Economic Development Resource Profile

Hutchinson Economic Development Authority July 2015

Table of Contents

Executive Summary

1

Overview of Hutchinson

2

Area Economy

3

Major Employers by Industry

5

Area Demographics & Workforce

7

Technical Training Resources

8

Transportation Access

8

Shovel-Ready Industrial Park

9

Available Buildings

10

Water & Wastewater Utilities

11

Reliable Power

12

Corporate Income Tax

13

Local Property Tax

13

Incentives & Financial Assistance

14

A Hutchinson Partnership

15

Contact 16

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Executive Summary

Category

Metrics Land

47 acres

69 ¢ psf, before incentives Minnesota certified shovel-ready

Industrial Park Infrastructure

6” water, 8” sanitary sewer

Minimum size available on all lots Building Space

237,000 sf industrial building

for sale or lease (built 1992 / 1998) Unemployment Rate

4.7%

(April, 2015) Customized Training

Ridgewater College

www.ridgewater.edu Power

RP3

CAIDI = 23.148 / SAIDI = 6.278 / SAIFI = 0.2662 Top 5% nationally for reliable service

Water

6.5 million gallons per day capacity Reverse osmosis & bio-filtration water treatment

Wastewater

3.67 million gallons per day capacity

Broadband Internet

1 Gbps +

upload and download speeds Corporate Income Tax

9.8% flat rate

Substantial tax deductions result in a significantly lower effective tax rate

More Detailed Information

www.hutchinsoneda.com

Contact

Miles R. Seppelt

Economic Development Director

320.234.4223 mseppelt@ci.hutchinson.mn.us

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Overview of Hutchinson Hutchinson is the center for high-technology precision manufacturing in Minnesota. World class companies such as Hutchinson Technology Inc., 3M, NuCrane Mfg., Hutchinson Manufacturing, Goebel Fixture Company, Warrior Mfg. and NuCrane Manufacturing provide ample proof that Hutchinson is a “technology town” and a great place to do business. In addition to being a center for precision manufacturing, Hutchinson serves as the regional hub for work, education, shopping and entertainment – accounting for about 75% of retail sales and 73% of population growth in McLeod County over the past two decades. Location and a high-technology-based economy are the primary catalysts that have kept Hutchinson growing at a rate twice as fast as the State of Minnesota as a whole.

Hutchinson can offer companies the rare combination of big-city amenities and small-town charm. Excellent shopping opportunities, a wide variety of restaurants and a multitude of entertainment options provide residents of Hutchinson with all the amenities of much larger cities without the crime, traffic and pollution often found in metro areas. At the same time, big-city entertainment opportunities such professional sports, the theater, concerts and museums are just an hour away in the Twin Cities.

With more than 25 parks and 375 acres of playgrounds, Hutchinson has one of the largest park systems in the State of Minnesota. In addition, the 63-mile Luce Line Trail provides an unrivaled opportunity for hiking, horseback riding, snowmobiling and cross-country skiing. Because of Hutchinson’s high quality of life, companies located in our community can offer prospective employees a lot more than just salary & benefits.

Library Square in downtown Hutchinson

The scenic Crow River runs through downtown Hutchinson.

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Area Economy Hutchinson, Minnesota’s Manufacturing City, is home to an industry cluster of precision high-tech manufacturers. Local companies are heavily engaged in both national and international trade – producing everything from components for offshore oil drilling, nuclear power plants & computer hard-drives to ingredients for the food in your pantry and the office supplies found on your desk. If you shop at a high-end department store in New York City chances are those store fixtures came from Hutchinson, Minnesota. Hutchinson companies manufacture products in a huge variety of economic sectors: defense, energy, food, computers, agriculture, medical devices, store fixtures, office supplies – and more! When one considers how many other companies exist between the Gulf of Mexico, or New York City and central Minnesota, and Hutchinson companies still get that work – that says something: our local companies are world-class. Hutchinson companies and their hard working, high-skill workers have the knowledge and experience needed to successfully deliver projects on a global basis.

Department store fixtures & components for offshore oil drilling – all made in Hutchinson, Minnesota.

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An economic base analysis of the community provides further validation that Hutchinson truly is Minnesota’s Manufacturing City. Comparing local employment by economic sector with that of nation as a whole, Hutchinson shows itself to be dramatically above the national average with nearly 3.5 times as much manufacturing employment as is typically found in a mid-size city. Other areas of local economic strength include utilities, as Hutchinson has its own municipal power utility, and retail trade & health care – reflecting the fact that Hutchinson is a regional center for shopping, health care and social assistance. Location Quotients by economic sector are given in in Table 1, below.

Table 1 – Location Quotients for Hutchinson, Minnesota, 2014

NAICS Economic Sector LQ

31 Manufacturing 3.48

22 Utilities 1.57

42 Wholesale Trade 0.76

44 Retail Trade 1.45

48 Transportation and Warehousing 0.29

51 Information 0.52

52 Finance and Insurance 0.48

53 Real Estate and Rental and Leasing 0.4

54 Professional, Scientific, and Technical Services 0

56 Administrative and Support and Waste Management and Remediation Services 0

61 Educational Services 0.45

62 Health Care and Social Assistance 1.43

71 Arts, Entertainment, and Recreation 0.44

72 Accommodation and Food Services 0.86

81 Other Services (except Public Administration) 0.76 Source: Minnesota Department of Employment & Economic Development QCEW Data, Hutchinson Economic Development Authority, 2015

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Another reason Hutchinson became known as Minnesota’s Manufacturing City is because nearly one-third of the local workforce is employed in the manufacturing sector – roughly triple the average across the United States. As a result, Hutchinson has a significantly greater number of engineers, scientists and highly-skilled technical workforce than is typically found in a city this size. Figure 1, below, compares non-manufacturing and manufacturing employment in the United States, Minnesota and Hutchinson.

Figure 1 – Percentage of Workforce Employed in Manufacturing

Source: Minnesota Department of Employment & Economic Development LAUS Data, Hutchinson Economic Development Authority, 2015 Major Employers by Industry Hutchinson’s economy is dominated by two major employers: 3M, which manufactures a variety of adhesives and tapes locally and Hutchinson Technology, Inc. which manufactures suspension assemblies for computer disk drives. Other significant employers include Hutchinson Manufacturing, which is heavily involved in the energy and defense sectors, Ag Systems, a manufacturer of chemical and fertilizer application equipment, and Customer Elation, and in-bound call center and answering service. Table 2, on the following page, summarizes Hutchinson’s major private employers.

Largest 3M plant in the world: Hutchinson, Minnesota

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Table 2 – Major Hutchinson Employers, 2015

Company

Products

NAICS

Emp.

3M

Adhesive tape, office supplies

325520

1,650

Hutchinson Technology, Inc.

Computer hard drive

suspension assemblies

334118

855

Customer Elation, Inc.

Call center services

n/a

210

Hutchinson Manufacturing

Fabricated metal products for

energy & defense sectors

332999

180

Ag Systems, Inc.

Fertilizer & chemical

Application farm equipment

333111

115

Goebel Fixture Company

Wooden store fixtures

337212, 337215

90

Warrior Manufacturing

Structural support equipment

332312

70

Impressions, Inc.

Commercial printing

323100

60

Midwest Industrial Tool Grinding, Inc.

Industrial tool grinding

333517

56

Ohly

Yeast products

311999

50

NuCrane Manufacturing

Nuclear power plant cranes

333923

40

RD Machine

General machining

332710

30

3D C-N-C

Precision tooling

333500

28

Pride Solutions

Farm equipment accessories

333111, 326199

24

Stearnswood

Transport packaging

321920

23

Source: Hutchinson Economic Development Authority, 2015

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8.0%

33.3%

37.8%

20.9%

Figure 2 - Local Educational Attainment, 2013

Less than High School H.S. Diploma / GED Some college or A.A. B.A. or higher

Source: U. S. Census, 2010

Table 3 – Population Breakdown by Age Group

Area Demographics & Workforce Hutchinson, with a population of 14,178 makes up just more than 39% of McLeod County’s overall population of 35,918. 51.16% of the population in the city is female while 48.84% is male. 95.4% of the population is white with 3.8% being Hispanic or Latino and the remainder being Asian, African-American and / or with multiple backgrounds. According to 2010 Census data, Hutchinson has 6,393 housing units and a total of 5,950 households, of which nearly 30% have children age 18 or younger. Average household size is 2.34. Median household income in Hutchinson is $49,209 while in McLeod County it is $55,170, compared to $59,836 for Minnesota as a whole. In 2014 Hutchinson had a total workforce of 9,848 while McLeod County had a total workforce of 16,753. Hutchinson’s workforce participation rate is just over 66%, while the corresponding rate for McLeod County is approximately 57%.

Age Group

Number

Percent

0 – 4

961

6.78%

5 – 17

2,666

18.8%

18 – 64

8,352

58.91%

65 +

2,199

15.51%

TOTALS

14,178

100%

Source: American Community Survey, 2013

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Technical Training Resources In addition to providing customized training for local companies, Hutchinson’s own Ridgewater College offers a variety of advanced manufacturing programs to provide companies with the highly-skilled technical workforce they need. Ridgewater College offers programs in: Automated & Robotics System

Technology Computer Aided Drafting &

Design Machine Tool Technology Nondestructive Testing Welding

Ridgewater’s Non-Destructive Training (NDT) program is recognized as one of the best in the entire nation by the American Society for Nondestructive Testing (ASNT).

Transportation Access Located 1-hour west of the Twin Cities in south-central Minnesota, Hutchinson is served by State Highways 7, 15 and 22. Four-lane access is 15 miles away via State Highway 22 to Minnesota 212, which connects to I-494 on the southwest corner of the Twin Cities of Minneapolis / St. Paul.

Hutchinson and McLeod County shown in relation to Minneapolis / St. Paul

Advanced manufacturing programs at Hutchinson’s own Ridgewater College

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Shovel-Ready Industrial Park

With 46.89 acres available, large rectangular lots and a “global” storm water drainage system, Hutchinson’s newly built “shovel-ready” industrial park is ready for business! Located on the east edge of Hutchinson and just 1 minute from State Highways 7, 15 and 22, companies in the park enjoy easy access to the Twin Cities, St. Cloud, New Ulm, Mankato, Willmar and the world beyond. I-94 access is 50 miles north and I-694 access is 50 miles east of the industrial park. 4-lane Hwy 212 is just 15 miles away.

Table 4 – Industrial Park Specifications

Price 69 ¢ psf, ($30,000 / ac.), before incentives Assessments None. Acres available 46.89 Zoning I-1, “Light Industrial.” Storm water Area system, no additional ponding required Water service 6” to 12,”depending on location Sanitary Sewer service 8” to 10,” depending on location Road 32’ wide, 10-ton capacity Internet T-3/DS-3 & OC-3 Internet access is available throughout

To Hwy 15 (1/2 mile) To Hwys 7 & 22 (1/4 mile)

Hutchinson’s new 47-acre industrial park, constructed in 2010

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Available Buildings Hutchinson has a number of buildings available for manufacturing, data centers, call centers and back office operations. Foremost among these is the HTI Manufacturing Facility, which Hutchinson Technology has for sale or lease (they moved some manufacturing to Thailand to better serve Asian markets). Built in 1992 and expanded in 1998, the 237,594 square foot facility is a world-class manufacturing / office building. With 8 megawatts of power on site, 5” reinforced concrete floors and a ceiling height of 29’8” in the manufacturing bay, the building can accommodate virtually any manufacturing activity. The 36-acre site features 1,100 parking stalls and has direct access to State Highway 7. Summary information on available buildings can be found in Table 5, on the following page.

The 237,594 square foot HTI manufacturing facility is for sale or lease

At 23,000 square feet, the former Office Max building could make a terrific data center or back office operation

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Hutchinson’s new water treatment plant, built 2007

Table 5 – Available Buildings

Building

Size

Lot

Built

Zoning

HTI Manufacturing

237,594 sf

36 acres

1992 & 1998

Light Industrial

Office Max

23,000 sf

1.5 acres

1999

Commercial

Cub Foods

60,000 sf

4.1 acres

1999

Commercial

Econo Foods

42,071 sf

3.23 acres

1992

Commercial

Water & Wastewater Utilities Unlike many other cities, Hutchinson welcomes large water users and has abundant water treatment capacity! Hutchinson can boast of a new state-of-the-art water treatment facility as well as a newly upgraded wastewater treatment plant. Completed in 2007, the City’s new water treatment facility uses a combination of reverse osmosis (RO) and biological filtration. Along with its 1.5 million gallon storage tank, the facility is capable of producing up to 6.5 million gallons of water per day, ready to meet the community’s needs well into the future. Hutchinson’s amazing water quality greatly reduces any additional pre-treatment needs for local industries.

The City of Hutchinson can also boast of abundant waste water treatment capacity.

In 2008 a major expansion of the city’s wastewater treatment facility was completed to accommodate community growth and industrial expansion. Designed to treat an average 3.67 million gallons per day (mgd) of the facility will meet the projected wastewater treatment needs of the city through the year 2028. The treatment facility has several features which allow it to meet Hutchinson’s specific needs for variable flows and operational flexibility. Biological and Membrane Bioreactor (MBR) processes are used to remove impurities from the wastewater and achieve the required level of treatment.

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Reliable Power

Municipally owned Hutchinson Utilities, with a reliability rating in the top 5 % nationally, provides companies with extremely reliable power and some of the very lowest gas & electric rates in the State of Minnesota. Hutchinson’s high-technology manufacturers demand power that is extremely reliable, i.e. free from power surges, spikes or outages, due to their precision manufacturing processes. In response, Hutchinson Utilities has become one of the most reliable power providers in the entire nation. For companies engaged in precision manufacturing processes, this reliability is a major cost saver. To see how Hutchinson Utilities compares, please refer to the table below:

Table 6 – Power Reliability Data Key Terms

CAIDI The average length of power interruption, weighted by the number of customers affected, during a specific time period.

SAIDI The average length of power interruption for customers during a specified time period.

CAIDI SAIDI SAIFI Year Hutchinson 23.1482 6.2786 0.2662 2014 Hutchinson 25.2207 11.0801 0.4493 2013

Xcel Energy

Metro East 97.75 81.28 0.83 2013 Metro West 105 98.71 0.94 2013 Northwest 102.86 95.9 0.93 2013 Southeast 145.1 108.8 .75 2013

Interstate Power

Winnebago 66.19 56.55 0.85 2007 Albert Lea 80.18 77.39 0.97 2007

Otter Tail Power

Bemidji 38.26 48.35 1.25 2007 Crookston 51.46 79.76 1.55 2007

Fergus Falls 63.55 85.79 1.35 2007 Morris 41.08 63.68 1.55 2007

Minnesota Power 102.25 122.7 1.2 2007

SAIFI Average number of times a customer experiences a power interruption, during a specified time period.

In all cases, a lower figure is better, as they indicate shorter and fewer outages. As you can see, Hutchinson Utilities provides the most reliable power available, by a very wide margin!

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Corporate Income Tax Minnesota imposes a flat corporate franchise tax of 9.8% on corporation income. In addition, corporations with sales, property and payroll in Minnesota exceeding a combined amount of $500,000 pay a small alternative minimum tax ranging from $220 to $9,650. To illustrate: If a Minnesota corporation had income of $1,000,000 their corporation franchise tax liability would be $98,000 (9.8% of $1,000,000). If they had property, payroll and sales of $1 million combined, they would also pay an alternative minimum tax of $300. Minnesota’s effective corporate tax rate can be significantly lower when all deductions and credits are accounted for. Significant tax deductions / credits include: Purchases of capital equipment are exempt from state sales tax.

Research & development tax credit – R & D expenses incurred solely In Minnesota

result in a 10% credit for the first $2 million and 2.5% above that amount.

Local Property Tax Local property taxes in Minnesota depend on three variables: Estimated market value of the property (determined by the tax assessor) Property tax classification rate (set by the Legislature)

o 1.5% on the first $500,000 of estimated market value o 2% on the value above $500,000

The combined local property tax rate (determined by local taxing jurisdictions) o 202.215% for the year 2015, in Hutchinson

Step 1: Determine the tax capacity of your property. Multiply the assessor’s “market value” of your property by the appropriate “property tax classification rate.” This gives you the “tax capacity” of the property. Step 2: Determine the amount of your local property tax. Multiply the tax capacity by the local “property tax rate.” This gives your property tax amount. Example Suppose your Hutchinson business has an estimated market value of $500,000. Step 1: Determine the tax capacity of your property. (The first $150,000 of value multiplied by the classification rate of 1.5% plus the value remaining over $150,000 [in this case $350,000] multiplied by the classification rate of 2% equals tax capacity). ($150,000 x .015) + ($350,000 x .02) = $9,250

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Step 2: Determine the amount of your local property tax. (Multiply your tax capacity of $9,250 by the combined property tax rate of 2.02215 [this is 202.215% divided by 100 to get a decimal] equals property tax). $9,250 x 2.02215 = $18,704.89 The estimated property tax on your $500,000 business would then be $18,704.89 for the year.

Incentives & Financial Assistance Hutchinson can bring a number of financial resources to bear to help companies grow and expand. If the company qualifies, assistance could include the following: Minnesota Job Creation Fund The Job Creation Fund can provide up to $1 million for companies meeting certain job creation and capital investment targets. Tax Increment Financing (TIF) / Tax Abatement Tax Increment Financing and /or Tax Abatement could be used to help defray the costs of land acquisition and / or site improvements. The company would pay the up-front cost for land or improvements and then be reimbursed over the course of eight years, plus interest. Minnesota Investment Fund (MIF) The Minnesota Investment Fund could provide a low-interest loan of up to $500,000. The program provides funds on a formula of $24,000 per job created within a two year period, assuming $14 - $15 / hour jobs. If, for example, the company were to commit to creating 21 jobs within two years of the plant opening, then $500,000 could be borrowed. The interest rate could potentially be as low as 0%. Economic Development Loan Fund The city’s own Economic Development Loan Fund could provide low interest loans of up to $150,000. Southwest Initiative Foundation (SWIF) SWIF has a revolving loan fund program that could provide up to $400,000 of financing at a rate of approximately 6%. Approval would be contingent upon the SWIF Board of Directors. Mid-Minnesota Development Commission (MMDC) The MMDC has a revolving loan program that could provide up to $100,000 at an interest rate of below Prime. Approval would be contingent upon the MMDC Board of Directors.

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A Hutchinson Partnership In summary, Hutchinson has a lot to offer: Proximity & easy access to the Twin Cities – Being just an hour away on Hwy 7 or Hwy

212, company staff could attend a meeting in the Twin Cities and still be back at the Hutchinson office that same day.

Industrial Park Space – Hutchinson’s Energy Park provides nearly 47 acres of prime

“shovel ready” industrial property that is ready for development today! Building Space – Buildings ranging from 23,000 to 237,594 square feet are available now.

Financing – A variety of competitive tax incentives and other financial assistance is

available for qualifying companies. Workforce – With over 128,000 people living within a 30-mile radius of the community,

Hutchinson can provide your company with a motivated, skilled labor force that has an outstanding work ethic.

Training – Hutchinson is home to Ridgewater College, which provides top-level customized

training in a variety of technical disciplines. Technology – Hutchinson is home to some of the most technologically advanced companies

in the world: Hutchinson Technology Inc. (HTI) and 3M. Hutchinson is a technology town! Quality of Life – Hutchinson offers all the amenities of the big city with all the charm of a

small town. Compared to the metro area, the cost of living is significantly less, crime rates are much lower and congestion is non-existent – no matter where you live in Hutchinson, you are just 5 minutes from work. Abundant recreational opportunities and a top-notch educational system round out the package.

Award Winning Economic Development – The Hutchinson EDA won the 2010 Business

Recruitment Award and the 2013 Economic Development Marketing Award from the Economic Development Association of Minnesota. We’ll bring that same “award winning” effort and expertise to your project too!

The Hutchinson Economic Development Authority strives to be an active partner with our local companies, not just during the recruitment and implementation phases of the project, but on a permanent, ongoing basis. The Hutchinson EDA will be the “go to” organization to get you to the right people, coordinate the appropriate meetings, facilitate required services, provide leadership on your behalf and act as your company’s advocate not just during the expansion – but for as long as your company is a part of the local economy. There’s a reason why world-class companies such as 3M, NuCrane Manufacturing, Warrior Manufacturing & Hutchinson Technology call Hutchinson home – because in Hutchinson, Minnesota’s Manufacturing City, our business really is business. We’d like to add your business to that group of world-class companies that call Hutchinson “home.”

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Contact If you have any questions or need additional information, contact Hutchinson’s Economic Development Director:

Miles R. Seppelt

320.234.4223

mseppelt@ci.hutchinson.mn.us For additional and more detailed information, visit:

www.hutchinsoneda.com