[Senate Hearing 107-339]
[From the U.S. Government Publishing Office]
S. Hrg. 107-339
REVITALIZING RURAL AMERICA:
WHAT CAN THE FEDERAL GOVERNMENT
DO TO PROMOTE SMALL BUSINESS
GROWTH AND DEVELOPMENT IN
RURAL COMMUNITIES?
=======================================================================
FIELD HEARING
BEFORE THE
COMMITTEE ON SMALL BUSINESS AND ENTREPRENEURSHIP
UNITED STATES SENATE
ONE HUNDRED SEVENTH CONGRESS
FIRST SESSION
__________
AUGUST 16, 2001
__________
Printed for the Committee on Small Business and Entrepreneurship
Available via the World Wide Web: http://www.access.gpo.gov/congress/
senate
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COMMITTEE ON SMALL BUSINESS AND ENTREPRENEURSHIP
ONE HUNDRED SEVENTH CONGRESS
----------
JOHN F. KERRY, Massachusetts, Chairman
CARL LEVIN, Michigan CHRISTOPHER S. BOND, Missouri
TOM HARKIN, Iowa CONRAD BURNS, Montana
JOSEPH I. LIEBERMAN, Connecticut ROBERT F. BENNETT, Utah
PAUL D. WELLSTONE, Minnesota OLYMPIA J. SNOWE, Maine
MAX CLELAND, Georgia MICHAEL ENZI, Wyoming
MARY LANDRIEU, Louisiana PETER G. FITZGERALD, Illinois
JOHN EDWARDS, North Carolina MIKE CRAPO, Idaho
MARIA CANTWELL, Washington GEORGE ALLEN, Virginia
JEAN CARNAHAN, Missouri JOHN ENSIGN, Nevada
Patricia R. Forbes, Democratic Staff Director and Chief Counsel
Emilia DiSanto, Republican Staff Director
Paul H. Cooksey, Republican Chief Counsel
C O N T E N T S
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Opening Statements
Page
Wellstone, The Honorable Paul D., a United States Senator from
Minnesota...................................................... 2
Witness Testimony
Meyer, The Honorable Larry, Mayor, St. Cloud, MN................. 1
Kittleson, The Honorable Paul, Mayor, Benson, MN................. 7
Daum, Edward, director, Minnesota District Office, U.S. Small
Business Administration, Minneapolis, MN....................... 11
Wallace, Prince, president, AquaCare, International, Inc., Maple
Grove, MN...................................................... 18
Hasskamp, Dave, director, Aitkin County Growth, Inc., Aitkin, MN. 38
Bouta, Dean, general manager, Bennett Office Technologies, and
chairman, KandiLink, Willmar, MN............................... 55
Struck, Renae, director of Human Resources, EMR Innovations, St.
Cloud, MN...................................................... 60
Stewart, Bonnie, director, Minnesota Women's Business Center,
Fosston, MN.................................................... 65
Spang, William, president and chief executive officer, Mountain
Iron First State Bank, Mountain Iron, MN....................... 71
Phillips, Mark, president, Iron Range Ventures, Virginia, MN..... 76
Matthews, Mary, president, Northeast Entrepreneur Fund, Inc.,
Virginia, MN................................................... 81
Alphabetical Listing and Appendix Material Submitted
Bouta, Dean
Testimony...................................................... 55
Prepared statement............................................. 57
Daum Edward
Testimony...................................................... 11
Prepared statement............................................. 13
Hasskamp, Dave
Testimony...................................................... 38
Letters........................................................ 40
Kittleson, The Honorable Paul
Testimony...................................................... 7
Prepared statement............................................. 9
Matthews, Mary
Testimony...................................................... 81
Prepared statement............................................. 84
Phillips, Mark
Testimony...................................................... 76
Prepared statement............................................. 79
Spang, William
Testimony...................................................... 71
Prepared statement............................................. 74
Stewart, Bonnie
Testimony...................................................... 65
Prepared statement............................................. 68
Struck, Renae
Testimony...................................................... 60
Prepared statement............................................. 63
Wallace, Prince
Testimony...................................................... 18
Prepared statement............................................. 20
Appendix Material.............................................. 112
Wellstone, The Honorable Paul D.
Opening statement.............................................. 2
Prepared statement............................................. 5
Comments for the Record
Harvey, Keith D., chairman of the board; Spraag, Cheryl,
president & CEO, Virginia/Gilbert Mountain Iron Area Chamber of
Commerce, Mountain Iron, MN, letter............................ 108
Mercil, Steven, CEO, Minnesota Investment Network Corporations,
St. Paul, MN, prepared testimony............................... 110
Wallace, Prince, data prepared by Bruce P. Corrie, Ph.D.,
Concordia University, St. Paul, MN............................. 112
REVITALIZING RURAL AMERICA: WHAT CAN THE FEDERAL GOVERNMENT DO TO
PROMOTE SMALL BUSINESS GROWTH AND DEVELOPMENT IN RURAL COMMUNITIES?
----------
THURSDAY, AUGUST 16, 2001
United States Senate,
Committee on Small Business and Entrepreneurship,
Washington, D.C.
The Committee met, pursuant to notice, at 10:21 a.m., at
the St. Cloud City Council Chambers, St. Cloud, Minnesota, the
Honorable Paul D. Wellstone, presiding.
Present: Senator Wellstone.
OPENING STATEMENT OF THE HONORABLE LARRY MEYER, MAYOR, ST.
CLOUD, MINNESOTA
Mayor Meyer. Hi. I am Mayor Larry Meyer, and welcome to St.
Cloud. We are going to get started here just a little bit late.
I want to welcome you to our city, and we are going to adjust
that mic there a little bit, thank you very much. You are
sitting in the old Central School gymnasium. The city of St.
Cloud bought this building from the school district sometime
ago, so if you felt like you were ready to participate in a
basketball game, that is because you are sitting in the first
childproof bleachers manufactured in the State of Minnesota,
about 1930 sometime. We just put carpet over the top of them.
But they were poured concrete, and they were very difficult to
get out of there, as we found out when we removed them from the
other site and put the City Mayor's office in.
But like many of you in rural Minnesota, you know how far
you have got to stretch a buck to make things go, and we all
know that business is the lifeblood of our communities in
outstate Minnesota. St. Cloud has certainly some advantages
that many of your communities don't that are out further from
the Metro area. Certainly St. Cloud, as many communities have
benefited, for instance, with new technology, better telecom
resources, better technology, has allowed location not to
matter as much as it did before in business development. But we
still need the Federal Government's help in so many ways, and
as Senator Wellstone knows, St. Cloud is always lurking in the
halls out there in Washington, either us or with our lobbyists,
because the resources they have are so important, so critical
for us, particularly in the area of transportation. For us,
that always seems the No. 1 concern: better roads, better
highways, better interchanges, and, of course, our airport.
Many of you, I realize, have other issues, and we will be
sharing those with the Senator and others today.
So, Senator Wellstone--and I also want to recognize
Representative Schumacher and Representative Opatz--thank you
so much for coming and being here with us today, and I hope you
have a very productive day here in St. Cloud.
OPENING STATEMENT OF THE HONORABLE PAUL D. WELLSTONE, A UNITED
STATES SENATOR FROM MINNESOTA
Senator Wellstone. Thank you.
[Applause.]
Senator Wellstone. I want to thank Representative Opatz. I
also want to say, you all may have very busy schedules, but if
you are going to be here at all for any length of time, please
come up here with me. I feel funny with you being out there.
Please join me.
Mr. Opatz. I am State Representative Joe Opatz,
representing St. Cloud and Sauk Rapids, and I also want to
welcome all of you here in our community, and also a strong
thank you to Senator Wellstone and the Committee for your
willingness to come out here and hear some of the difficult
issues that we are facing in outstate Minnesota, and lend my
support as a State legislator to say that addressing some of
these issues as we see a changing economy, whether it is health
care or schools or small businesses, needs to be a partnership
between the Federal Government and the assistance of the
Senate, the State Legislature, as well as individual
communities like St. Cloud and many other communities that are
here today.
So welcome to St. Cloud, and I look forward to an
interesting and thoughtful agenda, and I also want to recognize
Leslie Schumacher, and maybe she would like to join--
Senator Wellstone. I would love it. Please.
Ms. Schumacher. Well, I too want to welcome everyone here.
I am glad I was able to come this morning. I had a little bit
of short notice, having been on vacation, but I think this is
critical to bring these issues to the forefront, and being on
the Policy Committee for the agricultural and rural development
issues in the State of Minnesota, I am happy to be here, and
anxious to hear the testimony and thoughts and forward thinking
that is going to come out of today's meeting. So thank you all
for being here today.
Senator Wellstone. Thank you, Representative Schumacher.
Let me thank Joe and Leslie for their remarks, and Larry, as
well. Let me just recognize very briefly a few people, and then
we are going to go right to the hearing, and I am going to be
uncharacteristically brief. I know that brings a smile to some
of your faces, but I am going to--because there is a lot of
really good testimony, and I realize yesterday we had a
gathering, and it was not a formal committee hearing, but just
a gathering with the small business community, and I could not
believe the number of people that turned out and the number of
people who wanted to speak and had things to say and great
contributions to make. So I am going to try to move this along.
I know John DaSilva has joined us from Senator Kerry's staff on
the Small Business Committee and he is going to help keep
everybody on track. Perry Lange from my staff came out here
from Washington, D.C. Perry is a person who does work in the
small business community. Connie Lewis is--I am not going to do
justice to everybody--the Director of my Minnesota office out
here, works a lot on small business issues. And then Toni
Merdan from Colin Peterson's office. Toni, thank you so much.
Come up here. No, I am serious, please come up. Come up here.
Colleen Landkamer is a Blue Earth County Commissioner. Colleen,
please join us up here. I am serious, I would like you to.
The other thing I just want to say is, I see Art here, and
I see Joe and others. I would like to thank some of the
veterans that are here. Your medical facility is extremely
important to the veterans community, and the veterans community
in St. Cloud and West Central Minnesota I think has a voice of
great dignity, so my thanks to all of you for being here.
Before we get started, I want to thank Brian and David, who
are the interpreters. They wanted to also say something before
we get going.
Interpreter. We just wanted to check if there are any deaf
individuals in the audience who need interpreting services?
Anyone? We will wait for a while to make sure.
Senator Wellstone. Well, what I would suggest, if you do
not mind interpreting, that would be great. I am very pleased
that you are here, and I do not think there is any way to ever
have a formal hearing without interpreters, so thank you for
being here.
With that, the Committee is going to come to order, and let
me call the first panel. As you are coming up, I will make my
1-minute worth of remarks. Paul Kittelson, Mayor of Benson. You
know what? I have got a lot to say about everybody, and maybe
what I will do is just be as brief as I can. Instrumental in
building a new fire hall, new ambulance facility, new water
tower, and also recently Benson has been selected as the site
of the Fibrominn generating plant. Ed Daum, who is head of the
Minnesota SBA office since 1987. I said this yesterday. I
believe that he--and you can think I am being quite the
politician here--I think he is the best district director in
the United States. We have the most successful programs in our
State because of Ed Daum. Ed Daum will be coming up. Prince
Wallace, who is originally from Nassau, Bahamas. He came to the
United States as a student of St. John's University--I think we
all know where St. John's is, am I correct?--and currently owns
three businesses in Minnesota, one in the Twin Cities, and then
two others. I guess there were more, am I correct? Is that
right?
Mr. Wallace. Yes.
Senator Wellstone. Prince also joined us yesterday, as
well. For my own part, I think I could go on and on. I think I
will just make two points. One I made earlier as some of us
were talking. I am convinced this is the best way for me to
summarize the total of my viewpoint about this hearing and
about why it is important. Every 2 weeks, I try to be in a
school. Usually it is high schools, and all too often in
Greater Minnesota I will talk to students, and they will say to
me that they have heard the following advice which Sheila and I
gave to our children when we were all growing up and who have
children themselves: the ticket to getting ahead is getting an
education. But in Greater Minnesota, in too many communities in
Greater Minnesota, the translation of that is, ``so you can get
out of this community, because there is nothing here.'' Colleen
is nodding her head. That makes no sense whatsoever. For my own
part, I put emphasis on the three E's: education,
entrepreneurship, and empowerment. The empowerment piece, by
the way, is when young people, and not such young people,
decide, listen, what happens in this community is not
independent of what we do. For young people to want to stay in
our communities in Greater Minnesota, they have to answer the
following two questions in the affirmative. First question: Can
I afford to live in this community? If I am farming, can I get
a decent price? If I am working, can I find a good-wage job?
And if I want to be an entrepreneur, can I grow a business
successfully? Then the second people ask: Do I want to live in
the community? That means quality-of-life issues. All of those
issues that have to do with good schools and good health care
or good public transportation, or affordable housing, or
affordable child care are not just urban issues. In many ways,
they are even more vitally important in Greater Minnesota. So
to me, this hearing is all about our future.
My final point, I would rather that the men and women who
make the capital investment decisions that determine whether or
not there are going to be businesses and jobs in our
communities, live in our communities, and know the people in
our communities, and care about our communities, than those
decisions be made by a group of people over martinis halfway
across the world. We are much more interested in our own
homegrown economies, in our own business people, in our own
self-reliant, self-sufficient communities, and that is what I
think this hearing is about.
[The prepared statement of Senator Wellstone follows:]
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Senator Wellstone. With that, we will move forward and
start out with Mayor Kittelson. Thank you for joining us,
Mayor.
STATEMENT OF PAUL KITTELSON, MAYOR, BENSON, MINNESOTA
Mr. Kittelson. Senator Wellstone, staff, and guests, I am
thankful for the opportunity to speak to the health of our
rural communities. There is much that is good about our rural
lifestyle. My experience is that people from all over the
United States cherish the work ethic of their rural populace.
There is a reason for this, and it has to do with lifestyle, a
sense of community, a sense of family, responsibility and
personal pride.
In our community, like many others, many of those who have
retired from work in the metropolitan areas come out to our
towns to retire. They are tired of the hustle and bustle of the
cities, and they want a quieter lifestyle. We are continuing to
try and meet their needs. We try to have senior housing that
will fit the various economic needs. We have an extensive
public transit system. We try to keep a hospital going. I think
we have done a wonderful job making our community senior-
friendly, and we will continue to try harder.
We, in our rural communities, try to stimulate and attract
businesses, not only for our economic health but also to keep
our young families at the center of attention. In order to keep
a healthy rural area, we must have young families, and in order
to have young families, there must be opportunities for them,
either in agriculture or business and industry. It behooves us
to try to make our rural areas strong so some of those same
values I spoke of continue and, for that matter, ensure that
there is a workforce available.
It is difficult for us to attract businesses for a variety
of reasons. They are not necessarily graded in order, but the
first one is, of course, transportation. Many of us are not on
the interstate system, and depending on the various highways
and byways throughout the State, transporting goods and
materials often is not cost effective. Benson was selected to
be the site of the Fibrominn project. It is a $110 million
project. We happen to be in the center of one thing the
metropolitans do not have--turkey litter. This will be the
first poultry-burning, electricity-producing plant in the
United States, and it will be the biggest in the world. We will
have hundreds, if not thousands, of people visiting that plant
from everywhere in the world. Are they going to fly into
Minneapolis--St. Paul and drive to Benson? I am sure they would
prefer to fly to our town. We have a 4,000-foot runway, and
many on our airport commission feel we ought to have a 4,500-
to 5,000-foot runway. Where do we get the money to build it? I
believe improved highways and expanded airports will benefit
the rural areas.
Communications. I spoke to our biggest employer in the city
of Benson, and I asked him: Of all of the points we are talking
about, which one is most important? He said communications, the
Internet system, that is No. 1. Some say that businesses would
relocate in rural communities if they were on the electronic
highway, and I think I agree. Large telephone providers haven't
to this point found it economically feasible to provide it. We
have a few cable companies providing broad band services over
fiber, but most of the State still operates on a 56K modem
connected to a telephone line. It is slow, and almost
prehistoric. Until the Government insists on equal access for
all communities, there is going to be this disparity and little
opportunity. It seems to me that there are a multitude of
businesses that could operate more efficiently in small town
USA if they had full and fast Internet capabilities.
Finances. Most of our communities operate on a relatively
small budget. Our residents want streets, water, sewer, police
protection, electricity, fire department, parks, a library, et
cetera. When it comes to budgeting for all of this, there is
very little left for development. The only thing we, in our
rural communities, had going for us was tax increment
financing. Some politicians, mostly from large tax capacity
districts, want to end this one tool we have had. I believe it
was used wisely in most cases, and it appears that tool is
disappearing.
There seems to be some thought that the rural areas take
care of themselves. This is an area filled disproportionately
with retired folks, lower-paying jobs, a rural way of life that
is in flux, and they seem to tell us, if you want the things
that other citizens have, you are going to have to dig deeper.
You have problems, figure them out.
Our aging population is growing disproportionately in the
rural areas of the country for obvious reasons. We in Benson,
Minnesota, try to keep a hospital going with Medicare paying 54
percent of the costs. This outmoded system pays us the least,
larger cities in the State more, and other States in the United
States much more. The hospital is needed in our town. We have
had to ask the taxpayers for money to keep it going.
Along with the aging, we have the problem with the young
people, how to get the best education possible in a declining
enrollment era. Good schools and medical services are necessary
to afford any business or industry for relocation.
At this particular point, I would like to commend Senator
Wellstone. I am talking to the converted. He has backed bills,
Senate bills 885, 830, 9776, 706, all of which help our rural
hospitals.
I do not think most of us want to see our rural communities
dry up and blow away. I do not believe this is good for our
large cities or for America. I do not have the solution, but my
sense is that improving transportation, giving everybody equal
access to the Internet, making moneys available for business
start-ups and relocation, and equalizing the Medicare payments
will go a long way toward helping solve the problems of our
communities.
The farm economy is also basic to us, because for all
intents and purposes, our communities do not end at city
limits, but they extend for miles around us. I see the things
that are being done for Third World countries and wonder: Can
we expect less?
I believe that if we focus on the problems and muster the
tools available to us, as well as initiate others that may be
needed, we can solve the problems of rural Minnesota and
America. I for one am willing to help find any solution any way
I can.
Thank you very much.
[The prepared statement of Mr. Kittelson follows:]
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Senator Wellstone. Thank you, Mayor.
Ed Daum.
STATEMENT OF EDWARD DAUM, DIRECTOR, MINNESOTA DISTRICT OFFICE,
UNITED STATES SMALL BUSINESS ADMINISTRATION, MINNEAPOLIS,
MINNESOTA
Mr. Daum. Thank you, Senator. Thank you, Senator, for
inviting me to testify on behalf of the U.S. Small Business
Administration on our role in rural economic development. SBA
is beginning a new era, with a new Administration in the White
House and a newly confirmed Administrator, Hector Barreto. Our
new Administrator is a small business person, and understands
the problems and issues that concern small business owners. Mr.
Barreto wants to ensure that SBA is meeting the needs of its
customers, the 25-million plus small businesses throughout the
country. SBA will be working on innovative new ways to meet
small business community needs, including those located in
rural areas.
SBA's initiative is to help people get into business and
stay in business, and we accomplish this through a variety of
programs and working with many resource partners. One of the
newest programs is the New Markets Venture Capital Program.
This is designed to combine venture capital in low-income rural
and urban areas. Nationally, seven companies were approved
during the first round of applications, and there will be
another request for more companies to be a part of this program
in late spring of 2002.
SBA recognizes regulatory compliance is a major concern for
small businesses. To address this, SBA has established working
relationships with each of the Federal agencies, and this is a
high priority for our new Administrator.
SBA's financial assistance programs cover a wide range of
business needs. They include microloans for very small start-up
businesses with loans up to $35,000. In Minnesota, we have six
active microlenders; four of those are located in rural areas.
SBA has provided $5 million in loan funds and almost $4 million
in technical assistance grants.
Then the SBA Certified Development Company program, this
program is specifically for the purchase of plant and
equipment. Over $63 million in loans were made in fiscal year
2000.
The 7(a) loan program, which is a loan guarantee program,
over $234 million in guaranteed loans were made in fiscal year
2000.
Small Business Investment Companies invest in small
businesses during their growth stages. Over $66 million was
invested by SBICs in Minnesota in fiscal year 2000.
Like the finance programs, SBA has several partners that
deliver the management assistance programs. Minnesota is very
fortunate to have a business partner such as SCORE. It is an
all-volunteer organization that conducts management assistance
workshops, provides counseling and training for small
businesses. We currently have 510 SCORE members statewide.
Fourteen SCORE offices are located outside the Twin City metro
area, and three are located within the metro area.
The Small Business Development Centers are another very
important resource for the SBA in program delivery. The SBDCs
provide counseling and technical assistance. They are located
in 17 different sites throughout Minnesota. Fifteen are located
outside the metro area, and two are located within the metro
area.
The SBA sponsors two Women's Business Centers in Minnesota.
These centers specifically provide women-owned businesses with
management and technical assistance. One is located in rural
Minnesota and one within the metro area.
In the area of Federal procurement, the SBA has several
roles, including helping small businesses get Government
contracts. One program is the HUBZone program. It provides
Federal contracting opportunities for qualified small
businesses located in distressed rural and urban areas. As for
outreach programs, for those that have computer access, SBA's
web site and the online classroom is available 24 hours a day.
The SBA web site, www.sba.gov, brings SBA into your home or
office at the touch of your keyboard.
Well, thank you for inviting me here today, and a special
thank you to Senator Wellstone who has been such a very strong
advocate of small business in Minnesota and as a member of the
Senate Committee on Small Business and Entrepreneurship.
[The prepared statement of Mr. Daum follows:]
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Senator Wellstone. Thank you very much.
Mr. Prince Wallace.
STATEMENT OF PRINCE WALLACE, PRESIDENT, AQUACARE INTERNATIONAL,
INC., MAPLE GROVE, MINNESOTA
Mr. Wallace. Thank you, Senator Wellstone, staff, and
guests. My name is Prince Wallace. Originally I came from the
Bahamas to attend St. John's University, fell in love with
Minnesota and its people, and here I am today.
As a small business person, I find myself in a unique
position, being a minority business owner, as well as a rural
business owner, and the fact that my wife runs one of our
companies as a woman-owned business.
My rural entrepreneurship experience has come largely
through West Central Environmental Consultants. We are a small
company in Morris, Minnesota. However, credit should be given
to the four individuals, the founders who created this entity,
to meet the environmental needs of rural Minnesota. In
addition, it provided the opportunity for talented students
graduating from the University of Minnesota--Morris to work and
live in a rural community. Today, West Central employs
approximately 40 employees.
In addition to my entrepreneurial business experience, I
was fortunate to be a part of the Minnesota Rural
Entrepreneurship Academy, which was created through a unique
partnership between the Ewing Marion Kauffman Foundation and
its Center for Entrepreneurial Leadership and Minnesota Rural
Partners. Its mission is to build and support a vital rural
Minnesota. Minnesota was selected, along with three other
States, to receive the Kauffman technical assistance grant. The
purpose of the grant and the goal of the academy were to
identify challenges to rural entrepreneurs and discuss and
recommend potential solutions. Attached is a final report from
the Minnesota Rural Entrepreneurship Academy.\1\
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\1\ This report is located on page 25.
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Why is rural entrepreneurship development vital in our
State? Even though the Twin Cities has experienced tremendous
growth and economic prosperity, and manufacturing services and
trade make up over 50 percent of our State's gross State
product, Minnesota's economy is still dependent on agriculture.
However, Minnesota's agricultural economy is changing
drastically, and this change will no doubt have profound
effects on our rural communities.
In order to achieve economies of scale, farms, crops, and
livestock are becoming larger. This trend will eventually
eliminate the small family farms. The question then becomes,
where will these families go, and what will they do? Hopefully,
we, as a society, will have the vision and the will to reinvest
back into our rural communities so that these same families who
are being uprooted will experience a new entrepreneurial
renaissance. The prime example where we as a society have
invested in our society that I would like for us to recall is
as follows:
After World War II, the United States embarked on what I
would consider a new economic investment strategy. It is called
the GI bill. This large-scale investment into the education of
our young people is one of the main reasons the United States
is what it is today--strong, and the most powerful Nation on
Earth. We need to do the same for our rural communities.
The Minnesota Rural Entrepreneurship Academy Report spells
out in detail what the issues are and their solutions. The four
areas of significant challenges are capital, technical
assistance, infrastructure, and culture and education. However,
as a small business person who has experience in the Twin
Cities, as well as in rural Minnesota, the most important of
the four areas is the need for access to capital. I was
fortunate to have time to spend with Senator Wellstone and a
group of other minority businesses, and I guarantee you that
the most resounding No. 1 issue was access to capital.
I would like to talk now about a new look at the farm, and
this is somewhat controversial, and that is, I would say, the
21st century look at the farm. The typical view of a farm today
is that it produces large-scale crop or livestock. This view
needs to change, and view the farm as any other asset on the
balance sheet, where one is always questioning how to make this
asset produce more. Farming in the 21st century needs to be
viewed as an entity which can generate many sources of revenue
on a continual 24-hour basis. For example, a 2,600-sow
operation's main source of revenue is to generate piglets. What
about other sources of revenue, such as manure waste converted
to gas that can generate electricity, fuel to power machinery,
including automobiles, solids converted to fertilizer to
enhance our dying--and I would like to emphasize dying--soils;
and liquid fertilizer to grow specialty crops hydro-
ponically, such as strawberries, tomatoes, lettuces, et cetera.
There is some additional information I would like to add in
terms of minority businesses in rural Minnesota. Bruce Corrie
stated yesterday, it is probably one of Minnesota's best-kept
secrets, in the sense that in rural Minnesota, minority and
American Indian businesses are growing. And so I can also make
this part of the record.
Senator Wellstone. Absolutely. Thank you.
Mr. Wallace. Thank you.
[The prepared statement of Mr. Wallace follows:]
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Senator Wellstone. Thank you very much, Mr. Wallace. What I
am going to do, I mentioned this to Colleen and Leslie, and to
everyone up here, what I am going to do is rather than ask
questions, there is a really good turnout here today, and I
want people to have a chance to speak. So rather than asking
questions, I think we won't do that. We will listen to
everybody on the panel, and then open it up for discussion and
do it that way.
The quickest observations, when Prince Wallace talked about
access to capital, we in the other room had talked--and, again,
we won't make this the focus of the hearing, but for those of
you, either vendors of the small business community, how many
of you are aware of the fact that there is a proposal now to
increase the fees in the 7(a) program? How many of you are
aware of that? OK. Well, some.
I mention that, because those of you who raised your hand,
you know why I asked the question. I think one of the things we
want to make sure of--this can be a strong message from
Minnesota. I do not hear any complaints about the 7(a) program
from borrowers or lenders, so this is critically important,
access to capital, and we want to be sure we maintain the
funding for that program.
Then, Paul, the only thing I want to add to what you have
said is I have been interested in the last few years in a real
coalition in working on this, and I am determined to get it
either in the ag bill or the workforce development bill. I
think there is a tremendous potential.
Joe, you will probably focus on this, as well. As long as
the information technology businesses are doing well, we have
to worry some about where the economy is going. I am convinced
for Greater Minnesota there is a real potential for many people
to telework from their home or from a satellite office. And,
you know, if the companies say we need people, people can work
for a company in the Twin Cities or a company halfway across
the world, and if these companies are looking for people with
good work ethic, and they are looking for people who are
interested in this, we have it. But we are not going to do it
if this digital divide is here. I was remiss in not mentioning
the importance of that technology and that infrastructure, and
thanks for pinpointing that, because that is a critical,
critical issue.
The only other thing--I could go on and on, but going back
to what Mr. Wallace said again, and when you were talking about
family farm, the two things that occurred to me about the 21st
century, one is that I think part of the decline of some family
farmers has been the inevitability of a stacked deck. I think
it has been policies that have been far more weighted toward
larger operations and conglomerate sources than the family farm
operation, that is, the person who lives on the land and works
on the land.
But what you said about diversification, in the Farm bill
that comes out of the Senate, I guarantee you that there is
going to be an energy section that is going to deal with the
potential of renewable energy, wind technology, small business,
clean alternative fuels, much of which comes from Minnesota.
Biodiesel, ethanol, you name it. The other thing is there is
going to be much more of an emphasis on conservation and
actually giving people credits and incentives for what they are
doing with the land in production, above and beyond the
Conservation Reserve Program. I think, frankly, that will be
all for the better, in terms of the kind of agriculture we
want.
Well, why don't we--let me just thank you. I have questions
and I think other people do also. Can we wait and do that, go
through everybody? Thank you so much for your testimony.
Let me call up the second panel, Barriers to Small Business
Growth. Dean Bouta, general manager of Better Office
Technologies, which provide Internet services to the Willmar
area. Again, I am not giving you all the proper introduction,
but Dave Hasskamp is the director of the Aitkin Growth Alliance
since 1987. Renae Struck is the director of Human Resources of
EMR Innovations, which is a small business here in St. Cloud,
and Bonnie Stewart is co-founder and director of People
Connection, Incorporated, and the Women's Business Center in
Fosston, Minnesota.
Dean, can we start with you? I will wait for everybody to
get that--OK. We will go from Dean to Dave to Renae, and to
Bonnie.
STATEMENT OF DAVE HASSKAMP, DIRECTOR, AITKIN COUNTY GROWTH,
INC., AITKIN, MINNESOTA
Mr. Hasskamp. My name is Dave Hasskamp. I am from Aitkin,
Minnesota. Please excuse my voice, it is going away. I have
been fighting it for a long time. It is wearing out. But thank
you for asking me here, Paul.
Senator Wellstone. Well, you have done great work.
Mr. Hasskamp. Well, I do not have a prepared statement that
I can refer to, but I have kind of lived this life for the last
16, 18 years, and I think I can--I could go on until tomorrow
about the things that I think we could do to improve our rural
communities. You are absolutely right, Paul, when you talk
about what rural communities need. Everything, absolutely
everything that is wrong in rural America has to do with
access. Whether it is transportation, workforce,
telecommunications, workplaces, hospitals, structure,
everything that is wrong is about access.
I am from Aitkin County. Aitkin County is known to be the
poorest place in the State since 1857 when we were organized.
There is no money in Aitkin County. It is pretty simple. But
there is a way to grow out of that problem. We do not have to
continue to be the poorest place in the State of Minnesota.
Today we are the third fastest growing county in Minnesota, but
the problem there still is access. The only way that we could
grow Aitkin, Minnesota, was for our community to own and
operate its tools for economic development.
We hear about SBA programs, but they are all operated from
somewhere else. The bankers in our community do not have people
on staff who do SBA forms, who apply for SBA loans. If we want
to do that, we have to go to a distant community and find a
Small Business Development Center at a college. The person we
work with may be great, but they have no ownership in our
community, and so it is not as important, it is not as critical
to the service providers that jobs in Aitkin, Minnesota, create
development evolve.
When we first started doing this, the old regional
Government centers are still in place throughout the United
States. We are part of the Arrowhead. Five miles to the west is
the county line, and we could have been a part of the St. Cloud
district, Brainerd district, but we are going to be positioned
poorly--we are on the edge of the range, on the edge of the
Arrowhead district. All of the tools were owned more central to
the range and the Arrowhead district. Why should we believe
that some young guy in a suit and tie can drive from Duluth to
Aitkin, Minnesota, a remote, deserted place to drive through,
get to Aitkin and be excited about creating a few jobs as I am?
They may have to be pinched on the way a couple of times,
because there is nobody on the highway. But I am supposed to
excite that guy and access cash from those people to make my
projects work in Aitkin, Minnesota. It just absolutely cannot
work.
So communities across the United States have got to have
their own tools for development. Otherwise, I tell people
often, it is like having your car broken in rural Aitkin and
all of the wrenches are in St. Paul or Washington. You cannot
fix it. You have got to do something to bring those tools to
the small communities that want to grow that--that do not want
to be the poorest place in the world. It is a long, hard
struggle, but you have to do it. You must have local ownership.
In Aitkin, our schools population was declining, like every
place else in northeastern Minnesota, and today we are the only
place in northeastern Minnesota that has an increase in the
population. We have young people who can have babies to fill
our schools, working in jobs. Our problem now is access to the
next level.
North of town, just a few miles, we have a power company
that has a huge fiberoptic cable running by our community, but
we do not have access to it. It is like living on a super
highway without an off or an on ramp. You cannot get to it. It
is there, but you cannot get to it. We have created a lot of, I
call, without any disrespect, grunt kind of jobs, probably
about 500 to 650 new jobs in manufacturing during the last 15
years. That has caused a lot of other things to happen
throughout the area and our community. We have a business
incubator. But we have to take it now to a new level, and the
new level has to be attractive to those more educated people,
or more sophisticated, more professional group of people, so
then we can really build diversity into our economy, not just
have jobs available for the run-of-the-mill population. We have
to be attractive to those who want more. We need access to do
that. So we need your continued support to do that.
Not too long ago, I read in the paper $181 million
appropriated in SBA funding, and the description that followed
was absolutely my community: to be used in the poor places of
the State to generate. I guarantee you, none of those dollars
have found their way into Aitkin County yet. They are all
controlled from someplace else.
[The prepared testimony and letter of Mr. Hasskamp
follows:]
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Senator Wellstone. I thank you. One of the things I think
would be interesting is for you and Ed Daum to talk, because I
think Ed is philosophically where you are. But I think you have
extremely important testimony. Thank you.
Dean, we will turn to you.
STATEMENT OF DEAN BOUTA, GENERAL MANAGER, BENNETT OFFICE
TECHNOLOGIES, AND CHAIRMAN, KANDILINK, WILLMAR, MINNESOTA
Mr. Bouta. Thank you for allowing me to testify here today.
I am here to talk about the aspect of technology and
telecommunications. I am here representing two areas: small
business and a telecommunications advocacy group.
I am the general manager of an office technology service
provider and Internet service provider in Willmar, Minnesota.
Our company works with many small businesses in West Central
Minnesota, providing office and technology tools that are
needed to run their business. This includes providing them with
the data connectivity internally and externally for their own
data communications, and high-speed Internet connectivity. So
we see firsthand that our business and as well as our
customers' businesses experience many roadblocks in rural
America in the area of telecommunications and technology.
I am also Chairman of KandiLink, which is a
telecommunications and technology advocacy group, in Kandiyohi
County. Our group was started about 3 years ago by local
business owners and community leaders who were concerned about
technology in our rural area. Our focus has been to work with
local businesses to educate them about technology services that
are available to them, and also educate the technology vendors
about area businesses' technology needs. You know, with a
consolidated effort, we have shown that there are unmet
telecommunications needs in rural Minnesota. Vendors, who are
becoming aware of these needs, are starting to bring some new
competition to the local market.
But one of the largest roadblocks that we see for small
businesses in rural America is the issue of LATA, which is the
Local Access and Transport Area boundaries that were
established in 1984 due to antitrust breakup of AT&T. This was
to encourage competition in the long-distance market, and
thereby preventing the RBOCs, which is the Regional Bell
Operating Companies, which is Qwest in our area, from providing
long-distance services. For an RBOC to move customer wireline-
based telephone traffic into a different LATA, it must be
passed off to a third party long-distance carrier, which
results in additional charges, which are eventually paid by the
customer.
With the current LATAs in Minnesota--and this is throughout
the country--it can oftentimes triple the cost of data circuits
for a business to connect across LATA boundaries. The Telcos
are required to pass the circuit off to a long-distance
carrier, when oftentimes the local Telcos could have handled
that traffic. This restricts affordable circuits from outstate
Minnesota connecting to the metro Twin Cities area, also to
other parts of the State, and even connectivity within counties
themselves. Counties like Renville County happen to have three
LATAs in one county. An example that I heard is the library
system in southeastern Minnesota has a connection through a
grant from Rochester to Owatonna and Rochester to Red Wing. The
Rochester to Owatonna is in one LATA, and their circuit charges
for the year are $4,200. When they connect Rochester to Red
Wing, it crosses a LATA, and their initial bid for that was
$37,000; it is about the same distance. They got a real deal
for $22,000. That is just an example.
But this restricts small business owners and entrepreneurs
from expanding to rural America. We locally see many instances
of small manufacturing firms, banks, insurance agencies,
accounting firms, medical clinics and hospitals that could
expand or share resources in neighboring communities, but
because of these costs of telecommunications, they are
reluctant. This is especially evident with firms that have home
offices in the Twin Cities metro area and would like to expand
to rural Minnesota to tap into our workforce and lack of
congestion. They cannot always justify the cost of high-speed
connectivity to rural Minnesota when they are located in
different LATAs.
Some of the positives of high-speed connectivity in rural
America are the ability for medical facilities to provide fast
diagnostics through data communications, eliminating the need
to transport personnel.
In 1996, the Telecommunications Act attempted to help this
situation by allowing more competition and allowing the RBOCs
the opportunity to reenter the long-distance business. The
competition has helped some in bringing new vendors to the
area, but the issue of data circuit costs between LATAs has not
improved.
LATAs were created at a time when main revenue for Telcos
was long-distance charges for voice traffic, and this is still
the case. But times now have changed, and data circuits are
needed in rural America, and everyone expects to pay more for
voice traffic between LATAs, but to have the same restrictions
as on the high-speed data traffic impedes business growth and
restricts competition.
Another roadblock is the issue of redundancy, which at
times is maybe more of a State issue, but, for example, in
Willmar, all of our traffic goes up one line between Willmar
and St. Cloud, and so when that line is cut, we lose
connectivity to the outside world. This does not encourage
companies to expand out here, because more and more is
dependent on the e-commerce activity.
Finally, in most rural areas of the country, the largest
employer and users of telecommunication are Federal, State, and
local governments. These include municipal hospitals and
educational facilities. What hurts the rural economy the most
is services are not provided by local vendors to these
entities. Often, local vendors could provide these services at
less cost, and the remaining business customer base that is
left after you take those away do not entice vendors to invest
in additional services that would benefit other local
businesses.
So, in conclusion, the LATA issue in regards to data
circuits and data circuit redundancy and a lack of public
entity telecommunication customers is inhibiting the local
economic development.
[The prepared statement of Mr. Bouta follows:]
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Senator Wellstone. Wow. I tell you, I need to learn more.
Thank you for your testimony. I have to be honest, there are
some parts of what you said that I need to grasp better. We are
going to move on.
Jim is here, and please come down. I really would love it
if you would. What we are going to do is, rather than ask a lot
of questions, we are going to wait until the end, we are going
to have three panels open up for discussion, people are going
to ask questions, make comments. Please join us, seriously, and
please come down.
Renae.
STATEMENT OF RENAE STRUCK, DIRECTOR OF HUMAN RESOURCE, EMR
INNOVATIONS, ST. CLOUD, MINNESOTA
Ms. Struck. My comments will focus on workforce
development, particularly for the small business in the rural
community. As a human resources professional, I would like to
focus my comments in three areas.
First is the training of the workers of the future. We need
to continue building partnerships between schools and
businesses to assure programs are developed and students are
encouraged to pursue areas of job development. Too often,
students consider only jobs they have had contact with, either
in their community or through the media. Students need to be
encouraged to broaden their horizons on how many different
types of jobs are out in the work world.
One program that had recent success here in the St. Cloud
area was called ``Outreach to Schools.'' This program placed
college interns in eight different high schools. These interns
worked in the high school career placement office on a daily
basis, up to 12 hours each week. The focus of their one-on-one
interactions or group presentations to the students involved
use of the Internet for post-
secondary planning, including finding a college or a career.
This program was sponsored by the St. Cloud WorkForce Job
Service through the State Minnesota Youth Program funds.
We need to continue to look for ways to connect with high
school students early in their high school years as sophomores
or juniors rather than wait until their senior year. With
cutbacks in education, many educators and counselors are
swamped. The intern in this program allowed students to focus
on career development issues that could otherwise be
overlooked. This is one example of a low-cost program that has
seen early success. It would be great to continue this program
and develop similar programs to connect students with available
jobs and careers.
We also need to focus on training for that dislocated
worker: those individuals who are laid off from their jobs.
When one loses their job through no fault of their own,
unemployment provides a partial weekly wage for up to 6 months.
However, the Federal programs that previously provided funding
for the incumbent workers have been drastically reduced. The
benefits of retraining a dislocated worker so he or she can
become a productive, tax-paying citizen are obvious.
Secondly, I belief that workforce development in the rural
areas must be tied to housing. There must be housing strategies
to provide an affordable place of residence for workers. There
have been numerous businesses in rural areas that have
experienced a direct impact over lack of affordable housing.
They have had a situation of having viable jobs that could not
be staffed because the worker could not find affordable
housing. Recently, the St. Cloud HRA approved a program which
will develop low-cost housing in the St. Cloud area. Although I
am not personally familiar with what type of Federal assistance
is currently available or has been provided in the past, this
continues to be an issue which must be addressed for additional
workforce development to occur.
The final area I would like to touch on is the FUTA Tax--
the distribution of this dedicated tax for the purpose for
which it was intended--which is funding the public employment
system. Each business pays the Federal Unemployment Tax of $56
per employee each year. These dedicated funds are to support
unemployment insurance and public employment service. However,
even though the annual amount paid by businesses has increased
over the years, the return to the States from the public
employment system has consistently been low. In Minnesota,
under 50 percent of the dollars paid into the system are
returned to the State. In 1998, Minnesota employers paid $132
million in FUTA taxes, with only $56.3 million returned to fund
services to employers. Nationally in 1998, employers paid $6.5
billion to this dedicated fund. Only $3.4 billion, or 52
percent, was returned to the States for the purpose for which
it was intended. I think all businesses like to see reduced
Government spending; however, this is a case where the money
paid by employers has not been reduced, only the benefits
returned have been reduced.
This is important for workforce development because a small
business needs a resource for a multitude of employment-related
issues. A small business does not have a full-time human
resources person dedicated to employment, benefits, training,
compensation and the numerous laws related to employment. In
the past, the local Job Service office, now called the local
WorkForce Center, has served as that needed resource for many
small businesses, particularly in the rural areas. The
WorkForce Center Job Service is funded by the FUTA taxes.
As an example, time and money has been spent to develop
America's Job Bank, and locally Minnesota's Job Bank. This has
provided an automated system for both those searching for
employment, also for the small business employer. It allows the
employer to both post an available job and also search for
candidates independently. Many small businesses are unaware of
this system or are unfamiliar with how to utilize it. The
WorkForce Center has been that resource. Additionally,
WorkForce Centers sponsor, or co-sponsor, employer educational
sessions on unemployment, lawful hiring, employment law, and a
variety of other topics. The WorkForce Centers sponsor, or co-
sponsor, Job Fairs across our State. In the fall of 2000, the
St. Cloud Area Job Fair hosted 120 employers and was attended
by over 2000 individual job seekers. Additionally, the
WorkForce Centers sponsor special job fairs in situations of
plant closure in small communities, such as one recently held
in Willmar following the closing of the AGCO plant, which left
270 individuals unemployed.
These services and many more have already been paid for by
the employer through their FUTA taxes. However, with budgets
that have been reduced steadily for the past 20 years,
employers are being shortchanged on their return from their
FUTA taxes. I would like to see a change in the Federal
Government policy and a release of all FUTA tax dollars
available. Employers have paid this dedicated tax, and they
deserve to receive the dollars back through services at the
local public employment service, known as the Workforce Center.
I thank you, Senator Wellstone, and the Committee on Small
Business and Entrepreneurship for allowing me to provide my
comments on the topic of Workforce Development.
[The prepared statement of Ms. Struck follows:]
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Senator Wellstone. I think what you are saying is that
people want their money's worth. Eventually when we throw this
open for discussion for everyone, we will make this a giant
seminar with lots of people speaking. I want to go back to the
high school students, especially those that are going on to
higher ed, and the connections we can make, you know, with the
training and the work that they are doing. Quite often they
have the idea that they will get a job, you know, but the job
is not necessarily related to where eventually they are
heading, and I think we can do a much better job of
apprenticeships at that age level.
Bonnie.
STATEMENT OF BONNIE STEWART, DIRECTOR, MINNESOTA WOMEN'S
BUSINESS CENTER, FOSSTON, MINNESOTA
Ms. Stewart. My name is Bonnie Stewart. I am director of
the Minnesota Women's Business Center, which is in Fosston,
Minnesota. We serve a 13-county region in northwest Minnesota.
Fosston, for those of you who do not know, is 200 miles
northwest of St. Cloud.
I want to thank you, Senator, and the Small Business
Committee for inviting me to be here today. I want to thank the
City of St. Cloud for hosting this hearing. As a former St.
Cloud resident, I love to come back here.
Senator Wellstone. This is a beautiful place. It really is.
Ms. Stewart. I moved back to Minnesota, my home State, in
1986 from another State, and I also moved back to my home town,
the main reason being a rural community seemed like a great
place to raise a family, and it has been. But in the past 15
years, I have been involved in a wide range of economic and
community development programs and activities throughout the
region, and I have witnessed a dramatic change in business in
northwest Minnesota. In addition to my activities with the
Minnesota Women's Business Center, I am also a member of the
Northwest Minnesota Health Care Alliance, and I serve on the
Northwest Minnesota Telework Partnership, and I am also a small
business owner. So those are the four components that are
focusing on my issues, the development issues that I believe
impact small businesses.
No. 1 is the loss of our family farms; they are vanishing
at a dramatic rate. The global market has created a universal
food market, providing competition for local small farmers from
places as far away as Africa, South America, Russia and places
beyond. Due to the lower prices created by these markets, farm
families are forced to subsidize their production by looking
for jobs in their communities. Some of these farm families are
also starting their own businesses. Also, the next generation
of farm families does not see farming as a viable economic
opportunity.
Another issue is underemployment. New jobs in rural areas
are dominated by low-wage industries, resulting in
underemployed workers who often seek higher-paying jobs in
metro areas.
Poverty. Poverty remains persistent in rural areas.
Business development can be a viable economic option for rural
families, but only after the issues of poverty are addressed.
Health care. The quality, availability, and affordability
of health care services for small business owners, their
employees, and families are eroding while costs are escalating.
Telecommunications. In addition to the knowledge of how to
use it, small businesses must have access to broad band
capacity.
These issues and others impact clients of the Minnesota
Women's Business Center, and I am going to focus now on
business development issues that pertain to women.
In 1989, the Small Business Administration established the
Office of Women's Business Ownership and through congressional
funding was able to launch the pilot project that formed six
Women's Business Centers across the country.
In the past 12 years, continued growth in this funding
source has enabled over 90 Women's Business Centers to be
operating across America, and I believe it is through this
program of empowering women business owners, along with other
public and private investment, that has created a vast impact
to our economy. For example, from 1987 to 2000, the number of
women-owned firms more than doubled, from 4.5 million to more
than 10 million businesses. In 1997, revenues from women-led
firms reached $818 billion. That is up 33 percent from 1992.
Jobs created by women-owned firms reached 27 million in 1999.
That is up from 9 million in 1996.
So even though women have showed measurable success as
entrepreneurs, we still have some issues that need to be
addressed. These include access to bank financing and venture
capital. Women-owned businesses currently receive only 4 to 6
percent of all venture capital invested, while more than 40
percent of new businesses are started by women.
Networking. Rural communities have a sparse network of
other businesses doing the same thing. This results in fewer
mentors for aspiring women entrepreneurs.
Education. We need to educate women-owned businesses with
the critical knowledge needed to take advantage of financial
opportunity and growth.
Visibility. The impact of women business owners is
underrepresented in the business media, business teachings, and
policy groups.
As previously mentioned, we are funded through the Small
Business Administration Office of Women's Business Ownership.
It is our mission through the Women's Business Center Program
to empower women to become economically self-sufficient through
entrepreneurship. We need to focus on the issues that include
increasing education to our local vendors. They need to be
aware of and be able to manage SBA and other statewide and
regional funding resources. Educating women business owners on
capital investment, and try to bring investment networks to
rural areas. Increasing mentoring opportunities and leadership
development. Expand training offerings, create awareness of
women business success, advocate for affordable health care for
all small businesses, and to promote business growth
opportunities through technology, and this includes telework,
community technology centers, and adequate training and access.
Successful business development growth in rural areas
relies on partnerships between agencies, local, State and
Federal units of government, and the private sector. In
Minnesota, we do have strong partnerships and alliances that
have been formed, and they are working, but we must continue to
be acutely aware of the barriers that we face.
Thank you very much.
[The prepared statement of Ms. Stewart follows:]
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Senator Wellstone. Thank you. I will tell everyone that is
here--because we are going to the last panel of the session--
listening to you speak, I have got like 20 questions, and it is
frustrating, but I still think the next thing is to go to the
next panel. I understand. We will go to the next panel, and
then we will open it up for discussion for everyone. Thank you
so much. It was just superb testimony.
By the way, those that are here in discussion, any
questions that people have or any comments for 10 more days, if
you get them to us in the next 10 days, we will just make it
part of the written record.
OK. We will move to William Spang, who is the president/CEO
of Mountain Iron Bank and also chair of the Minnesota Business
Finance Corporation. Mark Phillips is the president of Iron
Range Ventures, and vice president of Northeast Ventures. Then
Mary Matthews. Since 1989, Mary has been the president of
Northeast Entrepreneur Fund. Again, much more can be said about
each of you, but I want to just get to your testimony. If we
could start with you, William, that would be great.
STATEMENT OF WILLIAM SPANG, PRESIDENT AND CHIEF EXECUTIVE
OFFICER, MOUNTAIN IRON FIRST STATE BANK, MOUNTAIN IRON,
MINNESOTA
Mr. Spang. Thank you, Senator. Our bank is in rural
northeastern Minnesota. We are located in four communities. All
of the populations are under 2,000 people. We are a small
business as a bank.
Our bank is currently involved with the SBA utilizing both
the 7(a) and 504 programs. Additionally, we work with the USDA
Rural Development, the Bureau of Indian Affairs, and many other
local and regional economic development programs. Our bank is
located on the Iron Range, which has seen the economic roller
coaster ride over the past decades. Most recently, our area has
been hit with the devastation of the LTV Mining Company
closure, which has cost our area 1,400 jobs, due in part, if
not entirely, to the importing or dumping, if you will, of
foreign steel.
Our area experienced a depression 15 years ago, as well,
when the steel industry was virtually shut down. This time
period saw massive unemployment, depressed real estate prices,
and the exodus of over 15,000 people. Although economic
conditions eventually improved, the permanent jobs that were
lost never returned, and our area, much like other rural
America, saw a loss of population that would never return.
The good to come of this time period was a surge of
entrepreneurialism and the recognized need to diversify our
economy. I often say, I would rather have 10 dimes than a
dollar, because if I lose a dime, I still have nine more. These
dimes, if you will, represent small business. In spite of the
recognition given to the giants such as General Motors or
General Electric, small business is the backbone of our
country.
Small business provides jobs and stability to our rural
communities. But in order for small business to succeed, they
will need access to capital. Since most people starting or
expanding a business are not wealthy, they need to borrow
money. As a banker, this is where I come in. However, when I
loan money, it is not my money; it belongs to the depositors of
my bank. I am therefore entrusted with a fiduciary
responsibility to minimize risk. Inherently, there is more risk
associated with small business, and even more so with a start-
up business, for success is yet to be proven. But consider how
many major firms in the United States started off this very
same way.
The SBA, through both its guarantee and debenture program,
provides mitigation to higher-risk commercial borrowing. As
mentioned earlier, much of small business is in rural areas
which are typically served by locally-owned community banks,
which, incidentally, are also small hometown businesses. Small
banks lack the vast networking the super regional banks may
have, thus lending issues often come into play. Again, both the
7(a) and the 504 programs provide avenues where capacity of the
local lender is increased, and thus total access to capital
remains local and ensures spinoff jobs as well.
I hope I have pointed out a brief outline of the benefits
provided to rural Americans with the SBA. Now to look at some
of the impacts of the potential cuts in these programs. Besides
being a banker, I am also currently chairman of the board of
the Minnesota Business Finance Corporation. We are a 501(c)(3)
corporation and a certified development company for SBA 504
loans. We are one of seven development companies in the State
of Minnesota, and our territory is all non-metro, with the
exception of St. Cloud and the Duluth markets. Our company
currently administers 458 small business loans representing
total outstandings of $117,045,735. Considering these are
subordinated second mortgages, it is safe to conclude that the
participating banks carry a like amount, which brings the total
impact to over $250 million, and we are one of seven counties
in the State of Minnesota. These are all small businesses.
Again, 10 dimes rather than a dollar, this capital outlay
represents hundreds of jobs, productivity, and wealth
generation in our smaller communities. The elimination or
reduction to this access to capital would be every bit and more
devastating than the closure of a major steel plant. Let's also
consider the impact to our local schools and municipalities,
the State, and the Nation. These small businesses pay taxes,
and the people who work for small business pay taxes. When you
consider this, funding for the SBA programs becomes an
investment, and the dollars leveraged by this investment are
returned many times over.
Investment in small business is a good investment for
America, and just like my bank, the local hardware store, or
the U.S. Senate, sufficient staffing is needed to make the
program run smooth and efficient. If we are committed to
investing and reaping the rewards of small business, sufficient
staffing will be needed going forward.
As I said earlier, typically small business lacks
substantial capital. One alternative to funding the programs is
by increasing fees to the small business borrowers. At the time
when they are borrowing, they can at least afford to pay the
additional fees. Are we not better off to enhance the ability
to be successful in their more vulnerable years by reducing the
fees with the thought that these folks will repay many times
over with the taxes from their success?
In closing, the SBA is not corporate welfare, as I
sometimes hear. It is an investment in America. As the term
``investment'' implies, a return is expected. We have seen a
return, let us not throw a good thing away.
[The prepared statement of Mr. Spang follows:]
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Senator Wellstone. Thank you, Mr. Spang. I am especially
appreciative of the fact that you did zero in on the 7(a) and
504, and I think that one of the things that you at least
implied, if you were not explicit about, is that not only are
small businesses not likely to get access to this kind of
capital through the banks in general without these programs,
but I think as we see the downturn in the economy, even less
likely. So this is like a cut-off pipeline; absolutely
critical, which, as far as I am concerned, we just cannot cut
this program. Cannot do it.
Mr. Phillips.
STATEMENT OF MARK R. PHILLIPS, PRESIDENT, IRON RANGE VENTURES,
VIRGINIA, MINNESOTA
Mr. Phillips. Thank you, Senator Wellstone.
Senator Wellstone. Ten dimes is better than a dollar. Have
I got that?
Mr. Phillips. I made a note of that myself. Good morning.
My name is Mark Phillips. I am president of Iron Range Ventures
in Virginia, Minnesota. Iron Range Ventures is a community
venture capital fund, and it is a certified Community
Development Financial Institution, which is commonly referred
to as CDFI. I am also the vice president of Northeast Ventures,
an affiliated community development venture fund, which is also
a CDFI.
Iron Range Ventures and Northeast Ventures have roots going
back over 13 years of time, when our region of northeastern
Minnesota was suffering the effects of the restructuring of the
American steel industry. This region of Minnesota lost 25
percent of its gross regional product virtually overnight in
the mid-1980s.
These two community development venture capital funds were
established as an effort to partly diversify the regional
economy by establishing home-owned and home-grown businesses.
Our region had a variety of economic development programs
providing primarily technical assistance and debt financing,
but no venture capital. This was true for most rural areas in
the United States at that time. These funds were established to
provide a permanent source of competent venture capital to our
rural region of Minnesota. To date, approximately $15 million
has been raised, primarily from philanthropic foundations,
utilities, and the Federal Government. The factors that were
established to measure the funds' success were as follows:
First, we were looking for local wealth creation, and local
control of these businesses.
Second, we were looking for sustainable enterprises with
good employment practices and quality jobs.
Third, we were trying to attract market-driven venture
capital to our region.
Fourth, we were trying to foster self-sufficiency and
entrepreneurial spirit in the region.
And, finally, the investments in these companies that
provide satisfactory financial returns and jobs for our
targeted population of low- to moderate-income people. We refer
to this as the double bottom line.
Iron Range Ventures and Northeast Ventures are mission-
driven organizations that operate within the geographic region
of northeastern Minnesota. This limits the investment
opportunities that are available. Our funds may look at
transactions that are smaller, with less up side and lower
technology than a traditional venture fund. We also have to
invest in companies at an earlier stage, hold our investments
longer, and experience higher transaction costs than
traditional funds, but still our return on investment is very
attractive.
Over this 13-year period, Iron Range Ventures and Northeast
Ventures have invested nearly $12 million in 28 companies.
These investments leveraged another $100 million in additional
financing. We have attracted co-investors, many from the
traditional venture capital community. Unlike lenders,
community development venture funds are intensely involved with
the companies they invest in.
Northeast Ventures has become a leader in the community
development venture capital industry, and our model has been
replicated throughout rural America. Our fund's senior
management was part of the leadership that formed the Community
Development Venture Capital Alliance, CDVCA. It is
headquartered in New York City. CDVCA is the trade association
of the community development venture capital funds, with over
110 members worldwide representing over 50 funds. As the
Nation's leading practitioners of community development venture
capital, the CDVCA and its organizations have begun to
establish a strong record of effectively promoting investment
in growth companies that will succeed financially and make a
profit, as well as providing jobs, entrepreneurial capacity and
wealth among economically disadvantaged populations and
distressed communities. It appears that community development
venture capital is a critical element of revitalizing rural
America, and CDVCA is training and advocating for these new
funds. This movement has depended on very limited philanthropic
and Government funding. Among its primary goals is the
development of the knowledge and human capacity that will make
these funds successful.
Iron Range Ventures and Northeast Ventures recommends that
the Federal Government proceed with the following:
No. 1, continues and expands the Community Development
Financial Institution (CDFI) funding that creates a unique
source of capital for the CDFIs. We ask that you resist efforts
to reduce and eliminate this valuable program.
No. 2, support the legislation that you introduced, Senator
Wellstone, that earmarks funds for the capacity-building
investments in rural community venture capital funds and the
companies they invest in. The investment in human capital will
pay the largest dividends.
No. 3, retain and improve the New Markets Venture Capital
Fund under the SBA. We urge that the SBA work with the IRS to
coordinate with the New Market Tax Credits program as a method
to provide the matching funds required under the venture
program. We also urge the program shift from a geographic focus
to a mission-driven focus, to help low- and moderate-income
individuals become employed.
And, finally, retain and improve the New Market Tax Credit
program that is administered by the IRS. These rules need to be
made friendlier to venture funds.
I find it somewhat ironic that the very forces that brought
our funds into existence over 13 years ago are looming even
larger at this time. That is why it is critical that the
limited sources of funding for rural venture funds are not
deteriorated but expanded, so they can play a vital role in
revitalizing rural America.
I thank you very much.
[The prepared statement of Mr. Phillips follows:]
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Senator Wellstone. Well, thanks, Mark. Northeast Ventures
has been a model for me. And the capacity bill, we are hoping
to put that in the commerce bill. We are not giving up on that
at all. I think we have got a shot at it. Very much appreciate
it.
Mary Matthews. And when Mary testifies, we will then throw
this open, starting with the Commissioner. I have handed out
cards, and there are 20 people who have cards right now that
want to speak, and so we are going right to, if that is OK with
everybody up here, discussion. Ed, I do not know what--we might
need you up here because there may be some questions directed
to you, as Director of SBA as well.
Mary, thank you so much for joining us.
STATEMENT OF MARY MATTHEWS, PRESIDENT, NORTHEAST ENTREPRENEUR
FUND, INC., VIRGINIA, MINNESOTA
Ms. Matthews. Thank you, Senator Wellstone, and guests.
Good morning. Thank you for this opportunity to testify this
morning. My name is Mary Matthews. I am here in two capacities,
first as president of the Northeast Entrepreneur Fund in
Virginia, Minnesota. The Entrepreneur Fund is a microenterprise
and small business development organization. We provide
training, technical assistance, and financing to emerging and
existing small businesses in seven counties in northeastern
Minnesota and Douglas County in northwestern Wisconsin. I am
also a board member of the National Association of SBA
Microloan Intermediaries.
The purpose of my testimony this morning is to talk about
the Microloan Program and the role it has played in our work in
rural Minnesota and central Wisconsin.
When the idea for the Entrepreneur Fund was conceived in
the early 1980s, we focused on the idea that local residents,
if given tools, could help rebuild the rural economy.
Northeastern Minnesota's economic future has always been
determined by large natural resource-based companies whose
ownership lives elsewhere. We needed solutions that would build
local entrepreneurship and create local economic opportunity.
We believe that if our region's skilled workforce, who had long
considered themselves employees rather than employers, were
taught business skills and principles, given encouragement, and
provided with small amounts of capital, they could learn to
create their own jobs by starting and growing their own
businesses.
In the last 12 years, the Entrepreneur Fund has provided
business development training and technical assistance to over
4,700 men and women, all local residents of our region, and for
many of whom this is their first----
Senator Wellstone. You might want to repeat that figure.
Ms. Matthews. Four thousand and seven hundred people. It is
over 2 percent now of the adult population in the Arrowhead
area. For many people, this is their first exposure to business
concepts. In our region, this is. So far, this has resulted in
the start-up, stabilization, or growth of 561 businesses. We
have made loans to 168 of those businesses, totaling $2.6
million. Over 85 percent of these businesses, mostly start-ups,
are still operating 2 years after receiving assistance. These
are small businesses, but each is owned and managed by a local
resident who is creating their own economic opportunity. As a
group, they generated a significant level of employment for
themselves and others--over 1,200 jobs created or retained so
far.
Here is an example. Colleen and Tom Ray purchased a
Christmas tree farm in Eveleth 5 years ago. Tom Ray is a part-
time furniture maker, with a veteran's disability pension.
Colleen Ray was a part-time waitress. They had an idea to
expand Ray Family Farms by making decorative wreaths out of dry
twigs using natural materials like pussy willows. They
successfully test-marketed the wreaths through local craft
shows and gift shops. A $5,000 microloan last December financed
their participation in the Atlanta International Gift and Home
Furnishing Market. That show produced over $26,000 in orders
for that company. They have hired two employees and, with an
additional $5,600 dollar loan in May, purchased dry twigs from
local suppliers, rather than the Rays' continuing to harvest
their own raw materials. One of the twig suppliers is a former
LTV employee who started his own brush cutting business.
The SBA Microloan Program provided the capital for Rays'
loan. That capital would not have been available from any other
source. It also provided the funding for the training and
technical assistance that the Rays received that has helped
them grow their business. Colleen took our CORE FOUR Business
Planning course, and both Tom and Colleen meet regularly with
their Entrepreneur Fund business consultant.
The SBA Microloan Program was created in 1991 to help small
business owners get various amounts of capital that were not
yet bankable. The SBA Microloan Program has grown from a small
pilot with 35 intermediaries in 1991 to a permanent program
with over 170 intermediaries today, with the SBA adding new
intermediaries each year. As Ed Daum testified, there are now
six intermediaries in Minnesota. The SBA Microloan Program is
the single largest funding source for the microenterprise
programs.
The SBA Microloan Program Intermediaries have made over
12,000 microloans totaling over $125 million since the
inception of the program.
The Microloan Program, as you well know, Senator, has two
parts. There is low-interest 10-year loans that are made to the
intermediaries who reloan the money to microentrepreneurs. The
SBA also provides intermediaries with an annual technical
assistance grant that helps support the cost of training and
technical assistance to borrowers. The grant is calculated at
up to 25 percent of the capital the intermediary has borrowed
from the SBA. Microloans are high-risk loans, usually to start-
up and early-stage companies. The technical assistance protects
the Federal Government's investment, and it increases the
entrepreneurs' potential for success.
Senator Wellstone, the first time you and I met was in 1994
when you invited me to testify before this Committee in
Washington. You were then and continue to be one of the
strongest supporters in Congress for this program. I am here
today to ask you to be our champion one more time in seeking
additional funding for the technical assistance portion of this
program, before the bill goes to the Senate floor for
consideration next month. As you well know, the President's
budget and the House and Senate appropriation bill call for $20
million for technical assistance in 2002 for the Microloan
Program. There just is not enough money to maintain the current
level of activity, and the SBA continues to add new
intermediaries. Let's do the math. By the end of 2001,
intermediaries will owe the SBA over $100 million. To provide
25 percent for technical assistance grants to intermediaries,
the SBA needs $25 million just to serve the current loans. In
addition, there are 30 non-replicating providers who annually
receive $125,000. That is another $3.75 million. We have not
yet talked about program growth. As the demand for the
Microloan Program continues to grow, if we can continue to grow
it, the investment and technical assistance dollars each year
will increase.
So what is the bottom line? Over $28 million will maintain
the technical assistance funding at its current level of 25
percent without new loans to intermediaries to the program. In
1996, when funding levels were cut last time, the SBA indicated
that they realized that funding levels of less than 20 percent
put the program at risk. Without more funding, the Federal
Government's $100 million investment today is at risk if
farmers do not receive technical assistance.
We also know that another intermediary's plan is to return
their capital to the Federal Government if, in fact, the TA
grants are reduced. This is and has been indicated to us that
the program is too high a risk to continue with fewer TA
dollars. Without a higher level of funding, this program is in
jeopardy, and its future is in jeopardy, and the Senate floor,
it appears to us, is the last opportunity to raise the level
above $20 million. Please help us.
Thank you.
[The prepared statement of Ms. Matthews follows:]
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Senator Wellstone. Thank you. Well, I am honored that you
ask, and absolutely committed to doing everything I know how to
do between now and when it hits the floor. Absolutely. Or when
it is on the floor. Not even any question about it. Thank you.
What I would like to do is, very quickly we are going to
now go to just general discussion. In case I forget, because I
think it is really important to thank people, Suzanne Hagen is
a court reporter, and I would like to thank you, Suzanne, for
your help. John, who has been running all around and helping us
try to stay more or less on time, has been great, and thank you
for coming out and helping us, John. If it is OK, Tony and
Leslie and Colleen and everybody, what we will do is, let me
refresh everybody's memory. Paul Kittelson testified, and,
Paul, maybe some of these questions will go to you, OK? So if
you feel like you want to respond, please do. The same thing
for Ed Daum. I am sure there is going to be questions that will
be put to Ed. The same with you, Prince Wallace. I mean, it
could be that you all are going to want to respond. Dave
Hasskamp, same for you. Dean Bouta, Renae, Connie Stewart, and
then the last panelists. If somebody--and we would like
everyone to try to keep their comments--we are going to try to
keep everybody under 2 minutes, if that is OK, so we can be
sure everybody has a chance to speak, but if some of the
panelists--if you have spoken, you feel like it is a response
to something you said, then just jump in, and that will also
apply to all of us up here. But I think out of respect for his
important notice, we will start out--everybody has got cards,
but the first card I am giving to the Commissioner, OK?
Mr. Berstein. Senator, thank you very much. You are very
generous.
I want to thank Senator Wellstone for inviting me to be
here this morning. I want to thank everybody here for taking
the time to come and do this. I work for Governor Ventura.
Governor Ventura is going to be spending much of the next 60
days on the road traveling all over the State of Minnesota
talking to folks about all of these issues. But the fact is
that maintaining a healthy economy in rural Minnesota is a high
priority for this Administration, like it is for Senator
Wellstone and Senator Dayton.
The question becomes, What can we do? My interest in this
as Commissioner of Commerce is many of the things that have
come up here today are things that my department regulates. The
things that are important are for companies to locate in rural
Minnesota and, most importantly, to stay and expand in rural
Minnesota are access to insurance. Insurance is pegged to how
well local fire departments operate. These are small things,
folks, but this is the kind of thing that companies look for
when they are going to come into rural Minnesota. Access to
capital has come up a number of times today. Banking,
microlenders, and, again, Mary, I appreciate your testimony. I
have got lots of great stories about what microlenders have
done in the State of Minnesota.
Telecommunications. A huge issue in Minnesota. Folks, we
are falling further and further behind. Part of this is the
State's responsibility. Much, however, is the responsibility of
local telephone companies. We have been trying to change the
laws in Minnesota. We are doing it slowly. I do not know how
many of you know, but our telecommunications laws in Minnesota
have not changed since 1930. Many of us were not even born in
1930, and many of us here remember telephones with rotary dials
and party lines. We still regulate under that kind of
assumption, and we all know the technology is radically
different.
Access to the Internet is a huge issue in rural Minnesota.
Access to the entire level of the communication system.
Commissioner David Fisher, from the Department of
Administration, is in charge to connect Minnesota with a new
telecommunications initiative to link all of rural Minnesota.
That is now underway. The question is always going to become
funding, and we have to change some of the laws in Minnesota to
open up networks. A real issue is, even when small rural phone
companies install fiber or wire, only about 5 percent of the
people sign up for it. Delivering high-speed access is
expensive, whether it is in the Twin Cities or any other part
of Minnesota. But when you have such small take rates, it
becomes very difficult for small phone companies to actually go
ahead and build the services.
I also want to talk about energy very briefly. Minnesota's
energy future is very secure, at least for the next decade or
so, but much of the energy development is not going to take
place in the Twin Cities but in rural Minnesota. We are going
to continue to develop and build lots of new energy, lots of
technology. Folks, the time has arrived. I go to public
meetings, particularly in western Minnesota, like this. When we
are talking about building coal plants, we are talking about
building nuclear plants, there are lots of signs out there
saying do not. When we are talking about wind, I have
landowners saying, ``How many of these can you give me? I will
take as many towers I can get.''
That is one of the differences, folks, between the
traditional kinds of energy and the new energy technologies
that are being developed. Minnesota is going to be looking at
this Administration, the legislature, our friends there in
Congress are looking at programs like micro turbines. These are
the kinds of things that distribute generation.
We were at St. Cloud about 3 months ago, 300 communities
across the State. Every one of them wants to have control of
its own energy future. This is a critical thing to do. If it is
going to take place in rural Minnesota, it is going to take
bankers, it is going to take the Small Business Administration,
it is going to take this Administration and the legislature to
fund those kinds of programs. But whether we are building
energy for small communities or large communities or energy to
supply much of the State, it is going to take place in rural
Minnesota. Northeast Minnesota says, ``We will take all of the
power plants you want to send up here.'' They haven't talked
yet about some of the negatives about that, but they want those
plants, they want those jobs. That is the only part of the
State that wants to do that, and we are looking to give it.
Two areas that haven't come up. One is health care. A huge
issue for folks who want to build businesses in rural Minnesota
or expand businesses. They need to have employees that have
access to health care. We are losing physicians, and we are
losing health care facilities in rural Minnesota. We have got
to reverse that trend. I do not have answers for that, but I
want everyone here to be aware of it. We need to look at this.
How we are going to fix this problem in rural Minnesota? It is
very difficult to locate a business and to expand a business if
the employees do not have access to health care in that
community.
Finally, workforce issues. We are merging the Department of
Economic Security, which would provide workforce training, into
Trade and Economic Development. Well, that is government at
work, but the fact of the matter is the legislature and the
Administration recognize that workforce development is economic
development. And the two ought to be done separately. The two
ought to be combined, and the focus should be on workforce
development.
I am here to listen, by the way. That is why I snuck up and
sat in the back, but I do want to hear what everybody else has
to say.
Senator I want to say thank you publicly, because I do not
know if I have done it. We have in this State gone through not
an energy crisis, but we went through an energy spike last
winter. Almost every one of us here felt that. I think everyone
here spent two or three times more on heating costs. Folks, I
have still got all over the State of Minnesota hundreds of
families, mostly seniors, who couldn't take those price hikes.
We have a program called the Low Income Heating Assistance
Program. We had to go to Washington to get more money, and it
was Senator Wellstone who led that fight to get that money back
to Minnesota to help folks who really needed the help so they
could pay their energy bills. Again, Senator, I want to thank
you publicly for spiriting that effort. It is much appreciated.
Senator Wellstone. Very nice of you. Thanks for your words.
OK. Card No. 1. Does that make sense? We will just do it
that way, but everyone, please, for the record, when you speak,
do not say, ``I am card No. 1.''
Ms. Spraag. Good morning, my name is Cheryl Spraag. I am
president and CEO of the Virginia, Mountain Iron, Gilbert Area
Chamber of Commerce in northeastern Minnesota.
Mr. Harvey. My name is Keith Harvey. I am the chairman of
the board with Virginia, Mountain Iron Area Chamber of
Commerce. I am also the chief financial officer of the Virginia
Regional Medical Center, so the Commissioner's comments about
health care hit me right here, so thank you.
Ms. Spraag. On behalf of our Chamber, Senator Wellstone, we
commend you and the U.S. Senate Small Business Committee for
initiating these discussions about the revitalization of rural
America businesses, which I think, at this point in time, we
are reaching a crisis point, and these discussions from here,
we hope we will come through with some solutions that are going
to be quick, and offer the help that is needed now.
Mr. Harvey. We represent about 300 businesses in
northeastern Minnesota. About 290 of those businesses are the
dimes that Bill Spang referred to, and about five of them
represent the dollars. Unfortunately, we experienced losing one
of those dollars in February of this year when the LTV mine
closed. That cost us 1,400 jobs, about $60 million in payroll,
and the economic impact on the region is about $400 million. So
we sense an incredible urgency on the issues that we are about
to talk about.
I would like to request that this letter and the following
declarations be entered into the official record with the U.S.
Senate Small Business Committee today, and I would like to
submit the following resolutions to you.
Ms. Spraag. These resolutions are based on discussion, a
membership survey, and the results of the round table
discussion we had with your staff, Senator Wellstone.
First of all--and these are taken verbatim from our
membership--we feel that as far as Small Business
Administration Program and loans, institute SBA loans which
will assist existing small businesses with refinancing for
technology improvements, daily operations, and management
restructuring, such as partnership buyouts, et cetera. Increase
SBA staff to provide reliable and prompt service to assist
financial lenders in determining loan recipients and loan
distribution. Utilizing the SBA for community development
grants. Reduce rates and fees on SBA loans. Become more of a
GAAP financier, and reduce documentation requirements on SBA
loans.
Mr. Harvey. We would like to allocate funds specifically
for small business research.
Ms. Spraag. Designate a larger portion of Federal work
projects and material orders to rural contractors.
Mr. Harvey. I think this is one of the biggest ones:
develop plans and earmark funds for advanced telecommunications
and Internet access.
Ms. Spraag. Ensure that natural resource industries, such
as forestry and mining, particularly in our area, can compete
fairly with foreign companies on national trade market.
Mr. Harvey. Review regulatory guidelines which may prevent
business development in rural areas, such as U.S. Forest
Service.
Ms. Spraag. Create more venture capital.
Mr. Harvey. Provide Federal loan and grant dollars for
rural economic development.
Ms. Spraag. Assist in the restoration of rural communities
to our downtown districts and infrastructure.
Mr. Harvey. And reduce Federal red tape.
Ms. Spraag. That was a verbatim. Another verbatim, offer
tax incentives which will inspire business to relocate to rural
areas.
Again, we appreciate your time and your efforts in
researching and finding solutions to these dilemmas, and if you
have any further questions, we have submitted this letter for
the record of this hearing, and we would be willing to answer
any more that you have.\2\
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\2\ Letter is located in the appendix.
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Thank you.
Senator Wellstone. Thank you for your very crisp policy
recommendations. I agree with almost all of them.
Ms. Spraag. Thank you.
Senator Wellstone. No. 2. If you all know your cards, just
go ahead.
Mr. Grimlund. Thank you for letting me come. My name is
Pete Grimlund. I am the CEO of Rural, Inc. We develop regional
technology cooperatives in rural Minnesota and across the
country to deliver technology, particularly consulting
services, and a host of software applications to communities in
the business, and residents within the community.
In thinking about what I want to say today, I think enough
has been said about the digital divide and the issues related
to connectivity. I would like to suggest we move beyond that
and think about what happens when connectivity is available to
everyone.
The challenges that we have seen amongst the businesses in
rural areas is not so much one of connectivity, it is an issue
of what do you do with it once you have got it. The skills do
not exist at the rural areas to support the type of
sophisticated infrastructure like you see around here in St.
Cloud and the metro area and California and wherever. If the
businesses are to survive in a virtual economy, a global
economy that we are in right now, they need to have access,
local access, to the sophisticated people and individuals who
can support that infrastructure, who can consult with the
businesses to help them in the changes that they need to be
competitive, and to bring to the table the various
sophisticated software tools and services that they need, and
need to integrate into the bows of their entity to be able to
survive in the local marketplace. Then and only then will they
be able to be fully engaged in the economy.
The one recommendation that I would like to suggest that
comes out of this and goes back to Washington is that we go
back into the past and take a look at what happened when a new
technology in the last century--or the two new technologies in
the last century were going out into the local areas:
electricity and telecommunications. The solution at that point
in time was to create a funding mechanism to support the
development of these cooperatives to aggregate demand, to
aggregate capital, to be able to build that out into the rural
areas. That same style, that same old financing mechanism,
needs to be put in place today, but put in place today so that
it is not asset-based, because the assets that are out in rural
America that need to be financed are intellectual assets and
they are software assets. They are not traditional assets that
you can go to a bank or go to the SBA or go any place else and
get traditional funding for. That, frankly, has been the
biggest impediment to our being able to go out and solve the
problem.
Thank you very much for your time.
Senator Wellstone. Yes, thank you. I think part of this
fits into the discussion we were having about workforce
development earlier.
Mr. Grimlund. Correct.
Senator Wellstone. OK. Thank you.
Card number three. You know, actually, people can--if you
know you are going to be like fourth, if we can get a couple of
people lined up and move along quicker. Card three? Card four?
Five? Six? We are moving along really well now. Seven? Eight?
Well, as soon as we get through these, we will go right to
others. Yes?
Mr. Bauerly. Senator, thank you for being here today. My
name is Rick Bauerly, and I live in Sauk Rapids. I work for
Venture Allies, a small business consulting firm, here in St.
Cloud. I want to tell a story about venture capital in
Minnesota. We all know that venture capital creates jobs. The
National Venture Capital Association reported that last year,
venture-backed companies created 4.3 million jobs in this
country. A little math would suggest that that is a large share
of all job growth in this country.
The second part of the story is that venture capital in
Minnesota lives in Minneapolis and St. Paul, and the seven-
county metro area. There are 25 venture capital funds there,
and, to my knowledge, there is not one largely capitalized
venture capital fund in Greater Minnesota. By largely
capitalized, I mean $50 million or more, which is sort of the
critical math that you need for a venture capital fund. So
venture capital creates jobs, venture capital lives in the Twin
City metro area. The worst part of the story, though, is that
the venture capital in the Twin Cities metro area flies to the
coast. By that I mean that last year, 12 percent of Minnesota
venture capital was invested in Minnesota. The majority of it
flew to Silicon Valley, to Wall Street, to Texas and so forth.
So we hear reports that there is quite a bit of venture capital
in Minnesota, but it is in Minneapolis, it is spent on the
coasts, and it is not in Greater Minnesota. That is the
problem.
There is a great solution. Ed and Mel know about it well.
It is the small business investment company that the SBA
sponsors, it has sponsored for 40 years, and we think that is a
great solution for this problem for Greater Minnesota. It
provides $3 of debt for every dollar of private equity that we
can raise. We think there is enough demand for such a fund in
Greater Minnesota with Central Minnesota as its anchor. As
evidence of that, if you look at the SPSs in the country, and
there are 300 of them, there are 30 of them in cities that are
smaller than St. Cloud, and in regions that are smaller in
central Minnesota. So a full 10 percent of them are in lesser
economic areas. We think that Venture Allies has the management
team to do this, the investors are ready to invest. We have one
barrier. The barrier to an SBIC in Greater Minnesota is this,
this is the barrier: I flew to Washington, D.C., and I sat down
with the license administrator of the Small Business
Administration, and I said, ``What does it take to get licensed
from a management team perspective?'' He said, ``Well, here's
the regulation. You have to have a senior partner who has
produced investment returns in the top 50 percent of venture
capital.'' That is an extremely high hurdle, and those people
live in the big cities. We have tried to recruit them here. We
cannot, and so we are going to try to make the application
ourselves. But we need support, and we need your support as we
make this application, and we need Leslie's support, and we
need Joe's support, and we need to look at the spirit of the
spirit of the matter, which is that we have a capable team
interested in investors, and a strong demand for this, and to
try to focus on the spirit of the matter.
Senator Wellstone. I appreciate your testimony, and, as you
know, we do want to help. I mean, it is not unreasonable to
sort of want to say, ``Look, we want to make sure that whoever
is going to be doing this, we have got some record success on
what they are doing.'' On the other hand, your point is well
taken, too. Let us just sort of see what we can do with this.
Thank you so much.
Mr. Bauerly. Thank you.
Senator Wellstone. Where are we now? Nine? Ten? Eleven? I
feel like I am doing an auction, here.
Mr. Brian. I will take the time and the money from the
folks that haven't shown up. Senator and staff, I am Tim, the
Soup Guy, and I started a frozen soup company a number of years
ago. It is my fourth start-up, but I also, after having success
with it, looked around and wanted to help some other folks.
Some of our profits go to homeless kids and family violence
issues, and so I started a group called Bread Board. You may
have heard of it. It has been written up in the paper. It is an
informal--or was supposed to be an informal networking group,
but the Department of Ag has asked if we would hold it there,
and we are. So it has kind of taken on a life of its own, and I
haven't been available to sell soup, so it is available at
Colborne's, if you live here.
We found out, as we go around, that Bread Board is a group
of CEOs and executives from small food start-up companies, and
statistically 99 percent fail, fall off the cliff. And that is
a real number.
Now, after looking at that, I started to look around,
wondering what could help me along the way--and I started
really studying it with some other folks, and I have come up
with the Minnesota Ag Club, which I faxed to your office,
Senator, and I have a copy here for you also. It has been
developed with the help of--here goes the acronyms, AURI, MBA,
USDA, and I do not need to go on. But anyway, input from
everybody.
What I have found is we do not need money. I am the one
here to say we are not asking for spending. What I am saying is
that I have found through talking to everybody there that we
need to spend money more efficiently. There is a reason I
didn't use any Government programs to start my business. I
didn't know about them, and it was very hard to understand them
at the time as a start-up. The resumes of the people who were
going to counsel with me didn't have a marketing background.
The idea behind it, in a nutshell, since I am out of time, is
it looks like a cooperative, and there are many cooperatives,
but my concern is that on the Bread Board, we have a buffalo
cooperative, for instance. Everybody in the cooperative knows
the same thing. How do you help each other? You pool resources,
but if everybody is poor and doesn't have resources, what good
is that? Even a dairy cooperative. The reason there are so many
subsidies going out is because everybody just knows dairy.
I really believe the model I have built here will help the
farmer--the difference of this cooperative is there are farmers
and hunters, which is myself, a food marketing entrepreneur,
and there are many of us who will come together. Now, when I
looked at it, the No. 1 reason that has never happened before
is trust. You know, we are total opposites in personality. So
it is like any other group. You know, the needs and strengths
of the farmer are inversely related to the needs and strengths
of entrepreneurs. They have the ag product, and I need ag
product. We have experience in marketing, and they need value-
added marketing. My concern is the USDA grants, millions of
dollars, are going to farmers who, as somebody from the USDA
said, are living off the grants, because they do not have
marketing experience. It would be like saying, ``For your soup
company, we have money, but you have to now milk cows and raise
cattle and your own carrots and things.'' So the current system
I think has some opportunity to be refined a bit, and I would
love to lead the way on that with some of this research.
Thank you.
Senator Wellstone. We would love to have your help. Thank
you.
We are up to 12, 13? For some of you, there will be some
follow-up. We would just like to talk more. Thank you.
Ms. Purvis. Good morning, my name is Lisa Purvis, director
of the Owatonna Chamber of Commerce and Tourism, and I
appreciate the opportunity to speak with you this morning.
Senator Wellstone. Thanks for coming.
Ms. Purvis. Owatonna is located at the junction of I-35 and
Highway 14. We have recently gained notoriety, with Cabela's in
our own backyard. Development continues to expand on the I-35
corridor with the new health care campus, industry, retail and
education coalition. Owatonna's population is approximately
22,000. Our demographics are becoming increasingly diverse,
including a growing Somali and Hmong population. This diverse
workforce grows with the largest manufacturing and industrial
base. However, as in many rural communities, there is a
disproportionate amount of affordable housing.
Owatonna grows success. We are the home of Federated
Insurance, Josten's, Winger Corporation, the King Company, and
the Owatonna Tool Company. However, several recent mergers by
multinational corporations that do not possess the same
community values that you spoke of earlier necessitates
additional resources to continue to grow our human feasibility
by fostering a positive environment for the entrepreneur
spirit.
Access to capital is a problem in this State. Economic
development tools for rural communities and development
corporations are limited. Tax increment financing legislation
intended to enable and empower local municipalities has been
attacked year after year. In 1995, Minnesota even went so far
as to discontinue a State Main Street program. Therefore, towns
like Owatonna must look to you not only to continue, but to
enhance three specific programs. The first one is the Small
Cities Development Corporate Program funded by HUD, whose
purpose is to provide decent housing, a suitable living
environment, and expand equal living opportunities for persons
of low-income and moderate income.
The second program is Main Street, which has been
incredibly successful, making it one of the most powerful
economic development tools in the Nation. The total amount of
public and private reinvestment in major communities is $15.2
billion. The average redevelopment per community is $9.3
million, and the number of new businesses generated is 52,000.
In addition, the Liveable Communities Initiative, created
by the Clinton administration, is a model of intergovernmental
cooperation of the highest and potentially most effective
level. I believe these Federal programs have the greatest
impact on the continued success of Owatonna, as well as many
other communities in Minnesota.
Thank you.
Senator Wellstone. Thank you. I--it is not to be outside of
it. Any number of different people today have talked about
affordable housing. As in not metro, but Greater Minnesota, as
well, and I think it is a long story.
One of the things that I am looking at, and there are other
people, but I--we did away with some of the tax credits and tax
breaks in the 1986 tax bill that was really actually critical
to the private sector involvement in affordable housing, and
then we didn't replace it with anything else. I think we really
need to go back to some of those, and we need to make sure--I
really think this is critically important in our State, and I
really appreciate it. All of the things you said about
Owatonna, I always thought about Owatonna as being a suburb of
Northfield. I just ended all of my chances in Owatonna.
Fourteen, fifteen, and sixteen.
Mr. Fuhr. My name is Dave Fuhr. I am the President and CEO
of a company, Airborne Data Systems, out of wabasso, Minnesota.
We build an airborne, digital, multispectral camera system. We
are the only company that does it. We are an international
company. One of the things that Minnesota doesn't play very
high in, is like an old military presence, we have never had
any bases, never had anything like that, and we play in the
market that is dominated by Government agencies, military, and
things like this. We are just totally unheard of. We can walk
into the best things, like sliced bread. They do not care. If
you are not growing, you do not exist. There has got to be some
kind of a way, whether it is just--we are so specialized, the
only thing we need to do is say, ``Senator Wellstone, go right
up to Forest Service''--we have got a system on the bench, and
we can sell this thing at a regional level to the lower echelon
in Forest Service. We cannot touch the national level.
Actually, we are a see front. We have got full broad band
Internet due to a rural telephone company. Anybody looking for
broad band international office space, we have got it, we will
rent it out. But when it comes to our markets, we cannot touch
that stuff. I do not know how to fix it.
I work with Minnesota Technologies, and they are great.
They have got some things that they could improve on. They can
provide some resources for people that little companies cannot
provide. We work with that since we started our business. That
is the comment I would like to make. I do not know how to fix
that, and I have heard nothing from anyone else on how to fix
that project.
Senator Wellstone. Thank you. I have two very, very quick
reactions. One is, without trying to make any promises that
cannot be followed up on, I do wish that you would talk to me,
because sometimes what happens is there are just ways that we
can, you know, go to work for companies and entrepreneurs that
can be helpful. And then the broader question you raised, which
I think is the question that was brought up in the Twin Cities,
as well, the overall question of procurement and contracting
and subcontracting, and how small businesses get a fair shake
in the competition is the other question which I think is
extremely important.
Mr. Fuhr. Especially when you get into technical
conferences. I was in a conference, How to Do Government
Contracting, in one of the hotels a couple of months ago, and
that was good, but if you get into technical markets and things
like that, it is--it just wasn't designed. There was just no
way to take something like that and just direct it to a higher
echelon level. We do not have the retired generals on our
staff. We do not have access to those people, because they
never retired to Minnesota because we do not have the bases.
And it is--you just do not have--you just do not have the
clout. You do not have the touch to people.
Senator Wellstone. Yes, this reminds me, just for a moment,
if you will think of the levity of Al Franken, who is from
Minnesota, who can be quite hilarious. I once heard him say at
a gathering that--he is Jewish, and I am Jewish, and he said
that he was trying to figure out when we would have the first
Jewish President. He said he has decided that the only time
that will happen is if it is a Jewish person that is a military
man or woman. He said that is the way it is going to happen. He
said, but the problem is--I then did my research, and I found
out that the highest-ranking Jew in the military was
Comptroller General of the Coast Guard. Anyway, I do not think
that is true. But that is another story.
Mr. Fuhr. Well, thank you very much.
Senator Wellstone. Yes, and please make sure that we talk
afterwards.
Mr. Fuhr. Thank you very much.
Senator Wellstone. Yes, do we have any more card numbers?
Anybody with cards--and, by the way, please, your comments as
well.
Mr. Babcock. Good morning. My name is John Babcock. I am an
attorney and certified public accountant. I practice here in
St. Cloud, and I have dealt with Jim previously on various
issues.
Access to capital is a real problem for rural businesses in
Minnesota. I want to give you a very specific example of
something that occurred in my experience, and I think Leslie
may have some reaction to this. There is a large turkey plant
in the City of Detroit Lakes that produces over a hundred
million pounds of turkeys per year, and the company that
operated that decided to leave the State. I worked with a bunch
of turkey farmers who were interested in acquiring that
facility and keeping it running, and they produced the turkeys,
the turkeys would go into the processing plant, and they were
going to sell these turkeys as finished products. They had a
certain amount of capital, and we wanted to leverage that. We
wanted to get some venture capitalists to come in and join us
in that acquisition. The problem was, the venture capitalists
were based out of Minneapolis, they just didn't understand an
agriculturally-based business. Agricultural businesses are
fundamentally different than a manufacturing business. You are
selling at large volumes for low margin, and that takes a lot
of capital that you wrap up in equipment. If you invest in that
type of business, you have to realize there is going to be
fluctuations that the market may impose on you, and you have to
live through those fluctuations, you have to be patient, you
have to strive for that long-term return. They just didn't
understand that, and I think that the need is critical that we
have an outstate venture capital fund that does understand
those concepts, that can make intelligent decisions, and I
think Rick, with Venture Allies, is certainly part of that.
Another tool that I think is available is the Small
Corporate Offering Program that enables small businesses to
make direct sales to the public of up to $1 million of their
stock. I think that is a viable program. I have worked with Jim
on trying to bring some of those businesses under that program
and bring that to the table.
Thank you for allowing me to make some of my comments.
Senator Wellstone. Thank you for your excellent comments.
We will just move right along. According to Bill, we are a
little bit over time, but I want to hear from others, if that
is OK, and I also want to comment--I want you to, if you do not
mind, take some time, Connie. Some to you, Leslie.
Mr. Wood. Senator Wellstone, thank you for the opportunity.
My name is Ron Wood. I am president of the Minnesota West
Community and Technical College. I also serve on the Granite
Falls Economic Development Authority and the Worthington
Regional Development Corporation.
Minnesota West serves 20,000 square miles of southwest
Minnesota, so I get to see an awful lot of ground as I travel
to our campuses. We have no community over 15,000 people within
that 20,000 square miles. Most of them are in the neighborhood
of 800 to 3,000 people.
Two issues I would like to talk about are access to capital
and access to technology. Boy, it is hard to stay under 2
minutes, too. OK. One of the problems that I find sitting on
the Economic Development Board is we do not have enough capital
to work in our communities to really help them. Being active is
not enough in a small community. In a larger community, they
are going to generate some revenue to do some real good things,
but it is hard in a small community of 2,000 or 3,000 to make
that work right. We run into problems. I mean, I just had a
meeting for 4 hours Monday night, and we run into problems
where the State and the Federal bureaucracy is so slow, where
we find that it takes too long. When you are in a business and
we are trying to move a business through, timing and use is the
most important thing. It is timing. It is not 2 months later,
not 6 months later, not 12 months later. The solution that I
offer is we have to have some more trust and flexibility in
lieu of the money down to lower levels.
I am going to just skip quickly forward to the banking
industry. We are still in the 1930s and 1940s and the 1950s in
the regulations. They have got to look at collateralization in
a different way. It has to be done in a different way.
As the gentleman from Rural Inc. said, we are not talking
about intellectual resources, we are talking about software.
When we look at technology one other solution is, we have got
to stop talking about land lines. We have got to talk about
satellite use in rural America. It is not going to work with
land lines. It is too long, it will take too long. It will be
10 years before we land line this State. Ecostar, Dish, they
now have a commercial solution that gives you the high speed.
Minnesota West, at this point in time, we use IP voice for my
senior staff. I do not have long-distance calls, but my senior
staff, we use IP voice over our T1 lines. But we cross our land
lines without problems doing that. That is something we need to
look at with technology.
When you write and speak, it seems longer. One of the
examples I would like to give, Rural Inc. was up here a little
bit earlier. I didn't know Pete was going to be here today.
That is an example of what Granite Falls has done. It has taken
a tremendous risk in its capital, in terms of its available
capital to do that, but there is an amazing demand out there
for IT services. Not full-time IT workers, but a quarter of a
worker, a half a worker. You have the co-ops concept; it is a
concept that really can be applied in rural America. It works
over and over and over. But we have to find ways to fund these
kinds of operations so that they can be successful, because
rural businesses cannot compete with cities unless they know
how to use that technology. It is not just access to it. It is
how to use it, also.
I want to thank you for this opportunity. Good luck in what
you are doing in Washington. Commissioner, I thank you, also.
Senator Wellstone. Yes, thanks for your comment. We will
get two more people, and if there is anyone else, we are going
to end within about 10 minutes.
Mr. Herges. I am John Herges, president of Stearns Bank in
St. Cloud. I want to thank you for your support with the SBA
program, and I am here today as a big supporter of the SBA
program.
Our bank is an independent bank. In addition to the one in
St. Cloud, we have five rural banks, and you might say that we
make a living making small business loans in rural America. We
are a big user of the SBA program, and both the 7(a) program
and the 504 program are wonderful programs and really are a big
aid to the banking community, and to small business people out
there in rural America. With the success the program has had,
both 7(a) and 504, I think we ought to be looking at ways to
increase the SBA budget and increasing the SBA program rather
than decreasing it.
I would also like to throw in a word of caution. Please do
not increase the fees. It puts a real burden on the small
business person, and what ends up happening is that the SBA
program becomes a lender of last resort. There are other
options.
The other program that I would ask you to continue on with
your support with the SBA program--it is a very, very important
program. I would also ask for you to look at the USDA program,
the USDA Rural Development, BNI program, which is another
guarantee program that is more specifically zeroed in on rural
development and rural economic development, and it also allows
larger laws to be made in rural America.
Thank you very much, Senator.
Senator Wellstone. Well, thank you. The whole question of
rural economic development, I think, will go with this ag bill
to the family farm bill, but will also be undergoing--Bill also
mentioned this.
For the record, your testimony on the 7(a) and 504 is
extremely important, and I wholeheartedly agree with you. I
wish we weren't in the position of, you know, trying to keep it
sort of where it is and say,``no.'' I wish we would extend, but
I think there are any number of us that are going to push very
hard. I know that John Kerry is certainly--this is a huge
priority. I know what is in Minnesota; I do not think we can
emphasize it enough. It is so successful, and it is critically
important.
Mr. Herges. As you pointed out earlier, the SBA office in
Minnesota is one of the best offices--is the best office, in my
opinion.
Senator Wellstone. I think so. Let's give Ed Daum a hand.
The other thing that will--it is not part of the subject matter
of our official hearing, but I cannot resist saying it because
of what you said earlier. I also feel very strongly that there
is an important distinction, and I do say everywhere, most of
you will agree, but I can say it everywhere. There is an
important distinction that is also involved between independent
and community banks, and I am very--I will only use the word
``saddened.'' I think we have made a terrible mistake by just
simply going forward and saying so little about the mergers and
the acquisitions and the concentration that has taken place in
the industry, because just as people were talking about small
business, you are talking about people who live in the
community and know people. I think the same distinction can be
made between your kind of a bank versus some of these large
branch banks. It is completely different, and I find myself
very much in opposition to some of the legislation that has
passed, and I think it has just encouraged more mergers.
Anyway, I am done. I am off my soapbox.
Ms. Johnson. Good afternoon. I am Susan Johnson, director
for the Nursing Service Department at St. Cloud University. I
am also from southern Minnesota, grew up on Century farm.
I am here just to mention that rural development is
contingent on good health care, and nurses do represent the
backbone of the health care industry. We currently have a
severe international, national, and regional and State nursing
shortage, and rural areas will be mostly severely impacted by
this issue. Again, I would like to encourage better funding to
go to nursing education, and State funding. We currently have--
I am acutely aware of this. We are starting, we are trying to
start, and we have over 700 students on an interest list.
Senator Wellstone. You have what?
Ms. Johnson. Over 700 students on an interest list, and
that is without even having--this is just word of mouth, this
is just coming to our office, and we have a lot of agencies
crying for nurses, but we do not have the funding for the
educational program to provide the education. So I would urge
you to think about increasing funding for nursing education and
making sure that some of that funding flows to rural areas.
Senator Wellstone. Absolutely.
Ms. Merdan. Susan. Oh, my mic is not on. Susan, I was just
going to say, there is not a nursing program now? Would you
talk about that? North of the Twin Cities--I am sorry. I am
Toni Merdan.
Ms. Johnson. Yes. We did our research looking at access to
nursing education. What we discovered was if a student is
interested in a generic, just a degree in a nursing program,
there are currently only three in the State of Minnesota in the
public sector: one in Mankato, one in Winona, and one at the
University of Minnesota. So if you live north of the Cities,
you do not have access to nursing education. When we look at
that, part of the reason is funding; nursing education is
expensive, or universities, and so we need to figure out some
incentive, some university incentives to provide nursing
education. Part of it, I think, is just looking at the problem
and getting the money to an interested student.
Mr. McLean. I am Bob McLean. I am in beautiful Pequot Lakes
in Minnesota. First I would like to say something to you,
Senator Wellstone. I genuinely appreciate the integrity and
intellect that you bring to the Senate. It is so vitally
important, and I think not in the mainstream, and it is really
appreciated.
I wanted to address one area that I think is being touched
on in almost every person's comments, but it concerns me it is
not getting more emphasis. If you want to increase the rate on
technology, if you want to mitigate risk in capital, if you
want to increase the confidence of loan officers and venture
capitalists, I think you need to increase education.
Especially--and I will start, I think in particular, with your
group, Ed. The SBA and SBDCs are doing an incredible job in
Greater Minnesota. You cannot imagine, when a loan officer has
to look at two different loans, and they have gone through an
SBDC program, there is such a heightened confidence in looking
at that loan. But these people are terribly overworked and the
demand for their work is growing. Not just in start-up, but in
the ongoing emerging. I think, too, in their host--generally in
our universities, we have got some wonderful entrepreneurial
programs in the University of Minnesota. They need to be
supported more strongly.
I didn't come with an agenda, but I do think that a key
point to our economic development is our education, and the way
that we fund education, that necessarily is in a traditional
form, but with technical assistance, like Mary, who was talking
about up in the Northeast, with--if you are getting an increase
in entrepreneurialism, you cannot expect somebody who is a
farmer to all of a sudden be an outstanding business person. Or
if they worked in a mine, they are not an instant MBA. So
whatever we can do to try and help get at the grass-roots level
and bring more of that kind of technical support and kind of
business support to our people, I think that is going to draw
the capital, I think that is going to increase the confidence
of our loan officers, I think it is going to help the process
of economic development in Greater Minnesota.
Senator Wellstone. Absolutely. I think that is what Renae
was saying earlier, as well. Jim, I am sure you agree with me.
One thing I am sure of is that all of this is of the definition
of K through 1. A number of people talked about what has been
outdated. That is another outdated--I mean, education is pre-K
through, I think, 65, and a lot of our students today are not
18 or 19, and many of them are trying to make this transition.
The human capital piece and the way in which you link that to
small business or entrepreneurship or ongoing development is
critically important. You couldn't be more right.
Mr. McLean. A key point, too, Senator Wellstone, is we do
not have to invent it. We already have good programs that
exist. We need to support that and increase it. So it is not a
matter of having to start over or starting anew. It is a matter
of taking what we have and making it available and supporting
it strongly. I always say, if you think education is expensive,
try ignorance. If you think a loan is a dangerous thing, if
someone doesn't know what to do with money, that costs you a
whole lot more.
Thank you.
Mr. Berstein. Senator Wellstone, in Minnesota we have a
terrific technical education system that needs to be preserved.
Much of what is going on in the workforce is going on in
technical colleges as well. There are difficulties, however.
Is there anyone else from technical colleges here? There
is, again--adapting to changes in the workforce, and so many of
the--it used to be that communities after 23 years--anybody go
to a technical college? Three or four, OK. That is because of
the change in the economy and having to go through the
retraining. So they need access--businesses to help them with
providing what we need in our workforce, but we also have to
provide the funds, and that is where the legislature comes in
and the Administration comes in to make sure that those systems
are what are funding it.
Senator Wellstone. Sonja.
Ms. Berg. Good afternoon. I want to welcome you, Senator
Wellstone, and all of the rest of you as individuals. My name
is Sonja Berg, and I am a city council member here in St.
Cloud, I am an educator, and just interested in this hearing. I
didn't hear about it until yesterday morning at the local
Economic Development Partnership meeting. I happened to be down
at the National League of Cities Steering Committee for
Information Technology, and some of the comments today sparked
my interest or sparked--I wasn't asked to speak on behalf of
anybody, but I am--I put up my own hand.
I think some of the issues that were talked about are
really important, and one is that what is happening in the
Federal Government right now in terms of not having--thinking
about selling off broad band for our safety police and fire
departments, rather than leasing it. Are you aware of that, the
spectrum digits? OK.
Another one that someone else talked about is the digital
divide. I think getting our schools and our libraries wired,
and then training our teachers so that they can teach at
preschool through grandparents, because many of these people
want to have and need to train to communicate with business,
through business, and so on. This will not have any popularity
whatsoever, but it has been on the--hardly has hit the radar
screen locally or in State government. We won't have any--we do
not currently have any taxes on goods purchased through the
Internet, and that while as a small business owner, one might
think, oh, that is wonderful, I can go and get my books that
way, and not be taxed. You are replacing what happens in that
the State collects and the Federal Government--I mean, State
tax collects, and you won't then have the police and fire
safety that you need in order to come back to the communities,
and you will take away the small businesses that once we went
to the local John Deere, we went to the local hardware store,
we went to the local book store. Those will be gone, because
why would you do that, unless you had a special book that was
only--I mean, there are more available through the Internet
than otherwise.
So those are the things that I wanted to add, and I
appreciate you coming and being here, and I appreciate the
chance to get to speak and listen.
Senator Wellstone. Thank you so much. The last issue you
raised is very much on the radar screen. There are many people
who are thinking along the same lines.
We are going to have one final comment.
Ms. Leonard. I am 55.
Senator Wellstone. No. 55. This better be great. You are
the conclusion, Jane.
Ms. Leonard. Thank you. My name is Jane Leonard, chairman
of the Minnesota Rural Partners, and also co-owner of Community
Technology, which is a very small business but helps lots of
communities with their community technology planning. I wanted
to take this opportunity, Senator Wellstone, to publicly thank
you and your staff for supporting the National Partnership
Development Act. We have worked very hard on that, and your
staff has been a great help, and so I wanted to publicly thank
you for that.
I wanted to just echo what I have heard here today, both in
energizing the entrepreneurs and closing the digital divide.
Those are two of the five areas that Minnesota Rural Partners
has been working on for the last 2 years, really, and we have
already heard about the Rural Entrepreneur Academy, and I want
to just let people know that, as we have heard today, there has
been a lot of collaborative efforts at the grass-roots level to
try and get the digital divide closed, and we have heard a lot
about infrastructure not being there. I think infrastructure is
there, there is a lot of activity in Minnesota, and we are
doing pretty well. The problem, I think, as has been pointed
out, is a lack of market development, especially for the new
technologies, like DSL, and a lot of folks will tell you that
they installed DSL, and they get 4 customers or 11 customers. I
think that one of the things that we do need to emphasize is
education. Technical training, but also leadership training,
and I would just like to invite anybody here, and including
your staff, the University of Minnesota, Minnesota Rural
Partners, League of Cities, Association of Small Cities, and
other regional cooperators are putting together regional
leadership seminars this September all across the State in each
of the six initiative fund regions, and we invite people to
come out to this. It is a way to help community leaders
understand the multi-dimensions of what we have talked about
here today, the regulatory issues, the leadership issues, and
in 3 hours. So we will see if it works.
Senator Wellstone. I think that what you all are going to
be doing this fall is so important. I think it is just
critical.
What I would like to do is, first of all, I have some
remarks that I would like to have included in the record, and
there are 10 days for additional remarks that I know you might
want to make. At the front door, there are instructions about
how to submit your testimony. I wanted to ask Representative
Schumacher, Leslie, and Toni and Colleen whether you all have
any final comments to make. We will all try to be relatively
brief. I have had a chance to speak more than enough, so I
would like to thank everyone. I thought it was a great hearing,
and I take it to heart, and it is not just symbolic. Owatonna
is not a suburb of Northfield.
Leslie.
Ms. Schumacher. I am Representative Leslie Schumacher. I
would like to thank you, Senator Wellstone, for conducting this
hearing today. I learned a great deal and have a ton of
questions. I have been taking notes, and I am hoping that you
will provide us with the names and titles, and how to contact
the individuals that testified here. I see lots of faces in the
crowd that I would like to take time out to talk to, and intend
to. Unfortunately, I have another appointment that I am running
late for, so I am going to have to exit very quickly. But this
was a fantastic meeting.
I have some concerns, and as well as some questions, and
some partnerships that I would like to form with individuals
that testified here to talk about how we can collaborate work
out of--I think out of the box. I think there are some changes
that need to occur, and we need to better work together to
provide services to rural Minnesota that they need.
So thank you for giving us this opportunity to listen and
participate. Thank you all for being here.
Senator Wellstone. Thank you for giving us your time. It is
much appreciated.
Toni, please go next. Colin is all over the district and is
absolutely committed to these issues, and so I am so glad you
are here.
Ms. Merdan. Thank you, Senator, for having me here today. I
really appreciate this, and I appreciate you being in the St.
Paul District. My name is Toni Merdan, and I am Senior Economic
Development Officer for Congressman Colin Peterson.
As you said, Senator, this is an issue that is vitally
important to the Congressman. He was the first U.S. Congressman
to appoint a full-time professional economic developer to his
staff, and since he has done that, and since he has had me,
there are quite a few other Congressmen in the U.S. House of
Representatives that have also followed suit.
I appreciate you having us today. It has all been excellent
testimony, and I will take back everything I have heard to the
Congressman for his consideration.
Also, one thing I might mention is that he is on the
Agriculture Committee, and he continually needs information and
feedback from what policy changes there should be, and so
anytime, please get hold of us, let us know what your thoughts
are. We are especially interested right now in USDA rural
development and any policy changes or ideas that could come in
front of the Committee on those issues. So like we talked
about, this is a program in rural development, and all of the
wonderful community development programs they have, and so if
there is anything there that we can take information back to
him, I would appreciate it.
So, again, thank you, Senator.
Senator Wellstone. Thank you for coming.
Colleen.
Ms. Landkamer. I am Colleen Landkamer, and I am a Blue
Earth County commissioner, and I have been a chair of the Rural
Caucus of the National Association of Counties. I just think it
is great you had this hearing today. You know, too frequently,
we do not get this information in the district, and it is nice
for you to bring people out to the State to hear the ideas here
and to make a difference. We all know that all good ideas do
not start in Washington. They start here, and you know that. So
bringing it out here and getting the ideas that are important,
and the people who put the programs actually in the ground, the
people who work in the dirt and make things happen out here,
that is what is important, and that is what we heard today. It
all shows how interdependent everything is.
We talk about health care, talk about technology, talk
about living in a knowledge economy, and the importance of
bringing all of that together and looking for new solutions and
new ways to do things. In that way, encouraging resilient
communities--and that is what this is all about, making sure
that rural Minnesota has resilient communities, places for
people to live and grow and have good jobs.
So I just want to thank you for doing this. I want to thank
you for letting me sit up here and learn so much from all of
you, and I look forward to working on this with you for a long,
long time.
Thank you.
Senator Wellstone. Thanks Colleen. I think you are being a
little modest. I think economic development is one of your
great areas of expertise, much less national.
Commissioner, before you finish up, Ed, you are getting the
final word. Since people put all of this praise on you, it is
only fair that you do. But, Commissioner, one of the things we
talked about, and I agree with you more on the other piece, the
one thing that you did say, although I think everybody knows
it, is that this clean technology is also much more small
business intensive. We have got so much potential. The other
thing is, it is a no-brainer for Minnesota, because we have got
over a $10 million a year energy bill. We are a State at the
other end of the pipeline, and so when we import the barrels of
oil and gas, we export dollars. Whereas wind, biomass--this is
a big part of our future.
Mr. Berstein. Yes, we have wind, we have the technology in
Minnesota, I think, and some of the big companies like 3M have
been instrumental. All are developing micro turbines.
I want to thank everyone here for your time today, and
honest issues. I also have a lot of notes on follow-ups, and if
I can grab a couple of cards, here, as well.
I came from a food marketing background, and the soup man
and some of his ideas, and Bread Board, but what is our largest
tax supporter? Does anyone know? It is agricultural products,
and we do not just have to send out corn or raw wheat. We can
send out processed or manufactured foods. There is also huge
development in the food industry. People do not always want to
buy Campbell's Soup or Progressive Food. This is the future of
Minnesota, market niches and, again, Minnesota is an energy-
producing State. Not with oil, not with traditional
technologies, but with the next generation of technologies,
whether it is wind, whether it is biomass, and whether it is
micro turbines.
So thank you, everyone.
Senator Wellstone. Thank you, Commissioner.
Ed Daum, thank you for having us, by the way.
Mr. Daum. Yes, thank you very much. I have taken lots of
notes today. I took lots of notes yesterday. Senator Wellstone
held meetings last week in several cities--Two Harbors, several
other ones. Our staff are taking notes. The reason I am saying
that is next week I am meeting with our Administrator in
Washington, and I will certainly take this and present this to
him, as well.
I would like to introduce someone, Karen Honz. Karen, can
you raise your hand? She flew in from Washington, D.C. She
works with the Senate Ag Committee, as well. So we are taking
notes. Again, Senator, thank you very much for inviting us here
today.
Senator Wellstone. This was a superb hearing. Thank you.
Some of you traveled very far, and for all of you who came and
sat through several hours of testimony, it is much appreciated.
Thank you everybody.
The hearing is adjourned.
[Whereupon, at 12:55 p.m., the Committee was adjourned.]
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