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Chapter Five Retail and

Industrial Demand

Retail Land Demand An overview of Northfield�s retail and industrial demand provides a valuable look at the economic impacts of commerce and helps set the stage for future land allocation. The comprehensive planning effort did not include a detailed market analysis. However, Maxfield Research Group, a Minneapolis-based market research firm, provided an overview of retail demand, industrial demand, and impacts of �big box� retail development on Northfield�s traditional downtown area. Retail Sales Table 5-1 shows retail sales in the city of Northfield and Rice County in 1996 and 1998. Retail sales in Northfield (including services categories) increased from $165.3 million in 1996 to $194.6 million in 1998, an increase of $29.4 million or almost 17.8%. Those categories that exhibited the greatest gains during this period were Auto Dealers, Stations - $11.8 million, Eating/Drinking Establishments - $6.7 million, and Hardware, Building Materials - $4.3 million. Business Services also experienced a substantial increase of $5.1 million in Northfield; however, this category contains revenues that are predominantly business related rather than retail, and are not directly consumer related. Categories that exhibited the greatest losses were Miscellaneous (a variety of retail businesses) � ($755,900), Apparel/Accessories � ($350,100); Personal Services � ($333,700); and Furniture � ($311,300). Those categories in Rice County that exhibited the greatest increase in retail sales during this same period were Auto Dealers/Stations - $10.0 million, General Merchandise - $9.6 million, Eating/Drinking Establishments - $6.2 million and Food - $5.2 million. Business Services in the County increased by $6.0 million during this period. The higher numerical increases in some categories in the city of Northfield, compared to increases in the County, indicate that other communities experienced some declines in retail sales, and that Northfield experienced strong retail sales growth in several categories. General Merchandise sales in Rice County as of 1998 totaled $51.8 million, a figure that had increased by $9.6 million over the previous two-year period. Much of this figure likely includes retail sales from Wal-Mart in Faribault and K-Mart in Dundas. The recently-opened Target in Northfield will likely tap into these sales, but will also capture dollars currently being spent at retail centers outside of the community in Burnsville and Apple Valley.

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Chapter 5 Retail and Industrial Demand

Table 5-1 Retail Sales Trends � Northfield and Rice County SIC SIC Category Retail Sales Change

Code 1996 1998 No. Pct.Northfield

52 Hardware, Bldg. Mater. 9,015,819 13,282,975 4,267,156 47.353 General Merchandise 0 0 0 N/A54 Food 29,973,087 32,738,663 2,765,576 9.255 Auto Dealers, Stations 57,858,151 69,624,016 11,765,865 20.356 Apparel, Accessories 2,246,941 1,896,818 -350,123 -15.657 Furniture 3,978,764 3,667,429 -311,335 -7.858 Eating, Drinking 16,141,962 22,862,333 6,720,371 41.659 Miscellaneous 32,754,128 31,998,181 -755,947 -2.372 Personal Services 1,539,293 1,205,600 -333,693 -21.773 Business Services 5,764,703 10,834,098 5,069,395 87.975 Automobile Services 5,979,716 6,526,829 547,113 9.1

Total 165,252,564 194,636,942 29,384,378 17.8

Rice County52 Hardware, Bldg. Mater. 31,447,244 36,298,254 4,851,010 15.453 General Merchandise 42,159,099 51,768,902 9,609,803 22.854 Food 79,011,906 84,250,712 5,238,806 6.655 Auto Dealers, Stations 134,001,403 144,075,716 10,074,313 7.556 Apparel, Accessories 8,464,063 8,738,599 274,536 3.257 Furniture 13,111,483 12,502,298 -609,185 -4.658 Eating, Drinking 43,113,785 49,345,501 6,231,716 14.559 Miscellaneous 63,899,212 68,989,625 5,090,413 8.072 Personal Services 4,274,818 2,514,026 -1,760,792 -41.273 Business Services 10,299,548 16,313,166 6,013,618 58.475 Automobile Services 4,978,791 7,144,279 2,165,488 43.5

Total 434,761,352 481,941,078 47,179,726 10.9

Source: MN Department of Revenue: Tax Research Division; Maxfield Research Group

Calculation of Retail Demand Table 5-2 shows a calculation of the additional retail square footage that could be supported in Northfield over the next few years given the current population, retail square footage, and potential leakage of retail sales out of the community to other retail centers.1 The 2000 population is estimated to increase 1,085 persons by 2005, which will also increase the demand for retail goods and services in the

1 The information shown on Table 5-2 relies on �industry benchmarks� and is intended to serve only as a guide. Actual market demand is likely to vary depending on consumer preferences, economic conditions, etc.

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community. Average annual per capita expenditures for non-shelter related consumer goods and services currently totals $8,261, a figure likely to remain stable or increase slightly over the next five years. Estimated retail leakage, defined as that portion of estimated buying power that will continue to be spent outside of the draw area despite the increase in population, was calculated based on core goods and services, those goods and services purchased with relative frequency.2 A slight increase in retail potential has been projected due to the number of workers who commute to Northfield from surrounding rural areas and would be most likely to spend retail dollars in Northfield. However, despite this projected increase, and despite currently attracting some retail dollars for various goods and services into the community from outside, Northfield�s estimated retail leakage is projected to total 20% of consumer retail potential. The estimated supply of retail space is calculated by multiplying existing retail square footage by an industry standard average sales per square foot resulting in about $180.0 million in estimated retail sales in downtown Northfield3. The table also shows a calculation of demand using the population of Northfield and the immediate surrounding area, understanding that people residing close to Northfield patronize businesses in the Downtown and along Highway 3. This calculation indicates that the city of Northfield, by itself, could not immediately support more retail square footage unless it can sufficiently reduce its leakage and/or attract people from outside of the draw area to spend dollars within Northfield. Currently, Northfield draws people daily for employment from the surrounding area, but it also has a growing number of people who commute to the Twin Cities daily. Similar calculations were done for Rice County. The projected demand for retail uses (Table 5-2) in all of Rice County is approximately 123,000sf as of 2000 and 384,000sf by 2005, assuming that population growth reaches projected levels. This demand reflects retail space for all of Rice County, although it is likely that Faribault, Northfield and Dundas will have the greatest expansion of retail space, because concentrations of retail already exists within these communities.

2 While automotive sales have increased substantially in Northfield over the past two years, such purchases are considered to be specialty goods. 3 The sales per square foot figure is a blended rate derived from the Urban Land Institute�s retail calculations of typical independent stores in centers across the Upper Midwest.

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Table 5-2 Demand for Retail Space, City of Northfield

2000 2005DEM ANDProjected population of Draw Area 18,035 19,120

Times: Annual Per Capita Expenditures $8,261 $8,261

Total Draw Area Expenditures $148,987,135 $157,950,320

Net Estimated Leakage @ (-20% ) ($29,797,427) ($31,590,064)

Total Estimated Demand $178,784,562 $189,540,384

SUPPLYTotal Competitive Retail Space in Draw Area (GLA) 1,200,000 1,200,000

Times: Average Sales/Sq. Ft. $150 $150

Total Estimated Annual Sales in Draw Area $180,000,000 $180,000,000

NET M ARK ET SUPPO RT

Excess Demand (Demand minus Supply) ($1,215,438) $9,540,384

SUPPO RTABLE RETAIL SPACE

Divided by: Average Sales/Sq. Ft. $150 $150

Total Amount of Additional Space Supportable in Draw Area (Sq. Ft. Gross Leasable Area) -8,103 63,603

Leakage is equal to the estimated amount of dollars coming into or leaving the trade area.Currently, Northfield is attracting customers into its market for some types of goods and services.

Source: Urban Land Institute, Dollars and Cents of Retail Shopping Centers, 1998; Thompson, John S., Site Selection, New York: Lebhar-Friedman, 1982; Maxfield Research Inc.

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Potential Impact of “Big Box” Retail Uses on Northfield’s Downtown The construction of a new Target store in 2000 prompted a community discussion on the impacts of big box retail uses on downtown Northfield. As a part of this comprehensive plan, Maxfield Research Inc., a market research firm based in Minneapolis, reviewed the mix of businesses in the Downtown and categorized the majority as having product lines that would not compete directly with those typically offered in a big box, general merchandise store. Some downtown businesses, however, do indeed carry accessory product lines that would compete directly with the general merchandise store. General merchandise retailers focus most heavily on the following product lines: ! Health and Beauty Aids ! Household Textiles ! Housewares ! Moderate price/casual apparel and accessories (Family) ! Electronics ! Jewelry (Moderate price) ! Paper Products ! Basic automotive supplies They offer very little (in terms of quality and selection) in the following categories: ! Furniture ! Appliances ! Building Materials/Hardware ! Groceries ! Specialty Items The types of stores that may typically be affected by general merchandise retailers are those that have product lines similar to those provided by a general merchandise retailer, namely drugstores, family apparel, children�s apparel, electronics, recorded music, and housewares. Although apparel is one area where general merchandise retailers offer a substantial selection, individual stores that offer a unique product line or have a specialty niche can often compete effectively against a larger store�s more generic offerings. Downtown Northfield currently enjoys a diverse mix of retail businesses, many of which have a specialized niche that is not easily replicated in a more generic retail environment. Business services, specialty retail items, reading materials, antiques, liquor, hardware, personal services (tanning, massage, hair salon), and other such items are not a substantial part of the merchandise mix of a typical general merchandise store.

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Downtown Northfield currently has the type of concentrated retail district in which customers can park once and shop twice. In addition, Downtown is easily accessible to nearby neighborhoods, and free parking is usually available, which encourages shoppers to patronize Downtown businesses. The downtown retail environment also benefits from related attractions. Facilities like the Post Office, Library, and arts and cultural offerings attract people to downtown Northfield. The compact nature of the downtown area makes it convenient to visit these attractions and to take advantage of local retailing opportunities. The convenience that general merchandise retailers can offer the consumer remains one of the greatest threats to the vitality of Downtown�s retail district. Convenience remains paramount to most of today�s consumers, and even though convenience is less important when shopping for a specialty item or service, the ability of a retailer to provide customers the opportunity to purchase items quickly and easily is still the preferred shopping experience. Instead of offering a high level of service, general merchandise retailers specialize in offering the convenience of a larger product line at a moderate price. Locating all of the items under one roof is a significant convenience, especially to busy families who might prefer this type of shopping experience. However, there are other groups of consumers who are less convenience oriented and prefer a higher level of service. It is these consumers that Downtown retailers should seek to retain and attract. General merchandise retailers in Northfield and Dundas pose another threat to downtown Northfield. General merchandise retail establishments like Target and Kmart attract other types of retail uses. Throughout the country, commercial uses such as grocery stores, restaurants, banks, and specialty retail uses are commonly found attached to, or adjacent to, large scale general merchandise establishments. If some of these types of uses locate near Target in Northfield, or in nearby Dundas, their presence could have an impact on downtown businesses. Should this occur, it will be even more important for downtown businesses to provide unique goods, services, and attractions to maintain a strong customer base. One way to strengthen the retail offerings downtown is to encourage additional housing in the immediate area. New residents near Downtown would be most likely to view the Downtown as their neighborhood shopping district, as well as their most convenient shopping option.


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Industrial Land Demand In order to calculate the future demand for industrial land, both the projected employment growth and the existing supply of industrial land/industrial building space available in Northfield were reviewed. Recommendations regarding a marketing approach for industrial land development are also made in this chapter. Employment Growth Table 5-3 shows employment numbers, categorized by industrial sector, for Rice County from 1990 through 1999. Strong employment growth has been experienced in Construction, Manufacturing, and Services, categories which are expected to continue to experience strong growth over the next five to ten years, according to projections made by the Minnesota Department of Economic Security (MDES) for southeast Minnesota. Of those categories, Manufacturing experienced the greatest growth in employment, adding more than 1,400 jobs in the County over the past decade. While some of this growth has occurred in Northfield, Faribault has also experienced manufacturing job growth. Construction, Manufacturing, Wholesale Trade, and Transportation, Communications & Utilities are those sectors that are most likely to require industrial land for their facilities. Projected growth numbers for these employment sectors and a projected land-to-building ratio for industrial facilities were used to calculate the potential need for industrial land. The projected employment outlook for Southeast Minnesota shows continued growth in Manufacturing, Wholesale Trade, and Services. Services typically include businesses predominantly housed in office space or other types of institutional or retail facilities. Therefore, Services are not included in the calculation of the potential demand for industrial space.

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Table 5-3 Covered Employment Trends, Rice County, 1990, 1995-1999

Change1990 - 1995 1995 - 1999

1990 1995 1999 No. Pct. No. Pct.

Agriculture/Forestry 185 191 290 6 3.2 99 51.8Mining 60 61 74 1 1.7 13 21.3Construction 821 1,065 1,362 244 29.7 297 27.9Manufacturing 3,829 4,396 5,255 567 14.8 859 19.5TCU1 419 425 443 6 1.4 18 4.2Wholesale Trade 869 989 1,001 120 13.8 12 1.2Retail Trade 3,650 4,039 4,130 389 10.7 91 2.3FIRE2 488 556 535 68 13.9 -21 -3.8Services 5,279 5,236 5,648 -43 -0.8 412 7.9Government 3,724 3,699 3,329 -25 -0.7 -370 -10.0

Rice County Totals 19,324 20,657 22,067 1,333 6.9 1,410 6.8

1Transportation, Communications & Utilities2Finance, Insurance & Real Estate

Source: MN Department of Economic Security; Maxfield Research Inc.

Land and Building Supply-Industrial Currently, there are several vacant industrial parcels being marketed in Northfield, comprising 16,800 square feet of available space distributed amongst four facilities. These smaller facilities offer between 3,000 and 5,000 square feet each, relatively small spaces. While smaller businesses would likely find this type of space attractive, they are not the types of businesses that would be likely to look for space in an industrial park, where space needs are more likely to range between 20,000 and 80,000 square feet, depending on the type of use. In addition to the vacant parcels, Northfield has recently experienced the loss of two major employers, Fairway Foods and Ryt-Way. As a result, more than 600,000 square feet of additional industrial space are available for purchase and/or lease. Maxfield Research Inc., in conjunction with the City of Northfield Planning Department, identified six parcels with a total of 76 acres zoned industrial and available for development. These parcels are located in several different areas of the City and range in size from 2 acres to 40 acres, and are provided with municipal utility services. Three of the six are 5 acres or less; two are approximately 12 acres; and the largest is the 40-acre parcel. An additional three parcels, ranging in size


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from one to six acres are zoned as highway business and are most likely to be developed with commercial space. The most recent data available on business growth by industry and number of employees was compiled by the U.S. Department of Commerce and the Census Bureau and covers the period from 1994 through 1997. The data shows that the majority of new business growth has occurred among businesses that employ between 1 and 9 people. The second greatest increase has occurred among those businesses that employ between 10 and 49 people. However, there were also ten businesses with between 50 and 250 employees. Despite strong growth among smaller businesses, the introduction of one business with 250 or more employees can have a significant impact on a community. The increase in larger businesses (gauged by number of employees) most often occurred within the Manufacturing, Wholesale Trade, and Services categories. Smaller businesses were most often located within the Construction, Retail Trade, and Services categories. Table 5-4 shows a calculation of demand for industrial land based on the projected employment growth among those categories of jobs that are most likely to utilize industrial land for their facilities. This projection reflects projected job growth and does not account for an outside business moving into the area from out-of-state, which would bring a significant number of jobs to the community. The chart shows that Northfield has an adequate supply of land to accommodate an expanded industrial base. The availability of the actual supply of land, however, is contingent upon the interests of the landowners. Large quantities of land owned by a single party or parcels of land that are withheld from development due to owners� interests can lead to a shortage of land supply. Today�s industrial development trends are focused on the following: ! Strong growth in smaller size businesses that are interested in a

combination of office/warehouse space; ! Strong growth in light assembly and high-tech businesses; ! Strong growth in wholesale trade and distribution, which usually

seeks bulk warehouse space; ! Convenient highway access is less important for light assembly and

high-tech businesses, but is usually very important for wholesale trade and distribution businesses. These businesses seek locations where access to major transportation routes is adjacent to their facility or in close proximity.

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Table 5-4 Demand for Industrial Land, City of Northfield, 2000-2015

Demand Calculation - Industrial Land 2000-2015

Projected increase in Manufacturing/WholesaleTrade/TCU/Construction employment - Rice County 3,750

(times) Estimated Manufacturing/Wholesale Trade TCU/Construction Employment - Northfield % of Increase X 0.33

(equals) Total Projected Manufacturing/Wholesale Trade 1,238TCU/Construction employment in Northfield City

(times) average sq. ft. per employee X 800

(equals) amount of building square footage required 990,000

(divided by) average land-to-building ratio / 0.3

(equals) total land required to satisfy projected demand 3,300,000for industrial space

(less) existing vacant industrial sites available 3,828,360

(equals) remaining demand for industrial land (528,360)excess land12.1 acres

Source: City of Northfield; Maxfield Research Inc.

In addition, many medium-size communities are competing for a limited amount of industrial growth. Nearly every medium-size regional community in Minnesota has an industrial park and is actively seeking new businesses. Often these communities are willing to offer a very attractive package to any business that will bring new jobs. Total projected employment growth for Northfield from 2000 through 2015 is estimated at 1,238 jobs. This calculation is based on an assumption of consistent job growth as well as three additional assumptions about the City of Northfield: that the City will continue to remain an attractive community for business growth, will have sufficient land available for new industrial development, and will continue to attract a similar proportion of the employment base in Rice County as it has in the past.


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Applying an average ratio of 800 square feet of industrial space per employee (blended rate for bulk warehouse and traditional manufacturing facilities) results in a projected demand for almost 1.0 million square feet of space to accommodate growth. At an average building-to-land ratio of 30%, this would require a land area of 3.3 million square feet. The existing vacant sites currently hold 3.8 million square feet of land area, providing an excess of 528,000 square feet, or about 12 acres, even after growth is accounted for. These figures do not account for built sites that may be absorbed by businesses. As was noted previously, another 600,000 square feet of space is located in recently vacated buildings. While this space may not be configured properly to accommodate a new business moving in, the space is nevertheless available and on the market. These properties have only recently been placed on the market and have already received some interest, but no offer of purchase has as yet been forthcoming. If these properties remain on the market for some time, the price will likely be reduced. However, there may also be issues with ongoing maintenance and repair of each facility the longer they remain vacant. Because processes and equipment are becoming highly specialized, most industrial businesses today prefer to build to their own specifications. Significant reuse of larger scale industrial properties does not often occur. Therefore, depending on employment growth and interest, it may be necessary to redevelop the Fairway Foods and Ryt-way parcels over time to better accommodate potential industrial businesses. Privately owned parcels, as compared to publicly held parcels, may also slow land absorption. Privately owned parcels controlled by individual owners with a profit objective rather than an economic development objective can result in a slower absorption rate for land. Conversely, sites marketed by the City with the specific intent to attract new jobs can result in a more rapid absorption. Communities with a substantial amount of publicly owned land available can create significant competition for communities whose sites are primarily privately owned. Thus, the proliferation of publicly owned industrial and business parks in many outstate Minnesota communities. The Industrial Land Physical Site Analysis (Figure 5-1) completed in 1997 identified three sites for consideration, two of which were deemed economically infeasible for the extension of municipal sewer and water. Site A, which has recently developed as a Target store, was identified as the most attractive of the three for several reasons including: ! lower cost to develop ! accessibility from a major highway ! visibility to and from a major highway ! convenient vehicular access to arterial roads ! favorable tax rates

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! public infrastructure availability at reasonable cost ! favorable site features ! existing or planned public/private site amenities ! positive identifiable recognition of area and immediate environs as a

desirable industrial development location Since this assessment was completed, this area has been converted primarily to highway commercial with Target as the primary tenant. As a result, site A is no longer considered an industrial area because of plans for mixed uses surrounding the Target retail development. Site B has also been removed from the list of industrial sites due to environmental considerations and a lack of supporting roadways. As a result, only site C remains as a viable industrial site. As part of this plan, the City will need to review alternative industrial sites, their strengths and weaknesses, and their potential suitability for development. Strong industrial growth trends in the southeast sector of

the Twin Cities have been identified as a harbinger of potential industrial development in Northfield. To date, while the strong industrial growth in the Twin Cities continues, it has expanded to vacant and redevelopment sites in the Twin Cities and not to small regional centers outside of the seven-county Metro Area. Additional industrial development has occurred in Faribault near the Interstate, and according to commercial leasing brokers, this trend is likely to continue.

Figure 5-1 Industrial Land Physical Site Analysis Study. BRW. 1997.

Northfield currently has a strong business base and business growth has been relatively strong during the 1990s. Minnesota is one of the few


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states in the country that is projected to continue to show growth in the Manufacturing sector, however the severe labor shortage is causing many manufacturers to try to enhance efficiencies through better implementation of technology rather than entirely via increased employment. Attracting a large employer to the community will require Northfield to be proactive regarding the availability of land and incentives to relocate. Northfield will continue to compete with other nearby communities (Faribault, Owatonna, and Lakeville) to attract large businesses, and it will be important for the City to have a strong economic development plan. However, the number of large businesses is declining at the same time the number of small businesses is rapidly growing. The City should identify those types of businesses it desires to attract and should develop a marketing plan designed to pull those businesses into the community. Consequently, the types of land/space that would be attractive to those businesses should be cultivated. A limited number of adjacent�and therefore able to be subdivided�5- to 15-acre parcels are available. An industrial area controlled by one owner (i.e. the City) offers greater control over the subdivision process. Demand Factors Demand Factors are calculated by the Minnesota Department of Economic Security using data from the Bureau of Labor Statistic; the result is called a location quotient. Location quotients less than one mean that a community or county is importing that product to meet local internal demand. Quotients equaling one mean that the community or county is producing just enough output in the identified industry to satisfy local demand. Quotients exceeding one mean that excess output is exported to meet the demand at locations outside of the immediate area. In Rice County, employment sectors with location quotients exceeding one include construction, local public administration, manufacturing, retail, and state public administration. Services and wholesale trade are calculated at slightly less than one. By comparison, in Northfield, manufacturing and services exceed one and retail and wholesale trade are slightly less than one. This data indicates that in Northfield, the manufacturing and services employment sectors are very strong and retail and wholesale trade are significant. A detailed explanation of location quotients and expanded listings of sectors in both Rice County and Northfield are located in Appendix 2.

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11/17/08 Comprehensive Plan for Northfield 10.1

10. Economic Development

A. Overview Northfield is in an enviable position for a community

of approximately 19,000 residents. The city boasts a number of assets and a unique character. An historic downtown and neighborhood, vital arts and culture presence, burgeoning riverfront and distinctive retailers make Northfield a popular destination. Two nationally-recognized liberal arts colleges, Carleton and St. Olaf, create intellectual capital that extends beyond students and faculty. This contributes to the community’s economic development in a unique and distinct manner. The colleges also provide a wide variety of cultural offerings for the community as a whole.

These attributes, in addition to a strong employment base and easy access to the Twin Cities, Rochester, and the evolving southeast Minnesota corridor create conditions under which growth must be planned for and managed. While rapid suburban development is a national pattern – resulting in communities with no real sense of identity – Northfield has defied the odds. It has done so by maintaining both its own employment base and its downtown core while being dedicated to thoughtful growth and preserving the city’s quality of place. Northfield’s ability to offer a diverse mix of employment and housing opportunities, to maintain and enhance the downtown, and to provide the level of services that current and future residents demand will hinge on the community’s commitment to pursuing specific economic development objectives – and to do so in a highly visible and assertive manner. The following land use principles of Chapter 4 relate to economic development: • The preference for accommodating future growth is

in infill locations, then redevelopment/land intensification opportunities; and then on the edge of existing developed areas (Principle 3).

• Places with a mix of uses that are distinctive and contribute to increasing the city’s overall vitality are preferred (Principle 6).

• Neighborhood-serving commercial will be small scale and integrated with the residential context (Principle 7).

B. Goal

A goal is a policy statement that states a desired outcome in general terms. The goal for economic development is provided below. The goal was developed by considering key findings related to economic development and integrating public input generated as part of the 2006 Economic Development Plan.

Organization A. Overview B. Goal C. Key Findings D. Priority Strategies E. Objectives and Strategies Purpose The purpose of the Economic Development Chapter is to identify the objectives and strategies for the success of economic development in Northfield.

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Economic Development

10.2 Comprehensive Plan for Northfield 11/17/08

Promote economic development by supporting existing businesses, by talent attraction and retention, by aggressive business recruitment, and by increasing the availability of commercial and industrial land. A further goal is to reposition Northfield to become more competitive in its economic development initiatives in relation to the Twin Cities, the Rochester corridor and its neighboring communities.

C. Key Findings

The community’s opportunities and challenges were identified in the Comprehensive Economic Development Plan, adopted by the Economic Development Authority (EDA) in 2006, and are identified in Table 10.1, above. The information in this table highlights Northfield’s strengths, weaknesses, opportunities, and threats, commonly referred to as a SWOT analysis. Broadly speaking, economic development strategies emerge directly from the SWOT analysis. Weaknesses – even if not directly related to economic development – must be addressed, and strengths must be supported and reinforced. Similarly, threats to the economic well-being of the community must be anticipated and responded to before they become crises. Opportunities, on the other hand, should be acted upon assertively and, if possible, collaboratively. D. Priority Strategies

The 2006 Economic Development Plan describes three priority strategies for the community:

• Diversify the economic base. • Maintain Northfield’s sense of place. • Attract and retain talent.

The 2006 Economic Development Plan contains a

detailed explanation of all the strategies associated with maintaining and expanding the economy. Where more detail is needed to understand the full context of the Economic Development Plan, refer to the 2006 Economic Development Plan.

1. Diversify the economic base.

The availability of land for commercial and industrial expansion and recruitment continues to be at the forefront of community discussions. This type of development leads to quality employment opportunities, increased tax base and ancillary businesses that support existing businesses. Strong residential demand and limited annexation powers combine to drive up land costs, making available property costly for development. Providing specific commitments to offer suitable land for commercial and industrial expansion, it is reasonable to expect that future industrial and commercial growth can occur. Because of the higher property class rate assigned to nonresidential property, commercial and industrial property typically generates more tax revenue than residential property. Businesses also generally require fewer public services, such as police and fire, often making them a net gain to the City’s tax base. Commercial and industrial development also has a “multiplier effect” as spending generated by companies and their workers circulate through the local economy.

In addition to the direct fiscal implications, uncontrolled residential growth without a corresponding growth in the commercial and industrial economy can

TABLE 10.1 NORTHFIELD SWOT ANALYSIS

Strengths Weaknesses Opportunities Threats Highly educated workforce Lack of commercial and

industrial space and land resources

Riverfront development "Northfield is becoming an increasing suburban bedroom community."

Authentic & thriving downtown business sector

Low rates of retention of graduates

Medical and related industries Loss of independent retail downtown

Presence of St. Olaf and Carleton Colleges

Limited number of Employment opportunities

Business expansion out of Minneapolis-St. Paul

Under-developed

Growing health care sector Limited housing, social and recreational opportunities for young adults

Expansion of existing businesses Land underutilized

Overpriced Housing Draw from Twin Cities Labor Pool

Limited diversity of retail downtown

Source: TIP Strategies and Northfield Economic Development Authority

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create a number of unintended consequences. These include increasing commute times (because residences and businesses are further apart) and demographic shifts (as developers cater to specific markets, such as senior housing or upper income markets), as well as the impact of market forces themselves. Strong residential demand creates dramatic rises in housing costs and speculation, while weakening demand can leave the community with vacant housing units, falling home values and deteriorating neighborhoods.

If this situation is to be resolved given the current competitive environment, increasing the availability of commercial and industrial land for existing business expansion and new business attraction is of utmost importance. In fact this issue is the highest priority for the Northfield EDA. This can be accomplished by accommodating the expansion needs of existing businesses, marketing the community strengths, and recruiting targeted commercial and industrial businesses. The City and the EDA are exploring alternative locations for commercial/industrial development that involve the identification of sites that are suitable for infill development, redevelopment/intensification and the creation of a new commercial and industrial center as identified on Map 10.1.

On Map 10.1, numerous locations for infill development and redevelopment/land intensification have been identified along Hwy 3 and along the Cannon River corridor with a total of approximately 30 acres available for commercial and industrial infill. In addition, there are approximately 91 acres of vacant land within the city zoned “mixed use” that are also available for development. Three possible locations for a new commercial and industrial center are also identified as: • West of the Northfield Hospital. • West of the existing industrial area along Armstrong

Road and Industrial Boulevard south of Hwy 19. • Area north of the city limits along the corridor that

would be the extension of Thye Parkway to Hwy 3. Because of market considerations and the potential negative impacts of too much commercial and industrial development, the size of the new commercial and industrial center should relate to the overall pattern of the community. Currently, commercial and industrial land uses represents 14.7% of the total land area of the city. As Northfield continues to grow and expand, the City should attempt to increase the proportion of land devoted to commercial and industrial uses to sustain the overall health and vitality of the community.

Ultimately, the size and location of any new commercial/industrial center should relate to the overall development pattern of the community, and will be influenced by such factors as infrastructure feasibility, landownership realities, intergovernmental agreements and market absorption influences. 2. Maintain Northfield’s Sense of Place.

The downtown area is essential to Northfield’s sense of place. It is widely recognized that a healthy retail area is a key indicator of the health of downtown. On this point, Northfield’s story is no different than that of many other communities. Independent retailers, whom are working with limited profit margins, are often unable to absorb rising costs or to offset even a small amount of competition from national chain stores. Faced with dramatic increases in property taxes and competition from larger retailers locating on Hwy 3, the future of Northfield’s independent retailers is vulnerable.

In addition to its historic character, downtown Northfield has an asset that many communities do not — the Cannon River. Once pivotal to the city’s existence, the river has faded in importance from an economic development standpoint. Despite recent developments, linkage to the downtown is still unfocused. Activating the entire riverfront by orienting development to it and encouraging uses that maximize a riverfront location can help invigorate the downtown and integrate it with other areas of the city.

Recent development proposals, including a redevelopment project called The Crossing at Hwy 3 and 2nd Street West set the tone for additional redevelopment and infill projects along the river. Emphasis should be placed on orienting new development to the river. This means ensuring that buildings have access to the river as well as to the street, creating additional pedestrian areas along the riverfront, requiring common architectural elements and adequate lighting and encouraging uses that relate to the riverfront. These uses could include sporting goods stores (with equipment rental options), cafés, and offices with river views as well as professional services and business support activity.

The City will continue to work with the EDA, the Northfield Downtown Development Corporation, the Northfield Area Chamber of Commerce, the Latino Enterprise Center, the Northfield Enterprise Center, the Northfield Housing and Redevelopment Authority and

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MAP 10.1 POSSIBLE LOCATIONS FOR COMMERCIAL AND INDUSTRIAL DEVELOPMENT

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the Rice County Economic Development office to strengthen the retail environment, promote tourism, increase the range of professional services and provide a range of housing options. The expansion and revitalization of the entire riverfront will accomplish many of these objectives. The City and the EDA currently provide financial support to many of the entities. 3. Attract and retain talent.

As worker shortages loom nationwide and competition for workers increases, attracting and retaining talent has become the focus of economic development organizations across the country. The concept of “talent” means more than a skilled workforce. It means recruiting talented people as well as cultivating the current talent pool represented by students. It also means ensuring that employees and companies that have been responsible for Northfield’s growth see a reason to remain in the area.

Northfield has a unique advantage due to the presence of St. Olaf and Carleton Colleges. Few cities of Northfield’s size are fortunate enough to have one institution – let alone two – directing a steady stream of young people to the community year after year. Collectively, the Colleges enroll nearly 5,000 students in a school year. The growing relationship of higher education to economic development and the opportunity presented by the graduates of St. Olaf and Carleton Colleges make the attraction and retention or return of alumni the most promising strategy for developing Northfield’s talent base.

Northfield would also do well to provide affordable housing to those who wish to work and live in the community. In the 2006 Economic Development Plan, major employers listed housing costs as a perceived barrier to the recruitment and retention of workers (this is addressed in Chapter 11).

The 2006 Economic Development Plan also noted that Northfield is reliant on neighboring communities to supply much of its labor force. For example, more than half of workers at local companies commute from outside the community. Many of Northfield’s more highly-paid workers commute from Dakota and Hennepin Counties. The relatively high cost of housing contributes to these commuting patterns and to the difficulty in attracting and retaining young people.

Finally, it was noted in the 2006 Economic Development Plan that immigration to Northfield

continues to be a factor in its growth as it has been from its inception. Newcomers bring gifts of talent, energy and a desire to make a better life. These have been assets that contributed to the growth of Northfield to this point in time and are required for its continued vitality. At the same time, immigration requires that the current residents reduce barriers to participation so that potential contributions can be made real. Successful economic development will require addressing housing, employment, education and social needs of all residents of Northfield, including recent immigrants.

E. Objectives and Strategies

Several factors shape the philosophy of economic development in this plan. First and foremost is the definition of economic development as outlined in the Economic Development Plan:

“Economic development is the application of public resources to stimulate private investment.”

With this in mind, the role of the public sector gains

clarity that other definitions obscure. Public officials and local government employees do not create jobs or generate wealth. But they do control significant resources. Directing these resources effectively and efficiently is their paramount duty. Effective programs should be judged by how well public resources can create a response from private investors. An understanding of trends affecting the practice of economic development across the United States frames the concept of economic development in Northfield. The strategies outlined below are designed to build on the city’s existing assets, while recognizing that change is an inevitable part of growth and that the growth the community will experience should be both manageable and sustainable.

Outlined below are four objectives and 19 strategies. The objectives indicate a specific policy direction and help organize strategies. Strategies are detailed actions necessary to initiate or complete an objective such as a program, policy or project. These objectives and strategies, when combined with the more detailed implementation matrix of the Economic Development Plan, will serve as an effective guide to ensure a coordinated approach to the enhancement of the economy of Northfield.

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Objective 1: The City will support existing businesses. ED 1.1 Seek opportunities to address barriers to retention and expansion of existing businesses. ED 1.2 Assure availability of key informational resources to support decision-making of existing businesses. ED 1.3 Offer leveraging financial tools to strengthen businesses and promote business expansions. ED 1.4 Adopt a regulating policy that accommodates and provides incentives for infill and redevelopment and land intensification opportunities. Objective 2: The City will make sufficient land resources available for the needs of existing and future businesses in line with the strategies outlined in the 2006 Economic Development Plan. ED 2.1 Land resources within the community that are served or can be easily served by infrastructure and are suited for commercial and industrial intensification and redevelopment will be zoned appropriately to enable full and efficient utilization. ED 2.2 Land resources that are adjacent to the city limits of Northfield and are relatively easy to serve with the extension of infrastructure should be pursued for future commercial and industrial development. ED 2.3 The City will support strategies of annexation that are designed to provide additional land resources for commercial and industrial development, and that are in compliance with the overall objectives of the Comprehensive Plan. ED 2.4 The areas that have been identified west of the Northfield Hospital, west of the existing industrial area and south of Hwy 19, and north of the city limits in Waterford Township along the Thye Parkway corridor should be viewed as priority areas for additional evaluation and possible annexation into the city. When these areas are considered for annexation, the City will review the requests with a Master Plan for the area.

Objective 3: Expanding and revitalizing the Cannon River corridor will be a pivotal part of the strategy to maintain the historic character that is Northfield. ED 3.1 Sites that are suitable for land infill and redevelopment/intensification along the Cannon River south of 5th Street should be identified, and strategies to encourage new investment in these areas should be pursued. ED 3.2 Any infill and redevelopment/intensification along the Cannon River corridor should be oriented to maximize the advantage that the river corridor creates for such opportunities. ED 3.3 Development design along the Cannon River should incorporate the following concepts: • A distinctive pattern of architectural and urban

design elements that includes many of the design concepts that have been developed from the Downtown Streetscape Framework Plan.

• Link existing pedestrian improvements, including walks and trails, with similar improvements that are required as infill and redevelopment/intensification occurs along the corridor.

• A development pattern that emphasizes pedestrian scale, minimizes building setbacks, ensures the public’s health and safety by protecting the floodplain, and discourages large parking areas in front of buildings.

ED 3.4 Encourage further redevelopment/intensification in downtown as a means to maintain and add to the vitality of this area. Downtown redevelopment/ intensification should focus on retail uses, professional services, arts activities including opportunities for live-work development, businesses that support other businesses, and downtown housing. ED 3.5 Establish regulations for locating neighborhood serving commercial nodes. These regulations will address the viability of the commercial node, the relation of the commercial node to the surrounding neighborhood, and strategies to prevent commercial nodes from competing with other commercial areas.

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Objective 4: Support the economic vitality of the community through business retention and recruitment and enhancement of tourism opportunities. ED 4.1 Target the retention and recruitment of those industries having the highest potential for success in Northfield, as outlined in the Economic Development Plan, such as logistics, specialty manufacturing, environmental technologies, healthcare and medical, professional and technical services and information technology. ED 4.2 Seek opportunities for the Northfield Hospital to be a stimulus for economic development. ED 4.3 Promote economic development opportunities that arise from the development of intellectual capital at Carleton and St. Olaf Colleges. ED 4.4 Seek ways to better integrate the economically-challenged into the economic life of Northfield, such as providing for affordable housing and targeting small business incentive programs to this segment of the economy. ED 4.5 Generate the type of economic growth that preserves the small-town character and is consistent with the overall objectives of the Comprehensive Plan. ED 4.6 Support programming efforts to further tourism in Northfield, e.g., Historic and Festival Programs, Arts and Cultural Programs and Tours.

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COMPREHENSIVE ECONOMIC DEVELOPMENT PLAN PREPARED FOR THE NORTHFIELD (MN) ECONOMIC DEVELOPMENT AUTHORITY

JUNE 2006

comprehensive economic development plan NORTHFIELD ECONOMIC DEVELOPMENT AUTHORITY 1 EEXECUTIVE SUMMARY

Northfield is in an enviable position for a community of its size. The city boasts a number of assets and a unique character that is absent from many of America’s small towns and suburbs. An historic downtown, burgeoning riverfront, and distinctive retailers make Northfield a popular destination. Two nationally recognized liberal arts colleges, Carleton and St. Olaf, create intellectual capital that extends beyond students and faculty to a wide variety of cultural offerings for the community as a whole.

These attributes, in addition to a strong employment base and easy access to the Twin Cities, create conditions under which growth is highly likely. While rapid suburban development is a national pattern – resulting in communities with no real sense of identity – Northfield has defied the odds in maintaining both its own employment base and its downtown core.

These advantages, however, are no guarantee that growth will occur in a way that is economically viable. In recognition of this fact, the Northfield Economic Development Authority (EDA) engaged TIP Strategies, Inc. (TIP), to develop a comprehensive economic development plan for the city. The plan is a response to the leadership’s desire to make economic development a priority while balancing the community’s desire to protect its identity as a “freestanding” community and maintain its sense of place.

Most importantly, though, this plan is intended to sound an alarm. Northfield is an exceptional community, easily deserving of its reputation as one of America’s most appealing small cities. Preserving the city’s quality of place, however, will come at a cost. Northfield’s ability to offer a mix of employment opportunities, to maintain and enhance the downtown, and to provide the level of services that current and future residents demand will hinge on the community’s commitment to pursuing specific economic development objectives – and to doing so in a highly visible manner.

I f we want th ing s t o s tay a s th ey ar e , th ing s w i l l hav e t o change .

Giuseppe Tomasi di Lampedusa (1896-1957)

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In broad terms, the objectives are:

� Active promotion of economic development by increasing the availability of commercial land, aggressive business recruitment, and talent attraction.

� Re-positioning Northfield in relationship both to the Twin Cities and to its smaller neighboring communities.

Priority Strategies

TIP, with the strong encouragement of the city’s leadership, has sought to address the question of Northfield’s future economic vitality in a clear-headed way. Based on our understanding of the city’s opportunities and challenges (see box), we believe that the following strategies represent the highest priorities for Northfield.

1. Increase the availability of business and industrial land. The availability of land for business expansion and recruitment continues to be at the forefront of community discussions. Strong residential demand and limited annexation powers have combined to drive up land costs, making even available property unattractive for non-residential development. Without specific commitments to offer suitable land for industrial and technology-related expansion, it is reasonable to expect that future growth will be dominated by housing.

These predictions have important implications for Northfield. Because of the higher property class rate assigned to non-residential property, commercial property typically generates more income than housing (see box page 10). Businesses also generally require fewer public services, such as police and fire, often making

our approach: COMMUNITY ASSESSMENT

TIP took an asset-based approach to this work, focusing on strategies designed to maximize Northfield’s existing advantages. We began by conducting an economic assessment of the community, (published under separate cover). In addition to this quantitative analysis, our work was informed by interviews with local businesses and community leaders, as well as with developers and others in the Twin Cities region. The findings from this phase, refined based on input from stakeholder meetings held in November 2005 and January 2006, provided the foundation for this plan.

The following table highlights Northfield’s strengths, weaknesses, opportunities, and threats, commonly referred to as a SWOT analysis. Broadly speaking, economic development strategies emerge directly from the SWOT analysis. Weaknesses – even if not directly related to economic development – must be addressed, and strengths must be supported and reinforced. Similarly, threats to the economic well-being of the community must be anticipated and responded to before they become crises. Opportunities, on the other hand, should be acted upon aggressively and, if possible, collaboratively.

STRENGTHS OPPORTUNITIES

- Highly educated workforce - Authentic downtown - Presence of St Olaf and Carleton

Colleges - Growing healthcare sector

- Riverfront development - Medical and related industries - Business expansion out of

Minneapolis-St. Paul - Expansion of existing businesses

WEAKNESSES THREATS

- Lack of industrial space and land resources

- Low rates of retention of graduates

- “Suburbanization” of Northfield - Loss of independent retail downtown


them a net gain to the city’s tax base. Commercial development also has a “multiplier effect” as spending generated by companies and their workers circulates through the local economy.

In addition to the direct fiscal implications, uncontrolled residential growth can create a number of unintended consequences. These include increasing commute times (because residences and businesses are further apart) and demographic shifts (as developers cater to specific markets, such as senior housing or upper income markets), as well as the impact of market forces themselves. Strong residential demand creates dramatic rises in housing costs and speculation, while weakening demand can leave the city with vacant units, falling home values, and deteriorating neighborhoods.

If this situation is to be resolved, given the competitive environment, public sector involvement will need to be a factor. For this reason, increasing the availability of commercial land should be the EDA’s highest priority. TIP recommends that the EDA explore alternatives for public participation in the development of a commercial/industrial center. Priority should be given to property surrounding the Northfield Hospital site and land to the west of the existing industrial area (see map). Because of current market considerations and the potential for negative impacts we recommend a site of no more than 120 acres. Accommodating the expansion needs of existing business should be the initial focus. Subsequent marketing of properties should be targeted to the industry sectors outlined in this plan.

2. Leverage the Cannon River. Few would disagree that downtown is an essential part of Northfield’s sense of place. And it is widely recognized that the health of downtown retail is a key indicator of the health of downtown. On this point, Northfield’s story is no different than that of many other communities. Independent retailers, most of whom are working with the thinnest of profit margins, are often unable to absorb rising costs or to offset even a small amount of competition from national chain stores. Faced with dramatic increases in property taxes and competition from larger retailers locating on Highway 3, the future of Northfield’s independent retailers is precarious.

However, in addition to its historic character, downtown Northfield has an asset that many communities do not — the Cannon River. Once pivotal to the city’s existence, the river has

Priority Business & Industrial Areas

Northfield Hospital

Riverview Industrial Park

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