Mnvalley 12 13 by Free Press Media

Justin Moratzka prepares candy for packaging at the MRCI candy facility in St. Peter.

Charitable businesses

Nonprofits rely on partnerships Also in this issue S&S Motors of Courtland Quality Gold & Silver Nancy Zallek, Mankato Area Foundation

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F E A T U R E S December 2013 • Volume 6, Issue 3

Nancee Mason, director of House of Hope, has many collaborations with local businesses.

Quality Gold & Silver, formerly Quality Pawn, tries to bridge the gap between thrift and new retail stores.

Nancy Zallek is leading the Mankato Area Foundation into a new era of growth and importance.

S&S Motors started on a farm on the outskirts of New Ulm. Its success led to a new lot near Courtland

MN Valley Business • december 2013 • 5

■ december 2013 • VOLUME 6, ISSUE 3 PUBLISHER James P. Santori EXECUTIVE EDITOR Joe Spear ASSOCIATE EDITOR Tim Krohn CONTRIBUTING Tim Krohn WRITERS Pete Steiner Kent Thiesse Heidi Sampson Tonya Rule PHOTOGRAPHERS Pat Christman John Cross COVER PHOTO John Cross PAGE DESIGNER Christina Sankey ADVERTISING Ginny Bergerson MANAGER ADVERTISING sales Danny Creel ADVERTISING Barb Wass ASSISTANT ADVERTISING Sue Hammar DESIGNERS Christina Sankey CIRCULATION Denise Zernechel DIRECTOR

For editorial inquiries, call Tim Krohn at 507-344-6383. For advertising, call 344-6336, or e-mail mankatomag@mankatofreepress.com. MN Valley Business is published by The Free Press Media monthly at 418 South 2nd Street., Mankato MN 56001.

■ Local Business memos/ Company news................................7 ■ Business and Industry trends.........9 ■ Minnesota Business updates....... 10 ■ Business Commentary................. 11 ■ Construction, real estate trends.. 25 ■ Agriculture Outlook...................... 26 ■ Agribusiness trends..................... 27 ■ Job trends..................................... 28 ■ Retail trends................................. 29 ■ Greater Mankato Growth.............. 30 ■ Greater Mankato Growth Member Activities ....................... 31

From the editor

By Joe Spear

Nonprofits build human capital

hey don’t make circuit boards or serve you food and drink. They don’t sell jewelry, clothing or shoes, and they don’t really have a profit and loss statement. But Mankato area nonprofits have just as much economic impact as some of the area’s typical businesses. Many of the area nonprofits are involved in building human capital and selling the idea of life’s potential. Some actually save lives. Their business model doesn’t get a lot of time in a textbook on microeconomics. Still, they are no less important to the economy than a bustling factory. This month’s cover feature details the contributions of nonprofits and their impact on the local and regional economy. MRCI is a local nonprofit that probably comes closest to the traditional business model. The company works with developmentally disabled clients and helps them secure jobs whether that be in one of the group’s own contract processing facilities or in local businesses. MRCI’s client-workers bag and label millions of bags of candy a year in the groups’ St. Peter facility. The company-owned facility was started in response to economic challenges of the recession and the trend toward outsourcing. The main goal of the facility is not profit, though. It’s to provide work for MRCI’s clients and provide businesses with products or services at a reasonable price. The nonprofit is growing. It will soon open a 30,000 square foot, $4 million facility in Mankato’s Eastwood Energy Park. The facility will be fitted to accommodate clients with severe disabilities. MRCI has a $60 million budget and works with 3,000 clients and about 1,000 employers and it is one of the largest such businesses in the country. The House of Hope in Mankato has a different clientele than MRCI but a mission that is no less significant. As a recovery agency for people with substance abuse, House of Hope helps people recover from addiction and re-establish a work history, says executive director Nancee Mason.

6 • december 2013 • MN Valley Business

They’re in the business of building back up the all-important human capital that makes every business successful. As a kind of intermediate step for those recovering from substance abuse, House of Hope helps them re-integrate into society after they have been through a detoxification process. “We try to teach them not to go back to the drugs and alcohol and how to be a productive member of society, how to find a job, balance a checkbook,” says Mason. There is no shortage or human capital to be rebuilt. Mason says there are 3,000 chemical dependence “beds” in the state and the need is more like 20,000 beds. Mankato YWCA helps build character capital, a strategy that if successful with girls early in life may prevent problems that House of Hope might have to deal with later. The YWCA focuses on eliminating racism and empowering women and offers character building programs like Girls on the Run for young girls and leadership programs for older girls. While nonprofits report they have financial challenges just like other businesses, most strike a note of hope on the financial, in-kind and volunteer support they receive. The Mankato region appears to be a special place in that respect. The Greater Mankato Area United Way is consistently ranked in the top 2 percent of United Ways in the country for its per capita giving. “We’ve always hit our goals,” says the United Way’s Shannon Gullickson. “During the recession we were concerned, but people stepped up and donated. We were really proud of the support.” People take pride in Mankato and its nonprofits, Gullickson says. They feel part of the community efforts and that they make a difference. It’s clear that nonprofits make a difference as well MV Joe Spear is executive editor of Minnesota Valley Business. Contact him at 344-6382 or jspear@mankatofreepress.com

Local Business People/Company News

■

Swanson Hinsch promotes two Carlie L. Stevens has been promoted to manager and Alexander Swanson to senior accountant at Swanson Hinsch & Co., an independent CPA firm. Both are Minnesota State University graduates. ■■■ Brunton adds structural engineer Brunton Architects & Engineers has hired Timothy Rapoport, who brings 17 years of experience to the North Mankato firm and has been involved in the structural design of steel, masonry, concrete, precast systems, and wood framed buildings. He has gained extensive experience in the design of distribution centers, U.S. Department of Defense facilities, public safety facilities, and industrial facilities. He holds a bachelor’s degree in physics/pre-engineering from Saint John’s University and a bachelor’s degree in civil engineering with structural emphasis from the University of Minnesota and is currently licensed in Minnesota and Connecticut.

■■■ AgStar performance up 20 percent AgStar Financial Services reported earnings for the third quarter ending Sept. 30. The company reported net after-tax earnings of $35 million for the quarter and $84 million for the year, reflecting an increase of more than 20 percent over last year’s performance. “We’re pleased to share the strong results for 2013. These earnings are the result of increased interest income and improved credit quality,” Paul DeBriyn, president and CEO of AgStar said in a statement. In 2012, AgStar allocated $55.3 million in patronage dividends. Since the program’s inception in 1998, AgStar has allocated $392 million in patronage dividends. Later this month, AgStar will make payments of the 2004 patronage allocations of $24.7 million to 10,400 clients. AgStar also recently led a $30 million hospital and clinic replacement project in Madison, South Dakota, through a program that focuses on putting together bond investments with multiple partners. ■■■

■■■ MinnStar CEO appointed federal delegate The Independent Community Bankers of America announced that Steve Olson, CEO of MinnStar Bank, Lake Crystal, was appointed to the ICBA Federal Delegate Board. In addition to helping shape and advocate ICBA’s national policy positions and programs, Olson’s duties include being a liaison between independent community bankers in Minnesota and ICBA staff and Steve Olson leadership in Washington, D.C. He will also work to recruit new members to ICBA. ICBA is the only national trade association dedicated exclusively to promoting the interests of locally operated community banks and savings institutions. ■■■ Hollands joins Enventis Todd Hollands has joined Enventis as the senior director/controller. Hollands is responsible for leading financial accounting activities across the company, implementing and managing accounting policies and systems, and coordinating and managing financial reporting for the company. He has 20 years of experience in finance, including previous experience Todd Hollands as a certified public accountant

Glawe, Ludewig join Title Resources

Title Resources has added Reed Glawe as a licensed agent and Gina Ludewig as a paralegal/real estate specialist. Title Resources is a full service title company that is professional Reed Glawe Gina Ludewig partners with Gislason & Hunter. Licensed agents Glawe and Thomas Wilson are also attorneys with the firm. ■■■ Zoet joins True Team, RE/MAX Sonja Zoet has joined The True Team, RE/MAX Dynamic Agents in Mankato. She has worked in real estate in Florida and South Carolina. She is a Mankato native and a graduate of Minnesota State University and Bethany Lutheran College.

Sonja Zoet

MN Valley Business • december 2013 • 7

Local Business People/Company News

■

Dove honored by FAA Gislason & Hunter announced that Michael S. Dove, a partner with the firm, received the Honorary American FFA Degree at the National FFA convention in Louisville. The award is given to those who advance agricultural education and FFA through outstanding personal commitment. The national FFA organization works to enhance the lives of youth through Michael Dove agricultural education. ■■■ Enventis refinances for $165 million in credit Enventis closed on a debt refinancing agreement for an aggregate credit of $165 million. The amended credit facility offers Enventis access to extended financing through 2019 to deploy capital in pursuit of its strategic growth initiatives. “We are very pleased with the terms and cost of this refinancing, which will replace our existing debt and provide additional capacity and flexibility to allow us to continue our growth strategy over the next several years,” said David Christensen, senior vice president and chief financial officer. The debt refinancing is in the form of an amendment to the company’s existing agreements. It includes the issuance of $135.3 million in secured term loans and a $30 million secured revolving credit facility, which has no outstanding debt or usage at this time. ■■■ Kreye chairs business advisory council The Minnesota State University College of Business Advisory Council has named Don Kreye of Abdo, Eick & Meyers as the chairperson for the council. Kreye will provide strategic leadership for the council and executive committee, whose mission is to assist the college in developing and implementing its strategic plan. Kreye joined Abdo, Eick & Meyers in 2009 to develop the new subsidiary company, AEM Financial Solutions. Later that year he became the firm’s business development manager. ■■■ Plato’s Closet gets Gold Star status Plato’s Closet in Mankato was recognized for achieving the “Gold Star Standard” for Plato’s Closet stores. A store reaches the Gold Star Standard when it achieves a set of standards set forth by the franchisor during the evaluation process. The Mankato store achieved the “Customer Experience,” “Store Operations” and “Consistent Brand Identity” standards to earn Gold Star recognition in 2013.

8 • december 2013 • MN Valley Business

Begalka joins Kitchenmaster ownership team Kitchenmaster & Co., under the ownership of Bob Kitchenmaster and Jill Klooster, has added Kelly S. Begalka to the ownership team. To mark the event, the company will now operate under the name Kitchenmaster, Klooster & Begalka. The CPA firm traces its roots to 1963. ■■■ Al-Yasiriwas honored for customer service Mankato resident Tareq Al-Yasiriwas was recognized this month by his employer, Mediacom Communications, for earning top honors in the company’s national awards program that recognizes employees for exceptional customer service. AlYasiriwas earned the company’s national gold “Customer Service Representative of the Year” award and Tareq Al-Yasiriwas the regional “Call Center Employee of the Year” award. Al-Yasiriwas is employed as a customer sales and service representative in Mediacom’s regional office in Waseca. He was cited for earning high marks for professionalism and customer satisfaction. The national recognition was one of 30 gold level awards earned by Mediacom employees. ■■■ Schoenecker joins I&S Group I&S Group hired Jeff Schoenecker as a senior systems engineer. He oversees the electrical distribution services at I&S Group, serving municipal and rural electric cooperatives with responsive and comprehensive planning, design, construction, and operations services. He has a Bachelor of Science degree in electrical engineering from the University of Minnesota and a Bachelor of Arts in applied physics from St. John’s University. He most recently worked for Dakota Electric Association.

To submit your company or employee news. e-mail to tkrohn@mankatofreepress.com Put “Business memo” in the subject line. Call or e-mail Associate Editor Tim Krohn at tkrohn@mankatofreepress.com or 344-6383 for questions.

■

Business and Industry Trends

Economy

Minnesota businesses optimistic

The new Minnesota Business Barometer Survey, cosponsored by the Minnesota Chamber of Commerce and Himle Rapp and Company, showed more optimism as profitability has returned to pre-recession levels. Still businesses voiced reluctance about expanding Minnesota. Highlights from the survey: Optimism is on the upswing. 40% of companies believe Minnesota’s economy is improving, up from 31% a year ago. 44% believe the economy is about the same, and 16% say it’s worse. 30% of companies report improved profits from a year ago; 20% report lower profits. This is the first time in five years that more companies reported higher profits vs. lower profits from a year ago. 80% report they are optimistic about Minnesota’s economic future over the next 10 years, a finding that has been consistent throughout the history of this survey. Companies are sending red flags about the state’s business climate. Despite their optimism about the economy, only 21% reported an increase in number of employees this past year, and 18% reported reduced workforces. Only 31% anticipate adding employees in the next 12 months, while 61% do not expect to hire. 37% believe Minnesota has a better business climate compared with other states, but 26% say it’s worse. This is the lowest level of confidence in the 10 years of the Business Barometer, with respective figures from 2012 at 55% and 10%.

■■■

Energy

Crude outages, but lower prices

Crude oil prices fell in late October and November, reflecting lower seasonal liquid fuels consumption. Outages among producers who are not members of the Organization of the Petroleum Exporting Countries rose by nearly 0.1 million bbl/d month-over-month in October because of new disruptions in the United States, Brazil, Canada, and Colombia. Nonetheless, expected growth in non-OPEC liquid fuels production leads to a projected decline in the call on OPEC crude oil and global stocks from an average of 30.2 million bbl/d in 2013 to 29.6 million bbl/d in 2014.

0.1 million bbl/d in 2013 and 0.2 million bbl/d in 2014. The declines in OECD consumption are largely due to lower consumption in Europe and Japan. Non-OECD Asia, particularly China, is the leading contributor to projected global consumption growth. EIA estimates that liquid fuels consumption in China will increase by 420,000 bbl/d in 2013 and by a further 430,000 bbl/d in 2014.

American fuel production up

Forecast non-OPEC liquid fuels production, which averaged 52.7 million bbl/d in 2012, increases by 1.6 million bbl/d in 2013 and by 1.5 million bbl/d in 2014. The largest non-OPEC supply growth is in North America, where projected production increases by 1.5 million bbl/d and 1.1 million bbl/d in 2013 and 2014, respectively, reflecting continued production growth in U.S. onshore tight oil formations and from Canadian oil sands. EIA expects smaller production growth from a number of other areas, including Central & South America, Asia & Oceania, and Africa. Of the 2.9 million bbl/d of global unplanned supply disruptions in October, approximately 0.7 million bbl/d occurred among non-OPEC producers. OPEC Supply. EIA projects total OPEC liquid fuels production to decline by 0.8 million bbl/d to 35.9 million bbl/d in 2013 and to stay near that level in 2014. The declines in 2013 mostly reflect supply outages among some OPEC producers, along with an average annual decrease in Saudi Arabia’s production in 2013. Nonetheless, Saudi Arabia’s crude oil production averaged 10.1 million bbl/d in the third quarter of 2013 as it boosted production in response to a seasonal increase in direct crude burn for electric power generation and lower production by other OPEC producers, including Libya and Iraq.

Natural gas production hits record

The natural gas production forecast is now informed by EIA’s new monthly Drilling Productivity Report, which provides a new gauge for looking at oil and natural gas production growth in six key regions. This month’s forecast raises the projection for marketed natural gas production by 0.4% in 2013 and 0.9% in 2014 from the previous predictions. In the past several months, natural gas production has hit record high levels, even as prices declined this summer. The Marcellus Shale has been the main driver of growth. EIA publishes a monthly production estimate for several major producing states (such as Texas, Louisiana, and Oklahoma) and an other states category, which includes the Marcellus. August 2013 production for the other states category was 17% (or 3.7 billion cubic feet per day (Bcf/d)) greater than August 2012.

China drives fuel consumption

EIA projects global liquid fuel consumption, which averaged 89.2 million bbl/d in 2012, will grow annually by 1.1 million bbl/d in both 2013 and 2014. China, the Middle East, Central & South America, and other countries outside of the Organization for Economic Cooperation and Development account for nearly all consumption growth. Projected OECD liquid fuels consumption declines by

MN Valley Business • december 2013 • 9

Minnesota Business Updates

■

■ Enventis net up 7% in third quarter

■ Unemployment taxes lowered

Mankato-based Enventis (HickoryTech) reported total revenue of $47.1 million for the third quarter ending Sept. 30, an increase of 3 percent year over year. Fiber and data revenue increased 8 percent over third quarter 2012. Telecom revenue was $15.6 million and equipment revenue was up 2 percent totaling $15.3 million. Net Income totaled $1.9 million, up 7 percent from a year ago. “HickoryTech’s momentum continues as we have increased strategic fiber and data revenue 14 percent year to date,” President and CEO John Finke said in a statement. “Our disciplined approach to expand our fiber network directly to customers is well underway as we make targeted investments to drive future growth.” Fiber and data revenue is comprised of 57 percent retail business and 43 percent wholesale revenue in the third quarter 2013. Year to date, business services accounts for 56 percent and wholesale services accounts for 44 percent of fiber and data revenue. Telecom segment revenue totaled $15.6 million, down 1 percent from a year ago. Telecom results are positively impacted by broadband growth and hindered by network access and local service revenue declines. Broadband revenue increased 8 percent in the third quarter. DSL subscribers increased 5 percent and Digital TV subscribers were up 10 percent, totaling 20,793 and 11,327 subscribers respectively.

Minnesota businesses will see lower unemployment insurance taxes starting next year. The Minnesota Department of Employment and Economic Development said that the unemployment insurance trust fund’s $1.2 billion reserve at the end of September was enough to trigger a tax cut proposed by Gov. Mark Dayton and enacted by the Legislature this year. The fund went into deficit during the recession, and the employment and economic development commissioner says its turnaround is a sign of an improving economy. The agency estimates businesses will save $346.5 million in 2014-15. The trust fund provides benefits to laid-off workers. Minnesota businesses pay unemployment insurance taxes on the first $29,000 of annual wages per employee. Starting Jan. 1, the base tax rate on that amount will drop from 0.5 percent to 0.1 percent.

■ Ameriprise has record quarter A m e r i p r i s e Financial reported record third quarter 2013 results. Net income in the quarter was $381 million, or $1.86 per diluted share, up from $174 million, or $0.79 per diluted share, a year ago. Operating earnings increased 36 percent to a record $392 million compared to $289 million a year ago, and operating earnings per diluted share increased 45 percent to $1.91. Operating net revenues increased 7 percent to $2.7 billion. Adjusting for the exit of bank operations last year, revenues were up 8 percent. Revenue growth was driven by robust client net inflows, increased client activity and market appreciation. Operating expenses increased 1 percent to $2.1 billion reflecting increased volume-related distribution expense offset by lower amortization of deferred acquisition costs from the company’s annual review of insurance and annuity valuation assumptions and modeling changes. Operating earnings growth was strong and reflected feebased business growth and ongoing expense discipline.

10 • december 2013 • MN Valley Business

■ Best Buy net up, sales flat Best Buy reported net income of $54 million for its most recent quarter, reversing a loss of $10 million a year earlier. The company’s sales were basically flat at $9.4 billion, but comparable store sales increased slightly, ending a streak quarterly declines that spanned three full years. However, the consumer electronics giant also warned that the crucial holiday season could be brutally tough as retailers battle each other on price. The holiday season could seriously set back Best Buy’s drive to regain the sales and profits of its glory days. Best Buy Chief Financial Officer Sharon McCollam told analysts that the company will sacrifice profits to keep prices competitive with rivals who are offering mark-downs, known in the industry as promotions. “We know that we will be facing an increasingly promotional environment,” she said. “We are committed to being competitive on price. If our competition is, in fact, more promotional in the fourth quarter, we will be too.”

■ Minnesota Cup adds food category A new food industry category has been added to the Minnesota Cup competition and the total prize amount has been raised to $300,000 for the 10th annual contest, which kicks off in March. The $100,000 increase in prize money will be divvied up among seven divisions next year, including the newest food category, according to a Minnesota Cup spokeswoman. The new “food, agriculture, and beverage” category will be open to businesses that work with food products, food processing and ingredients technologies, agriculture innovation, and food safety advancements, among other sectors in the food industry.

■

Business Commentary

By Tonya Rule

A flurry of Obamacare details emerge

ew guidance on various aspects of the Affordable Care Act, commonly referred to as Obamacare, has been continuous in the past year. In November, Notice 2013-71 was released modifying the “Use It or Lose It” requirements on flexible spending accounts (FSAs). The Affordable Care Act puts a cap on employee FSA contributions starting in 2013 of $2,500. Notice 2013-71 allows $500 of this $2,500 to be carried over to the following plan year and used for qualifying medical expenses incurred in the following year. To comply, employers will need to amend their plan document. The plan can still maintain a “run-out period.” This is the period of time in the year following the plan year in which qualified medical expenses of the previous year can be reimbursed. Plans adopting the $500 carryover can no longer have a grace period of up to two months and 15 days immediately following the plan year in which individuals may incur qualified medical expenses and receive reimbursement from the prior year’s FSA. In September, Notice 2013-54 was issued providing clarification on health reimbursement accounts (HRAs). Starting in 2014, standalone HRAs will no longer be in compliance. There are limited exceptions to this rule which include retiree-only HRAs and HRAs that are HIPAA excepted benefits. Many businesses are scrambling since their existing HRA will no longer be in compliance. It is important to note that HRAs that are integrated with a group health plan are not impacted. Also, this new law applies to plan years starting in 2014. Therefore, employers may fully fund their employees’ HRA accounts up until the first day of their 2014 plan year. Also in September, the IRS released proposed Section 6055 and 6056 regulations on the information reporting that large employers and insurance carriers will need to file for calendar years beginning January

2015. It is anticipated that the information for Section 6055 will be reported on form, 1095-B, and Section 6056 on form, 1095-C. These forms will help individuals determine whether or not they can claim a premium tax credit for each month of a calendar year. It will also be used as a tracking system for the IRS. In July, the Treasury Department announced the delay of the employer mandate. This mandate, which was set to begin in 2014 and is now delayed until January 2015, requires employers with 50 or more full-time equivalent employees to offer their full-time employees affordable and adequate health insurance or face potential penalties. Although this mandate has been delayed, businesses need to look at their staffing now as the measurement period for 2015 starts in 2013 (for those employers choosing a 12-month measurement period). The measurement period, is a period of time often referred to as the lookback period; when employers can look at their employees’ hours to determine if they meet the definition of a full-time employee. If employees are considered full-time, employers will need to offer these employees adequate and affordable health insurance during the following stability period. The measurement period is a useful tool to help employers with variable-hour employees. There is also an administration period which falls between the measurement period and the stability period. This is the period of time in which the employer is to provide the employees, who are deemed full-time in the measurement period, the adequate paperwork to sign up for insurance on day one of the stability period; it cannot exceed 90 days. An example is an employer who chooses a 12-month measurement period, a two-month administrative period and a corresponding 12-month stability period. The 12-month measurement period would run from November 1, 2013 - October 31,

2014; the administration period would run November 1, 2014 – December 31, 2014; and the stability period would run from January 1, 2015 – December 31, 2015. Employees who worked 1,560 hours or more during the measurement period would need to be offered insurance during the following stability period, calendar year 2015, which is when the employer mandate begins. This is a simple example of why businesses need to stay on top of the mechanics of the employer mandate as tracking of these employees has already begun. In May, the Department of Labor issued Technical Release 2013-02 detailing the requirements of businesses covered by the Fair Labor and Standards Act (FLSA) to provide a written “Notice of the Exchange” to employees. This requirement was often overlooked by businesses. In September 2013, the DOL announced that although giving this notification is still applicable, there will be no penalty for failure to provide a notification to employees. That said, we still recommend tracking what and how your notification was distributed to employees. It is critical that businesses understand the impact of the Affordable Care Act. Eide Bailly developed an employer analytics tool that allows us to look at the affordability of insurance, the potential subsidies that employees could receive, employer penalties, the Cadillac tax and the nondiscrimination penalties. We can also assist you with your measurement and stability periods, calculation of your full-time employees, and more. Obamacare is a reality and, therefore, it is important to understand the implications for your business. MV Tonya M. Rule, CPA, is Tax Manager and Health Care Reform Specialist with Eide Bailly LLP in Mankato.

MN Valley Business • december 2013 • 11

Barb Dorn leads the YWCA in Mankato

Sweet charity

Non-profits flourish with strong business support By Tim Krohn | Photos by John Cross and Pat Christman

he business of non-profits is to offer a hand to those who need it. But Mankato area charities say it’s the business community that makes that possible. “We do a lot of collaboration with businesses. There’s a lot of support in this community for the programs of the YWCA,” said Barb Dorn, executive director. “Businesses give money, sponsor events, donate space for events. It’s a very collaborative spirit in Mankato.” Nancee Mason, executive director of the House of Hope,

where those recovering from addictions find support, said business’ giving goes far beyond financial donations. “We have over 100 businesses in town that hire our clients and allow them to begin getting a work history again.” No non-profit has more interaction with area businesses than MRCI, which helps people with disabilities find and keep employment. “We couldn’t do it without our community employers,” said CEO Brian Benshoof.

Cover Story

12 • december 2013 • MN Valley Business

Brian Benshoof, CEO of MRCI, at the production facility at MRCI’s Mankato offfice. The close ties with businesses meant non-profits had to weather some leaner years during the recession. Businesses did pull back during the recession,” said Shannon Gullickson, board chair of the Greater Mankato Area United Way. “I’m seeing businesses loosening up now, but it’s going to take some time. Everyone wants to go slow and see if the economy is really on the rise or not. “But the business community here has always given more generously than elsewhere in the state and nation.” Indeed, a survey of United Way organizations showed the Mankato area ranked in the top 2 percent per capita in the nation for donations. Statewide, charitable giving has been steadily recovering from the recession, according to a recent report from the Minnesota Council on Foundations. Foundations, businesses and individuals from Minnesota gave $5.5 billion in 2011, the most recent data available. That was about 3 percent more than what was donated in 2010. Giving by foundations and corporations went up most dramatically, by 15 percent from 2010 to 2011, accounting for $1.7 billion in gifts. The largest corporate donor in the state was Target, giving $146.1 million. Target was followed by the Margaret A. Cargill Foundation ($142 million), McKnight Foundation ($102.9 million) and General Mills ($102.7 million).

Empowering women Dorn, who came to the YWCA in January, oversees a robust collection of programs, all with one the goal of eliminating racism and empowering women. “That’s a big mission. We work in three areas: women’s leadership, girls’ empowerment and working with new American families,” Dorn said. “There are definite needs in all three areas and I think there is equal opportunity in all three areas. We have to be careful to use our resources carefully and still offer good programming. We don’t want to spread ourselves too thin.” Women’s leadership programs include leadership conferences and the Elizabeth Kearney Women’s Leadership Development Program. In its seventh year, the 10-month-long Kearney program builds business and community leadership in women between the ages of 20 and 30. The best known YWCA program is Girls on the Run, which is for third- to fifth-graders. The YWCA also tried a pilot called Girls Inc. for sixth- to eighth-grade girls. “That went very well. We hope to keep that and would like to have a high school program, too,” Dorn said. “It’s primarily intended to help girls become strong, selfconfident young women. It builds leadership skills and self-awareness and how to navigate some difficult years for girls,” she said. “It’s really fun to see the changes in these girls over the

MN Valley Business • december 2013 • 13

course of the program.” For new Americans, much of the YWCA’s work is with the Somali community, through a program called Walking in Two Worlds. “We help immigrants and refugee families become acclimated to their new community and connect them with resources to help them meet their basic needs. Many of the women come to the community unfamiliar with the country,” Dorn said. “We connect them with resources for health care, education, language. It’s important when you’re new to know what’s available to help.” The Y also works with young immigrant and refugee children with their Ready to Learn program, in which trained volunteers go into homes to help prepare kids for school. The YWCA budget, under $500,000, comes from contributions from individual donors, foundation grants and from the United Way. “These are challenging times for non-profits. Funding sources have dwindled, so we have to be more creative,” Dorn said. “But I think that’s good for the non-profit sector. It’s good to take a hard look at your mission and see if you’re operating as efficiently as you can be. “I think non-profits are becoming more business minded in how they operate their organizations.” Uniting behind charities Despite the long, hard recession, the United Way never suffered. “We’ve always hit our goals. During the recession we were concerned, but people stepped up and donated. We were really proud of the support,” Gullickson said. “I think part of it is the Midwest pride in community and a sense that this is what you should do, that you need to pay it forward. And I think we’re the right-size community, we’re not too small, but we’re not too Shannon Gullickson big and people have a real sense of community here,” she said. And she said, Mankato has had a core group of families who have long supported the community. “I think we do have some unique families in this community that have given generously for generations and that rubs off on others.” While a large amount of the annual United Way giving comes from businesses and their employees, Gullickson said the money is only part of the effort. “Cash is king, but you need the people, too. I think when people volunteer that’s how they get familiar with a nonprofit and they get invested in that organization. If they’re not donating at the time, they will in the future when they’re able to,” she said. “Businesses giving their employees a role in volunteering is important, it let’s them see what those non-profits do

14 • december 2013 • MN Valley Business

and they feel invested. “There are an amazing number of people involved in United Way in many businesses in this community.” The United Way partners with 40 member agencies and provides funding for 60 programs. The organization began in Mankato in 1931, when it raised $6,000. Since then $45 million has been raised. Last year the local United Way, for the first time, hit the $2 million fundraising mark. This year’s goal is $2,060,000 with the campaign focus being on supporting caregivers. The United Way is welcoming a new director this month. Connie Hanner was a Habitat for Humanity executive from Rhode Island. MRCI shifts to meet new challenges In a production facility in St. Peter, workers bag and label candy that is sold in stores such as Menards, which takes 4 million bags a year. The facility, owned and operated by MRCI, was opened in part to offset the loss of job opportunities for the disabled in the community. Benshoof said the recession reduced the number of jobs companies offered for MRCI clients. “But a bigger issue has been the outsourcing of work overseas, or automation. Our specialty has always been packaging. It’s more difficult to find work like that. That’s why we started the candy facility. But Benshoof said the operation’s goal isn’t profit. “It’s not there to be in the candy business, it’s to provide work. We hand-label bags rather than use machines. It’s truly a non-profit business.” MRCI is also building a 30,000-square-foot building in Eastwood Energy Park in Mankato. The cost of the project is nearly $4 million, with half the money already raised by MRCI as it sold off some smaller buildings it had been operating from. “We just outgrew our other spaces and they didn’t have loading docks and things you need to get trucks in.” Benshoof said the new facility will be flexible, allowing MRCI to set up various program spaces for a variety of different clients doing different tasks. “A lot of the programs are for people with more severe disabilities. You need some flexibility. Some people have sensory needs who don’t like a lot of stimulation. The new building will allow us to have a lot of options rather than just a big building where you throw everybody together.” He said the new facility will be state of the art and heavily staffed because of the severity of disability in the clients. “There will be licensed staff — one staff to three people. You have people with autism and things who need intense help and you have to adapt the work for those folks. All our people like to work, but you have to adapt it.” MRCI still operates a packaging facility out of its building on Map Drive, but the number of workers there has declined from about 400 to 100. “The real focus in the future is to keep getting people out of our buildings, not having people with disabilities working in large groups. It’s a national trend. We give people a choice on where they want to work. Some like the social connections staying in the building here. We let

them drive what we do,” Benshoof said. “But the real trend is to get them out into the community and into businesses long term. That’s been a process we’ve been working on since the 1980s.” MRCI, with a $60 million budget and about 3,000 clients at any time, serves a large area, including Chaska, Rosemount, Shakopee, New Ulm, Fairmont and Mankato. Funding comes from state and federal funds for the services MRCI provides and through millions of dollars in sales from facilities like the candy plant in St. Peter. “Even though we’re a non-profit, we contribute to the economy quite a bit. Clients earn and spend money.” While there are many similar services in the state, MRCI is by far the largest and one of the biggest in the country. MRCI works with about 1,000 employers, either doing work for them at one of MRCI’s Nancee Mason is executive director of House of Hope in Mankato. facilities or having clients work at the companies. “The economy has been getting better so and then they come to us for 60 to 90 days. We try to teach we’ve had pretty steady work for people the last couple of them not to go back to the drugs and alcohol and how to years. We couldn’t do it without our community employers, be a productive member of society, how to find a job, whether they send work or hire people.” balance a checkbook,” she said. He said getting clients into long-term jobs in the We have some who come from jail or prison. We’re not community is time intensive. “It’s one person at a time, a locked facility, people can leave if they want, but there very individualized training. You need to find out what might be consequences (if they leave) if they’re on would keep them from succeeding and then try to fix those probation.” things. Mason said a key to helping insure long-term recovery “We’re not going to businesses as if it’s charity, but that is to get people back into the workforce. “We work closely we’re going to give you a really good employee if you give with Overhead Door in Mankato and BuyFun.com and a it a chance. A lot of companies are finding that we have lot of others. It’s wonderful for clients to get some work less turnover and really good employees.” history because many don’t have that.” MRCI started in 1953, led by parents looking for better Insurance, medical assistance and some county funds services for their children. Much of the focus then was on cover House of Hope’s $3 million in operating expenses polio victims. with donations raised for extras, such as recreation “There was just really good leadership over the years opportunities and for community programs. that helped us grow. We grew a lot when state institutions “We do community outreach where we go out and in St. Peter and Faribault closed in the ‘70s and ‘80s.” educate seventh- to ninth-graders on alternatives to drugs and alcohol. Offering hope “We also educate parents on what to look for, what new House of Hope helps those recovering from chemical drugs are out there and how to talk to your kids. We don’t dependency through residential sites and programs that get a lot of questions that night, but the next day the provide ongoing support and job opportunities. phone’s ringing off the hook from those parents who have Mason said the main residential building in Mankato questions. Things they thought of or things they maybe has 29 beds for men and seven for women. There is also didn’t want to bring up in front of a group.” an outpatient program serving up to 15 clients at any time. House of Hope started in 1971 in a house on Fulton House of Hope also has a 26-bed facility in Fairmont Street and moved to its Third Avenue facility in 2000. that opened early last year that serves 16 men and 10 Mason said that while demand is already overwhelming, women. those in the chemical dependency business believe there She said the group has been strategically growing as the will be even more demand as the Affordable Care Act kicks need for services is significant. in, as it requires most insurance policies to cover chemical “There aren’t enough services. There are less than 3,000 dependency treatment. beds in Minnesota for chemical dependency treatment. “We’re looking at more expansion. And we’re in the very There could probably be 20,000 beds,” Mason said. early stages of discussions to see if we could take on a “There are 23 million people in the U.S. in recovery and detox project in this community. We’d love to do it, but it that doesn’t touch on how many are still suffering.” would be a huge expense. It’s very difficult for a standA majority of clients come from referrals from primary alone detox to make it because of the medical costs.” treatment centers. Mankato had a detox center but it closed over lack of “We’re a moderate-level chemical dependency treatment funding. The closest detox centers are in New Ulm and center. A person would go to primary treatment to be Albert Lea. MV detoxed, to learn the basics of addiction, for about 28 days

MN Valley Business • december 2013 • 15

Bryan (left) and Brad Lachmiller, owners of Quality Gold & Silver.

Not their father’s pawn shop Lachmillers’ shop evolved into Quality Gold & Silver By Heidi Sampson | Photos by Pat Christman

he History Channel’s hit television show Pawn Stars features three generations of the Harrison family -grandfather Richard, son Rick and grandson Corey – all working together at the Gold & Silver Pawn Shop, on the outskirts of Las Vegas. According to Pawn Stars, pawning was the leading form of consumer credit in the United States until the 1950s. In fact, pawn shops are still helping everyday individuals to make ends meet in an economy that hasn’t been all that favorable in recent years. While the Pawn Stars television show is geared towards high end items of worth and historical value, Quality Gold & Silver Trading Emporium, formerly known as Quality Pawn, is about reaching out to help the needs of the average individual through a system of bartering.

Bryan and Brad Lachmiller, brothers and owners of Quality Gold & Silver, believe they “bridge the gap between thrift store and new retail,” said Brad, the younger of the two brothers. “So basically, if someone has something that is too nice to throw away and too good to donate, they can bring it to us to get some quick cash.” Bryan believes Pawn Stars has helped to gain an awareness of the used pawn market as they have demystified the business of pawn stores, which often had a negative perception. Bryan and Brad feel Hollywood movies have been particularly biased in their portrayals of pawn stores in that, “most often pawn stores are portrayed with a dirty scum bag behind the counter and nothing but stolen items present throughout the store, which couldn’t

Profile

16 • december 2013 • MN Valley Business

be further from the truth,” said Brad. “For the most part, each state has its own regulations for pawn stores and each town can add to those. We also do our best to work with area law enforcement to ensure that if a stolen item does come into the store, it would be returned to the original owner and the person who brought the item in, would be criminally prosecuted.” Opened as part time business in ’97 Bryan and Brad purchased Quality Pawn from their father, Mark Lachmiller, around 2007. Originally, Mark worked for Katolight Corporation. After eighteen years of service to the generator industry, he decided it was time to branch out on his own. Brad recalls seeing his father flip through the yellow pages to see not only what was already offered within the area but also what he could offer to the community, if he were to start his own business. Mark came to the conclusion that either a small engine repair shop or a pawn shop offered the most potential for possible growth and on August 8, 1997, Quality Pawn opened its doors as a part time adventure. Initially, Mark’s hours of operation were from 4-7 p.m. while he continued to work full time at Katolight. After six or eight months of operation, Mark decided the pawn business could support itself and his family, which caused Mark to pursue Quality Pawn as a full time endeavor. In the beginning, Quality Pawn occupied only the front section of the main building but as the business had grown, Mark expanded into the back section of his store, to allow for more space. In time, he acquired the building beside them, which more than doubled Quality Pawn’s square footage for used items. As young teenagers, Bryan and Brad would come home from school, do their homework and head straight into town to help their father with his business. “Where other kids our age might have been learning more about sports,” said Bryan, “we were here, developing our business and bartering skills.” Two years ago, Quality Pawn dissolved the pawn aspect of their business, which basically means that they no longer complete short term collateral loans. It was during this time that they officially changed their name to Quality Gold & Silver Trading Emporium. From rings to parrots Bryan characterizes a typical week at Quality Gold & Silver as that of being one where on Monday, 95 percent of his transactions could be purchases they make. The trend for Thursday, Friday and Saturday, shifts to bigger sale days as customers free up their schedules from a week of work or school, to see what items are available as their inventory is always in a constant state of flux. Quality Gold & Silver’s customer base tends to vary

from college students who will come in to purchase dorm fridges, surround sound equipment and gaming systems, at the start of the school year to carpenters, who are looking for specific tools or equipment for various jobs. Some distinctive items that have come into their store have consisted of bagpipes, vintage guitars, a 2.7 carat ring, and a Sitar, which is an 18 to 20 plucked string instrument native to India. One of the odder items to have crossed their threshold was a parrot, named Polly. Their father, Mark, purchased the bird from a regular customer who needed to move. “The bird became the stores mascot for around four or five years,” said Brad, “before we finally sold her.” In recent years, a rather unique market has opened up with the idea of vintage video games. A vintage video game or gaming system is roughly characterized as three game system generations back from the current best seller. “There have actually been world records set for single video games sold,” said Bryan. “The market itself is probably not even a decade old but it’s really grown exponentially. It’s not unheard of to see a vintage video game sell online for a thousand dollars.” Since Quality Gold & Silver continuously searches for other avenues in which to sell or expand their merchandise inventory, Brad has branched out into the trade and collectible show arena as a way to reach more customers statewide while the business itself has expanded to include online eBay auctions. “Items that might be worth quite a bit more than what they would sell for within the store, often go straight to our eBay account,” said Brad. “eBay has allowed us to help those customers whose items may have more value on the national market rather than our local one, which allows us to purchase items that wouldn’t normally sell around here.” Online shopping has allowed Bryan and Brad access to a much larger database for price referencing whereas before the internet, research on a particular item would have been defined by what was of value to the area, rather than what could also be sold nationally. The Internet has given them the ability to check trends, pricing and feedback, on any given item with a few key strokes of the computer. In the future, Bryan and Brad would like to expand their online business to include the creation of a website that could host their products while offering the conveniences of an online store. “We don’t have the luxury of calling in the experts like Pawn Stars,” said Bryan. “We are the experts. People come to us to try to establish what the worth of their item is. We constantly have to readjust our figures and change our strategy with every item presented. I guess one could say we kind of run on the fly.” MV

MN Valley Business • december 2013 • 17

Nancy Zallek and the Mankato Area Foundation have reinvigorated the group with more funding to support community projects, such as the annual City Art Walking Sculpture Tour.

A strong foundation

Zallek leads the rejuvenated Mankato Area Foundation By Pete Steiner Photos by Pat Christman “In ten years, this community will be different, the needs will be different.” Nancy Zallek, as she is most of the time, is smiling, explaining why donors find the Mankato Area Foundation (MAF) an attractive option when they decide “to give back to the community.” Zallek emphasizes how funds deposited

with the Foundation can be directed at a future date toward whatever then-current needs might be. More and more, benefactors seem to appreciate that approach, if we can deduce anything from the fact that MAF’s net assets have doubled since 2009. Executive Director Zallek and her board currently

Spotlight

18 • december 2013 • MN Valley Business

oversee $4.4 million in assets, spread across a variety of funds. Disbursements from those funds, the Foundation’s mantra says, are “shaping our community for good.” ••••• ‘Tis the season for giving, an appropriate time, it seemed, to take a closer look at the nearly 40-year-old MAF. Last year, the Foundation distributed more than $110,000 in grants and scholarships, including $50,000 to help kick off the Kiwanis Holiday Lights display at Sibley Park. Other gifts went to organizations such as the Merely Players, the Open Door Clinic, and the City Art Sculpture Walk. Nearly 150 companies, nonprofits, couples and individuals are listed as donors in the 2012 annual report. While Zallek and her 20-member board are worthy compadres of Santa, they differ in some important respects. Santa, after all, gives to everyone. MAF operates under strong guidelines as to who gets the money. Donor-advised funds, for example, make gifts to specific projects, causes, or fields of interest specified by the donor. Scholarship funds and designated funds are directed to specific individuals or areas of interest annually. Some unrestricted funds do allow the Foundation to make semi-annual grants to various community non-profits. As Zallek puts it, “It’s my job to match donors’ funds with their passions…. We connect donors with great ideas.” That connection can continue after the donors’ lifetimes. The initial funding for Kiwanis Lights, for example, came from the Al and Erla Fallenstein Funds. Zallek says, when they were alive, the couple had always loved participating in the annual Christmas decorating display on Mary Circle in upper North Mankato. They also loved area parks. The use of proceeds from their designated funds fit well with the project at Sibley. ••••• The interview is lively on this bright morning. Zallek, whose breakfast has consisted of a cup of coffee and two power bars, asks the interviewer if he minds being interrupted for a meeting -– in fact, he can observe that meeting. The Kiwanis’ Scott Wojcik, Kyle Mrozek and Shannon Gullickson have just arrived to discuss this year’s

improved edition of Holiday Lights. They’re coordinating the unveiling of the latest addition: the Mary Dotson Skating Rink. “I need to know when to cut the check,” Zallek tells the group. Wojcik passes her a detailed breakdown of costs. She also needs to know details about the ribbon-cutting ceremony. “This is what I’m envisioning,” Zallek begins, laying out the plan. But after an hour, they still need to line up more sponsors for individual nights of the display. ••••• After the meeting, Zallek returns to her desk and opens an inch-thick planning book. Its pages are filled with lists of tasks she needs to accomplish -– anything from creating a big-picture concept for a potential donor to staging a press conference to procuring a giant scissors for a ribboncutting. “I’m chief herder of cats,” she laughs. “I love it. I can’t imagine a better job … [although it] would not be a job for an introvert.” She’s a fifth-generation resident of the Mankato area, whose first job was at 12, working for her father at the family’s Brett’s Department Store. Eventually she became vice-president, but when the store closed in the early ‘90’s, she became a stay-at-home mom to her and husband Mark’s three children. Several years later, she was hired as Executive Director of the Mankato Ballet Board, overseeing rapid growth for that organization. She says she learned there how to work with a board. Another non-profit, the St. Peter United Way, then hired her for a four-year stint until she took the helm of the MAF four years ago. The Foundation had started somewhat modestly in 1974 when the Mankato Chamber’s Paul Hadley saw a need. Original board members included local business titans Ogden Confer, Sr., and Lowell Andreas, and the board was originally chaired by Nancy’s mother, Gretchen Taylor. It was a project-based foundation that tended to spend the dollars as they came in. Then when Ogden Confer, Sr., died, he left the Foundation a $500,000 endowment that still funds grants to this day. About ten years ago, the Foundation got a major boost when Thin Film Technology established a $1 million fund specifically for making scholarship grants to students studying science, technology, engineering and math. Zallek says, the focus had then shifted toward growing the endowment: “When I was hired, it was made clear they wanted to increase assets. There were donors out there, but they didn’t know we existed.” Nancy doesn’t so much recruit donors as she does educate them. Ninety percent of initial contacts come from their financial advisers. “We often get a call from their attorney, CPA, or investment adviser. [It’s] some major situation -– taxes, succession planning -– and they want to give back. They come to us.” ••••• 2013 has been a very good year for MAF, a year that almost perfectly illustrates Zallek’s vision. Longtime Mankato businessman, Dennis Dotson and his wife, Carole, had established a donor-advised fund, the “Dotson Family Fund.” Administered through the Foundation, Zallek says the intention was for the Dotsons to make gifts in their lifetime that they could enjoy. One of those gifts,

MN Valley Business • december 2013 • 19

Mankato Area Foundation Executive Director Nancy Zallek sits by the fountain at the Blue Earth County Library. The Foundation provided the funding for the fountain in 1977. the largest-to-date ever made through the Foundation, was announced last June: $500,000 to the Children’s Museum of Southern Minnesota. Another gift from the Dotson Family Fund was more recent. Zallek says Denny “had a vision” a year ago during a preview tour of the initial Kiwanis Holiday Lights. The idea of eventually adding a skating rink had come up. Dotson pulled her aside and whispered, “We’re doing that!” Thus, the Mary Dotson Skating Rink will be added at Sibley this year. The $50,000 artificial-ice rink will honor the memory of Denny’s mother, who for half-a-century maintained a skating rink in the neighborhood park across from her family’s home for the use of neighborhood kids. “What a unique gift,” Zallek exclaims. •••••

20 • december 2013 • MN Valley Business

Except for donor-advised funds, all gifts and grants the Foundation makes are disbursed only after review by a granting committee and a vote by the entire 20-member board. Zallek says she couldn’t get everything done without that “very active” board, led by Board President, Bryan Sowers. The Foundation’s principal assets are invested with the Central Minnesota Community Foundation, whose investment portfolio helps them grow. As it is for Santa, December is a busy month for the Mankato Area Foundation. It’s a month when potential donors are considering if an immediate gift is appropriate in light of year-end tax implications. Zallek looks forward to the anticipated activity. After all, before she’s done, she says, she hopes to preside over a $50 million foundation. But for this day, she has phone calls to make, a committee meeting to attend, and, oh yes, finding that giant scissors for the ribbon cutting. MV

507-625-4606 121 E. Main St. Ste 311 Mankato, MN 56001

MN Bus Ad Dec-2013 PRINT.pdf 1 11/19/2013 12:42:49 PM

CMY

MN Valley Business • december 2013 • 21

Mark and Kim Schaefer started S&S Motors on Mark’s family farm until moving to their new location near Courtland in 2001.

Driven to succeed S&S Motors started on family farm By Heidi Sampson Photos by John Cross

& S Motors of Courtland, started out on Mark Schaefer’s family farm, a farm that had been in his family since 1860, which was across the river their current location on Highway 68. Mark and his uncle began their used car business in 1986. Since the business was located on a farm, the two initially operated their office out of an old chicken barn. After the first year of business was completed, Mark’s uncle phased out as he decided the used car market wasn’t for him. Within a few years, once a better office was created on the home farm, Kim Schaefer, Mark’s wife, became a solid part of S & S Motors. S & S Motors moved to the outskirts of Courtland, in February of 2001, with the construction of their new building.

“Originally, I had looked into moving our business to New Ulm,” said Mark. “We bought the building where Gislason & Hunter Law Office is now located. The problem was the site still wasn’t big enough for what I had in mind. In the end, I sold that building to Gislason just as somebody else happened to approach me saying this particular piece of land was available.” Ten years ago, Mark started looking for a possible GM dealership to purchase as a means of branching out. He found a Chevrolet opportunity and purchased Amery Chevrolet, in Amery, Wisconsin. In 2009, S & S Motors added a body shop to their Courtland location. Their auto body shop was one of the first auto body shops in Southern Minnesota to use

All In The Family

22 • december 2013 • MN Valley Business

S&S Motors was one of the first to use water-based paints when it does body work in its paint booth. water-based paints. “Our auto body shop went green right away,” said Mark. “We think it’s very important to do what we can where we can.” MVB: Describe how you and your wife divide up your time within the business? Mark: Well, Kim is our office manager. She’s here more than I am. I spend a lot of my time traveling to our Wisconsin location and working there. Kim: Mark does our purchasing, sales and everything else. He does stay very busy traveling. MVB: What does S & S Motors primarily sell? Mark: We sell only pre-owned vehicles at this location. I do purchase the newer used vehicles we acquire. We also take a lot of vehicles in on trade.

fuel economy but they don’t want to buy the micro car for transportation because there isn’t a whole lot of room. Customers want something that will give them 30 miles per gallon but they are also looking for comfort as well. The Equinox has been a very popular smaller sport utility vehicle in recent years. In the case of an Equinox, you can get 30 mpg and still have room. I would also say the trend is moving toward smaller engines for better fuel economy as well. MVB: How do you handle the competition of car sales? Mark: I think anything in retail has competition. You have to work harder than your competition. Kim: I’d say keeping up on the current trends is also essential.

MVB: What trends have you noticed in vehicle sales? Mark: People are buying the smaller sport utility vehicles. Kim: I think people are keeping their cars longer, too. Purchases are now need based as opposed to a few years back when people might have bought a vehicle on a whim or because they wanted to have a particular car. I think part of the reason for that is due to the economy. People have realized they don’t need to spend that kind of money anymore.

MVB: What’s the best part of owning your own business? Mark: As owner, you are able to make all of the decisions, I guess. That can also be the worse part. There’s also the freedom to do what you want. Kim: There’s not as much freedom as you’d like personally though. Mark: Yes, a drawback would be that we are not able to be away from the business a whole lot because we are needed to be here. But as far as running a business, good or bad, the decisions are yours to make.

MVB: What your most popular car? Mark: You know, in this area the tiny economy car has never sold well. People want to buy something with good

MVB: What would be the biggest asset of your business? Mark: We have great employees. Kim: Yes, our employees are our best asset. We have 23

MN Valley Business • december 2013 • 23

employees. Most all of those are full time employees. MVB: What are the biggest challenges to owning your own business? Mark: I’d say the biggest challenges are in keeping up on regulations. MVB: Where do the majority of your customers come from? Mark: The majority of our customers come from within a 50 mile radius. We have also exported cars to customers in different countries. We’ve shipped specialty cars to Spain, Canada, South America and Russia. I’d say our number one priority is in taking care of our customers, we want them to return again and again. MVB: What would be the benefit to purchasing locally? Mark: Well, the number one benefit

24 • december 2013 • MN Valley Business

to purchasing locally is that your purchase is helping someone else to have a job and if you need service on the vehicle completed, it’s nicer to have access to those services locally. Also, a lot of our vehicles still have their original factory warranty. MVB: What would be your plans for the future? Mark: We’ve never really had a plan. We’ve just worked really hard to get where we are at. I guess one plan would be our continuing to go green. Recently, we’ve decided to install solar energy at this location. The solar panels have already been placed above the building. We also will be putting up LED lights in our parking lot. Kim: We believe in going green. The less waste the better. Plus, it cuts down on costs. MV

Construction/Real Estate Residential building permits Mankato

(in thousands)

- 2012 - 2013

8000

$5,716 $2914

6000

Residential building permits North Mankato

- 2012 - 2013 (in thousands) $2,811

3000

$839

2000

4000

1000

2000 0

Source: City of Mankato Information based on Multiple Listing Service and may not reflect all sales

- 2012 - 2013 250

Includes single family homes attached and detached, and town homes and condos

Housing starts: Mankato/North Mankato - 2012 - 2013

170

150

13 9

100

50 J

Source: Realtors Association of Southern Minnesota

Source: Cities of Mankato/North Mankato

Commercial building permits Mankato

(in thousands)

- 2012 - 2013

Commercial building permits North Mankato

- 2012 - 2013 (in thousands)

2000

$507

1500

$4,401 $5,043

$212

1000 500

Source: City of Mankato

— 2012 — 2013

5.5 5.0

4.3%

4.5 4.0

3.3%

3.5 J

Source: Freddie Mac

Source: City of North Mankato

Interest Rates: 30-year fixed-rate mortgage

3.0

144

200

20000 18000 16000 14000 12000 10000 8000 6000 4000 2000 0

Source: City of North Mankato

Existing home sales: Mankato region

Foreclosures: Third Quarter of 2013 County Blue Earth Brown Faribault Le Sueur Martin Nicollet Sibley Waseca Watonwan

2012

2013

Percent change

24 11 14 23 12 13 13 11 6

19 6 7 22 6 18 8 7 4

-21% -45% -50% -4% -50% +38% -38% -36% -33%

Source: Minnesota Foreclosure Partners Council C. Sankey

MN Valley Business • december 2013 • 25

■

Agricultural Outlook

By Kent Thiesse

Food stamps continue to bog down Farm Bill negotiations

uch of the focus on the new Farm Bill debate has centered on the Supplemental Nutrition Assistance Program (SNAP), which includes the food stamp program, the women, infants, and children (WIC) program, and the school lunch program. Food stamps were added to the Farm Bill legislation several decades ago, mainly because the food stamp program is administered through USDA. Based on USDA data for 2012, there were over 47 million people in the U.S. in the SNAP program, which represents nearly 15 percent of the U.S. population. The average food stamp benefit in the U.S. is $133 per person per month, which correlates to approximately $1.49 per person per meal on the average. Approximately 554,000 residents of Minnesota currently get benefits through the SNAP program, which is about one tenth of the State’s population. About one-third of those receiving the benefits are children, with another one-fourth being elderly, and a majority being in families where at least one adult earns a paycheck. Economic experts have estimated that every dollar spent on SNAP benefits generates approximately $1.80 in total economic activity. The Congressional Budget Office in May estimated that the current Farm Bill would require $973 billion over the next 10 years from fiscal year 2014 to 2023, or approximately $97.3 billion per year, without any reductions in expenditures. The CBO breakdown of Federal expenditures over the next decade is as follows : SNAP, $764 billion (79 %); Crop Insurance Program, $84 billion (8.6 %); Conservation Programs, $62 billion (6.3 %); Commodity Support Programs, $59 billion (6.0 %); and other USDA Programs, $5.9 billion (0.10 %) The CBO projects that SNAP program participation and Federal expenditures are likely near their peak, and will start to decline over the next decade.

One of the biggest differences in the U.S. Senate and U.S. House versions of the new Farm Bill is in the proposed future funding for SNAP programs. This was also one of the main roadblocks to passing a new Farm Bill in the House. The new Farm Bill passed by the Senate would cut the spending on SNAP programs by about $400 million per year, or $4 billion over 10 years. By comparison, the House proposal would cut SNAP funding by about $3.9 billion per year, or $39 billion over ten years. Currently, USDA allows States considerable flexibility in setting their own standards for who can receive assistance through the SNAP program. Federal standards allow food stamp assistance to any person living below 138 percent of the federal poverty line, which correlates to an income below $15,415 per year for an individual, or $26,344 for a family of three. Many States, including Minnesota, have opted for higher threshold income levels for food stamp eligibility. The version of the Farm Bill passed by the Senate earlier this year would make very few changes in SNAP program eligibility; however, the House version would make significant changes in eligibility requirements. The House version would force states to bring their SNAP eligibility requirements more in line with Federal guidelines. The House legislation would also require able-bodied adults that are receiving SNAP benefits to actively seek employment after a specified period of time in which they have received benefits. Changing these requirements for SNAP benefits has been quite controversial during the Farm Bill debate. In October, Oklahoma State University conducted a Food Demand Survey, which included some questions relative to SNAP funding and program changes. The highest levels of “support” in the survey results existed for targeting some SNAP funding for food purchases at farmers markets (82.7 %); implementing stricter

26 • december 2013 • MN Valley Business

work requirements for able-bodied adults receiving food stamps (73.1 %); future separation of the SNAP program from the overall Farm Bill, as proposed by the U.S. House (72.7 %); and prohibiting the purchases of certain foods and sugared sodas with food stamps (68.9 %). The question that received the highest number of “oppose” responses was cutting SNAP program funding by $39 billion over the next 10 years, as proposed by the House (60.7 %). Other questions with moderate opposition (54-55 %) were the Senate proposal to cut SNAP funding by $3.9 billion over the next 10 years, increasing food stamp funding over the next ten years, and increasing the maximum length of time a person can remain on food stamps. The proposed funding levels for the SNAP programs over the next decade are likely to be a major sticking point in reaching a compromise on a new Farm Bill, as both sides are fairly well entrenched. It will also be interesting to see if future decisions regarding SNAP program funding and requirements continue to remain as part of the Farm Bill negotiations, or develop into a separate legislative process.

MV Kent Thiesse is farm management analyst and vice president, MinnStar Bank, Lake Crystal. 507- 381-7960; kent.thiesse@minnstarbank.com

Agriculture/Agribusiness Corn prices — southern Minnesota

(dollars per bushel)

— 2012 — 2013

$7.15

Soybean prices — southern Minnesota

(dollars per bushel)

— 2012 — 2013

$13.46

4 2

$12.45

$3.99

Source: USDA

Iowa-Minnesota hog prices

$79.53

$74.68 J

Minimum prices, class 1 milk Dollars per hundredweight

— 2012 — 2013 24

100

Source: USDA

Milk prices

185 pound carcass, negotiated price, weighted average

— 2012 — 2013 110

Source: USDA

$21.00

$20.68

Source: USDA. Based on federal milk orders.

Corn and soybean prices are for rail delivery points in Southern Minnesota. Milk prices are for Upper Midwest points.

C. Sankey

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MN Valley Business • december 2013 • 27

Employment/Unemployment Initial unemployment claims

Minnesota initial unemployment claims

Nine-county Mankato region Major September Industry ‘12 ‘13 Construction Manufacturing Retail Services Total*

78 203 42 148 471

Percent change ‘12-’13

74 141 45 165 425

-5.1% -30.5% +7.1% +11.5% -9.8%

Major Industry

September ‘12 ‘13

Construction Manufacturing Retail Services Total*

2,695 2,340 1,112 4,642 10,786

Percent change ‘12-’13

2,289 1,964 1,141 4,758 10,149

-15.1% -16.1% +2.6% +2.5% -6%

Services consist of administration, educational, health care and social assistance, food and other miscellaneous services. *Categories don’t equal total because some categories not listed.

Local non-farm jobs

Minnesota Local non-farm jobs

- 2012 - 2013

Nine-county Mankato region

126,284 126,429

30000

2000

10000

1000

Local number of unemployed

- 2012 - 2013

Nine-county Mankato region

7,051 5,872

0000

Minnesota number of unemployed

- 2012 - 2013 168,343 152,473

200000

8000

150000

6000

100000

4000

50000

2000 0

2,823.0 2,818.3

3000

20000

00000

- 2012 - 2013

(in thousands)

Mankato/North Mankato Metropolitan statistical area

Unemployment rate Number of non-farm jobs Number of unemployed

Unemployment rates Counties, state, nation

(includes all of Blue Earth and Nicollet Counties) August

2012

2013

5.4% 54,622 3,120

4.5% 54,786 2,565

Source: Minnesota Department of Employment and Economic Development

28 • december 2013 • MN Valley Business

County/area Blue Earth Brown Faribault Le Sueur Martin Nicollet Sibley Waseca Watonwan Minneapolis/St. Paul Minnesota U.S.

August 2012 5.5% 5.4% 6.1% 6.6% 5.6% 5.3% 4.6% 5.7% 7.1% 5.8% 5.8% 8.6%

August 2013 4.7% 4.6% 5.0% 5.8% 4.9% 4.0% 4.3% 5.3% 6.5% 4.9% 5.1% 7.7% C. Sankey

Retail/Consumer Spending Vehicle Sales Mankato — Number of vehicles sold 820

- 2012 - 2013 1,075

1200

(In thousands)

400

800

300

600

- 2012 - 2013

500

1000

$461.7

$342.1

200

400

100

200 0

Includes restaurants, bars, telecommunications and general merchandise store sales. Excludes most clothing, grocery store sales.

Sales tax collections Mankato

Source: Sales tax figures, City of Mankato

Lodging tax collections Mankato/North Mankato

Source: Sales tax figures, City of Mankato

Mankato food and beverage tax

- 2012 - 2013 $56,816

$40,320

60000

- 2012 - 2013

75000

$48,860

$58,043

50000 50000

40000 30000

25000

20000 10000 0

Source: City of Mankato

Gas prices-Mankato — 2012 — 2013

Stocks of local interest

Oct. 16

Nov. 19

Percent change

Archer Daniels

$37.63

$40.97

+8.9

Ameriprise

$96.46

$105.20

+9.1

Best Buy

$42.63

$38.78

-9

Crown Cork & Seal

$40.12

$43.66

+8.8

Fastenal

$48.30

$46.45

-3.8

General Growth

$20.79

$20.56

-1.7

General Mills

$45.92

$50.38

+9.7

HickoryTech

$11.50

$12.45

+8.3

Hutchinson Technology

$3.87

$2.98

-22

Itron

$44.24

$42.19

+4.6

Johnson Outdoors

$26.86

$28.14

+4.8

$121.69

$130.05

+6.9

Target

$64.22

$66.63

+3.8

U.S. Bancorp

$37.41

$38.66

+3.3

Wells Financial

$21.85

$23.40

+7.1

$.65

$.45

-30.8

$28.05

$28.49

+1.6

$3.21

$3.08

1 0

Gas prices-Minnesota — 2012 — 2013

$3.24

4 3 2

$3.02

1 0

Winland Xcel

Source: GasBuddy.com C. Sankey

MN Valley Business • december 2013 • 29

ER MA N K

Advancing Business Business forfor Advancing a Stronger Community Community a Stronger

BUSINESS AWARDS & HALL OF FAME Presented by:

Branching into the Future On November 19, 472 members of the business community gathered to honor some of our region’s most outstanding businesses and professionals at the Greater Mankato Business Awards & Hall of Fame. Please join us in congratulating those who received awards from Greater Mankato Growth, and Visit Mankato and the City Center Partnership.

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