The New Duluth

The Northern Minnesota town famous for shipping and biting winters is biting back and proving that, in an era of uber connectivity, the burgeoning economic machine that is the new Duluth knows no bounds.

By Beth Probst

The marquee boldly stating "Girls Friday Nights" is an unlikely place to gauge the business environment of a community-unless you are Duluth and the marquee belongs to the historic Norshor Theater.

In June, the city of Duluth finalized the purchase of the historic downtown theater and Temple Opera building for $2.6 million; a bold move initiated in May. A potentially odd investment to be sure, it owes largely to the fact that the dollars used were allocated for downtown renovations and couldn't be spent elsewhere. The transaction marks one of numerous deals underway focused on revitalizing Duluth-an effort that's gaining momentum thanks to big thinkers who are investing their livelihood in the region's future.


Bold Vision

One such visionary is Rod Raymond, who played a key role in the purchase of the Norshor Theater and is co-owner of Old City Hall. The aggressive entrepreneur also co-owns the old Carlson Bookstore, the Brewhouse, Burrito Union and the Red Star. While Raymond doesn't believe starting business in Duluth is easy, he says the changing of the guard at City Hall helps.

"Doing business in Duluth has improved greatly," he says. "Everything from the permitting process on-down is getting better."

One noticeable change: Duluth's mayor, Don Ness. The 36-year -old has been called young, hip, progressive and a variety of other things associated with moving the city forward. While Ness won't jump to agree, his commitment to Duluth and making change at City Hall is something he's eager to talk about.

This includes two major areas of focus: removing barriers and providing better customer service to developers. "We're working hard to create a one-stop shop for developers, covering everything from construction to building safety to engineering," he says. "By creating a Planning and Construction Services Department, we can provide better communication and a more timely response."

A gigantic undertaking, the proposed Unified Development Chapter of the City of Duluth Legislative Code (UDC), is also underway. Forgo yawning for a moment and recognize that Duluth hasn't updated its zoning regulations since 1958.

"Our current zoning code is over 50 years old, which creates a lot of hurdles for developers," says Ness. "This new plan will streamline and reflect the current market versus the more 1950s urban-sprawl-type developments." As for when this will be complete, Ness says the council will vote on the plan this summer.

While progress is great, a more subtle, cultural shift is also taking place-which, although tough to quantify, is a vital part of the "new" Duluth. "There's a new sense of optimism in our community," says Ness. "We now believe we have the strength and ability to complete with other communities across the nation."

This is quite a shift from the last economic downturn of the early '80s when Duluth had the second-highest unemployment rate in the nation and an infamous billboard on I-35 headed out of town that read, "Would the last to leave, please turn out the lights?"

"It would have been easy to give up," Ness says. "But that didn't happen. Instead, we pulled together to transform our local economy." Strong local resources assisted in this transformation, assuring the new Duluth can thrive. One such resource, which was the result of a regional economic summit in 2001, is the Area Partnership for Economic Expansion (APEX).

"It became clear that if the private sector in our region were to thrive, we needed an organization focused on advocating for private business and to provide a connecting point for businesses and resources," says Lisa Heyesen, director of business development at APEX.

To date, the organization has worked with about 200 businesses to retain, attract or expand more than 2,000 jobs, not just in Duluth but throughout northeast Minnesota and northwest Wisconsin. In total, the efforts of APEX, with assistance from numerous partners, is worth about $75 million in wages.

"We're fortunate in that we can take a regional approach to economic development," says Heyesen. "We can leverage regional resources, act nimbly, coordinate efforts across county and even state lines, and act on behalf of the entire region versus just one community."

APEX, along with many of its partners and members such as the Northland Foundation and Northeast Entrepreneur Fund among others, support emerging industries while recognizing a blend of old and new, to help drive Duluth ahead. More importantly, this regional approach to collaboration has put many decision makers on the same page about Duluth's future.

"Duluth remains a strong port city with an industrial backbone," Ness says. "But we're also a diverse community that is a progressive, creative economy always looking to the horizon for the next big opportunity."

And businesses are starting to take notice. In addition to recently being considered for a new wind turbine manufacturing plant, Duluth is a strong contender for the Google Fiber project. Earlier this year, the company GeaCom announced it would locate in Duluth to create the Phrazer, a handheld device that displays video clips explaining various procedures and diagnoses in a patient's native language. In the meantime, the city remains home to Cirrus Designs, six colleges and universities, a strong medical community, and hundreds of small businesses-many of which are doing business globally, directly from Duluth (see sidebar).

Is Duluth perfect? Not exactly. Ness readily admits that more can be done in attracting and retaining businesses, especially building a network of venture capitalists where "seed money remains a challenge." Even Raymond, the eternal optimist-he's been known to say, "20 below isn't cold, it's an adventure"-says more needs to be done to encourage entrepreneurs. 

"It's all about that happy middle ground," says Raymond. "If you make it too easy, it encourages the wrong kind of entrepreneurs." But some reasonable hurdles with resources and the city on your team is a pretty good place to end up.

It's a path Duluth is headed down, thanks to strong innovators, abundant local resources and the firm resolve of  Mayor Ness to "become the premier small city in the Midwest ... A place that people love."



Going Global

Attracting big business is just part of the puzzle for the new Duluth. At the University of Minnesota-Duluth Center for Economic Development (CED), folks are busy working with small businesses to expand. The small business development center for northeastern Minnesota, the CED works diligently to ensure businesses succeed. "We're currently seeing 600 to 700 businesses per year," says CED director Elaine Hansen. While this sounds like a lot, it is just a drop in the bucket given there are about 8,500 small businesses in the region-many of which say doing business in the north is their best option.

Marvel Concepts, LLC.
Ann Wallin Harrington never planned to start the business Marvel Concepts, LLC. But eight years ago that changed when a routine mammogram turned up abnormal. While bearable, Harrington determined after enduring multiple mammograms, that a simple warmer could make the procedure more comfortable for thousands of women. "This was a small enough thing that it was something I thought I could really make an impact with," she explains. Eight years later, Harrington and her business partner are looking at what to do next with their CozyMamm Bucky Warmer-a success she attributes to strong resources in the region. "Everything I needed to launch a business was available in Duluth," she says. "I think people in Duluth don't realize the support system that is available until they actually need to use it." For her, these resources include being a tenant of the CED Business Incubator located in the Tech Village, along with working with the Natural Resources Research Institute (NRRI) at the University of Minnesota-Duluth on rapid prototype machines. 

loll Designs and Epicurean
Dave Benson, CFO and one of three owners of loll Designs and Epicurean, initially started his first business, constructing skate-boarding parks, near Minneapolis. Needing more space, the company relocated several times, finally landing in Duluth. Today, his multi-million-dollar businesses now include high-end furniture and cutting surfaces, making space less of an issue. Regardless, the companies are staying put. "We've had an extremely positive experience developing in Duluth," Benson says. "This region has a great workforce and strong resources." Similar to Harrington, Benson tapped into NRRI, which has assisted in everything from material research to strength and product testing. "The NRRI is a huge asset to businesses in this region," explains Benson. "They provide a unique area of expertise that a lot of communities don't offer."

Louise Russell, owner and founder of Arrowhead Fabric, now Dogbooties.com, started doing business in Duluth in 1993. Somewhat new to the business world, Russell sought out local resources, including the CED for its expertise. "They really helped me through the process and made sure we were on the right track," she explains. While Russell admits that initial financing was a bit of hoop-jumping, she's pleased with how everything turned out. A 2009 recipient of the prestigious Labovitz School of Business and Economics Business Person of the Year Award, Russell says the global marketplace makes doing business in Duluth a great option; "being centrally located helps and ultimately the physical location doesn't really matter for my business." That's good given her largest customer resides in Norway and just put in a 2010 order for 64,000 dog boots-not bad for a small company doing business in the great air-conditioned city of the north.


Duluth Business Resources

University of Minnesota-Duluth Center for Economic Development
Description: Works with more than 900 of the 8,500 plus companies in northeastern Minnesota, facilitating more than $20 million in loans, and assisting in the creation, retention, and stabilization of more than 3,000 jobs.
Website: umdced.com

Area Partnership for Economic Expansion (APEX)
Description: A private nonprofit business and economic development organization, whose members represent more than 50 of the most influential companies in northeast Minnesota and northwest Wisconsin.
Website: apexgetsbusiness.com

Natural Resources Research Institute (NRRI)
Description: Fosters economic development of Minnesota's natural resources in an environmentally sound manner to promote private sector employment.
Website: nrri.umn.edu

Northland Foundation
Description: A diverse organization involved in grant-making, business lending and a variety of other initiatives to assist the children, families, older adults, businesses and communities of northeastern Minnesota.
Website: northlandfdn.org

Northeast Entrepreneur Fund
Description: Helps people start and grow successful locally owned small businesses. Its mission is to promote the entrepreneurial spirit and create economic wealth and diversity.
Website: entrepreneurfund.org