Three small towns navigate economic turmoil

When you fly over Missouri and other Midwestern states, you see a patchwork of green, stitched together by roads leading to small towns. Towns like Slater, Mo., population 2,100, just south of the Missouri River in the heart of the state.  
"Rural communities are the lifeblood of Missouri," said Ron Monnig, a Slater city councilman.

A sign welcomes Slater visitors with the theme, "A great place for growing," a bow to the fields of corn and soybeans surrounding town, but also a promotion of Slater as a good place to nurture families and businesses. Many rural places want to grow, but Monnig feels pretty good that Slater's population remains steady.

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"We're lucky we have strong leadership, with our council, mayor and city administrator all on the same page," Monnig said. "We've built up some reserves over the years-you have to have matching funds to get grants for some of these projects."

Monnig's proud that the city does more with less. The town electric company increased rates for the first time in 15 years three years ago. In recent years, he said, "Every street in the city has been repaired and paved. We replaced pipe from our water processing plant to town, built a new water tower and upgraded our storm and sewer systems."
It's not all rosy in Saline County. A rehab center for the disabled in nearby Marshall recently laid off workers, reduced employee health insurance and cut services.
"Slater's a struggling little city, but they haven't taken it lying down," said Richard Sheets, executive director of the Missouri Municipal League.

Slater's just one example of a rural town that works hard to maintain vibrancy in today's economy. We talked to leaders in two other rural Missouri places, Monroe City and Kennett. All three communities lie in agricultural areas far from St. Louis or Kansas City. None have the advantage of lying in the patch of southwest Missouri, where retirees flock to Lake of the Ozarks.  

Smaller towns tough it out
Of 800 municipalities in the state, more than 400 have fewer than 1,000 residents, according to Sheets. "A lot of smaller towns are in trouble," he said, speaking of towns so small that they're lucky to have a convenience store. "They're having a rough time keeping services in their communities."

But rural trade centers like Slater-towns with 2,000 or more residents-are more likely to have a grocery store, gas station and other services. "They're not faring too badly," Sheets said. "There's a trend toward people shopping closer to home."
While the state of Missouri cut 2,300 jobs a year ago, Sheets hasn't seen many municipal governments laying people off, and Slater, with its 30 to 35 full-time employees, is no exception.

"Small towns aren't hiring, they're not giving raises, and they're reducing benefits," Sheets said. "They're cutting costs, but trying to keep their workforce. It's more up-close and personal in small cities. They don't maintain that many employees in the first place, and officials are more connected to the value of those employees."

Monroe City, population 2,600, saved costs by asking two existing employees to assume responsibilities of a vacant city administrator position. "As employees are terminated, they are not replaced except in the police department," said Gary Osbourne, city clerk. He's one of Monroe City's 30 full-time employees. "We have eliminated most capital expenditures." So far, city services haven't been reduced.  

Kennett lies in Missouri's Bootheel, where farmers grow cotton, corn, soybeans and rice. With 11,000 residents, it's larger than Slater or Monroe City, but faces similar problems.
As in most small cities, the mayor's position isn't intended to be a full-time job, but "I feel like a full-time mayor," said Mayor Roger Wheeler, who's retired from automotive-related industries. He still finds time to travel, fish and play golf, but city business keeps him hopping since the city council decided not to replace the retiring full-time administrator.

Kennett hasn't cut any of the city government's 60 to 65 full time jobs, or its electric, gas and water utility's 60 to 65 positions, but officials are reducing staff through attrition. In 2011, Kennett will cut health insurance benefits for dependents of city workers by 25 percent. "This will have a significant impact on some employees," Wheeler said. Along the same line, the city recently privatized airport management, allowing the city to avoid covering the employee's benefits.

Show me the jobs
Wheeler keeps a close eye on jobs in the community. He reports that Dunklin County's unemployment rate hit 10.1 percent at the end of May, compared to 8.7 percent for Missouri and 9.3 percent nationally. The town lost 600 jobs a few years ago when a manufacturing plant shut down, and may lose more.
"Probably the largest employer within the City of Kennett would be all of the social service agencies if they were combined," Wheeler said. "Some of these budgets are being reduced."

Quite a few small manufacturers operate in rural Missouri. In Kennett, two rail car parts companies recently recalled some laid-off employees. A trailer manufacturer expanded by 40 jobs, and the town is courting a prospect for its industrial spec building. In Monroe City, you'll find small dye-casting and heating element industries.  

Joel Kotkin, an author who writes about America's changing demographics, explains that the Heartland may be positioned to attract more jobs. "We're moving beyond the industrial model, with economic activity diffusing from great population centers," he said. "Over the past three decades the Heartland's strongest gains have been in manufacturing and wholesale trade, which between 1970 and 2000 expanded more rapidly in rural places than in cities."

Other competitive edges may spur Kennett's growth. High-speed Internet fiber loops around town, two colleges produce an educated work force, and an expanding rice-growing industry attracts ducks, geese and hunters to its flooded fields.
"More and more students utilize our local colleges because they can stay at home while attending classes," Wheeler said. "Between the cost of fuel and housing, students can make their education dollars go further."

If Kennett's efforts take off, Wheeler welcomes new residents. "In the years ahead, some of those industries that have gone off shore will return," he said. "Many will find it attractive to come to rural America."

Wheeler may be on to something. "Although rural states and communities have been hit by the recession that began in 2007, on average they maintained their job levels more than the more populated areas and suffered far lower unemployment," Kotkin said. "This movement to the interior has generally been overlooked, while national interest has focused on the shift of American office and technical jobs offshore. Lower costs have often been cited as the primary reason for moving jobs offshore, but relocation to the Heartland brings many of the same benefits."  

When it comes to attracting jobs, Slater can't compete with larger towns like Kennett. Slater's home to a host of ag-related businesses, including Central Missouri AGRIService. There's no college, but Slater businesses offer high-speed Internet. And to attract new residents, the town's offering free lots to individuals who want to build or put up a manufactured home.

Monnig thinks Slater is weathering the recession fairly well."It seems small rural communities are at the tail end of any upswing or downslide in the national economy," he said.  

Monroe City will probably show a population decline in the 2010 census, Osbourne said. The town's largest employer closed its doors last year, and county unemployment runs at 14 percent. While three new homes went up recently, home sales remain sluggish.
Still, the town holds its own. Agriculture remains vibrant, two new businesses recently opened, and a newly expanded highway makes it easy to zip to larger nearby cities of Hannibal, Mo., and Quincy, Ill.

Show me the tax money
As long as a town doesn't grow too fast, new businesses and their workers build the local tax base, making attracting jobs vital to towns of all sizes. According to Sheets, sales taxes remain the most important revenue for cities, and leaders have learned to earmark them for specific purposes when placing tax measures on the ballot. Voters prefer sales taxes to property tax increases, in part because they like visitors to share their pain.
In Slater, voters continue to support a sales tax to fund streets and capital improvements. Kennett voters increased the town's sales tax in April. But Kennett's sales tax revenues continue to drop each month compared to the same period in the previous year. "Until I see a sustained increase, even minor, I will not feel that the economy is getting better," Wheeler said.  

Sheets thinks it's fortunate that little state revenue-a small share of the state gas tax-goes to municipalities, making Missouri cities more independent than cities in other states, and more independent than counties. But like Kennett, most towns are seeing a three to five percent drop in sales tax revenues over last year.

Beyond local and state tax contributions, federal tax dollars boost rural towns. In Slater, stimulus funds and ongoing federal programs helped fund the water system, Head Start and early warning sirens. A renewable energy program even funded a local farmer's grain dryer. In Kennett, Uncle Sam funded sidewalks, streetlights, a new aquatic center, a counseling center, sheriff's vehicles and early warning radio receivers. Monroe City attracted federal funding for a disabled workshop and a senior center.

Many of the federal dollars come from an agency run by Janie Dunning, state director of the U.S. Department of Agriculture's Rural Development arm, which funds 40 infrastructure programs from rural electric and telecommunications systems to hospitals, nursing homes, rehab facilities, housing, water and sewer.
"Midwest states always rise to the top in terms of use of these funds for jobs and economic development," Dunning said. "Missouri's been right on top of states benefiting from the stimulus." In 2005, USDA Rural Development spent $588 million in Missouri. In 2009, thanks in part to stimulus funds, the allocation more than doubled to $1.2 billion. "For 2010, we could exceed that," she said.

Stimulus funds prove especially important in rural areas, Dunning said, since rural people earn less than their city cousins. "Once the stimulus goes away, and we go back to our normal federal allocation, the big challenge will be to stay ahead of our infrastructure needs."

Opinions vary on the benefits of stimulus funding. "The stimulus didn't do anything for the vast majority of the country," Kotkin told Today's Farmer. Kennett's Wheeler also debunks stimulus effects, saying "Most of the rhetoric is just political propaganda." As Monnig said, the impact of the stimulus "is very hard to gauge."
Hometown hope glimmers

Whether you believe in the effectiveness of the stimulus or not, rural communities face pending state and federal cutbacks. But opportunities remain.
The Missouri Department of Economic Development coordinates with USDA and other federal and state programs to develop local economies. John Fougere, director of communications, provides other examples of towns that are attracting jobs. In Cuba, population 3,200, an electric products company expanded, creating 37 jobs. Rock Port's 1,400 citizens are welcoming a new grain facility that will result in 11 jobs. In both cases, state and local partnerships created Enhanced Enterprise Zones that offer tax incentives to businesses.

"Many rural areas are ideal for entrepreneurial locations as the cost of doing business for start-up companies is much less than in urban areas," Fougere said. "But communities must work to educate themselves about the
many economic incentive programs. They're crucial to attracting new investment and creating jobs."

Dunning gets in the last word the rural outlook "We've got some obstacles, but from a rural economic development perspective, we've got some great things going in this state," she said. "We're already seeing people moving into the Heartland."

Kotkin hails the Heartland
The U.S. stands poised to grow from 300 million to 400 million people by 2050, and Joel Kotkin believes a good share of the growth will come to the Heartland.
"One of the least-anticipated developments in the nation's 21st-century geography will be the resurgence of the American Heartland, often dismissed by coastal dwellers as 'flyover country,'" Kotkin says in his book, The Next Hundred Million: America in 2050.

"For the better part of the 20th century rural and small-town communities declined in percentage of population and in economic importance. But as the nation gains 100 million people, population and cost pressures are destined to resurrect the nation's hinterlands."
Kotkin cites the resurgence of towns like Bismarck, Omaha, Des Moines and Dubuque as evidence. His website, newgeography.com, includes Missouri's Columbia, Joplin and St.

Joe on a list of the best small cities for job growth.  
His book spells out attributes that help rural communities attract jobs. A summary might inspire even the smallest burg:
_    The cost of housing in rural areas runs much lower than in major cities. That's why some major software companies moved to places like Fargo and Boise. Businesses can pay employees less because they can live better on a lower salary.
_    Good schools and colleges attract jobs by providing a source of new talent. Especially colleges that work with employers to customize training for their industries.  
_    The Heartland generally views industry positively, and the region's workers share a good work ethic.
_    You can work from anywhere with high-speed Internet. It helps people feel less cut off. If you don't offer high-speed, forget it.
_    Communities that will do best lie less than 30 miles from a larger city with an airport, good health care, cultural activities and other important services.
_    Rural areas with amenities like Lake of the Ozarks will continue to attract retirees and others.

"I'm an urban person, but just because I like the city doesn't mean everyone does," Kotkin told Today's Farmer. He teaches at Chapman University in Los Angeles. "Being in a city has more disadvantages than advantages. That's why we're beginning to see net in-migration to rural places like Kentucky."   

He supports this contention in his book. "Recent surveys reveal that as many as one out of three U.S. adults would prefer to live in a rural area, compared to some 20 percent who actually do," he said. "A large, mostly untapped, population would consider a move to a smaller community in the Heartland."

Kotkin doesn't paint a completely bright picture for the smallest towns, which may continue to lose population to larger regional trade centers. But overall, the impact of America's growing population on costs and congestion in big cities and along the coasts will drive more people into the Heartland.
"No longer geographically isolated or cut off from vital information, the Heartland is one of America's critical assets as it prepares to accommodate the next hundred million," Kotkin concludes.