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Friday, November 14, 2008

Wherein I Do Dwaine Chapel's Job...

Commenters have had a field day with the obtuse essay from Dwaine Chapel that I posted Wednesday. Readers questioned the income data presented, smoked out the pretty clear mischaracterization of the Community Reinvestment Act (CRA), and expressed a fair amount of suspicion and disagreement over how the LAIC operates.

Maybe the LAIC wouldn't catch such heck if it operated more transparently. A big step toward such transparency would be clearer communication from its executive director, Mr. Chapel.

As an example, consider the essay currently under scrutiny. The text Chapel wrote for the Nov/Dec Chamber newsletter reads to an outsider like a cut-and-paste job with no clear unifying thesis. We get definitions, a Wikipedia-quality explanation of the CRA, a couple euphemisms (banks "are afforded the ability to reinvest" by the CRA? har har), and a couple statistics about Lake County. So what's wrong with that essay?
  • The author draws no clear connection between any of that information and current events in the county.
  • The CRA appears not to apply to Lake County, which doesn't appear on the FFIEC list of "distressed or underserved" tracts.
  • The income information is given no context: whatever Lake County's median family income may be, how does that compare to housing prices?
  • The essay sounds like the author forgot that his readers don't have all the information he does. Maybe someone who has read the housing study would understand the point... but how many of you have sprung $250 for a copy?

The only logical meaning suggested by my readers is that the CRA essay was Mr. Chapel's attempt to encourage local banks to adopt a more liberal lending policy toward affordable housing projects, specifically Randy Schaefer's TIF district. It is a reasonable thesis: economy's tight, credit is freezing up, nobody wants to take risks. Where President Bush thought $700 billion dollars might prime the pump, fellow Republican Chapel perhaps thought he'd try some gentle words as a local stimulus package.

But the current economy is no place for gentle words. If I were the local official in charge of economic development, and I wanted to send the message my readers have divined from Chapel's words, here's the essay I would have composed:

There's no doubt about it: the economy's tight. Debt has finally caught up with individuals and businesses, and everyone wants to scale back and save.

Now as consumer and taxpayer, I think saving money is a great idea. However, as a public servant charged with serving Madison and Lake County by promoting economic development, I recognize that everybody tightening their belts could actually do more harm than good.

Specifically, let's look at housing and construction. Imagine what would happen if Craig Williams and Nick Opdahl and all the other builders in town said, "We'd better cut back. No more houses until the recession is done. We're going fishing." Folks would lose jobs, houses wouldn't get built, and the local economy would lose out. We need our construction industry to keep chugging along.

But it can't do that if our local banks hang the "Gone Fishing" sign on the door. Ed, Tim, the rest of you, we need your help. Sure, housing looks like a risky investment right now. But we're not talking about facilitating the house-flipping and other real estate speculation that got the country into its current mess. We're talking about building houses for local folks, for your neighbors, the folks who've helped you build the successful banks you have. We're talking about sustaining jobs and cash flow in our community. That's not a risk; that's an investment.

Funding Randy Schaefer's housing project and other building right now may not look good on your actuarial tables. But consider: every house Randy builds is another several truckloads of materials Pro-Build sells (and it it helps, I'll get Randy to buy everything locally). It's another several weeks of work for a construction crew and all those subcontractors. And it's a new home for a new family who, once they get their boxes unpacked, will come around wanting loans for a new car or maybe even a new business.

Madison and Lake County need your help. The housing study proves we need more affordable housing. Don't believe me? Read it for yourself, for free: I'm having Kari run a copy over to the public library, and I'm sending an electronic copy to Cory to post on his blog.

Tightening our belts is a perfectly reasonable response to short-term economic concerns. But to make Madison grow, we always need to think long-term. Banks, investing in your neighbors has always paid off, and it always will. Let's see some loans! Forward Madison!

Are local banks getting too tight with their money? Should they pour funds into the TIF district and other projects right now? Does Madison need more housing? Beats me. But if those statements are true, we don't have to reach for a vague and irrelevant appeal to the Community Reinvestment Act and contextless statistics to make that point.

Maybe even my glittering prose wouldn't move banks staring down the barrel a deep recession. But the local economy and life in general would be so much better if all of us, including quasi-public officials like Dwaine Chapel, would just say what we mean.


  1. Here's another economic development fact to consider. Madison is losing folks at an alarming rate, over 10% have left in the past two years. Some died, many moved. Skewing the numbers are the 575 full-time RV'ers from out of state, who now claim Madison as their residence (actually a post office box at 110 E Center known as www.MyDakotaAddress.com). Jon Knuths has a great little side business that allows folks to claim South Dakota residency and the new residents count toward our census. If we're up 575 RV'ers who don't really live in Madison and strictly take advantage of our favorable state tax status, we're actually down about 600 real bodies, maybe even more in the past two years. Madison always touted 6500 residents. If you add 575 RV'ers, we should be over 7000 now, but we're actually about 10% below that, even with the RV'ers. My guess is that Madison is currently at about 5800 actual bodies, plus the RV'ers. Jobs bring people, people bring income to your community and income drives housing needs. Dwaine Chapel has the cart before the horse. I don't believe LAIC's housing study supports a need for what is being proposed. Placing a copy of the study at the Public Library is an excellent way to give the public access to that housing study. After all, public money funds LAIC operations.

  2. Liberal lending practices is what got us into this circumstance in the first place.

    If people meet the qualifications for a home loan, then banks are lending the money.
    The problem is that people are not meeting the qualifications.
    If these qualifications would have been adhered to in the first place, we would not be facing so many home foreclosures.

    Lending money to people who are unable to pay it back is not good business practice. A lesson that the banks and now the tax payers are paying for.

    If that means that people will have to do without, then that is the way it should be.

    People need to take responsibility for their actions. When a bank makes a home loan they want to make sure a person can pay it back, if there is a high risk that they can not pay it back, it does not make sense to make the loan.

    Let me reemphasize, people who qualify for loans are getting loans, people who do not qualify for loans are no longer getting them.

  3. JH said: From what I'm reading, Performance Measurement is a common concern for economic development corporations, and when applied reportedly leads to significantly improved results. It is entirely legitimate for our tax dollars to be tied to measurable results. "Performance measurement will not only help you manage your economic development programs more effectively, but also help you gain and keep public support by demonstrating that your program gets results." Here's one good article on it: http://www.angeloueconomics.com/measuring_ed.html

  4. It’s interesting that Dwaine will give a web seminar on how to raise big money for economic development corporations.
    * Learn how a rural community of 7,000 turned economic adversity into economic opportunity by raising over $2 million to fund an aggressive economic development strategy.
    During his time in Madison the community has brought in several industry and retail businesses which will create nearly 250 jobs over the next few years. The LAIC has been involved with the expansion of 5 local companies and continues to help others grow.
    What jobs are those?

  5. What about selling Arctic Cat....to expand Rosebud....which is now having it's own lay offs????

    Arctic employed 98 people at the time. Mr Chapel was qouted as telling the Arctic employees that "Rosebud will be expanding....starting pay around $11...."

    WHATEVER.... With Mr Chapel in charge Madison will become a ghost town.

  6. Being a new person to the area, this is sad to hear that the population has been going down. When I heard that Ghel laid off people my heart was saddened.

    Madison is a wonderful community and I think the leaders need to find new an innovative ideas to attract new business to the area. Personally, I think they need to look at more of the banking industry vs manufacturing. Get some call centers that will offer people jobs to STAY in Madison, rather than commute. With a College right in town, a call center would have a starting work force.

  7. Call centers -- ugh. I've worked in a call center. Where anyone gets the idea that a call center is great employment is beyond me. Rather than importing one big corporate employer that turns us all into peons, how about promoting more locally owned small businesses that create more owners, more bosses, more folks with more independence and ability to support their community as they see fit?

  8. I have spoken to Dwaine Chapel about attracting a call center to Madison. Whether it is a smaller credit card operation, an extension or expansion of an area credit card operation or perhaps a claims center for an insurance company, those are tremendous primary and secondary income jobs that we so desperately need after the loss of May & Scofield, Rosco and Arctic Cat among other firms.

    We have a hard working population with excellent speaking skills that service centers need. We have advanced communication lines into Madison and a tech center that needs to be filled.

    Manufacturing is very important, but we also need those second-income jobs that would benefit spouses and college students.

    Interestingly enough, I called a toll-free phone number and spoke to a service person for an online window blinds company which operates out of California. I asked her where she was located and she said, "Sioux Falls, South Dakota". Small world.

    Many companies need reliable phone-bank employees and Madison should be a prime location for those jobs.

  9. You should buy your blinds locally Rod.

  10. rod goeman said:

    "We have a hard working population with excellent speaking skills that service centers need. We have advanced communication lines into Madison and a tech center that needs to be filled."

    Selling a company on setting up a call center in Madison is not a good solution. Such facilities are being sent overseas regularly. Further, as other countries have started teaching English at a younger age, the "excellent speaking skills" group has become extraordinarily large. It would be hard to get a call center to come in and it would most likely be quick to leave due to competition. Lastly, there is no compelling reason to come to Madison over Sioux Falls where a much larger and more scalable infrastructure exists.

    So, what exactly is unique about Madison residents?

    1. Do they have some unique skill?
    2. Are they naturally stronger and more capable of completing a physical task?
    3. Are they super friendly and create a positive environment?

    I honestly can't point to anything super unique about the people. So, they only way ahead is to either lure jobs to Madison or to create new jobs in Madison.

    So far the "luring" has a very spotty record. I would tend to think a creating jobs approach would be better. If possible, I would lean heavily on the local college to jump start the process.

    Out here in Rapid @ SDSMT, we have filled up our business incubator (many times the size of the tech center in Madison) and are spinning out small businesses on a regular basis. DSU is equally capable in computer science as we are in engineering. I would put money down that if the LAIC focused on creating tech jobs that you would see huge pay back in 3-5 years.

  11. Good points, Tony! That's one reason I (and some actual economists) like using big infrastructure projects as the best way to do economic stimulus. Roads, bridges, pipelines, rail -- you can't outsource work like that overseas. Plus infrastructure work creates something the community/country can actually use, something that lasts.

    Now I will grant Rod's point, that with all the job losses of this decade, families need some source of income. I'll take answering phones or digging ditches or cleaning Rod's bathroom over starving (though I might drop a few pounds before hitting the phones again). But as an economic development strategy, focusing on jobs that provide only supplemental income (not to mention jobs with no local autonomy and little opportunity for advancement) is not one I can get excited about.

  12. The idea of incubator business centers is one piece of the puzzle. Those with tremendous ideas but little capital need a space to develop their plan, market and sell their product, software or service. The downside of incubator business centers is the rate of failure, but it becomes a numbers game, open more incubator businesses and you'll have more successes. Maybe the tech center is considered a start-up business center in Madison?

  13. The former Rosebud Mfg buildings are now being disposed of. Does the city sell them or will LAIC be able to get rid of them is the question. Anyone know.


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