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Northern Great Plains Rural Development Commission Priority Recommendations

2007-11-04

Deploy throughout the Northern Great Plains Region a microenterprise loan and community-based training program.
Small businesses, especially microenterprises, are significantly important to the rural areas of the Region and have high potential for future growth. Until recently there were no operational models for how public policy could be used to reach the diffuse array of rural microbusinesses. So, many state and federal programs and agencies have overlooked the needs of this group of entrepreneurs, choosing instead to focus on larger companies in manufacturing and high-tech industry microenterprises because of regulatory considerations, high transaction costs and relatively higher risks associated with this group of small businesses. A microenterprise loan and community-based training program will have the most impact on small companies started by young people, women and minorities.

Replicate the Pacific Northwest Economic Region’s Catalyst business and trade lead opportunity system within the Northern Great Plains Region.
The Pacific Northwest Economic Region (PNWER) has created a domestic and international business opportunity system (called Catalyst) which screens business leads from a variety of sources, targets them to firms at the eight-digit level of the SIC code, faxes a one-page inquiry to firms asking if they are interested, and does nothing further until the firm signs the fax and sends it back, at which point detailed information is sent, for which firms pay a fee.  This predominantly business-driven project has been highly successful in generating business for the Region. PNWER is willing to work with the Northern Great Plains Region to establish a program similar to Catalyst.

The legislatures of the five states should review existing laws and modify or propose new legislation to insure opportunity for farmers, local investors, and entrepreneurs to establish and participate in business structures that benefit from value-added enterprises, including operations that capture economies of scale. 
There is a need for review of corporate farming regulations, particularly in the area of animal agriculture. The purpose is not to promote large corporate farming, but “family” farms that need more flexibility to organize into more efficient units.  This may be in the form of corporations, limited liability companies, or cooperatives.  These units, in many cases, can capture economies of scale, utilize new technologies, and build greater management expertise that are not easily available to smaller units. In addition, there is a need for financial institutions to handle stock options on value-added producer-owned cooperatives, limited liability companies, and other forms of legal companies that are comparable in all five states.  This would allow more producers the opportunity to invest in value-added projects without affecting their cash flow and borrowing power. These options should be seen as collateral and should have a face value that is positive to the producer’s balance sheet.

Create a Northern Great Plains Trade Research Institute.
All five Northern Great Plains states currently struggle to increase exports without the kind of hard data, market intelligence, and technical assistance services that could improve the chances of success. This is especially a problem for the three western states in the Region, with their small trade assistance budgets. Yet all five states have similar leading export industry sectors and export markets.  Jointly-conducted export development research and technical assistance could substantially strengthen each state’s individual export promotion activities.  A Northern Great Plains Trade Research Institute could help equip the states, and the businesses within them, with the tools to actively seek new market opportunities. The Institute would be overseen by a Regional board composed of the directors of the five state trade offices and representatives of the Region’s small and medium-sized businesses. It will be designed to commission research and provide services on their behalf.

Establish an ongoing, neutral organization to implement the Commission’s recommendations.
Within the Northern Great Plains Region, an ongoing Regional effort aimed at multi-state collaboration has widespread potential benefit. Such an effort would be able to address civic and social capacity on a ten-year plan basis and overcome the existing barriers of turf, territory and history that divide areas within states and the states themselves in the Region. A long-range approach of this type would require the oversight and focused attention of an organization dedicated to the purpose of Regional development.

Congress should exercise its powers under the Commerce Clause of the Constitution to end the use of subsidies and preferential taxes by states to compete with one another for jobs and businesses.
Efforts of an individual state or municipality to benefit its local economy should not be made at the expense of other states or municipalities or at the peril of the strength of the entire economy.  There is growing evidence indicating that when states compete through subsidies and preferential taxes for specific businesses, the overall economy suffers through the loss of both private and public goods. Congress should ban the direct or indirect utilization of federal funds of any kind, including subsidies, grants, bonds or tax-exempt financing that funds, in whole or in part, any special tax, infrastructure improvement or financing incentive by any state or municipality to lure existing jobs and businesses from one location to another.

Simplify and standardize small equity placement filings within and among the five states in the Region to better meet the capital needs of growing companies.
Growing companies need patient capital to sustain their growth.  Short term-loans and mortgages are not the complete solution.  Equity investments are required to provide the fuel for growth. Of particular concern are the small placements of $250,000 to $1,500,000 that are too large for family and friends and too small for the vast majority of institutional venture capital partnerships.  One of the artificial barriers to capital formation that has been erected in the United States is the different set of regulations that each state develops for equity placements.  This limits the capital available to small companies to their state of incorporation in almost all cases – due to the high cost of understanding the requirements of preparing documents for fillings in other states. 

Establish a Regional chapter of the Export-Import Bank of the United State’s City-State Cooperator Program to improve access to export finance for firms throughout the Northern Great Plains.
The Northern Great Plains generally lacks expertise in export finance. The Export-Import (ExIm) Bank of the United States operates a program by which states and cities may, with formal ExIm training, serve as local “teller windows” to make the Bank’s array of loans, guarantees and insurance programs more readily available, especially to small and medium-sized firms who may lack the resources to journey to Washington, D.C. to deal directly with the Bank. Regional proposals for participation in the program are possible. Two of the Region’s states, Minnesota and Nebraska, have received ExIm training, but only Minnesota’s program is truly operational.  The other three states cannot afford to dedicate staff to trade finance and Nebraska too has been unable to move beyond preliminary training. A Regional office, headquartered in Minnesota, would solve these problems.

State legislatures should modify current cooperative law to allow investment in agriculture cooperatives by interested parties, other than the producing farmers (i.e. small town merchants and professionals vitally interested in the success of agriculture).
As the five states look at prioritizing and giving emphasis to different types of development projects relating to value-added processing, priority should be given to producer or locally-owned projects.  Giving producer or locally owned projects priority would encourage local investment and discourage foreign investment.  Provision must be made for more local decision-making and the ability of rural residents to participate in capital investment in value-added operations.

State legislatures and regulatory agencies should provide for reasonable uniformity and also reciprocity among states in meat, dairy, and other food inspection programs.
Legislatures should examine the potential for reciprocity agreements in the five-state Region that address inspection procedures and various standards that affect food products or movement of food products and agricultural raw materials across state lines. These agreements could maintain food safety in the Region while creating greater opportunities for small producers to market products within one Region.

Develop both a Regional interagency strategy and a federal interagency strategy to provide direction, coordination and support for Native American telecommunications.  Initiate policy inquiries on Native American telecommunications and invite active participation from tribal governments, state regulators, private companies, and others.
The Commission has identified equity of access to modern telecommunications services as a critical goal for everyone in the Region.  The NGP Region is home to many Native Americans, whose access to telecommunications infrastructure lags behind the majority of society. Policy makers at the federal and state levels should work together to develop federal and Regional policy statements and strategies to assure universal access for Native Americans.  The statements should address such topics as sovereignty and self-determination, universal access, and strategic partnerships.

State legislatures should implement new legal and financial structures that will enable inter-generational transfer of farms and ranches, including reform of capital gains tax and state inheritance tax.
With the farmer population aging, it is important that young people become involved in farming to produce food for the United States in the future.  With current inheritance tax laws, the farmers cannot afford to sell or hand down the farm to the next generation, creating a serious lack of future farmers.  This issue of transfer of farm and ranch ownership will become increasingly important in the next 10 to 15 years.  The average farmer age in the five-state Region is now in the 50s, and in some states, closer to 60.

USDA must modify its export promotion spending priorities within its new International Trade Strategy to give substantially greater emphasis to value-added agricultural export promotion and less to raw commodity export promotion.
Raw commodity exports produce far less direct and indirect employment or income than manufactured exports. Even if commodity exports were dramatically increased, income and employment improvements would be very modest. If the objective is to increase income and employment in rural America, it can only be achieved by increasing manufacturing and manufactured exports.  In agriculture, that means value-added agricultural exports.  There is no Region in the nation for whom current changes in U.S. agricultural policy have a greater effect, or hold more promise, than the Northern Great Plains. As support programs are phased out, the role of value-added agriculture takes on increased importance as one of the few opportunities for employment and income growth in an already threatened Region.  Now that is has a new international trade policy aimed at increasing value-added exports, USDA must change its export promotion spending priorities to ensure that firms in rural America, and particularly the Northern Great Plains, have the knowledge and expertise to take advantage of this fundamental shift in policy.

The Northern Great Plains Region should develop a long-term trade and transportation infrastructure strategy for ensuring that its export products are able to get to market.
Increased trade opportunities resulting from the growing global marketplace offer important economic development opportunities for those businesses, cities, and Regions that recognize this and take action.  In order to take advantage of the opportunities to expand marketplace activity within the Northern Great Plains Region, it is essential that the private and public shipping and transportation providers and the federal, state and local funders of transportation infrastructure work together to ensure that the Region has the necessary infrastructure to deliver product to the global marketplace. First, the Northern Great Plains Region should develop a long-term trade and transportation infrastructure strategy for ensuring that its export products are able to get the market. This effort would involve the federal and state Departments of Transportation, metropolitan planning organizations, representatives of private shipping firms – including rail, truck, air and water, firms actively involved in export of both agricultural and manufactured products, economic developers, representatives from the primary ocean ports, and the Region’s university based transportation research institutes.

Establish a coordinated curriculum among the higher education institutions in the five-state Region that trains post-secondary students for value-added agricultural careers.
The post-secondary educational systems should introduce more programs aimed at training people to work in and manage “food factory” businesses, and to allow young people to remain in rural communities. The university systems throughout the five-state Region should collaborate on creating a food processing curriculum at one or more of the universities to promote the training of people for management of agri-processing businesses in the Region.  The curriculum would include a combination of food science and entrepreneurship courses. 

A Region-wide wellness transition demonstration and dissemination program should be established.
In order to capitalize on the opportunity to bring the benefits of an increased emphasis on wellness services and behaviors to the rural areas of the Northern Great Plains Region, there is need for a Region-wide demonstration and dissemination program. The program would involve representatives of state hospital and public health associations; tribal governments and the Indian Health Services; private and public service delivery providers; and insurance, purchasing, consumer and policy interests from throughout the Region. The program could develop effective models for creating organizational and individual incentives, and establishing service and education infrastructures that redirect the current rural delivery and financing systems toward a more effective balance of preventive and sickness oriented care and the benefits derived therefrom.

Initiate a discussion among philanthropic organizations in the Region regarding strategies for increasing civic philanthropy in the Region that supports rural development.
Associations and networks within the Region represent an important investment in civic and social capacity building.  By strengthening these building blocks of capacity, the Region as a whole will profit.  A major strategy for long-term organizational development in the Region should be to address the need for and operations of foundations with Regional or multi-state perspectives.  Several major foundations target states in the Region, but no concerted effort is underway to specifically address the Region as a whole.

The five states in the Region should explore the creation of a multi-state health insurance purchasing cooperative.
Many rural areas and people are experiencing a continuing erosion of health insurance coverage in both the small group and individual insurance markets. In addition and despite recent reductions in the growth of insurance premiums in many areas, premiums in the small employer and individual markets have continued to rise, and coverage is less. Perhaps the most important factor contributing to this trend has been the inherent instability in these markets due to the health risk underwriting and other practices of insurers.  There is great interest in finding ways to extend benefits of group purchasing to the small group and individual insurance markets through the development of public or privately sponsored purchasing cooperatives or alliances.  A purchasing cooperative that combines the buying power and risk pooling of a multi-state geographic area of rural citizens and markets, and the possible “piggybacking” of such a pool with existing large purchasing pools may offer a unique solution to a critical Regional concern.

Make the marketing, merchandising assistance, and business start-up advisory services of the Nebraska Food Processing Center available to the entire Northern Great Plains Region.
The success of Nebraska’s processed food industry – the state’s number one export industry sector – is attributable, in part, to the Nebraska Food Processing Center. The Center has developed a worldwide reputation for excellence in a wide range of food processing capabilities, but what sets it apart from other predominantly research-oriented centers are its domestic and international marketing, merchandising assistance, and business start-up advisory services. Given the importance of food and kindred products sectors in each of the Northern Great Plains states and the weakness of such expertise in the other four states, making these services available to firms in other states on a fee basis, would be of benefit to the entire Region.

Initiate and urge Regional collaboration on telecommunications regulations and other issues of common concern.  Involve the five state public service/utility commissions and state telecommunications leaders in regular discussions to focus their agendas on Regional telecommunications issues of infrastructure, access and sustainability; seamless interoperability of an interactive voice/data/video infrastructure between and among the five states; existing regulatory anomalies among the states which discourage or prohibit cross-border initiatives; and assurance of affordable pricing across the Region.
The competitive marketplace initiated by the Telecommunications Act of 1996 shifts the focus to state public service commissions.  Seamless connectivity and interoperability among the voice/data/video networks of the five Northern Great Plains states will facilitate Regional identity, information sharing, replication of best practices, and acceleration of the Region’s learning curve. Collaboration on regulatory and other key issues will be critical if rural areas are to have efficient, effective, and affordable telecommunications access.  Specific measurable goals must be set for rural telecommunications service in the Region, and progress monitored on a regular basis.