Pitching in

To bridge a demographic gap, rural America answers the call for more jobs and opportunity.

Fifteen years ago, Conrad, Iowa, had the look and feel of a town in its twilight. The town's infrastructure was still intact-it had a sound school system, quality parks and roads, and affordable and up-to-date housing. But youth were leaving because jobs were dwindling. Like many other rural communities, Conrad's residents were aging and incomes were stagnant. Access to healthcare and filling classrooms were chronic issues before city leaders.

In 1990, local residents decided to take back the town. Shane Tiernan, senior vice president of First State Bank, says Conrad became the first self-initiated Rural Main Street Program in Iowa. Main Street is a program sponsored by the National Trust for Historic Preservation in Washington, D.C. The program focuses on community revitalization around four basic premises-promotion, organization, design and economic restructuring.

Tiernan says Conrad was the first official Main Street program in the nation to bring a communitywide focus to economic development. Most economic development programs take the traditional downtown-only approach. However, with seed money from First State Bank and other private sources, one part-time staffer and almost 150 volunteers began promoting Conrad inside its borders and out. The town encouraged entrepreneurs and companies to set up shop and sample the small-town quality of life Conrad offers. Tax breaks and private investments lured new businesses throughout the 1990s, filling storefront properties and pumping new life into the larger community.

All totaled, Tiernan says the town's 1,000 residents gained 28 new retail, service and manufacturing businesses. The tax base rose from $18 million in 1988 to $42 million in 2000. Forty-- eight new homes were built. And despite the area's loss of 3,000 farm operators between 1978 and 1997, the town's population grew about 10 percent since 1990.

"We have had success because we took a communitywide focus," Tiernan says.

According to the Center for the Study of Rural America, six out of 10 rural counties in the nation are grappling with shrinking populations. The greatest population losses are concentrated in the Midwest and Great Plains regions. The 2000 Census confirmed that many small towns in remote stretches of these areas are withering away. Unemployment numbers for these rural outposts are deceptively low, masking the fact that few new jobs are being created to keep youth in the community.

To stem the tide of population loss, rural development initiatives are on the rise, providing vision for a better, stronger future for much of rural America. Much of these grassroots efforts rely on collaborations of local talent and leadership to stimulate economic, regional and community development. Federal, state and local assistance programs are playing a big role, but more often than not, it's community bankers who are leading the charge to energize their hometowns.

Declining Populations

Rural populations have been declining for much of the century. One in five Americans now live in non-metropolitan counties, down from one in four in the 1950s. According to the Los Angeles Times, rural counties in the Great Plains alone have lost one-third of their population since a peak in the 1920s. Although the nation's population expanded by 13 percent during the 1990s, nearly 60 percent of the Plains' counties shrank as the elderly died and the young moved away.

Not all rural areas have been affected the same, largely creating a division among towns that have economically advantageous features -scenic and recreational amenities, technological infrastructure, or a diversified economic base-and those that do not. According to the Federal Reserve Bank of Kansas City, there is a high correlation between counties that lost population in the 1990s and those still dependent upon agriculture. This loss often translates into more elderly residents and fewer working age people, a demographic shift that, left unchecked, can destroy a town.

Rural towns in the heartland face even greater challenges than diversifying from ag-based economies. In 2001, the Center for the Study of Rural America found that manufacturing in rural communities continued to shrink and service industries lost steam. Unlike urban areas, e-business and new technologies-especially broadband Internet access-have yet to make it to many of the nation's smaller towns.

Despite these trends, there are solid opportunities for growth that can keep small towns on the map. Andrew M. Isserman, professor of agricultural economics at the University of Illinois, says, "Much of today's rural America will be the fastest growing part of the nation in the next half century." The potential for growth in rural America, he adds, is based on the country's overall prosperity and growth; urban growth toward rural communities; the addition of almost 30 million more senior citizens; and the greater movement of immigrants into rural areas.

Grass-roots Development Developing rural America starts at home as leaders step forward to create community-based groups committed to progress. Todd Heitschmidt, president of Western State Bank in Leoti, Kan., says economic development kicked off for west-central Kansas in 1996 with the creation of Wichita County Economic Development Inc. The WCED has arranged for more than $200,000 in tax credits and negotiated more than $350,000 in revolving loan programs. It has also received more than $3 million in grants from foundations and state organizations for everything from strategic planning to technology, marketing, housing and schools.

The WCED has even reached into federal coffers at the United States Department of Agriculture to get Leoti on a growth path. In 1996, the city was approved as an Enterprise Community, making it eligible for up to $2.5 million in federal matching funds over 10 years. Enterprise Communities and Empowerment Zones are awarded USDA funds for strategic plans that show promise in revitalizing struggling areas. Residents in these designated areas, not federal officials, decide how the money will be spent.

Heitschmidt says the WCED uses private and corporate donations to leverage USDA money into grants that fund downtown business improvements, property cleanups and revolving loan programs. He adds that Leoti is the only city to receive the Enterprise Community designation for a declining population. The city's population has been shrinking since the farm crisis in the 1980s. "The work is slow and not always visible," he says, "but we are trying to bring people back."

More than money is necessary to turn the tide. In addition to funding, numerous state and regional nonprofit organizations provide technical, strategic and research capabilities to rural community groups. A state-funded program in Minnesota, the Experiment in Rural Cooperation, for example, helped citizens of Plainview identify and build a tourism niche in the arts.

Dean Harrington, chairman of the First National Bank in Plainview, Minn., says the city's community development council worked closely with the Experiment in Rural Cooperation. The state-funded partnership arranges for small communities to tap into the vast resources of the University of Minnesota to develop community-based economic initiatives in agriculture, natural resources and tourism. State financial support for individual projects has ranged from $2,500 to $63,000.

City organizers, along with a research team and other university representatives, devised a plan to open a local theatre to boost tourism. Private and corporate donations were used to convert an abandoned International Harvester Plant into a professional theatre. The theatre, now in its third season, has sold about 9,000 tickets, 80 percent of which were to people outside the community. "We have brought more than 7,000 people to our town as a destination," Harrington says.

As a member of the board of directors for the theatre, Harrington says the secondary commercial response to the theatre has been strong. Restaurants and bed and breakfasts have expanded. A production company has moved to town. And a Rural America Writers' center has opened one door down from the theatre to build on the arts theme. What began as a pursuit of artistic nature, he says, has created solid economic opportunities.

Working Toward Change

The job of putting together public and private partnerships to bring about change usually falls to members of the local community or economic development council. McCook, Neb., has had an active economic development arm since the early 1980s. McCook is a town of 8,100 residents located halfway between Denver and Lincoln, Neb.

Mark Graff, the president of McCook Economic Development Corp. and president of McCook National Bank, says the economic development organization was formed to create jobs. A full-time executive director and staffer now run the organization, which Graff says has brought more than 500 jobs to the area.

Community development corporations are community-based and governed nonprofit organizations that work on social and economic development to boost local communities. According to the National Congress for Community Economic Development, there are more than 3,600 community development corporations nationwide that address location-specific, complex challenges. Twenty-six percent serve rural communities. Different types of organizations-some grass-roots, some governmental, some for-profit, many nonprofit-are used to create very individualized strategies.

The McCook Economic Development Corp. began small with a piece of industrial property, commitments from private businesses and pledges from the city and county for start-up costs. Directors now include representatives from three of the five area banks, local business owners, the vice president of the local community college, a city representative and representatives from the gas and electrical utilities.

"We have communitywide support for our economic development activities," Graff says. "We know we can't do it alone."

McCook Economic Development Corp. is a 501(c)(4) not-for-profit partnership. Although contributions are not tax-deductible as charitable donations, businesses can write off their contributions as a business expense. The corporation receives funds from five banks, from the city and county, from the hospital and from businesses and other private contributors.

A combination of grants, low-interest loans, subsidized property and tax breaks motivate companies to invest in McCook. In exchange for the incentives, companies commit to creating jobs and spending money in the community. For example, when a large manufacturer chose to locate in McCook, Graff says, the development council provided financial incentives, such as subsidizing the cost of commercial property, in return for a commitment to create at least 200 full-time jobs.

Partnership Power

Often multiple alliances are necessary to stimulate local and regional growth. David Smith, president of the State Bank of jasper, Minn., has watched his hometown's economy struggle for years. The city of jasper most recently lost its local hardware store and elementary school, leaving little more than a grocer, convenience store, car repair shop and bank in the town of 600 people.

Smith works with a number of groups-public agencies, private firms and concerned citizens-to improve infrastructure and expand business in Jasper. As co-chairman of a regional healthcare alliance, he brings together county commissioners, city officials and local business owners from nine counties to build a purchasing alliance to negotiate with insurance carriers. The coalition aims to increase the number of insured in the area and keep healthcare providers in the region intact, a chronic issue in rural areas.

As mayor of Jasper, Smith also recently created an economic development committee for Pipestone County to create business opportunities for the region. The committee is working with the University of Minnesota's extension service to complete a survey of more than 60 businesses to identify options to build business activity. The committee also antes up $4,000 a year to a private venture capital group to get leads on 24 companies looking to relocate. So far, one new company creating 20 new jobs-moved into the county with a package of low-interest loans and tax increment financing through the program.

Ultimately, though, it is the residents of a small town who will make or break economic development efforts. "People have to want to invest in an area, place or business to make things grow," explains Charles Moyer, chairman of the First National Bank and Trust in Phillipsburg, Kan. Moyer is also a former member of the President's Council on Rural America under the Clinton administration.

Bob Gustafson, executive officer of the First National Bank of Valentine, Neb., says community foundations provide residents with a vehicle to reinvest in their towns. These organizations put homegrown funds to work locally. They help fund the arts, historical preservation, community betterment initiatives, scholarships and other communitybased projects that do not necessarily benefit from tax dollars.

As vice president of Panhandle Banks in Clarinda, Iowa, Michael Thompson has been passionate about promoting the Clarinda Foundation, a community-based, nonprofit organization that can receive bequests or donations to make grants to local charities and public causes. As a 501(c)(3), all donations and bequests are tax-exempt.

The foundation kicked off in the early 1990s with a challenge grant of $25,000 that, within months, was doubled by local residents. An additional $2 million was soon raised from more than 1,000 local donors for a community center. The facility contains a senior center, meeting room, racquetball court, gym, indoor walking track, pool and exercise rooms.

"Our community center has made Clarinda a better place to live," Thompson says. The Clarinda Foundation now has more than $1 million in assets. Earnings each year in several endowment funds are poured back into the community.

Community foundations represent one of the fastest growing segments of North American philanthropy. According to a 2000 survey by the Columbus Foundation that tracked 664 community foundations, respondents received more than $4 billion in 2000 and gave out in grants almost $2.2 billion. Total assets surpassed $31 billion.

As rural America continues to gray and as baby boomers consider their legacies, Thompson says a community foundation gives people a creditable, tax-advantaged way to give back to their towns. Community foundations also represent a significant, if indirect, method of economic development. He explains that as the Clarinda Foundation improves local amenities, like parks, schools and the library, the town becomes more attractive for businesses.

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Alliances at Work

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North Dakota has been the hardest hit state in the union by population migration. Two Rural Economic Area Partnership Zones have been designated in North Dakota. Approved under the Clinton administration, Terry Zeltinger, president of United Community Bank of North Dakota in Burlington, N.D., says the zone his bank operates in receives federal assistance each year. The money is used to collaborate on community projects, establish a venture capital fund, design tax incentives to expand business and provide for technology upgrades that allow people to operate high-tech businesses from home.

"It is a neighborhood concept where every community in the zone is a neighbor community," he says, The citizen-- led effort requires that counties and communities plan

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together instead of competing to determine the economic direction for the region.

As a result of being designated a REAP zone. communities in these areas receive special consideration for funding through U.S. Housing and Urban Development, U.S. Department of Agriculture and other federal agencies. For example, $2 million has flowed from HUD into both zones during the last four years for housing, grants and revolving loan programs and to hire full-time economic development staff.

"This is a pilot program," Zeltinger says. Since the two North Dakota zones were established in 1995, two more REAP zones have been designated in New York and one in Vermont. "As long as Congress makes money available, funding toward the program will continue."

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Kristine Newkirk is Independent Banker's senior staff writer.