Foreign Trade Zone Information

Why a Foreign Trade Zone will be successful in Koochiching County

Despite slashing interest rates to the lowest level in over 50 years, the Federal Reserve was unable to ward off the economic recession that is beginning to show signs of a gradual recovery in 2002. The future of the battered technology industry is still uncertain, as investors are weary and capital remains difficult to come by. While economic response was swift to minimize the economic fallout from the recent disasters in the U.S., those events coupled with the threat of future attacks continue to delay a turnaround for many communities but not with this Borderland community, our strategic location is key to Homeland Security and Port Commerce and over 40 new customs jobs are being created here. Predictions indicate the U.S. economy will begin to exhibit moderate growth by the second half of the year, although the outset and extent of this growth may be tempered by several volatile situations such as the war on terrorism, turmoil in the Middle East, higher U.S. unemployment, and highly sensitive consumer and business confidence levels. The industrial real estate industry is expected to remain largely in balance as long as consumer driven demand supports it. Given the lack of Wall Street confidence, real estate development is opportunity. This is why today's timing is so important for the Foreign Trade Zone project.

The thriving economy of the previous years resulted in tremendous growth in new construction, absorption, product demand and rental rates. Just-in-time supply chains, point-of-purchase inventory control, robotics, and "around the clock/around the world" communications revolution quickened the pace and reshaped the map of producer-consumer interactions. Development has slowed down some but construction has generally kept pace with the expanding markets rather than surpassing demand.

Bearing the brunt of the weak economy, manufacturing grew for the first time in 1 ½ years in the 1st quarter and consumer spending posted solid gains. The service and construction sectors have also fared relatively well. Still, the trend toward consolidation is now viewed as the main driver in industrial expansion. Firms that in the past have had several smaller distribution centers in an area are now moving to one larger property. International Falls/Koochiching County a perfect location for the following:

1. Central location to Chicago (the central commodity distribution center of the USA)
2. International Airport
3. Growing Rail Port of Entry
4. Expanding Highway 53 project
5. New high speed Telecommunications
6. Existing building facility (that are ready to begin operation immediately)
7. Rainy River Community College who's initiative is customized workforce training
8. Existing/Expanding skilled and successful INS, Border Patrol & Customs workforce
9. Low cost of living, and high quality of life with Rainy Lake, Rainy River and Majestic Woods

Therefore, consolidation is resulting in more space being taken and this is expected to continue, largely being driven by demand for efficiency.

The need for very large facilities continues to be a concern, as measured both by the floor area of bulk distribution space and ever-taller ceiling height requirements. Location preferences have been impacted by the need of suppliers to be close to port accessibility. The reinvention of industry is, without question, one of the vital themes of the return of U.S. competitiveness on the international scene.

There can be no more telling evidence that foreign corporations recognize the return of American competitiveness than their own decisions to participate in the manufacturing and distribution revival here. Not only are the markets here in the U.S., but so is the skilled labor, the technology, and the innovation.

A. Location

While Minnesota is well known as the state of 10,000 lakes, it is far more than that. Minnesota offers a great combination of economic opportunities that make the state one of the best environments for businesses. From Fortune 500 firms to small-size companies and minority and women owned businesses, Minnesota offers a variety of opportunities and benefits.

Minnesota has a competitive advantage over other states in terms of a highly skilled and eager labor force, low rate of absenteeism, training opportunities, and high labor force participation. All of these factors contribute to a strong and healthy labor market. Minnesota's labor force participation has reached 2,839,898 with an unemployment rate of 3.2%.

The state is the home of one of the 30 firms in the Dow Jones Industrial-Average, Minnesota Mining and Manufacturing (3M). With 15 other Fortune 500 companies headquartered in Minnesota- among them Target Corporation, SuperValu, United Health Group, Northwest Airlines, Best Buy, The St. Paul Companies, General Mills, U.S. Bank, Nash Finch, Hormel, and Lutheran Brotherhood - the state ranks 10th among all states. Minnesota's economy is one of the most diverse in the nation with more than 90 percent of all major U.S. industries located in the state.

Nearly 50 million people, one million businesses and 80 thousand manufactures are located within 500 miles of Minneapolis and St. Paul, making it a top U.S. market and an important business hub. The overall health of Minnesota's economy and its potential for future growth makes the state and excellent place for businesses to thrive.

Minnesota consistently ranks as a top location for exporting companies. It can also be for importing as well. Business and government offer a broad range of services to support these activities, from export counseling and shipping, to international legal; accounting and communications expertise.

Minnesota's 25 largest multinational companies derive 32 percent of their total revenues of $21.6 billion from outside the U.S. Not only has Minnesota ranked among the top 10 states in the export of many agricultural commodities, but its manufactured exports, valued at $9.1 billion, have grown 55 percent since 1990. State exports include such high technology products as Medtronic's mechanical heart valve.

B. Minnesota Incentives and Basic Taxes

Minnesota's economy grew 25% faster than the U.S. economy between 1990 and 1999. It was ranked 11th in per capita income in 1999, up from 14th in 1995.

Minnesota's annual average unemployment rate was the 16th lowest in the nation. It was also ranked the "Most Livable State" from 1997 to 2002 and the 2nd "Healthiest State" in 2001 and 2002 by Morgan Quitno Press.

For six of the past seven years, the Corporation for Enterprise Development has placed Minnesota on the Honor Roll of its Development Report Card for the state, a publication that assesses each state's economy and potential for future growth based on more than 70 state measures.

Minnesota truckload shipments can reach most U.S. destinations in three days or less. In addition, Minnesota has four major Great Lakes ports, the largest rail port this side of the Rocky Mountains is in Koochiching County and a river system that consists of 231 miles of navigable waterways.

Due to the use of all major forms of fuel to meet its electrical needs, commercial electric prices are 15% below the national average, and commercial natural gas rates are 7% below that of other states.

Minnesota's workers' compensation cost has been progressively declining since 1992, and was ranked 13th lowest out of 45 states in 2000.

Minnesota Investment Fund
The Department of Trade and Economic Development (DTED) can provide up to $500,000 for companies adding jobs to Minnesota. The Investment Fund is channeled through the city in which the company locates and the city and the company collaborates on applying to the state for financing. Virtually all types of businesses are eligible, excluding retail enterprises. Criteria of the program center around the number of new jobs and the specific salary levels the company will commit to over a two-year period, the size of the overall capital investment, the demographics of the city in which the company would be located, and the size of any other applications that the state may be pending from that city.

The Rural Challenge Grant Program provides low interest fixed asset and working capital financing of up to $100,000 for companies located outside the seven-county Twin Cities Metro Area.

The Tourism Loan Program provides low-interest loans of up to 50% of the project to tourism-related businesses to upgrade or develop new facilities.

Industrial development bonds
The state of Minnesota is able to provide tax-exempt financing (IDB's) for construction projects that meet qualifying standards under federal law. DTED has its own program (known as the Small Business Development Loan Program) but individual cities can also issue tax exempt financing on their own. Financing typically is in the range of $1-4 million, and cannot exceed $10 million in total investment.

Minnesota Job Skills Partnership Program
This is a customized training program, through which corporation's specific training can be met by a collaborative effort with an educational institution. State funds are provided to the institution to develop and deliver the training, which can be tailored to the company's training requirements. Under this program there is a maximum of $400,000 that can be provided for any one project.

The Hire Education Loan Program (HELP) provides up to $250,000 in short-term, no interest loans directly to businesses for training new or existing employees.

Tax Exemptions
All capital equipment used in manufacturing is exempt from sales tax in Minnesota. In addition, food and clothing are exempt from sales tax.

Minnesota is one of the few states that exempt inventory, machinery and equipment from commercial and industrial property taxes. There is also no tax on personal property, benefiting equipment-intensive businesses.

Corporate Income Taxes
State taxable income is calculated by an apportionment formula. Minnesota's apportionment formula weighs sales at 70 percent, and payroll and property at 15 percent each. As a result, businesses with a small proportion of sales within Minnesota may have a significantly lower effective corporate income tax rate than similar businesses in other states.

Minnesota allows a corporate income tax credit for research and development expenses. The credit can be carried forward up to 15 years.

Property Taxes
In June of this year, Governor Ventura signed a bill that provides for a net 10% reduction in business property taxes. This bill not only reduces the burden by 10%, but also compresses the classification rates and provides for the likelihood that future property tax increases will be smaller. This is one of the most significant tax reform measures passed in Minnesota in many years and is expected to make it more attractive for businesses to expand and locate themselves in the state.

Additional Taxes
Unlike many other states, Minnesota state law does not allow local governments to impose additional income or payroll taxes on businesses.

C. Additional Local Benefits

Koochco provides low interest loans to qualified existing or prospective small business owners. It is managed by the KEDA.

Northeast Entrepreneur Fund, Inc provides "dollar capital" in the forms of loans to qualified applicants and we offer training and consulting to existing or prospective small business owners.

Small Business Development Center assists in business planning, business start up, marketing, sales, accounting, financial analysis and budgeting.

Koochiching Development Authority (KDA) is the county board with full economic development powers. It receives funding from the IRRRB (Iron Range Resource and Rehabilitation Board).

MN Workforce Center provides job placement and employment services through a local state office.

Occupational Development Center provides job coaching and career development for individuals with disabilities.

Chamber of Commerce handles projects collectively for the benefit of Koochiching County.

Convention and Visitors Bureau utilizes lodging tax dollars and markets the Rainy Lake and Int'l Falls area.

Koochiching County projections, 1995-2025
Minnesota State Demographic Center, Minnesota Planning, June 1998
http://www.mnplan.state.mn.us/demography/prj/koochiching.htm
Age	Sex	1995	Projected	Projected	Projected	Projected	Projected	Projected
		Population	Population	Population	Population	Population	Population	Population
		Estimate	2000	2005	2010	2015	2020	2025
Total		15,911	15,620	15,320	15,000	14,640	14,200	13,580
0-4	Male	462	310	310	330	310	270	210
0-4	Female	451	300	300	310	300	250	210
5-9	Male	560	470	310	310	330	320	270
5-9	Female	518	460	300	300	320	300	260
10-14	Male	650	570	480	320	320	340	320
10-14	Female	633	530	470	310	310	320	310
15-19	Male	680	660	580	470	320	310	330
15-19	Female	539	640	530	460	300	300	310
20-24	Male	431	460	520	450	370	250	240
20-24	Female	345	400	510	420	360	240	240
25-29	Male	481	410	450	510	440	360	240
25-29	Female	388	340	390	500	410	360	230
30-34	Male	687	490	420	460	520	450	370
30-34	Female	592	410	350	410	520	430	370
35-39	Male	768	690	500	430	470	530	460
35-39	Female	592	610	420	360	420	530	430
40-44	Male	669	770	700	500	430	480	530
40-44	Female	543	610	620	420	360	420	530
45-49	Male	579	670	760	690	500	420	470
45-49	Female	490	550	610	620	420	360	420
50-54	Male	466	570	660	750	680	490	420
50-54	Female	465	490	550	600	610	420	360
55-59	Male	400	460	560	640	740	670	480
55-59	Female	392	470	490	540	600	610	420
60-64	Male	349	380	440	540	620	700	640
60-64	Female	378	390	460	480	530	580	590
65-69	Male	341	320	350	400	490	570	650
65-69	Female	359	360	370	430	450	500	550
70-74	Male	291	290	280	300	350	430	490
70-74	Female	329	330	330	340	400	420	460
75-79	Male	236	230	240	220	240	280	350
75-79	Female	284	290	290	290	300	350	370
80-84	Male	126	170	160	170	160	170	200
80-84	Female	190	230	230	240	240	240	290
85+	Male	90	120	160	180	190	190	200
85+	Female	157	220	270	310	330	340	360

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