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Improving the business climate in Duluth

An aerial view of the Canal Park area of Downtown Duluth. (Clint Austin / / 2
Maurices and Duluth downtown Civic Center aerial. Bob King / rking@duluthnews.com2 / 2

It's no secret Duluth can be a cold place, in terms of the weather, anyway. But is the business environment as icy as our Decembers?

If you buy into the myriad rankings out there, maybe. But unlike the weather, there is the possibility of climate control at the local and state levels.

"There are many factors that make up a business climate, such as infrastructure, workforce, regulations and costs," said Beth Kadoun, vice president of tax and fiscal policy at the Minnesota Chamber of Commerce. "Minnesota typically ranks well on infrastructure and workforce so we need to continue to improve on those strengths. On the cost side, we rank among the highest business costs in the nation."

The Small Business and Entrepreneurship Council puts Minnesota at 47th on its policy index; the Tax Foundation ranks the state at 46th for business taxes. Wisconsin fared better on both lists, at 28th and 39th, respectively.

"We have heard from our business community that high business taxes are impeding their ability to grow their Minnesota operations, so we need to focus on reducing those high-cost areas," Kadoun said. "Especially in border communities, this cost differential can be extremely important for location decisions."

A less-reputable ranking, by the website WalletHub, recently pegged Duluth as the 1,171st best small city to start a business and Superior as 14th best based on business environment, access to resources and business costs.

That's good for Superior, though perhaps a red flag for Duluth. Instead of dwelling on problems, however, local business boosters The Northspan Group offered a suite of solutions for the city's workforce, properties, housing, business succession and access to capital when the News Tribune asked about correcting the business climate.

"Regional partners in economic and community development have taken a number of steps to proactively address them, but they're all works in progress," the group said.

For the workforce, it's all about attract, retain and train — the region's labor pool is declining and the need for new skills is increasing. Yet the burden isn't on employers alone, Northspan said, it's shared among workforce centers, schools and nonprofit or government agencies.

As far as starting, relocating or expanding businesses, the built or hard-to-build environment can make Duluth a difficult sell.

"The city has been a leader in its work with brownfields and adaptive reuse, and Duluth needs to continue to be creative as it thinks about how to modify existing spaces to suit the needs of businesses," the group said.

Mayor Emily Larson said in a statement the city has chased such solutions and has already seen success there: "We heard clearly from the Lincoln Park businesses about the need to repurpose prime but outdated properties and responded with a new gap financing program through the Duluth 1200 Fund Advance West Pilot to help cover some renovation costs."

The city is also hosting a business resources summit Tuesday morning at Clyde Iron Works that is meant to connect entrepreneurs with local programs and experts.

Northspan said the city also needs to "keep up the pressure" to build or convert more housing for the workforce, and business owners nearing retirement need to start thinking of how to transition the business into the next generation or new owners.

Access to venture capital and angel investors is also an issue for the Northland, removed as it is from bigger financial centers.

"Duluth has engaged lenders in the banking and economic development lender community, but has yet to fully harness the potential of start-up equity capital," Northspan said. "Building stronger investment networks will help new businesses get off the ground and reward the creative entrepreneurs who fuel local job growth."

New online equity platforms, such as MNstarter, can help Duluth connect to existing investment networks in the state.

Many of these business climate conundrums come up in cities across the country, especially those on state borders where one city, like Superior, might recognize tips as wages while another, like Duluth, may not.

But a very local issue that could face local employers is an earned safe and sick time policy, which a city work group is currently studying. Enacting such a policy, already in place in Minneapolis and St. Paul, would give workers a considerable new benefit in that most businesses would be required to provide paid time off. Some business groups are fighting the proposal tooth and nail.

"The Minnesota Chamber strongly believes that employers should determine the benefit offerings that suit the unique needs of their employees in their industry — and that government should not dictate these offerings," said Cam Winton, a policy director for the Minnesota Chamber of Commerce.

The state Chamber spends millions every year lobbying the Legislature, and this year the group got a bill passed that would bar cities from setting their own labor standards.

Gov. Mark Dayton has not said if he will sign the bill once the House and Senate agree to a final version.

Either way, there's no telling whether it would help Duluth's business ranking on some website.

Brooks Johnson

Brooks is an investigative/enterprise reporter and business columnist at the Duluth News Tribune.

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