The Fergus Phoenix

From the ashes of a devastating fire, some Fergus Falls business leaders found hope in Project 500 that lives on

By Joel Myhre (Contact) | The Daily Journal

Published Tuesday, March 4, 2008

On the list of the largest employers in Fergus Falls, health care, government and Otter Tail Power are clearly on top. However, manufacturers certainly make their mark.

And while health care, government and electrical utility jobs have been present in Fergus Falls not much after the town was founded, most of the manufacturing jobs today can be traced to the efforts of one enthusiastic, if not desperate, group of city leaders in the 1980s.

The group was known as Project 500. Its aim was to create 500 jobs in 500 days, a goal which many city council members scoffed at but which economic development director Bruce Thom had almost inadvertently stuck on himself. “The council was skeptical about making the goal, and I said, ‘Maybe so, but we’ve already printed the buttons.’ ”

While the group fell short of the 500-day goal, the effect of Project 500’s efforts can be seen on today’s top employers list: Northern Contours (200 jobs), Shoremaster (180, including fabric division), Quality Circuits (114), Thiele Technologies (80), not to mention the handful of other companies that followed due to relationships built here, skills developed here, or employees found here from the Project 500 days.

When asked to look back on the group’s efforts, just about all who were involved, in big ways and small, said the 600 permanent jobs created directly because of businesses recruited to come here, and the countless others that came from spin-off industries, businesses who located here later thanks to the industrial parks and incentive programs created in the 1980s, made the effort worthwhile.

“This community definitely would be different without 600 jobs here,” said John MacFarlane, current chairman and former president of Otter Tail Power, and a key player in economic development locally. “(The effort) brought new people in, new ideas, certainly some new wealth.”

“The proof is in the pudding,” said Thom, who now owns the Fargo-Moorhead RedHawks minor league baseball team.

The credit for the success, based on a survey among all involved, does not go to a particular person, but a fire that sparked a desperate, passionate community effort.

The environment:

The Fergus Falls City Council’s creation of Project 500 in 1984 came after a series of economic gut punches.

Months earlier, the community had lost meat processor, Landy Packing, and clothing manufacturer, Rosenblatt’s, and had been suffering from a sagging agricultural industry. But it was the Dec. 10, 1983, fire of Medallion Kitchens, and the relocation of the cabinet manufacturer to Waconia several months later, that prompted the late Mayor Kelly Ferber and the council to take action.

At that time, Ferber said the city intended “to mobilize the entire resources of the Fergus Falls area and do whatever is necessary,” to attract 500 jobs.

Those involved at the time said many took Ferber’s words to heart.

“We were in an era of high unemployment anyway, and then to lose 500 jobs, it was a real crisis,” said Toni Merdan, who served on the Project 500 staff and is now the senior economic development officer for Rep. Collin Peterson. “Everyone at that time was motivated to make partnerships when they previously wouldn’t have looked at each other.”

All who worked directly with economic development at that time said it was the commitment of Ferber and the council to economic development — providing the financial resources, creating partnerships and removing obstacles — which paved the way.

“Without the council behind us, I could have been the pied piper of Fergus Falls and not gotten anywhere,” Thom said.

“Desperate was too strong of a word, but there was certainly a strong concern about what was going to happen to the community,” MacFarlane said.

Business owners who were recruited to Fergus Falls could also see the need, as well as opportunities.

“At that point in time, Medallion Kitchens had burned down, every block had a home for sale on it, and a lot of businesses on main street were closed up,” ShoreMaster founder Dennis Tuel Sr. said.

The salesman:

Business owners say they are in Fergus Falls now because of the presence of a quality workforce, key managers, good industrial facilities, and most of all, the quality of life the area offers.

“Why stay in Fergus Falls? We live here,” said Erik Ahlgren, president of ShoreMaster.

But each made it clear that, in order to get them here, it took a relentless sales effort from Bruce Thom, and

an incentive package that made it financially worthwhile to come here.

Former Northern Contours owner George Rone, for example, said Thom called him every day at his hotel in Acupulco, Mexico, until he finally gave up, cut his vacation short and took a trip to Fergus Falls. ShoreMaster owner Dennis Tuel said Thom convinced him to sign two napkins over drinks at the Holiday Inn in Alexandria. “I still have those napkins,” Tuel said.

Les Nokes, the founder of Frontier Equipment that he later sold and turned into Thiele Technologies, said Thom locked the door on Nokes and his partners until 2 a.m. when they finally negotiated a deal.

Business owners who have been “sold” by him today say they can’t think of a better advocate for business.

“Bruce is a go-getter, he’s boisterous, he’s a promoter, and he was one of the best things ever for Fergus Falls,” Nokes said. “He may have stepped on a lot of toes, but what I saw was a guy that was so pro-small business.”

MacFarlane thought so much of Thom’s ability to work with business owners that, following Thom’s departure from the city of Fergus Falls in the late 1980s,

MacFarlane hired him to head the company’s diversification operations.

“I don’t know anybody else that could have gotten the job done,” MacFarlane said. “He’s a unique individual. If he lived in the Old West, he certainly would have been a gunslinger.”

The team:

While Thom was the ringleader, he had plenty of help.

Along with the hiring of Thom’s company, Thom Consultants, the council also created a loan pool, with local banks, Otter Tail Power and others contributing. Thom said it was the creation of this pool which allowed Project 500 to provide loans that a bank would have found too risky.

“(Thom) was the point person, but he had his own team and he collaborated with the city,” Community Development Director Gordon Hydukovich said. “Anything Bruce needed, he had.”

Nokes, for example, said Thom convinced himself and his partners to move to Fergus Falls because the city provided a building and a low-interest loan to buy equipment for his packaging machinery operation. “(The city’s incentive package) was just what we needed at that time,” Nokes said.

“Talk is cheap. It takes money to buy whiskey,” Thom said. “If we wouldn’t have had the capital, (the business deals) wouldn’t have happened.”

Many also said while Thom had the ideas and could sell them, he needed the help of city officials and others in the community to hammer out the details, and make his vision a practical reality.

“There were a bunch of people that were involved,” said Jim Nitchals, former city administrator who now lives on Leech Lake. “The effort was to try to get it done.”

Merdan also pointed to a non-profit corporation created by Project 500 in which the city was a stockholder, and the creation of a Port Authority in a city without a port as examples of tools that Thom and company had at their disposal.

“We definitely had some unique tools that nobody else had,” Merdan said.

Many close to the program said some of Thom’s sometimes wacky ideas sometimes caused the government and banking types left to figure them out to pull their hair out.

“If Project 500 were a landscaping company, Bruce would be running the bulldozer, and (the others) would clean up,” Nokes said.

Dealing with risks:

With the willingness to take risks, Thom and company also experienced failures. Of the 25 businesses that Project 500 was credited for recruiting to come to Fergus Falls, more than half of them failed. For every Shoremaster that succeeded, there was an SST or an American Cedar and Redwood that didn’t make it.

However, such businesses failed only after Thom and his staff made an exhaustive effort to keep them afloat. For those that needed it, Thom and others at City Hall went so far as to help find land, provide loan and mortgage services, review financial reports, make management suggestions, and in more than one case, ask the owner of the company to step down and recruit someone else to take the business over.

“We were full-fledged partners with each of these businesses,” Thom said. “If the business started to go south, then we’d take some action.”

One of the best examples of such involvement by city officials was in the case of circuit board manufacturer E and R Engineering, which eventually went out of business. As it turned out, the folding of E and R Engineering led to the recruitment of Wayne Dirkman, who purchased E and R’s equipment, hired the company’s employees, and created Quality Circuits.

“Wayne came in, took the business over, and made it what it is today,” Thom said.

Many pointed to the fact that, in some cases, the owners of the companies the city recruited weren’t what they presented themselves to be.

“We definitely ran into some characters who sold us a bill of goods,” MacFarlane said.

Can it be done again?:

The question of whether Fergus Falls could recruit 24 manufacturing businesses in a five-year period, as it did between 1984 and 1989, is certainly up for debate.

“The times are so different now,” current Fergus Falls Mayor Russell Anderson said. “The job structures, the wage structures have all changed.”

Thom, for one, says, it’s still possible to convince business owners to locate here.

“If you can get in with and sit down with the business owners, and if a business owner is up front with you, then yes, it’s still possible,” Thom said.

Loren Bailey, a founding member of Project 500, said communities not only in the region, but the nation and world have figured out what Fergus Falls learned early, increasing the competition.

“(Economic development) certainly can’t be done as quickly,” said Loren Bailey, a founding member of Project 500. “There’s so much competition from other communities, and not just in Minnesota.”

Some also question whether Fergus Falls is as willing to risk what it did when Project 500 was created.

For one, the needs for the community have changed significantly. Many point to a perennially low unemployment rate and an aging population as evidence that needs such as housing, retail and other quality of life issues should take priority over job creation.

Some also question whether significant local tax dollars – an estimated $300,000 to $400,000 per year during Project 500’s hey day to pay for staff, real estate purchases, loans, grants and other financial tools – could be found in the city’s budget today.

“Why put out that kind of risk when you don’t have the need?” Merdan said.

Hydukovich also pointed to the changes in regulations -- from the amount of reporting required to the increased rules on loans -- that hamper the flexibility cities have in helping individual businesses.

“The amount of reporting we do takes away from time we could be spending prospecting,” said Hydukovich, who works with economic development for the city these days. “And unless you have an angel investor, it’s definitely hard to start loan pools.”

That said, the advent of technology means that economic development can get done much more efficiently, and with only a fraction of the financial risk, according to current economic development director Harold Stanislawski.

“Back in those days, there was no Internet, and there were no Internet-based businesses,” Stanislawski said. “Things have changed a lot.”

No matter what the era, many say, leadership is still key to doing economic development in any form.

“What made things happen was a positive city council, and the teamwork of the whole community,” Thom said. “We would not have been able to what we did without that.”