Harmony, Minn., will pay up to $12,000 for new residents

HARMONY, Minn. – In an empty, grassy lot bordered by cornfields stands a red sign: "Up to $12,000 CASH to Build in Harmony!"

This southeastern Minnesota city, population 1,020, wants you to live here. So much so that it will pay you $5,000 to $12,000 if you build a house.

Officials began the rebate after sorting the dozens of cities in the area's three counties by residents' median age and income. Tiny Harmony landed at the far ends of the 2013 data. Age: 51 years old, the highest. Household income: $32,985, the lowest.

After interviewing employers and families, officials learned that they were losing young professionals to other cities. The problem? Old homes that need work.

"The younger people coming here, they don't want to live in their grandmother's house," said Steve Cremer, president of Harmony Enterprises, which manufactures trash compactors and recycling equipment. Cremer estimates that 95 percent of his employees live outside of Harmony, in cities such as St. Charles, Rushford and Rochester.

Cities and counties, looking to boost property tax revenue, fill schools and rejuvenate Main Street businesses, have long tried creative ways to lure residents — with mixed results. In the 1980s, a few Minnesota towns gave away cash and groceries. Some have offered free residential lots to people who promise to build. This month, Watertown announced that to combat "sluggish new home starts," it would waive water, sewer and stormwater fees — a value of $9,500, the Carver County city said.

This new round of incentives speaks to small-town economic development officials' efforts to recruit people in addition to industry, sometimes family by family.

The view from Harmony's Main Avenue looks just fine. Storefronts are filled with restaurants, shops, Amish furniture stores. There's a law office, a corner hardware store, a bank. The JEM Movie Theatre's classic marquee advertises a first-run film, "How to Train Your Dragon 2." Prices are old-fashioned, though: $5 for adults.

Thanks to Amish communities nearby as well as a state park and trails, tourism is strong, said Chris Giesen, vice president of the Community and Economic Development Associates, the organization working with Harmony on the new rebates. "The question is: How do we diversify off that and get people to live here?"

Single-family houses on the market might cost $60,000 but then require $50,000 of work, said Christopher Skaalen, head of the Harmony Economic Development Authority. Meanwhile, he said, young professionals want move-in-ready homes.

"We do have homes like that, but they never go on the market," said Skaalen, president of First Southeast Bank. Instead, they're snapped up privately, without ever being listed.

Harmony's offer ranges from $5,000 to build a house worth $125,000 to $12,000 for a $250,000 home. The city boasts at least 15 lots that are "basically shovel-ready," priced around $14,000, Skaalen said. Lots with dilapidated, vacant homes could also qualify.

The program's $65,000 price tag comes from a tax-increment financing district that was decertified. The city expects that it will take five years to make a $12,000 reward back in property taxes.

Five years is too long, said Charles Marohn, a planner and president of Strong Towns, a nonprofit based in Brainerd, Minn. "That's five years of free services — snowplowing, police protection, fire protection — that everyone else in an otherwise really poor town is going to subsidize."

Young professionals are "not a group that is having difficulty finding homes right now," he added. "There is an excess of housing in this state in the $180,000 to $250,000 range.

"They're competing in a saturated market."

Harmony is eyeing Stewartville, a city of 5,900 just south of Rochester, which in 2013 began offering $5,000 to build a house or $7,500 to put up a commercial, industrial or multifamily residential building. More than a dozen people have taken advantage of the program, said William Schimmel Jr., the city administrator.

"It's worked — very much so," he said. "I know that some think, 'Oh, those folks were going to build anyway.' But we've seen new investment."

Harmony's population has stayed stable and its leaders aren't hoping to grow to Stewartville's size. But they wouldn't mind a little of Stewartville's youth. There, the median age is 34.

Harmony Enterprises employees gathered at noon on a recent Thursday to eat smoked pork chops and celebrate 400 days with no lost time.

These are people that Harmony wants to move in.

Chris Applen, 30, joined the engineering staff here more than three years ago and rented a place in town. He recently met with a real estate agent but because of student loan debt doesn't feel quite ready to buy. The rebate's got him thinking, though: "It's not too often you come across an opportunity where a city is willing to pay you," he said.

"Thirty-something isn't exactly the demographic for this town," Applen said. "I don't mind it."

He paused, then laughed. "It makes it tough to get married, but oh, well."

Jenna Ross • 612-673-7168