Selling points-Fresh ideas, new attitudes may be the key to cultivating a prosperous future in Montana

When people think of Montana, they think of a fabulous getaway spot. They think of tall mountains, a vast, open sky and friendly people.

By JILL FITZSIMMONS Western Montana InBusiness – Missoulian

But what they don’t think of is a great place to start a business, or relocate one. Economic developers in the state have a huge task in front of them, but they aim to turn this way of thinking around.

“It isn’t that we have a bad reputation; it’s that we have no reputation,” said Joe McClure, executive director of the Big Sky Economic Development Authority in Billings.

For many companies, Montana isn’t even on the radar screen, said Dave Gibson, chief business officer for the Governor’s Office of Economic Opportunity. Most successful states have made efforts to get in front of businesses, while Montana hasn’t, Gibson said.

“We aren’t viewed as a place to do business,” agreed Dick King, executive director of the Missoula Area Economic Development Corporation.

State leaders are working hard to build a new and alluring reputation for Montana. Just off the third annual Montana Economic Development Summit, held in May in Billings, state business leaders took away from the event a renewed energy and excitement. Adding to that energy is the passage of several bills by the state Legislature this past session – including creating a primary work force-training program, extending the life of some economic-development programs and reducing income tax rates – that hopefully will spur development. Economic development, it seems, has pushed to the forefront in Montana.

“First we need to paint our door so people can see it and it doesn’t just blend in with the scenery,” McClure said.

But before painting a big “Open for Business” sign on Montana’s door, you have to know what companies are looking for when opening or relocating a business. The answers, experts said, vary, depending on the business.

It isn’t always one or two obvious things. In fact, sometimes you can’t even put your finger on it, McClure said. It may be crucial for a business to have a university nearby. It might be the owner needs something as simple as job options for a spouse.

Billings has been trying to make itself more attractive by putting money into projects such as bike trails. These are small, quality-of-life issues, but they are what many people look for when moving into town, McClure said.

It’s that quality-of-life issue that economic developers see as the state’s biggest selling point. As baby boomers retire, younger generations taking over the working world will be more focused on their lives outside the workplace, Gibson said.

“Those things are going to be more important in the future, not less,” he said.

And western Montana can give people what they are looking for. Missoula is a smaller community with a diverse population, a low crime rate, a university, quality schools and a great setting, King said. It’s a vibrant, active community with access to the outdoors, he said.

Drawing businesses based on quality-of-life issues also will draw attention to the fact that there is an outstanding work force here, the experts say. The area has an entrepreneurial spirit, said Tom Power, chairman of the University of Montana’s economic department. There is an incredibly high level of people who are self-employed while holding down another job. Missoula also has a highly skilled work force that isn’t being used. And, on the blue-collar side, people here work hard.

So, part of the trick for Montana, will be to draw attention both to the its quality-of-life issue and the work force issue, McClure said. The state cannot rely on quality-of-life issues alone, he said. “You can’t take a great scenery and put it on your plate and eat it,” he said.

This is where the list gets longer – naming what’s standing in Montana’s way when it comes to economic development.

For starters, companies want air travel they can rely on. While the Missoula airport transports people to six hubs, it can be inconvenient. Airfare is usually higher and people may be making a few transfers to get to their destinations, King said.

“That’s perceived as a barrier,” he said.

However, there won’t be any major growth in air transportation until the population grows, Gibson said. But Montana has good air transportation system for what it is – a diverse but sparsely populated state, he said.

One of the discussions that came up at the economic development summit was the lack of leadership in the state, said Tom Scott, chairman of the First Interstate BancSystem in Billings. To outsiders, we may appear to act like people not committed to the same goal, he said. Legislators didn’t get a whole lot done this past session because they couldn’t agree on much, he said. We need to get our act together and develop a goal we are all committed to achieving, Scott said.

Relationships between state government, the Montana University System and the private sector must become stronger for the economy to improve, Gibson agreed.

Montana also continues to receive what Gibson termed an unfair bashing over its tax structure. The Legislature fixed what he saw as the biggest problem at its last session, lowering the top individual income-tax rate of 11 percent to 6.9 percent. The lower rate should elevate Montana in various economic indexes, such as the Small Business Survival Committee rankings. That index now ranks Montana at 38th out of 50. Gibson expects the state to be elevated to 30th place.

Montana continues to be in the bottom third of many of the well-known indexes. While he won’t “live or die by these indexes,” Gibson knows companies use them as indicators of economic potential and growth. He would like to see the state move up to the middle ranks. He’d especially like to see Montana move up five spots – the state is at No. 45 – in the nation’s ranking of per capita income in the next 10 years.

“Could we be 40th? Yes. Are we going to be 30th in 10 years? No way. But in 20, sure,” Gibson said.

And while Montana now has an excellent work force, a shortage of workers is on the horizon for Montana, Gibson said. Although this is a national issue, it may be more pronounced here, he said. Simply put, Montana’s population is aging. The state has 25 percent to 30 percent fewer 25- to 35-year-olds than it does 45- to 55-year-olds, Gibson said. So, who’s going to replace those older workers once they retire?

Combine that with an unemployment rate that’s lower than the national average and Montana will have to prove to businesses that it has the employees available, Gibson said.

Montana also doesn’t have the money to compete with other states for economic development. States back east compete for business by building huge incentive programs. Montana’s investment in economic development is pretty small even when compared with nearby competitors, such as Wyoming and Idaho, King said. The state simply has a lack of resources, he said.

Just one example is Missoula’s business-incubator project, MonTEC. That project cost $4.6 million, of which $3 million came from two federal grants. While the state donated the land, not a nickel in cash came from the state, King said. By comparison, the University of Wyoming in Laramie is looking at building the same project. It is receiving $5 million from its state government, King said.

Because the state doesn’t have the dollars to compete with other states’ incentive programs, the answer to its problems isn’t recruitment. Rather, it should be the expansion and retention of the companies that exist now. Missoula has a good collection of locally owned businesses that should be focused on, King said.

“Those are the people we know are committed to Missoula,” he said.

If economic developers recruit someone from out of state, who’s to say another state won’t lure them away a year later, King asked. Expansion and retention isn’t as sexy as recruiting the big companies, but it has the support of the community, he said. The people of Montana have a reputation themselves of being against bringing large companies into a community. The future is in mid-sized and small businesses, King said. Montana is a place where those companies do very well, he said.

Real economic development doesn’t come from mega-projects, Power agreed; rather, he said, it’s homegrown and entrepreneurial-based. It’s tied to people wanting to live in a certain place and then making a small business work there, Power said.

Parachuting a large company into Montana will only create jobs for people migrating here. Whether that creates real economic vitality is unclear, Power said.
This is where the term “clustering” comes in. McClure calls clustering the new buzzword in economic development – and it’s a term he said he tries to avoid using. But, the concept behind the buzzword works, he said. Clustering is nothing more than getting similar businesses to work together, he said.

Clustering was a hot topic at May’s economic development summit. Gibson rolled out a condensed version of a $170,000 study outlining opportunities for growth in Montana’s economy. The study identified six core clusters and ways to build on them. The six are: wood-based products; agri-foods; tourism; creative and artistic businesses; and life sciences such as biotechnology and information technology. Clustering describes competing businesses that locate near each other to take advantage of assets, such as trained labor pools and suppliers.

Missoula has a real economic cluster in the medial technology and services area, Power said. That cluster wasn’t purposely created, but happened naturally; that’s how development trends take place, he said. Economic-development policy should enhance that sort of potential in a community, Power said.

Montana doesn’t want to compete with these other states that offer public services at prices that can be found in any third-world country, Power said. It doesn’t make sense, he added. It does make sense, however, to build upon what the community has now.

“I think it’s a much better idea than cruising the country, looking for a footloose manufacturing company,” Power said.

But perhaps more than anything else, Montana is known for its independent-minded people. Working together as businesses could cut against that grain, McClure said. And, the vast majority of the companies in Montana are small, entrepreneurial companies that are independent by nature, he said. So clustering is a new, possibly difficult, concept for them, he said.

Power maintains that Montana’s current economic-development state is brighter than most people think.

“Over the last decade, we’ve shown every sign of economic vitality that economic development types might wish for,” Power said.

Citizens should see that we’ve made significant growth, we’ve generate hundreds of thousands of jobs, the average pay is healthy and the state has moved in positive directions, Power said. We’ve ended up with a larger, low-paying economy, but that’s what an economist would expect when you push quantitative expansion of jobs, he said.

The state needs to focus more specifically on improving skills or expanding employment opportunities, he said. Real economic-development policy is focused on specific problems, not describing it as wages are too low, he said.

Overall, Montana is poised for growth, Gibson said. And he expects to see even more growth in Missoula. With the university, the environment of western Montana and the educational system, Missoula will continue to see more growth than the balance of the state, he said. Northwest Montana is just one huge area of opportunity, he said, and many people feel the state is on the cusp of something big.

“The trajectory we are on is a good one,” Gibson said. “Montana is going to be discovered, and I don’t think that’s a bad thing.”

http://www.mtinbusiness.com/current/business06.html