Small towns near Rochester hope — and plan — for DMC-fueled growth

In 2015, residents of Chatfield approved a levy request from the local school district, which was seeking more money to cover its operating expenses. The next year, voters approved another request – this time for $10.8 million for improvement projects at the high school. The city got into the act in 2017, asking for $4.4 million for the construction of a pool. That, too, won approval from the voters.

It was an impressive trifecta and, in some observers’ eyes, a promising reflection of the public mood in this town of 2,900 in the southeast corner of Minnesota. “People don’t vote for those things without confidence in their future,” said Joel Young, Chatfield’s city clerk for the past 28 years.

While it’s difficult to pinpoint the source of such civic pride, one plausible mood-booster in this region of Minnesota is a multibillion-dollar economic development initiative under way in Rochester – an ambitious plan that aims to make that city’s famed Mayo Clinic an even bigger draw than it already is. Destination Medical Center, as the plan is called, claims it could generate as many as 30,000 new jobs in Rochester alone over the next 20 years – jobs in high-tech industries as well as in hospitality and other sectors.

It’s expected – or perhaps hoped – that that expansion will also lead to growth in the small towns in Rochester’s orbit, where some of the new workers would presumably live or recreate. Not surprisingly, the chance for those communities to capture a sliver of that growth is enticing. A few more families, some new homes, another business or two – any of that would be welcome at a time when Greater Minnesota cities are trying to hang on to their populations and way of life.

Spurred, in part, by DMC, Chatfield joined several other communities in an eight-county regional economic study that, when it was released last fall, provided an economic snapshot of this region as Rochester embarks on its bold plan. The needs it identified have become familiar in many regions of Greater Minnesota: more child care options, more places to live, better public transportation, more workers to fill jobs.

“Nobody lives in a vacuum, so we have to have an understanding of all of these economic changes,” Young said. “People understand that change is afoot.”

Regional study

The Southeastern Minnesota League of Municipalities (SEMLM), a planning and advocacy group that has been around since the early 1960s, represents about 65 cities from eight counties in this region.

The agency, with the help of a Chatfield-based consultant, commissioned the economic report and garnered a grant from the state Department of Employment and Economic Development (DEED) to pay for it. The eight counties included in the study – Dodge, Fillmore, Goodhue, Houston, Mower, Olmsted, Wabasha and Winona – have a combined population of about 368,000, along with about 190,000 workers. (Rochester, with about 110,000 people, makes up nearly a third of that population).

The 108-page report dives deep into the statistics and trends in this region, shedding light on how it might adapt to changes over the next two decades. (Destination Medical Center is listed as one of the “major regional initiatives” driving change here, along with the growth of manufacturing and the possibility of upgrades in transportation and an expansion of the tourism trade).

As in most regions of Greater Minnesota, housing was identified as a potential barrier to growth. For instance, the study found that the region needed 5,500 new housing units to keep up with population growth between 2009 and 2016 – but produced just 1,900. Over the next two decades, meanwhile, the study projects that the region will need 14,000 housing units in addition to its current pace of production to keep up with the need. The study recommends that cities in the region revamp their zoning policies to generate more construction.

The study also recommends that the region expand its transportation networks; create a regional tourism strategy; do more to support its new immigrant population, which grew from 4.2 percent of the region’s population in 2009 to 6.4 percent in 2016; and increase its child care options.

Brenda Johnson, the executive director of SEMLM, said the study was essential for public officials and business leaders to get “a better picture” of the local economy so they can plan appropriately for growth. “Southeast Minnesota communities know that what happens in one has a drift effect on those around it,” she said.

She added: “The study has given our cities, counties and school districts a huge amount of information, which will help us to prioritize what we need to be working on and to identify those places where the market might be leaving things behind.”

Mark Schultz, an analyst with DEED who follows southeast Minnesota, said an economic boost is certainly possible from the DMC initiative. Yet he wonders whether new jobs in Rochester, especially those in retail and hospitality, will actually draw small-town commuters – or simply encourage more people to move to Rochester.

Schultz also noted that as the region envisions economic growth, projections show that 6,000 baby boomers will be leaving the workforce between 2020 and 2030. Add in the need for more child care and better transportation to support workers, and a lot of barriers could get in the way of that hoped-for development. “It all throws a wrench into the proverbial gears,” he said.

(The SEMLM report also identified a “talent mismatch” between what employers need and what workers can offer).

Nonetheless, interest in DMC remains high. Young, the city clerk, noted recent activity by other civic groups that seems partly driven by DMC projections. Besides the SEMLM study, a group called SE Minnesota Together – “a regional collaborative network of organizations and individuals,” as it bills itself – recently held a discussion on regional transportation. Another civic group, Journey to Growth, is pushing an economic strategy to diversify the regional economy, which is heavy on health care and manufacturing.

Destination Rochester

Destination Medical Center was launched in 2013, when the Legislature approved $585 million in public funding for DMC, a 20-year economic development initiative that involves the city of Rochester, Olmsted County, the state of Minnesota and the Mayo Clinic and other private investors.

DMC officials have said the funds will spur $5 billion to $6 billion in private investment. The idea is that as DMC invests in infrastructure and in research and innovation, private developers will invest in high-tech industries, as well as in the amenities that are needed to support more workers and more downtown activity: apartments and hotel rooms, restaurants and retail outlets, skyways and heated sidewalks.

Several projects are under way. This spring, for instance, a new Hilton property with 264 rooms is slated to open, while two apartment complexes with 285 rooms are scheduled to open this summer, according to DMC officials. Tenants in a planned bio- and life-sciences campus will include the Mayo Clinic and the University of Minnesota.

Lisa Clarke, the executive director of DMC’s economic development agency, said officials meet regularly with civic and business leaders in the region, adding that she often tells them to “leverage DMC any way you can!”

Clarke called the surrounding towns “powerhouses” for the workers they supply in Rochester, noting that Rochester City Lines sends 30 buses into surrounding communities each day to pick up and return workers. But, she noted, “there are gaps in the community for travelers and patients and people who work here.”

“Part of our work plan every year is how we connect with regional communities because they are so integral to Rochester’s success,” she said.

Said Johnson, the SEMLM executive director: “Huge credit to Rochester for having the perspective and a positive understanding of working with the communities around them. They know that it is very important for them to keep all of the communities in mind as they move forward.”

More housing, please

Concerns about the housing stock in greater Minnesota have perplexed policymakers for years.

In this region, the SEMLM study pinned the housing dearth on “a confluence of factors” that included rising land prices and construction costs and restrictive zoning regulations. It also noted that “slowly increasing wages” prevented the potential for higher rents or sales prices that could support the demand for new housing.

Plainview officials also believe Rochester’s growth could drive their own – if they have the houses needed for new residents. About 38 percent of the workers in the Wabasha County town of 3,300 commute the 20 miles to Rochester to work, according to the city’s economic development coordinator, Judith Jordan.

For its part, Rochester hopes to encourage regional development through an unusual tax-sharing arrangement with a handful of nearby cities.

When residents approved a sales tax increase to support DMC, they also agreed to send $5 million of that revenue to 17 towns to be used for economic development. In 2013, Plainview received $357,609 under the arrangement. (Chatfield, through its Economic Development Authority, received $297,453, which it has used to improve Main Street storefronts, among other things.)

Plainview put the money into three loan programs that helped the city add 11 lots to a housing development and make two residential building loans, according to Jordan. She called that “a good beginning” for a town that had little housing growth from 2007, at the beginning of the Great Recession, through 2016. (The city was building 30 to 40 homes per year prior to the recession, a figure that dropped to six or seven a year from 2008 to 2010 before fizzling to one or two annually).

The city also plans to review its land-use policies and to develop a strategy for increasing the number of commercial and industrial lots that are ready for development, Jordan said.

Meanwhile, Beth Carlson, the mayor of Lewiston, a city of 1,600 in Winona County, said her town is trying to generate some new housing, too. Recent homes on the market have sold within a week, she said, suggesting that people would choose to live in her small community if they could find a place to live.

In recent years, Lewiston lost its bowling alley, a grocery store and a Herff Jones portrait studio, leaving the community “feeling a little stagnant,” she said. So the promise of DMC looms large. “We want to make sure that if and when that growth hits us that we are prepared for it,” she said. She added: “We look at us as being in a very good location between Rochester, Winona and LaCrosse for working couples.”

Already, she said, three buses carry workers from Lewiston to Rochester and back every day – an hour, round-trip.

Gateway to bluff country

Chatfield is sometimes referred to as “the gateway” to Minnesota’s bluff country – or sometimes as “the chosen valley,” a moniker that appears in the names of local businesses, such as the Chosen Valley Country Club and the Chosen Valley Care Center.

For a traveler, the rustic character of this region begins to emerge about 10 miles south of Rochester, when Highway 52 narrows to two lanes and then gently weaves into Chatfield. As the town comes into view, so do hints of the iconic bluffs, just enough to elevate some of the city’s neighborhoods above others.

The natural beauty of this region, especially around bed-and-breakfast hamlets like Lanesboro and Preston, has long made it a tourist destination. Farmhouses and barns border its winding roads and highways. The Root River State Trail stretches 42 miles, from Fountain to Houston; a spur goes southward to Harmony. According to the SEMLM study, the hospitality and leisure industries here generate $50 million in annual state sales tax revenue.

Like other cities that benefit from their proximity to regional centers, Chatfield is already in an enviable position. Its population is larger than it has ever been (though growth has been modest) while its high school has been steadily graduating classes of 65 students or so.

On a snow-covered February day, several people ate lunch at Jac’s Bar and Grill, where the special was a personal pizza, side salad and soda.

Health care, manufacturing and government make up more than half of this region’s jobs, and Chatfield has its share; the city’s top employers include the school district and manufacturers like Tuohy Furniture and EZ Fabricating. Popular attractions include the Chatfield Fish & Game Club and the Chatfield Center for the Arts, which was fashioned out of a mid-20th-century high school.

About 20 new homes were built in Chatfield over the last year, many of them selling in the $300,000 range, according to Young. Hopes are high, with DMC as a backdrop, that the community will continue to attract new residents.

“There will be a range of people coming in, and that is going to be very exciting,” said Johnson, who lives in Chatfield. “There will be more professionals and, yes, they will have to have a lifestyle and life experiences that will make them want to stay.”

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