In Thief River Falls, jobs boom brings problems, too

THIEF RIVER FALLS, Minn. – Fifty miles northeast of Grand Forks, N.D., where the wind screams in off the Red River Valley, a town known for building snowmobiles is leading a jobs recovery in a corner of Minnesota where work otherwise has been drying up.

With the rise of a quiet giant called Digi-Key Corp. and a recent lift from the resilient Arctic Cat, Thief River Falls, population 8,500, has become a little fount of economic growth.

Employment in Pennington County — which includes Thief River and the villages of Goodridge and St. Hilaire — has grown four times as quickly as the population since 2000, adding 1,857 jobs but only 490 people.

"It's a little success story in rural America, and we're just chugging along," said James Retka, dean of workforce and economic development at Northland Community & Technical College. "The dilemma of this city is, does it want to grow? It's a good problem to have, but like any good problem, there's issues."

Employment in the county rose 20.7 percent from 2000 to 2011, the second-fastest rate in the state. Every neighboring county lost jobs except Beltrami, where the gain was 2.2 percent.

Among the results is a housing shortage that the city and its two dominant corporate citizens have yet to solve.

"You can't rent a shoe box," said Maryel Anderson, owner of Anderson Realty. "You can't rent storage for your things even if you can find a place to bunk."

That has prevented more rapid growth in the workforce; both companies are expanding in other places — such as Fargo, N.D., and St. Cloud.

School district voters narrowly approved a $54 million bond referendum in 2011 for a new elementary school and renovations to the high school to help attract more families, and Digi-Key plans to bus in workers from Crookston, more than 40 miles to the southwest.

"We almost, as a community, have been too successful in creating jobs," said Mark Larson, president of Digi-Key.

Thief River Falls straddles the Red Lake River where the Thief River joins it from the north. The surrounding farmland is too far east for the sugar beets that dominate the Red River Valley and too far west for the forest that stretches from Bemidji to Lake Superior. Farmers there grow mostly wheat, soybeans, hay and oats.

Each May, people hang the blue cross of Norway on flagpoles next to the Stars and Stripes in honor of Norwegian independence.

Arctic Cat occupies a long metal factory on the southwest edge of town. Digi-Key is next door, in a concrete box of a building that used to be Arctic's "head shed," before a 1981 bankruptcy.

Most of the new jobs are at Digi-Key, which sells electronic parts for things such as smartphones, electric cars, LED lights and medical devices. With 840,000 parts in a packed warehouse snaked with conveyor belts, the firm can turn an Internet order into a cardboard box on a FedEx truck in as few as 17 minutes.

Twenty years ago, the company sold mostly to design engineers and hobbyists. Sales have surged since it jumped on e-commerce in the mid-1990s, then started selling to manufacturers who want to make limited runs of a product.

"It's got lots of parts, maybe 400 different parts," said Larson, who has managed Digi-Key since 1976. "They can come to us and say, 'I need 40,000 of each of these parts,' and we can deliver it pretty much off the shelf."

Ten years ago, 1,247 people worked there. Today, the number is 2,600. The starting wage in the warehouse or on the phones is $13.68 per hour and the health benefits are remarkably good — no premiums and minimal co-pays and deductibles for singles and a nominal premium for families.

UPS and FedEx both charter nightly flights from Thief River's tiny airport to hubs in Louisville, Ky., and Memphis, and trucks roll back and forth to Fargo and the Twin Cities, carrying cables, switches, transistors, capacitors, sensors, resistors.

Jim Hagert, a pilot who commutes about 275 miles to Thief River from Olivia, Minn., has made the flight to Louisville with a plane full of boxes so many times he's memorized the landscape from 39,000 feet. On clear nights, he can see Grand Rapids across Lake Michigan, pick out the black ribbon of the Mississippi River or the lights of Lambeau Field. "I've never seen Detroit," he admitted. "You can see St. Louis, you can see Des Moines."

Digi-Key needs to hire up to 400 people this year, while Arctic Cat is hiring 75. Minnesota companies to the north such as Marvin Windows in Warroad, Polaris in Roseau, Central Boiler in Greenbush and Mattracks in Karlstad all have signaled that they need to hire people, which is good for a struggling region but doesn't help with labor scarcity.

"Not just on the plant side, but even on the management side, whether it's IT or finance, right across the board, there are only so many people up here," said Claude Jordan, CEO of Arctic Cat.

Arctic Cat's employment in Thief River has grown from 1,100 to 1,300 in the past five years. But recruitment is the reason the company's headquarters are in Plymouth. It also now has an engine factory in St. Cloud.

"As we continue to grow and stress the capabilities we have here, there's no doubt that we'll have to look at are we able to meet all the needs of the business," Jordan said. "I don't see us moving to Mexico, I can tell you that."

Demand for housing

Employees hired from out of town have trouble finding homes, and the city has struggled both to attract developers and approve development that residents won't oppose.

Financing apartment projects got more difficult after the financial crisis, said Mike Moore, the city's community development director. Also, Digi-Key lacks Arctic Cat's name recognition, while Arctic Cat lacks Digi-Key's record of stability, he said. That combination has been troubling to potential investors.

A deal for 41 apartments on the south side of town is moving forward, but several projects have died in planning. Because the city would prefer not to raise property taxes to extend sewer lines and roads, the apartments that have been proposed are close to existing homes, said Moore.

Petitions against such projects have been successful, and one deal is stalled because a landowner who wants a single-family home development sued the city to stop it from rezoning nearby land for apartments.

Shane Zutz, principal of Lincoln High School, knows the number for the switchboard at Digi-Key by heart. The company now provides one-fourth of the jobs in the county, so plenty of parents work there.

He sees the school's bonding-funded improvements as a workforce strategy. The high school and middle school are being overhauled. Next year, every student in the district will have a school-issued tablet or laptop.

"Our facilities now are being upgraded, and they really needed it," Zutz said.

The city has two global companies, but it's remote, and small. Better schools can help attract the necessary talent, he said.

Still, there are questions about whether the community can adapt quickly enough. Already, Digi-Key is expanding a fulfillment center in Fargo, a choice the company attributed to rising income taxes in Minnesota as well as the need for nearby housing.

That scares Anderson, the real estate agent.

"I think it's a sign that we're past reacting to this housing thing. We kind of missed the boat," Anderson said. "If you know anybody who wants to build housing, send them our way."

Adam Belz • 612-673-4405 Twitter: @adambelz