Holy heck! LM Glasfiber explodes!
A couple of months ago, LM Glasfiber said it would expand employment at its Grand Forks plant from 320 to 450. This week, the company said it plans on expanding to 550. That's a whole lot of jobs in a very short time.
For a comparison, check out the Grand Forks Region Economic Development Corp.'s 2004 report on major employers. At 550, LM would be the city's biggest manufacturer by head count.
There's been a lot of discussion about economic development on this blog, accompanied by a lot of healthy skepticism. Some question whether this is the proper province of government, with most of the criticism directed at money-losing facilities such as Grand Forks' Alerus Center and East Grand Forks' Riverwalk Centre.
To me, those facilities are just economic development's sideshows. The main attractions are really employers like LM, Cirrus Design, SEI Information Technology, and Amazon.com, among others. Companies within primary sector industries -- meaning firms that export products and services outside their homd regions -- that pay a relatively high wage are what economic developers go after.
How those companies perform should be benchmarks for the state of economic development in Grand Forks, not how events centers and malls perform.
LM got its start in Grand Forks in 1999 when the EDC built, with city funding, an 84,000 square foot plant, which was then leased to the company. Back in March, the city decided to spend $2.65 million to renovate a section of the Amazon.com building, which the city owns, to turn it into factory space for LM. The city will soon be deciding whether to spend $2 million to renovate the rest of the space. LM would then lease the warehouse.
You could ask if LM would have come if the city hadn't built a plant for the company. I suspect the answer would be "no." Philosophically, you could say that government should let businesses decide where businesses go. Realistically, with other cities competing for the same companies, governments that are philosophically pure would be at a disadvantage against those that are pragmatic.
I have to admit, as a fan of economics, I tend to think that the economy operates most efficiently when it is free of distortions caused by government intervention. I suspect, though, that places like North Dakota would be empty of people if that policy were followed to the letter. And, broadly speaking, I'm keenly aware that a lot of innovation have come out of government efforts. After all, it was DARPA, a government research agency, that invented the Internet.
For a comparison, check out the Grand Forks Region Economic Development Corp.'s 2004 report on major employers. At 550, LM would be the city's biggest manufacturer by head count.
There's been a lot of discussion about economic development on this blog, accompanied by a lot of healthy skepticism. Some question whether this is the proper province of government, with most of the criticism directed at money-losing facilities such as Grand Forks' Alerus Center and East Grand Forks' Riverwalk Centre.
To me, those facilities are just economic development's sideshows. The main attractions are really employers like LM, Cirrus Design, SEI Information Technology, and Amazon.com, among others. Companies within primary sector industries -- meaning firms that export products and services outside their homd regions -- that pay a relatively high wage are what economic developers go after.
How those companies perform should be benchmarks for the state of economic development in Grand Forks, not how events centers and malls perform.
LM got its start in Grand Forks in 1999 when the EDC built, with city funding, an 84,000 square foot plant, which was then leased to the company. Back in March, the city decided to spend $2.65 million to renovate a section of the Amazon.com building, which the city owns, to turn it into factory space for LM. The city will soon be deciding whether to spend $2 million to renovate the rest of the space. LM would then lease the warehouse.
You could ask if LM would have come if the city hadn't built a plant for the company. I suspect the answer would be "no." Philosophically, you could say that government should let businesses decide where businesses go. Realistically, with other cities competing for the same companies, governments that are philosophically pure would be at a disadvantage against those that are pragmatic.
I have to admit, as a fan of economics, I tend to think that the economy operates most efficiently when it is free of distortions caused by government intervention. I suspect, though, that places like North Dakota would be empty of people if that policy were followed to the letter. And, broadly speaking, I'm keenly aware that a lot of innovation have come out of government efforts. After all, it was DARPA, a government research agency, that invented the Internet.
posted by Tu-Uyen at 1:45 AM
18 Comments:
Bravo for Grand Forks and LM! I do have to say I think in North Dakota it is vital for local governments to be involved with economic development. It's what drove Fargo to their size. The Alerus Center and other things are part of the "wow" factor to help lure people and businesses. Overall, the Alerus Center has proved itself to help the local economy. Congrats GF, keep growing!
Great to hear that Grand Forks will be getting more jobs, but I'm still a skeptic on this economic development stuff.
I see you mention Amazon.com, yet isn't that the company that ended up not coming to Grand Forks which left the city with some million or so dollars of real estate that was purchased that's not being used for anything?
I think these economic development things fail about as often as they work.
I think it's great that cities promote themselves to businesses to help attract themselves to the area. I'm just not so sure I like how tax dollars are spent on that promotion.
Being burnt in the past from a company's rapid growth, I have to be the wet blanket and say that sometimes, rapid hiring is not a good thing. I've seen it lead to the massive lay-offs, as companies are growing too quickly in size and not matching it with the strategy that needs to accompany the growth.
What would the naysayers have us do?
Does this mean that Amazon.com will no longer be occupying any part of the building? If so, this may mean bad new about the company staying in Grand Forks.
Amazon employs about 450-500 people in Grand Forks. From what I can tell they aren't going anywhere. Amazon really likes Grand Forks.
Hasn't Amazon been passively shopping around for new digs anyway?
Correct me if I'm wrong but, don't internet merchants only have to collect sales taxes on sales originating from their home state? In this case, all sales in N.D. So, essentially Grand Forks, and N.D., probably see very little $$$ from Amazon.
I'm not being critical, just asking. Personally I feel Economic Development in most cases is pure snake oil.
This is great that LM is expanding. Manufacturing can be good or bad, it just so happens that LM is in a growing industry and therefore is able to expand, but (sorry to be negative) one day their business will see a downturn, and so will our economy due to those jobs. There's also the other problem that the real money from these large manufacturing firms typically doesn't stay in our community as the owners and executives live and spend their money in a different town or even country in the case of LM. That is why EDCs cannot just focus in on one strategy, and Grand Forks seems to diversify pretty well through retail, service, and helping local entrepreneurs through various programs.
I'm with Dave here, I thought it went up in flames.
But to the second to last anonymous poster, there is rumors flying around that Amazon.com might be moving to downtown in the civic center.
So essentially, Amazon could move out of the industrial park and LM could expand into the rest of the building.
Anywho, congrats to LM expanding. I'm glad these type of companies stick around here.
I will grant you that there appear to be some success stories associated with government getting involved with economic development. There are also a lot of disappointing failures.
A success means there are some benefits on the periphery of the situation- Maybe an increase in the tax base (unless they give that away). Maybe some new jobs (unless they're McJobs). Maybe some spawning of "feeder" businesses, etc. But who has ever been able to quantify these benefits so that they can be balanced against the (very) direct losses that are incurred when some business comes in and then later goes belly-up? I mean losses like infrastructure expenses for these huge projects, purchasing land just to give it away, job losses and the following unemployment costs. Those losses are much easier to quantify, because they leave footprints behind them.
How many of our leaders that cheerlead economic development can say they understand these ramifications? If a business wants E.D. money, why can't they simply make their case to lending agencies or venture capitalists? Those people are in business to lend to other business, and will generally be able to discern if the business proposal is viable. If LM Glasfiber or Amazon or Canad or whatever or whoever wants money, can't they run with the big dogs and make their case to a lender?
I bet some of us would like a new car or truck, and maybe deserve a break on the interest, because, well, it would help the economy, especially for the car dealers. Why not establish a loan pool from sales tax money for us? What do you mean that doesn't make sense? What's the difference? Oh, the difference is being a big shot on the other guy's dime?
Hmmph. Naysayers.
Sorry about that headline, guys. It was late and I'd been out celebrating the upcoming wedding of two friends (one of them is former WDAZ weekend anchor Herryn Riendeau.).
A few points:
1) An anonymous reader noted that there is potential for a big lay off if things don't work out. I was careful to ask LM people that and they said they have not done so in three years in spite of slow downs related to the hold up on wind energy production tax credit legislation. So make of that what you will.
2) Rob wisely pointed out that economic development dollars also got us into that whole fiasco with the giant Amazon.com distribution center that never came. I suppose that's an example of what not to do. Just like any tool, economic development can be abused.
It's interesting to note though that a lot of money that went towards the purchase of the Amazon.com land was really federal flood aid. Given the use it or lose it nature of that money, I've heard it speculated that the reason the City Council made the decision it did was because it didn't want to give back the money. Now we have the land available forever.
3) Some readers noted that Amazon.com sales taxes and LM company profits don't stay in Grand Forks. (Actually, I pay sales taxes on Amazon.com purchases so, no, that's not true.)
The point of economic development, as I understand it, is to generate employment and property taxes. That's a huge amount of money that stays in town. Many companies also do business with locals. I don't think it was out of state people that built the factory, for instance.
Back in my college days, I took a lot of classes on international political economy -- that's one of my majors -- and there's an argument to be made that it doesn't matter where the companies are based but where they have plants. Where do they expend capital? Where do they put their investments? Whose workers do they employ and do they improve the skills of that work force? Let's say LM folds one day, are the skilled work force it employs now able to migrate to another employer or industry?
We live in an era of increasing mobility of capital (money) and corporations (LM is Danish). Even the work force is mobile. The challenge for cities and other polities is to provide an environment where companies want to do business and workers want to stay. That's why you hear Grand Forks city leaders debate about being "business friendly" and about "quality of life."
Naturally, as with anything, there is the right way to do these things and the wrong way.
Hey Tu-Uyen,
Sorry to go a little off topic but, can you point me towards the Herald article that showed how many millions of flood recovery dollars the city was accused of spending inappropriately please? It read like the Feds were comin' after lil' ol' Grand Forks bigtime, but then backed off.
The reality is...citizens across America would be flabergasted to hear that their tax $'s were spent on dirt in N.D. (amongst other questionable purposes) during the days when .com companies were milkin' dreamers like the G.F. City Council.
Also...regarding L&M, making fiberglass wind power propellers is skilled labor?
Whistler: The sales tax is charged depending on where the buyer lives so North Dakota wouldn't have an advantage.
Anonymous: Yes, making wind turbine blades is skilled labor. You can't take some schmo off the street and put him to the task. It takes training and patience. I don't know first hand but I've seen them work. It ain't robots making these things.
The reality is...citizens across America would be flabergasted to hear that their tax $'s were spent on dirt in N.D.
This money is not related to the money the city had to pay back. The Amazon.com land was purchased with community development block grant funds, I believe, and we can spend it however we want. Other communities that get CDBG do the same so there won't be any complaints.
The pay back thing you mentioned has to do with money used to repair flood damage. The feds contend that some of the damage that was repaired was not caused by flooding but by other factors. There was a lot of chaos in those days and I think it's understandable the city and its contractors might have messed up. City officials say one fed guy would OK a project only for it to be questioned by another fed guy.
Oh yes, your story request. Old stories aren't in the regular archives. I'm afraid I'd have to direct you to Newslibrary.com, the archive company we use, or, for cheap, www.odin.nodak.edu. That's the library's Web site. It has free databases.
Thanks, I'm familiar with newslibrary.com.
I hear you on the Feds mis-steps after the flood. The flood damage assesment of my home had new hardwood floors AND carpeting. Because that's what we all do riiigght? Install and finish beautiful hardwood floors, and then quickly carpet over them.
It's funny lookin' back now.
This is kind of off-topic from LM Glasfiber and from the whiners/complainers, but:
There may be a silver lining in Northwest's announcement that it will be contracting out its ground crews at GFK (not good news to GFK ground crews). Other airlines resist coming into new markets for a one or two flights daily unless there is contract ground crews already available. With a contract ground crew that could presumably service all airlines, the costs for a new airline to enter the GFK market decrease due to no fixed costs (full-time employees vs. contract labor).
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