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Tackling the Trifecta

Rural towns are struggling with three interconnected challenges: the child care crisis, a worker shortage and a lack of affordable housing. Here’s how Central Minnesota communities are pursuing innovative solutions to these pressing issues.

By Gene Rebeck | Illustration by Chris McAllister | Photography by Michael Schoenecker 

Nicole Kittock knows how tough it is to find someone to take care of your children. 

Five years ago, the difficulties that Kittock, then a surgical technician, and her husband faced finding a child care slot inspired her to open an in-home business in Howard Lake, her hometown. She now has space for 12 kids, and she dearly wishes she had more.

“I get so many phone calls per week from parents asking if I have room,” Kittock said. “It’s heartbreaking that I have to say, ‘I’m sorry, I don’t.’ It crushes me because these parents are trying so hard. They shouldn’t have the stress of finding child care.” Without child care, one of those parents might need to quit a job. And that, of course, can mean a loss of needed income.

Across Minnesota, demand for child care far outstrips supply. It’s true for the state’s larger, more urban regions, and it’s especially true with unique challenges for rural communities like Howard Lake, a city of about 2,000 residents in Wright County.

“Employers cite lack of child care as a limiting factor to future growth, attracting and retaining employees,” said Howard Lake city administrator Nick Haggenmiller. But Howard Lake doesn’t have the population to attract more child care providers. “We recognize and quickly admit we’re small and have limited resources,” he added.

Kittock’s dream is to own and operate a larger child care center that would have more space—and be able to grow. That’s not something she can develop and fund on her own. But Howard Lake, which knows how crucial child care is to its economy, is looking for ways to help. This year, a group of 14 community leaders and business owners—Kittock among them—banded together to find a new approach.

Childcare_Trifecta.jpgHELP FOR FAMILIES: Nicole Kittock and Howard Lake city administrator Nick Haggenmiller are banding with community leaders to increase child care access.

A Caring Approach

According to Minneapolis-based First Children’s Finance, a nonprofit that provides funding, business financing, training and other support for providers, Central Minnesota has a deficit of 14,332 child care slots. Howard Lake has a shortfall of 44 openings; at the high end, the Greater St. Cloud area has a shortfall of 1,273.

So why aren’t providers springing up to meet the demand? “The current child care market is just very difficult to do profitably,” said Nate Bean, a graduate student at the University of Minnesota Morris’s Center for Small Towns. Bean is drafting a report on the challenges small communities face in attracting child care providers. Based on his research and surveys, Bean discovered that sustaining a child care center “is tough in a community of less than 10,000 people.”

Some challenges are legislative. Several state regulations established in the last few years to bring Minnesota into compliance with federal law, including stricter inspections of facilities, have many in the child care industry asking for relief. Some even blame those regulations for the decline in the number of child care businesses in the state. According to a 2017 Minnesota Legislature task force report, Greater Minnesota lost more than 16,000 providers between 2006 and 2015.

One of the biggest challenges is low pay, said Landon McKay, business development specialist with First Children’s Finance. The average child care employee in Minnesota earns about $8 an hour. That makes it difficult to compete with other employers, such as fast food restaurants, which offer up to $14 an hour.

This year, First Children’s Finance launched an initiative to help providers and communities develop innovative solutions to this challenge. Its Rural Child Care Innovation Program works with local leaders to define what’s happening in their community, bring key stakeholders to the table and shape a solution, McKay said.

Howard Lake is one of these communities, joining a cohort that includes Virginia, Red Wing and Hallock. Howard Lake was chosen because the city has “a history of coming together to solve community-wide problems,” said McKay, whose work focuses on Central Minnesota. First Children’s Finance expects its work in Howard Lake will last 18 to 24 months.

First Children’s Finance is partnering with the Initiative Foundation and other regional nonprofits to shape the Rural Child Care Innovation Program. This past June, the Initiative Foundation hosted a child care summit in Little Falls, bringing together about 100 business, economic development and other Central Minnesota leaders. “Based on the attendance, the questions that were asked and the stories that were shared, it’s clear that identifying solutions to the child care crisis is top-of-mind throughout the region,” the Foundation’s Hickman said.

As Howard Lake and First Children’s Finance look to craft new approaches to meet child care demand, they can draw on innovative models that are being used elsewhere. “We’re finding that many school districts are beginning to embrace their role as educators, all the way from preschool to grade 12,” McKay said. “While the old model was K through 12, school districts increasingly are saying, ‘Wait a minute. If we don’t step in early enough in the process, we’re going to end up with kids who aren’t prepared for school.” Some districts have started preschool programs, including care, within their facilities. 

Another possible model: A child care center or family-based operation working onsite in partnership with a local business. “The child care workers can earn a higher wage and get benefits,” McKay said.

Some rural employers actually are putting a child care provider on staff. They then reserve space for their own employees’ children. The provider also can receive the employer’s benefit package.

Yet another possible approach for communities like Howard Lake is “the pod model,” where multiple family providers are housed in one building, Bean said. “That allows the county or businesses to subsidize the rent and perhaps secure some spots.” This approach can give family providers “a much more realistic way to make a living because they’re not paying for rent.”

Meanwhile, Little Falls is exploring the addition of a child care center alongside the school district building, a move that would incorporate child care in the district’s cradle-to-career approach to student success, said Cheryal Lee Hills, executive director of the Region Five Development Commission. Region Five is a Staples-based economic development organization that covers Cass, Crow Wing, Morrison, Wadena and Todd counties. The project, which has been put out to bid, could be funded in part through the school bonding plan recently passed by Little Falls voters.

The proposal has experienced some pushback. “Many people don’t believe that public dollars should be used for what has traditionally been a private-sector business,” Hills said. How to counter such resistance? By emphasizing workforce needs. “Business leaders are coming to us and saying that without child care, they can’t attract workers,” Hills said. “And that has a negative impact on our tax base in terms of housing and businesses being able to expand.” 

Given businesses’ need for employees, McKay suggests we view child care as a community asset—“something that’s critical and absolutely essential to the existence of the entire community.” Similarly, Bean said that child care should be viewed as an amenity like public education rather than a purely for-profit business enterprise.

Housing_Trifecta.jpgAT HOME: Kirsten Kennedy meets with a resident of an affordable housing unit in North Branch.

A Place to Live

In many respects, housing is similar to child care: The need is huge. And so are the challenges. In an April report on the rural workforce housing shortage in Minnesota, the St. Peter-based Center for Rural Policy and Development cites several challenges for the workforce housing shortage. One is a lack of “churn” among older rural households. Since older residents tend to stay in their homes longer, fewer single-family homes are available for younger workers. 

But there are sparks of innovation across the region, including an initiative that’s showing promise in Chisago County, where they’ve undertaken a housing study with a focus on meeting workforce needs.

“We had heard from many of the cities—specifically North Branch and the Chisago Lakes area—about the challenge of finding workers,” said Cathy Bennett, a commissioner for the Chisago County housing and economic development authority.

This past summer, the Chisago housing and economic development authority published its densely detailed study. It “validated what some of the cities already knew: that some employers are concerned about housing for their labor force and for their ability to expand,” Bennett noted.

It also built awareness among county employers, said Nancy Hoffman, executive director for the Chisago County HRA-EDA. “A lot of their employees come from Wisconsin or perhaps north of us, like Pine City.” The study helped them understand that if there were more affordable housing options, including apartments, “they might be able to attract more employees.” 

Hoffman recently spoken to businesses in her region that would like to expand but are uncertain if they can—or should—due to the worker shortage. The county’s unemployment rate as of May was 2.7 percent. Hoffman also noted that metro jobs tend to pay more, which means more people are willing to travel from the county for work.

“We have so many people commuting out of the area—about 85 percent,” Hoffman said. The city of Wyoming, population 7,856, serves as a strong example. “There are only 342 people working in Wyoming who live in the community,” she said. “That means there are about 4,000 who commute out and almost 3,000 who commute in.”

Chisago County has abundant single-family housing but little multi-family housing. Both are in demand. During the recession, single-family housing in Chisago County was hit hard with foreclosures. “Now they’re all bought up,” Hoffman said.

While demand is strong, developers aren’t able to create supply. Hoffman recently asked a developer working on a project in Wyoming to consider some of her county’s other communities. “He says he just can’t make it work because what he can get for rent even just as far away as Forest Lake is $100 or $200 more a month than what he can get for rent here,” she said. With construction costs being equal, coupled with higher labor costs, it just makes sense to develop housing projects where the return on investment is higher.

The conclusion: Affordable housing is not often profitable. But it’s something that businesses and communities need. “People want to live in the same community in which they work,” said Margaret Kaplan, former community development director for the Minnesota Housing Finance Agency (MHFA), a state agency whose funding and other programs help communities attract the development of quality, affordable housing. A town where people commute in or out “doesn’t help your tax base, and it doesn’t help the cohesiveness of your community,” Kaplan added.

With its housing study in hand, the Chisago County HRA-EDA is now compiling a development workbook, which will help to identify areas for different types of housing. “The community is helping us identify opportunity sites for different developments,” said Hoffman, whose organization can also use the study to attract potential affordable housing developers. 

There’s evidence that this active push for new housing is bearing fruit. During the past year, North Branch has moved forward on two multi-family developments. One is a 20-apartment building proposed by the Central Minnesota Housing Partnership, a St. Cloud-based nonprofit. The other, driven by a private developer, will consist of 48 cottage-like units near the city’s Interstate Business Park. Both projects are tapping state and federal financing sources for affordable housing, and they’re expected to break ground in 2019. 

North Branch Mayor Kirsten Kennedy said more trickle-down development is occurring. “We now have a developer that wants to come in and do a 500-unit project that will include single family and townhomes and senior housing and two large apartment complexes.” She acknowledged that “there are some citizens who will never support” affordable housing, particularly when it requires some kind of subsidy, such as tax-increment financing. “The way you get them on board is by proving to them that it is actually good for our community to have places where workers can live and can take jobs that our businesses so desperately need to fill.”

Rural employers also could help develop employee residences that are close to their facilities. Bennett noted that Sven Comfort Shoes, which manufactures clogs at its headquarters in Chisago City, “would like to identify ways it could partner with a developer to build housing on open land next to their facility.” Bennett also suggested that communities familiarize themselves with government funding resources for housing, such as the MHFA.

Felling_Trifecta.jpgWORKING OPPORTUNITIES: President and CEO Brenda Jennissen (right) and co-owner and vice president of administration Bonnie Radjenovich.

Building the Future
With a state unemployment rate of 3.1 percent as of June—the national number was 3.9 percent—businesses all across Minnesota are clamoring for workers. Indeed, the number of job vacancies in 2017 exceeded the number of people looking for work. Statewide employment totaled more than 2.96 million jobs, the most ever.

Making the hunt for workers even more arduous for Central Minnesota employers: competition from the nearby Twin Cities metropolitan area, where jobs are plentiful and wages are higher. Many Central Minnesotans are willing to commute or relocate for the increased earnings potential.

Sauk Centre-based Felling Trailers, Inc., is one of the many Central Minnesota companies needing more workers to meet burgeoning demand. The industries that purchase its specialty trailers—agriculture and energy production, in particular—are booming. As of late June, the company had 275 employees—which includes 55 at its second facility in Litchfield. But with Stearns County posting a 2.9 percent unemployment rate, new hires are extremely hard to find. 

“It gets to where you’re competing for employees with more attractive packages and those sorts of things,” said Brenda Jennissen, Felling Trailers president and CEO. “You just don’t see people stay in a job for 20 or 30 years like you used to.” 

Competing signing bonuses, more common in the metro area, also present challenges. So Jennissen and her company have been pursuing new ways to stock its pool of potential employees. “What we’re trying to do is attract more people to the trades in general,” Jennissen said of her community-oriented approach. “Not just welding, but working with one’s hands. And we’re really promoting that at a younger age.” Felling Trailers reaches out to the local schools, offering tours of its manufacturing facility. “We want to show kids what’s happening in their backyards,” Jennissen said. In addition to welding, students are made aware of other manufacturing specialties such as finishing and wiring, as well as back-office functions like accounting and purchasing.

Four times a year, Felling Trailers offers a free after-school welding camp to boys and girls ages 12 through 18. Felling hosts the camp at its Sauk Centre welding facility; one of the company’s certified welding inspectors serves as instructor. By the end of the one-day camp, the students finish their own welding project.

For the past two years, Felling Trailers also has partnered with Sauk Centre Secondary School, offering a class for high school seniors in its welding lab. The class is also taught by a certified welding inspector, along with one of the high school’s industrial technology teachers. During the second half of the school year, students are “out on the production floor with our team members, who serve as something like mentors,” Jennissen said. Felling Trailers will be offering the class again this fall. 

Jennissen says this hard work is paying off. From among this year’s graduates in Sauk Centre and nearby Melrose, “there was a significant increase in those who wanted to pursue welding,” she said. Additionally, two of the students who completed the class started work with the company after graduation. All told, Jennissen added, “we definitely see a positive feedback from our attempts.”

Felling Trailers’ programs represent one community-driven approach to workforce development. Meanwhile, the Initiative Foundation has been conducting an ongoing series of “Talent Advantage” workshops with partners including the Brainerd Lakes Chamber, Central Lakes College, Region Five Development Commission and Sourcewell, formerly known as the National Joint Powers Alliance. The goal of this regional approach to attract and retain talent is to remove barriers and expand the pool of available workers. 

One obvious path is to tap into hidden talent pools, including immigrants, the formerly incarcerated and those with disabilities. “We can’t afford to have people with skills left out of the marketplace,” said the Foundation’s Don Hickman. “There are opportunities for many organizations in this region to provide meaningful work that will lead to productivity and growth. It just takes an accommodating mindset and a willingness to learn, stretch and grow.”

It Takes a Village 

The upshot is that leaders of all kinds in smaller communities need to take an active role in addressing the interconnected challenges of child care, housing and workforce development. 

Case in point: Howard Lake. By bringing together a cross-section of local stakeholders, community leaders are providing residents—and the businesses that employ them—with the child care services they so urgently need. And with solutions in play to address child care needs, more workers are freed up to fill available jobs.

“In all of my research [in rural Minnesota child care], that’s one of the patterns I’ve seen,” Bean said. With a dedicated team of volunteers who can collaborate and make creative use of community resources, realistic models can be shaped.

Smaller communities are realizing it takes a village to create a child care center. And the same holds for affordable housing and workforce development. “The state demographer tells us that there will be more jobs than workers in our state for at least the next 12 years, if not longer,” said the Foundation’s Don Hickman. “Communities that can implement an effective response have the opportunity to retain or attract young talent and position their economy for continued growth despite the tight labor market.”

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