After years of cutting jobs and scaling back operations, Minnesota's big manufacturers have turned to a new method of building prosperity: bricks and mortar.
Company expansions are all the rage in Minnesota, where state officials estimate that 112 construction projects worth $800 million were underway or recently completed just through the third quarter. Of those, more than $500 million are by manufacturers such as 3M, Shutterfly, Toro, Proto Labs, Datacard, AGCO, Valspar and Viracon.
"There was definitely an increase from last year in the number of expansions we saw. And we still have a whole quarter to go," said Madeline Koch, spokeswoman for the Minnesota Department of Employment and Economic Development. Fourth-quarter expansions, renovations and relocations could bring in another $200 million when they're tallied, she said.
The new trend is a reversal from when commercial construction screeched to a halt during the recession. Many experts credit the change to the need for manufacturers to stay competitive and replace outdated facilities, and to generous state tax deals that are sometimes spawned by corporate threats to take business elsewhere.
Koch insists that the state's $108 million basket of economic development incentives helps Minnesota talk to growing companies and compete with other states vying for business.
But the overwhelming factor that makes companies choose Minnesota is "our well-educated and qualified workforce and our diverse and improving economy," Koch said.
Confidence and comfort
"We have an unemployment rate of just 4.6 percent. We recovered from the recession faster than other states, so companies feel confident and comfortable expanding and relocating here," Koch said.
Last month, Price Mechanical in Winnipeg announced that it will open a $4 million, 40-person research facility in Maple Grove for its customized heating, ventilation and air conditioning products.
Minnesota gave Price a $700,000 loan that is forgivable, provided that the company meets certain job creation targets at the 11,745-square-foot space.
Price Mechanical CEO Ron Hanlon said the company chose to expand in Minnesota after an extensive search in the United States and Canada. In the end, it came down to where he could find knowledgeable workers.
Workforce swung the deal
"We … settled on Minnesota due to the availability of engineering and technical workers as well as an innovative and productive workforce," he said.
Economists also credit expansions like Price's to good, old-fashioned optimism. A recent survey of U.S. factory managers revealed that the business outlook "has edged higher in each quarter in 2013, a feat made easier by the fact that we were grappling with the prospect of the fiscal cliff at this point last year," said Chad Moutray, chief economist with the National Association of Manufacturers. "As we move into 2014, manufacturing leaders anticipate mostly modest growth."
This summer, 3M broke ground on a $150 million research center in Maplewood, after securing state tax-increment finance agreements that lowered the sting of a rising property-tax assessment.
The massive structure will house 700 existing researchers and scientists and serve as a collaborative network for all of 3M's five business groups, officials said, noting that the project is a major investment in the United States. The lab building is one of the largest developments for Minnesota.
Job growth is a result
"We are thrilled to see this high level of expansion activity across the state," said Katie Clark Sieben, commissioner of the Department of Employment and Economic Development. "The diversity of investments highlights our state's ability to attract and grow businesses, which is contributing to job growth statewide."
Farther north, Magnetation Inc. began building its $120 million iron ore recovery facility over the summer. The building, Magnetation's fourth, is expected to be completed in 2015 near Coleraine.
Last month Olympus Surgical Technologies America started construction on its new $37 million research and manufacturing facility in Brooklyn Park. The building will house 265 existing workers from Maple Grove and another 100 newly created positions.
After a tough recession, Apogee's building-glassmaking subsidiary Viracon chose to build its $30 million plant expansion in Owatonna instead of Georgia.
To help swing the vote in Minnesota's direction, state, city and county officials offered a $4.9 million tax incentive package and helped move a highway via a $1.4 million infrastructure grant. Company officials said the expansion project was a smart choice since Viracon already had a major plant in Owatonna with experienced workers.
In September, Toro Co.'s CEO Mike Hoffman jumped on a backhoe and broke ground on a $25 million addition in Bloomington, after securing a $750,000 forgivable loan from the Minnesota Investment Fund. The loan requires the company to retain 900 jobs and add another 50.
State aid aside, Hoffman said Toro has long ties to the city of Bloomington and to Ryan Cos., which is building the addition. The expansion allows Toro to continue traditions started in 1952, when the firm first moved its R&D center to Bloomington. The site, which became Toro's headquarters in 1962, last underwent a major expansion in 1997.
"And now, we are investing [again] in our Bloomington facility to enable our businesses to continue to meet the needs of our customers," Hoffman said.
"With the anticipated growth of our business, ongoing product development and the addition of recent acquisitions taking us into new markets, this investment … will help position us for the future and reinforce our commitment to innovation, our customers and our employees."