Can AgStar Save Rural Minnesota?

For instance, one of the needs Agstar is addressing is an improved health care infrastructure. Monson estimates that the average cost of a rural assisted-living facility, which is typically a single-story building with 25 to 50 units, runs between $1.5 million and $7 million. And he notes that a critical-access hospital, which by definition has no more than 25 beds, would cost between $15 million and $25 million to build.

Currently, the state has 147 rural hospitals, 79 of which are classified as critical-access. According to Capital Improvement Needs of Minnesota’s Small Rural Hospitals, a 2001 Minnesota Department of Health report, 70 percent of these rural hospitals were classified as “struggling” or “distressed,” as measured by their ability to make capital investments to maintain their facilities and to purchase equipment to stay abreast of advances in medical technology. The report says that these struggling hospitals reported needing $99 million to correct code and related deficiencies and to meet other urgent needs. The total cost to meet all of these hospitals’ capital improvement plans, however, would be much greater.

In the Twin Cities, long-term fixed rates are readily available. But in many of Minnesota's rural communities, AgStar has found, there aren't as many lenders able and willing to fill that need.

For instance, one of the needs Agstar is addressing is an improved health care infrastructure. Monson estimates that the average cost of a rural assisted-living facility, which is typically a single-story building with 25 to 50 units, runs between $1.5 million and $7 million. And he notes that a critical-access hospital, which by definition has no more than 25 beds, would cost between $15 million and $25 million to build.

Currently, the state has 147 rural hospitals, 79 of which are classified as critical-access. According to Capital Improvement Needs of Minnesota’s Small Rural Hospitals, a 2001 Minnesota Department of Health report, 70 percent of these rural hospitals were classified as “struggling” or “distressed,” as measured by their ability to make capital investments to maintain their facilities and to purchase equipment to stay abreast of advances in medical technology. The report says that these struggling hospitals reported needing $99 million to correct code and related deficiencies and to meet other urgent needs. The total cost to meet all of these hospitals’ capital improvement plans, however, would be much greater.

Another urgent need for rural Minnesota is attracting and retaining businesses. In this case, one of Monson’s challenges is Greater Minnesota’s aging population—and the flight of its young adults to larger cities. “It is very difficult to bring large employers into regions that don’t have an adequate work force,” Monson notes.

Giving financial support to the right mix of businesses will also be critical, considering the changing demographics of rural Minnesota. “The clients that we can serve are changing,” Monson says. “The demographics are changing and our goal is to try to meet those needs, understand those needs, and build rapport with those communities the best we can, and that takes time.”

Some rural areas have seen significant increases in the number of Hispanics, who have been seeking work in meat-processing plants and other facilities. According to the U.S. Census Bureau’s 2006 American Community Survey, the Seventh Congressional District, which covers the northern two thirds of western Minnesota, has a Hispanic/Latino population that is growing faster than any other ethnic group—up 111.9 percent from 2000 to 2006. The Hispanic/Latino population in the First District in southern Minnesota saw the second-largest increase in the state, up 55 percent.

Hispanics aren’t the only ethnic newcomers in AgStar’s market area. Monson notes that a large Somali population has settled in Barron, Wisconsin, to work at the local Jennie-O turkey plant. “There is a real strong need for businesses that cater to that customer group,” he says. “We have been talking to people there about small-business needs, and one entrepreneur wants to start a grocery store–restaurant for that clientele.” Other examples of small-business investment possibilities, Monson says, are an entrepreneur who is considering launching a Hispanic migrant school in southwestern Minnesota and an Argentine immigrant who wants to start a bakery in the small Wisconsin city of Menomonie.