News HighlightsPage address: http://www.mnsu.edu/news/read/?id=old-1347291349&paper=topstories
Making Economic Impact
University makes significant contribution to local economy.
Tim Krohn, Mankato Free Press, 9-10-2012
MANKATO — Mankato City Manager Pat Hentges goes through a list of budget items, ticking off some major ones that benefit private businesses.
There’s maybe $10 million a year of road construction projects that go to various contractors and subcontractors. Add about the same amount for building construction and renovations.
There is more than $100,000 paid to HickoryTech for technology services and hundreds of thousands of dollars that pass through Najwa’s Catering for catering civic center and other city events.
Then there’s a long list of lesser but significant spending.
About $60,000 a year to Red Feather Paper for various cleaning supplies.
About $30,000 to American Linen.
Paragon Printing will take in about $60,000 a year for printing jobs. Napa Auto about $25,000. C&S around $30,000. The Free Press will get $50,000 for publishing city legal ads and other advertising.
And the list goes on.
“We try to do as much local as possible in Mankato and North Mankato,” Hentges said.
“When we get quotes, we always require competitive quotes and we have a strong bias to do those locally.”
Of the city’s $85 million budget, about $20 million annually is paid out in construction projects with more going to a variety of vendors for services and supplies.
At Minnesota State University, Mankato, Vice President of Finance & Administration Rick Straka looked up local businesses that received contracts in 2011.
“Just the vendors with a North Mankato or Mankato address, there were 600 vendors for approximately $5.5 million,” Straka said.
“That would range from a $100 honorarium stipend to speak to a class to a major construction project.” When major construction projects are done on campus, the figure rises substantially.
Public spending in the private economy is a major benefit, particularly in this area with large universities and sprawling state hospital complexes in St. Peter.
And local businesses don’t just benefit from local public spending.
At engineering firm Bolton & Menk, municipal clients come from across Minnesota, Iowa and other states.
“About 75 to 80 percent of our business is with municipalities. We have a full range of engineering services,” said President John Ripke.
The federal government’s reach into the economy ranges from spending on roads and airports to military contracts at area manufacturing plants.
“Military contracts account for 15 to 20 percent of our business,” said Sarah Richards, president and CEO of Jones Metal Products. “We will feel the effects of military (budget) cuts.”
Nuclear submarine parts
Workers at Jones Metal have been fabricating steel battery boxes that will be installed on nuclear submarines.
Don’t ask to take a look at them, however. New federal International Traffic in Arms regulations place tight requirements on all contractors and subcontractors.
“Everyone who works on the process or the drawings has to be a proven U.S. citizen or get special clearance,” Richards said.
Military contracts also bring extra paperwork and inspectors.
“There’s a lot more work up front. The specifications are a lot more intense. The military lost a (nuclear) sub in the ’60s, so they dot every i.”
Jones Metal has to assemble welding procedures for each item and send it in for approval.
Once they build something, “destructive” testing is done to make sure the piece holds up.
“So if we need to make 20 items, we make 22 because two go in for destructive testing.”
Inspectors — who can’t be associated with Jones Metal — are also on hand to check projects at various stages of assembly. “We’re a second-tier contractor. The primary contractor will have an inspector come in.
They’ll be here for two or three weeks — they become a regular fixture.”
Despite some extra hoops to jump through, Richards is happy for the work.
“Our economy depends a great deal on the military and government in general. It definitely makes a difference,” she said.
“We have the advantage of being woman-owned and operated. Our customers need a certain percentage of their suppliers to be women or minority-owned or operated companies.”
Richards has been watching the debate over military spending more closely than most. “It’s amazing how quickly it affects the chain. It takes 10,000 people five years to build one nuclear sub. There’s a big impact from military spending.”
Bolton & Menk started in St. Peter in 1949 and moved to Mankato in the ’60s.
Today the firm, with nearly 300 employees, has 12 offices throughout Minnesota and two in Iowa.
While they have some commercial customers, they’ve chosen to focus almost exclusively on serving municipalities and counties.
“From water supply and treatment, to airports, wastewater treatment, water drainage and transportation, we have the full line of services,” Ripke said.
Their clients range from towns of 100 up to Minneapolis. “We grew up in Greater Minnesota, so that’s where we have a real broad base of clients. Most are from Mankato size down to Sherburn size.”
Prior to the recession, Bolton & Menk was helping cities plan and manage fastpaced growth in residential and commercial development.
While new home and commercial development hit the brakes in 2008 and 2009, Bolton & Menk felt the biggest impact in 2010.
“Cities weren’t asked to do projects because no developers were doing anything, and they were dealing with developers going belly up and defaulting on their agreements,” Ripke said.
“In 2010, with cuts to local government aid, rural cities realized they had to still take care of their infrastructure, but they weren’t looking as much to outside assistance like ours as they had in the past. “While municipal projects were delayed, they eventually had to be done. They looked at what they could afford and needed to do. They started doing projects again, but they weren’t the size of the projects they did before.”
In response, Bolton & Menk increased marketing efforts to broaden their client base. That included opening a Maplewood office in 2009, adding to their presence in the metro area. In 2010 they opened an office in Baxter and opened offices this year in Rochester and Spencer, Iowa.
Aging municipal facilities and increased environmental restrictions mean cities need new or upgraded facilities and more specialized experts from Bolton & Menk and similar firms.
“There have been challenges with arsenic and radium and the lower allowed levels. We’ve had to do more of those over the years.”
Sewage treatment plants that had been built in flood-prone areas also forced many municipalities along the Minnesota and other rivers to build new plants.
Designing a new plant in St. Peter — where floods had often overwhelmed the old plant — was a major achievement for the firm. The $32 million 10-year project used an advanced technology process first developed in Europe and was one of the first to utilize it in the United States.
The project won a Grand Award from the American Council of Engineering Companies.
Cities are also focused on more sustainable infrastructure and resource use.
“The reuse of treated waste water is being discussed more and more.” Ripke points to the city of Mankato sending its treated water to the Calpine power plant, where it is treated further and used to cool equipment.
“You’ll see more of that as treated water is used for irrigation or some other process. It can become an asset that would attract industry to a community.”
Ripke, who’s been with the firm since 1973, wouldn’t have imagined some of the specialties now needed at Bolton & Menk to meet new environmental and social needs.
“We even have an archeologist on staff because of the cultural surveys that have to be done.”
The firm often hires interns from the Minnesota State Mankato geology department to help on artifact digs on sites slated for development to check for the presence of Native American or other important artifacts.
“One of our clients is the Mdewakanton Sioux at Mystic Lake. They are very concerned about the cultural resources of any area they impact.”
Minnesota State Mankato's long reach
“There’s a huge interaction between the university and the community,” Straka said. “We rely on the community and believe we have a large economic impact on the area.”
The last formal economic impact study, done in 2007, estimated Minnesota State Mankato’s impact at $307 million. A figure that is probably about $400 million now, Straka said.
That impact includes direct and indirect economic impacts. MnSCU, which operates the state’s universities and colleges, pegged direct-spending economic impact for the entire MnSCU system at $1.1 billion in the 2007 study. The study concluded there was another $2.4 billion in economic impact created annually through enhanced productivity of the workforce due to training at system colleges.
The biggest direct spending at Minnesota State Mankato is for ongoing maintenance and repair and new construction. Straka said that while larger construction firms from outside the region may get the bid on projects, they generally use a variety of local subcontractors.
The university also has a number of ongoing contracts that add up big. “We have a lot of refuse so that’s a big contract. There’s a lot of technology up here that needs to be serviced. There’s office supplies and many other things,” Straka said.
While many contracts are done statewide by MnSCU to save money, and others go to firms outside the Mankato region, many others stay local.
“The $2 million or less projects, we’re more likely to see local vendors. With the $20 million or $30 million projects, it’s more likely to be a bigger regional firm.”
In the last five years, Minnesota State Mankato spent about $50 million on construction and renovations, including the Leonard A. Ford Hall wing on Trafton Science Center, the Preska and Sears student housing complexes and major renovations in Centennial Student Union.
Major projects coming up include the imminent demolition of Gage tower dormitories and a planned $28 million clinical science building in 2014.
Straka said other things tied to the university also have an impact. The Small Business Development Center at Minnesota State Mankato, overseen by the state, served 373 local small business clients in 2011, leading to 22 new business starts and creating or retaining 523 jobs.
Events such as Vikings training camp boost the local hospitality industry.
And having 15,000 students brings lots of spending to the private sector.
“We have beds for 3,000 students. So that’s some 12,000 beds that students rent, supporting landlords and rentals,” Straka said.
“It’s a partnership. We wouldn’t be here as we are if the city wasn’t so great, and I think we’ve improved the city.”
The entire version of this story can be read in a print copy of the Mankato Free Press. Call the Mankato Free Press at 625-4451 or (800) 657-4662 to find out how to purchase a print copy. The Free Press also prints select stories online at www.mankatofreepress.com.