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The following story is a publication of MinnPost, and can be found online here. It has been republished with permission from the publication.
When some people think of Faribault, they may think of Shattuck St. Mary’s boarding school (and its elite hockey program), or the processing plant for Jennie-O meat, or the fancy-blanket purveyors at Faribault Woolen Mill Co. Others may think of the cultural and racial tensions in the town as its Somali population has grown in the last decade.
But when some state officials think of Faribault, they think of it as a success story. That’s because despite a population of fewer than 25,000 people, Faribault has four major employers owned by companies outside of the U.S., an abundance of foreign investment that experts say is essentially unheard of for a small city in the Midwest.
In fact, it’s unique in Minnesota and “probably across the country,” to have “a town of that size as globally integrated as they are,” said Laurence Reszetar, the director of the Office of Foreign Direct Investment at Minnesota’s Department of Employment and Economic Development.
SageGlass, a high-tech glass manufacturer owned by France’s Saint-Gobain, has a plant in Faribault, as does Japan’s Daikin Industries, which makes commercial HVAC systems. Mexico’s La Costeña owns Faribault Foods, a cannery known for S&W beans and Butter Kernel vegetables. The German supermarket chain Aldi also has a distribution center in the city.
Taken together, that’s a rare combination of outside investment that Reszetar said he believes can offer a case study for other cities hoping to attract similar employers.
So how did Faribault become such a hub of foreign-owned companies?
Some natural advantages
Deanna Kuennen, the community and economic development director for the city of Faribault, said the area has been able to woo companies thanks to a combination of their natural assets as a city and officials’ outreach efforts. Tax breaks are “of course” part of that package, Kuennen said, but added that was only part of the puzzle.
One reason Faribault is attractive to companies is simply because of its location. A straight shot down Interstate 35 from the Twin Cities, the city offers companies easy access to the metro area and an international airport, as well as the ability to ship goods elsewhere conveniently. It’s close to the East-West Hwy. 14, and almost equidistant from Interstates 90 and 94.
Kuennen said many businesses also prefer working with a smaller city government, because they can be more accessible and attentive to individual companies. She said the city has worked hard to build good relationships with their existing companies and to attract new ones.
Jane Sumner, an assistant professor of political science at the University of Minnesota who studies multinational production and foreign investment, said such infrastructure is crucial for bringing in companies, especially for manufacturing businesses. Sumner also said Faribault’s local airport helps.
Sumner said low taxes “do matter,” but research shows they’re usually effective only if a company is deciding between locations with equal benefits in categories such as infrastructure, the strength of their education systems and the availability of workers.
Sometimes, cities or regions are able to brand themselves and excel at fostering certain types of industry, which Sumner said then acts as a magnet for other companies. Silicon Valley boasts a huge tech industry, obviously, but smaller cities have also managed to do something similar in other fields: Sumner pointed to Battle Creek, Mich., which has long been a hub of the cereal industry.
There’s no such obvious link between Faribault’s companies, which makes it somewhat unusual, Sumner said. Yet Reszetar said the city does have a long history of manufacturing and distribution, which are critical to each of the foreign-owned businesses it now hosts. City and county officials have also become experienced in making life easier for global businesses over time, Reszetar said.
“So you already have this competency and understanding of how you get things out across the market and take advantage of the different infrastructure and distribution resources that are there,” he said.
Still, each company has taken its own unique route to the city.
Daikin has had an outpost in Faribault for at least 50 years, said Mike Schwartz, the CEO of the company’s division for the Americas. He couldn’t say what first attracted the Daikin to Faribault, but said the company is committed to the area: it’s opening a new manufacturing facility expected to bring another 200 to 300 jobs to the city. Daikin also has a plant in nearby Owatonna and headquarters in Plymouth. Schwartz said Daikin currently employs about 1,500 people in the state.
Schwartz also cited the quality of the workforce, due to a work ethic that he attributed that to the “cultural fabric” of the area. And he agreed with Kuennen and others that Faribault’s highway access and smaller local government has been helpful. He said the city has rewarded Daikin with grants and infrastructure support to help with their power, sewage and water capabilities.
Schwartz noted Faribault’s size was another benefit in recruiting a workforce. He said in a smaller city, the company can be a “cornerstone employer” instead of one many in the Twin Cities metro, even while still being close enough to the cities to draw some workers from there.
La Costeña, a large food brand in Mexico, bought Faribault Foods in 2014 from local owners. According to the Star Tribune, the expansion was part of a push into the United States and because of the previous company’s success and a growing Hispanic market.
Tax incentives also played a role in the decision of some companies to locate in the area. When Aldi built a new distribution center in the city in the mid-2000s, company officials cited state and local tax breaks offered under a program known as Job Opportunity Building Zone (JOBZ), which DEED spokesman Shane Delaney said has since been phased out. SageGlass and Daikin have both received upwards of $1 million in tax breaks from the state, too, according to DEED.
“Without JOBZ this facility would be in [Hudson] Wisconsin,” one Aldi leader said at the time, according to the Minneapolis/St. Paul Business Journal.
In many ways, it would be difficult for other small cities to copy Faribault’s successes. Not every town just happens to be directly on a major highway and near a booming metro area, after all.
But Sumner said there are still lessons to be learned. A city or county can build infrastructure like airports or roads and invest in education, especially with an eye toward highlighting and boosting the area’s strengths, or the “things that make you special.”
If governments focus on what makes their city “uniquely attractive,” they can actively seek investors and companies specialize in that area. “If you want to attract mining companies but you have nothing to mine, well there are some things stacked against you,” Sumner said.
Gabrielle Gerbaud, executive director of the Minnesota Trade Office, said all of this can take significant long-term planning. Reszetar said Faribault has excelled at intentionally working to attract and keep its global businesses.
“If Faribault has been ahead of the curve, what they’ve been ahead of the curve with is thinking about themselves as a global location,” he said.