Connecting state and local government leaders

How One Montana City Is Weathering Talk of a ‘Trade War’

Great Falls, Montana

Great Falls, Montana

 

Connecting state and local government leaders

“If the farmers and ranchers aren’t making money, we feel it immediately in Great Falls.”

Long dependent on the volatile agriculture commodity markets, economic development professionals in Great Falls, Montana see opportunity in food processing—and selling to China.

But the imposition of tariffs by the Trump administration, and even the possibility of a trade war, could put breaking into that region on hold.

Whatever comes out of ongoing trade negotiations, greater predictability is critical for cities like like Great Falls, which is working to keep housing affordable while increasing wages.

Route Fifty sat down with Great Falls, Montana Development Authority President and CEO Brett Doney at the SelectUSA Summit—a gathering of global business investors and U.S. economic developers hosted by the Department of Commerce—to discuss foreign investment in rural regions like his, and how it’s handling recent trade upheaval.

Route Fifty: Tell me a bit about Great Falls, Montana Development Authority and the economic development trends you’ve seen of late.

Brett Doney: “We’re a regional, public-private economic development partnership. We cover what we call the “Golden Triangle,” the Great Falls trade area, which is the Rocky Mountain front region of Montana. We’re unusual in Montana in that we’re mostly private sector driven. It’s 150 companies that we’re trying to grow and diversify our economy. We’ve been too dependent on just a couple of industry sectors, and we’ve suffered from low wages, which some businesses like. But our wages are not in balance. We’re an affordable place to live, but there’s still a gap between our cost of living and wages.

We’ve been focused quite a bit on our strategic location. For most of the businesses in the world, we’re not a good location, but for some very highly targeted industries we’re very well located. We’re halfway between Edmonton, Alberta and Salt Lake City on the I-15 CANAMEX Corridor, so we’ve been taking advantage of that in supporting all types of energy: oil, gas, hydro, solar, wind, and biofuels. And then we’ve been focused on food and agricultural processing and beginning to get into new uses for agricultural products: biofuels, biochemicals, bioplastics, bio-packaging, and things like that. So those are two sectors we’ve focused quite a bit on.

We’ve also become kind of a center for some higher-end, back-office operations—health insurance claim processing, technical customer service. So that’s been a good industry sector for us, and that’s not really tied to our locations, it’s just tied to the quality of the workforce.

We’ve been participating in SelectUSA since it was founded, and it really ties in well because it’s hard for the 363rd biggest metro area in the U.S. to stand out. With the help of the U.S. Commercial Service it allows us to connect with targeted companies. We went over to Japan for the first time in April, and we worked with SelectUSA to help identify and set appointments with food processing companies. We’ve been following our grain, so companies that have been purchasing raw product in Montana for years, and talking with them to see if we can make the business case of doing some of the first ingredient processing in Montana before shipping the product.”

Route Fifty: How closely do you work with Great Falls city government?

Doney: “We have a number of public partners, from the city of Great Falls to Cascade County—which is our county—our school district, our airport authority. Partnering is absolutely critical, both right in Great Falls as well as with the whole rural region. Extending those partnerships out, we’ve been working quite a bit with economic development groups in Alberta. They have clients that would benefit from expanding down into Montana, and we have clients that benefit from expanding up into Alberta.”

Route Fifty: Your P3 has been in existence 16 years. How have things changed in Great Falls in that time?

Doney: “One of the things we’re proudest of, when we were created, our cost of living was 93 percent of the national average, and our average wage was 67 percent of the national average. We’ve kept the cost of living low. In fact, now we’ve dropped to 92 percent of the U.S. average because our housing costs we’ve kept affordable, but we’ve raised our average wage to 75 percent of the national average. That doesn’t seem like a lot, but going from 67 percent to 75 percent, in our little metro area, it’s hundreds of millions of dollars in earnings, which means people have more money to raise their kids and buy things and have a better life. Our long term goal is to keep our community affordable and get our average wage to be above the cost of living, so every one to two years, we’ve been able to move it up a percentage point. We’d like to move it up a lot quicker, but the last 16 quarters, our wages have grown faster than the state and national averages. That’s what we need to do to catch up.

It’s largely through just restructuring. We started as an industrial community. We lost our big manufacturing plant in 1980, and we never replaced it. So manufacturing got down to 2 percent of our employment base, and it’s just one of those industry sectors that tends to have higher wage jobs. In the U.S., it’s 10 percent average. Now we’ve been able to raise it to 4 percent, but we have a long way to go to build up manufacturing, as well as those other primary sector industries that tend to have higher wages.

We still pursue tourism sectors, and that’s very important to us. But our whole tourism strategy is to not necessarily increase the number of tourists but to get them to stay longer and spend more and come back more often.”

Route Fifty: Full-time, minimum-wage workers can’t even afford a one-bedroom apartment in all but 22 U.S. counties. How have you managed to keep cost of living reasonable while raising wages?

Doney: “I think it’s by taking a comprehensive economic development strategy; I’ve always called it community economic development. We’re a community development financial institution. We provide gap and bridge financing. Over a quarter of our loan funds right now are in bridge loans for apartment construction, so you have to look at downtown and riverfront revitalization. You have to look at housing. You have to look at the schools and workforce. We see our goal in economic development as improving quality of life for all residents, so our metrics—I don’t want to criticize economic development—but some are driven just by total number of jobs created. We look at quality of jobs, but we’re mostly looking at quality of life. Housing is very important to us at all price points, as well as pathways to the better jobs. We’ve spent a lot of time working with our community college, our university and our school district and workforce training so that, when higher quality jobs are created, there are pathways.

There aren’t pathways to every job because, if you have a brain surgeon, it’s going to take a lot of schooling. But when we brought a specialty steel fabrication company from the Montreal area, we created the first dual-certified welding center in the U.S. Ever since we created it, we have high school kids that graduate from the community college and get certified in welding a week or two before they graduate from high school. So they come out of school with no debt, they have an associate’s degree and they’re certified in the U.S. and Canada in structural welding. It’s that kind of thing that gets me excited about what we do.

I think more and more economic development groups are looking at the whole picture and not just one piece of it.”

Route Fifty: With the current U.S. tariff situation—it’s a bit volatile now, obviously—how has that played out on the ground in Great Falls?

Doney: “Businesses hate uncertainty, but we live in a rapidly changing, uncertain world. We felt the effects when it was first started to be talked about because businesses changed their plans, or they put their plans on hold. We’ve just had to spend a lot of time with our businesses and visiting their headquarter locations to see how they’re dealing with the uncertainty. Some companies it hasn’t affected their decision-making at all; they’re going ahead with investments. Other companies have put investments on hold. Others are accelerating their plans because they want to get ahead of things, but basically the more uncertainty there is, the more it creates hesitation among businesses.

We’re hoping it all gets resolved soon and that there are more trade opportunities. We’re very dependent as an agricultural state on trade, and foreign direct investment is very important to us. We’ve done a lot of work with Canada and Japan. We’ve done some work with European companies. So it’s certainly not made things any easier.”

Route Fifty: How much would tariff retaliation from China affect Great Falls’ bottom line?

Doney: “We’ve been trying to move away from dependence on global commodity prices by doing more food processing. With China being a rapidly growing economy, we’re trying to break into the Chinese food markets, so if we get into a trade war it would set back those efforts.

Our biggest industry in Great Falls is still being the service center for a very large rural region. If the farmers and ranchers aren’t making money, we feel it immediately in Great Falls.

Our whole strategy has been looking at how do we diversify away from commodity prices because what worked for many decades isn’t working any longer. Wheat prices have been down. Beef prices have been down. We don’t process meat in Montana on a commercial scale, and we’re trying to get into that. Exporting to China is a wonderful market opportunity for us. If that gets shut off, it just means that other countries like Australia and elsewhere will have that market for themselves.”

Route Fifty: What would you like to see come out of the trade talks with China and elsewhere?

Doney: “Increased trade opportunities for all countries and some long-term agreements so businesses looking to make capital investments, they have some future outlook that things aren’t going to change by the minute. When you invest in plants and equipment, it’s a long-term investment.”

Dave Nyczepir is a News Editor at Government Executive’s Route Fifty and is based in Washington, D.C.

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