Chamber Blog

During our Brainerd Lakes Chamber recent Eggs ‘N’ Issues breakfast, area legislators shared their ideas on what they can do to help create jobs and control spending in order to grow our economy. The conversation was encouraging. Our newly elected legislators were sharing ideas that have been supported by business leaders for some time now. Government needs to remove the obstacles that are preventing businesses from creating jobs. The area legislators talked in support of reducing the permitting process to allow entrepreneurs to grow business; of creating tax incentives for businesses creating jobs; and about budgeting like a business.

District 4 Sen.-elect John Carlson, R-Bemidji, summed up what business has advocated for some time – fund the needs and then prioritize the wants, all while budgeting like a business. The spending cannot exceed the available revenue!

Chamber members shaped the discussion during the breakfast meeting by bringing their questions to the legislators. Topics addressed included statewide economic development, capital equipment sales tax procedures, health insurance costs, energy regulations, poverty, and the government role in supporting entrepreneurism and innovation in business.

Discussion also addressed inequities between rural and metro regions in Minnesota. District 12A Rep. John Ward, DFL-Brainerd, said a lot of the legislators work well together across the aisle. He said often there is more conflict resulting from rural vs. metro issues than between political parties. When talking about local government aid, he said a more fair and equitable formula is needed to address metro vs. “real Minnesota” concerns. Not rural, not outstate, but “real Minnesota. We are real Minnesota.”

The Brainerd Lakes Chamber and our business members hope legislators use a business model to balance the state budget. As I shared with the legislators, the Brainerd Lakes Chamber Small Business Policy Survey revealed that the majority of respondents do not favor a tax increase to balance the state budget. The majority – 78 percent – of respondents want legislators to cut government spending. They – 76 percent of respondents – believe redesigning government services is necessary. Only 26 percent supported raising taxes, which may have been suggested in combination with cutting spending. (Respondents could choose more than one solution.) Time will tell how our legislators choose to balance the state budget.

Let’s hope the New Year brings economic growth, to the Brainerd Lakes Area, encouraged through thoughtful decision-making by our legislators.

The title for the Minnesota Chamber of Commerce Regional Policy Meeting recently in Baxter (reflected in this blog title) really says it all. Bill Blazar, Senior Vice President of Business Development & Public Affairs with the Minnesota Chamber of Commerce, led a lively discussion with about 30 of our business leaders in the Brainerd Lakes Area.

On the majority of issues discussed, there was widespread consensus in the room. But how we achieve these overall goals is not without concern, especially for large regional communities such as Brainerd. Government must start operating like a business – within its means. Preliminary results of our Brainerd Lakes Chamber member survey indicate 70 percent of members are opposed to tax increases. To achieve a balanced state budget, we then must cut spending.

General fund revenues in Minnesota are projected to increase by nearly 8 percent by 2012-2013. Would you be satisfied if your company revenues grew by that amount? This projected increase should be substantial enough to support Minnesota’s needs. The problem is general fund spending during this same time period is projected to grow by more than 20 percent, which has led the state into a projected budget shortfall. How can we balance the budget? The Minnesota Chamber – and the Brainerd Lakes Chamber – support reforming the budget process as well as reducing overhead costs and increasing efficiency. The Minnesota Chamber wants the Legislature to live within the projected general fund revenue of $33 billion. There isn’t a need – or an appetite in the business community – for the state to spend more than $38 billion. Rather than building a budget based on past practices, the Legislature has the opportunity to take a step back – wipe the slate clean. Our legislators need to create a budget based on our most important needs – our priorities.

The budget proposals of the Minnesota Chamber, in large part supported by Minnesota businesses, are not without some controversy. One change the Minnesota Chamber advocates is the need to realign public sector jobs with those in the private sector. This can be accomplished, in part, through reform of public employee compensation packages. Through redesigning public pension and health insurance programs, the Minnesota Chamber estimates the state can save at least $637 million.
The Minnesota Chamber also supports replacing local government aid with a much smaller local government innovative fund. This proposal would hurt greatly large regional centers, such as Brainerd, that have large percentages of tax-exempt property. This proposal must be carefully explored so that economic growth is not impeded in communities losing LGA. There needs to be a level playing field for communities competing for business development. If this change moves forward in the Legislature, it should be phased in over time and state mandates must be addressed to give local control of spending to local governments. A phased-in approach would give LGA recipients the opportunity to reshape and restructure government while continuing to deliver high quality services. Through redesigning government, opportunities for communities to collaborate can be encouraged with incentives. Circuit-breaker programs for property tax relief also should be explored.
The state chamber estimates cost savings of $800 million through elimination of local government aid.

Another suggestion by the Minnesota Chamber, one that carries an estimated $1 billion in cost savings, is to redesign medical assistance.

Other priorities for the Minnesota Chamber this legislative session include reforming K-12 education for world-class results; streamlining environmental permitting processes; and repealing the ban on nuclear power.

What can you do? Share your opinions with your locally elected legislators. Share your business story – how do you set business priorities and balance your budget? How do you want your state government run? Ask your legislators to bring these private-sector ideas to state government to balance our budget.

Does new home construction have an economic impact in the Brainerd Lakes Area? The answer is a resounding yes!
New home construction leads to new income and jobs as well as additional revenue for local governments. The benefits are both immediate and long-term.
The Mid-Minnesota Builders Association recently sponsored a study, “The Local Area Impact of Home Building in Cass and Crow Wing Counties,” which was conducted by the National Association of Home Builders. This study was the topic of a recent MMBA meeting in Baxter, which Lisa Paxton and I attended on behalf of the Brainerd Lakes Chamber. The MMBA also hosted a meeting for elected officials to talk with them about the results of this study.
What was learned? The 384 single-family homes built in Cass County and Crow Wing County in 2009 will generate local income of $150 million and local taxes of $27 million in the first 10 years, according to the NAHB study.
These results show that home building is more than paying its own way and should put to rest the notion that existing home owners are subsidizing new home construction here in the Brainerd area, said Elliot Eisenberg, the Senior Economist, who conducted the analysis of the impact of home building here in Cass County and Crow Wing County.
The economic impact is not just viewed in terms of short-term job creation in construction-related industries but in the long-term job creation in other industries as a result of a ripple effect and the ongoing benefits resulting from occupancy of the home.
During the construction phase, the building of 384 single-family homes creates 838 jobs (578 jobs in construction alone), generates $2.4 million in local taxes and $37.2 million of local income in the first year. The ripple effect of those homes, which includes the wages and profits local area residents earn during the construction period that are spent on other local goods and services, results in another 403 jobs, $2.7 million in local taxes and $16.7 million in local income, also in the first year. The ongoing annual effect of those homes, which includes local jobs, income and taxes generated as a result of the home being occupied, is 263 jobs, $2.3 million in local taxes and $10.2 million in local income per year.
Conversely, the drop in the number of new homes built in the Brainerd Lakes Area the past few years has had a ripple effect on the economy here in this economic downtown. Fewer construction jobs has had a domino-effect on other jobs, ranging from jobs in constructed-related industries such as home improvement stores to jobs in service and retail sectors, such as restaurants and clothing stores. The community has lost tens of millions in local income and local taxes because fewer homes are being built today when compared to the number of homes being built here five years ago.
The impacts were calculated assuming that new single-family homes built in Cass and Crow Wing counties have an average price of $234,318; are built on a lot for which the average value of the raw land is $43,534; require the builder and developer to pay an average of $1,522 in impact, permit, and other fees to local governments; and incur an average property tax of $1,500 per year. The study was based on information gathered from the cities of Baxter, Brainerd, Breezy Point, Crosslake, Nisswa and Pequot Lakes; the counties of Cass and Crow Wing; the Cass County Office of Environmental Services; the Crow Wing County Assessor's Office; the Greater Lakes Association of Realtors®; and the U.S. Census Bureau.
In his presentation, Eisenberg noted that collectively single-family residential construction jobs rank as one of the largest employee groups in this region. As a result, the economic impact of this industry is on par with any of the largest employers in Cass or Crow Wing counties. Before the recession, if this specific industry was one employer, it likely would have ranked as the largest employer in the region with more than an estimated 1,500 people working in the single-family residential construction field.
If you wish a complete copy of the study, please contact me or the MMBA at www.midmnba.org.