City maintained a dependence on older industries. Now, with half as many industrial workers producing twice as much product, the Iowa city has seen its economy struggle.
“Sioux Falls has changed its structure to more service-oriented while Sioux City kind of used the old model,” Musick said.
Sioux City was larger than Sioux Falls in 1969, Brown said, but now Sioux Falls has 155,000 residents with thousands more on the edge of the city, while Sioux City’s population has dropped to less than 100,000.
Mitchell needs to emulate Sioux Falls, he said, and offer a blend of manufacturing, industrial, retail and other jobs that will create a booming economy. The study can help make that happen, Hisel said.
“It brings us focus,” he said. “It helps clarify.”