Grand Forks is seeing minimal economic growth at a time when other cities in North Dakota, and the state as a whole, are seeing more and more development.

The manufacturing sector remains strong in Grand Forks, but the city is lagging behind the rest of the state in certain economic categories, like job growth, gross domestic product and sales-tax revenue. Meanwhile, North Dakota as a whole is seeing an upward trend in those categories.

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"Grand Forks is clearly growing," said Dave Flynn, chair of the UND economics department, "but there is a gap and that gap is increasing."

The issue with Grand Forks is twofold: Although certain sectors are growing, like manufacturing, others decline, like retail.

The decline in retail in the Grand Forks region has been well noted, with the closure of several big-name stores like Sears, Macy's and Kmart. The numbers tell a similar story: Data compiled by the Herald show Grand Forks' sales tax revenue has dropped, even though the same figure has grown in other areas of the state.

Another indicator: From 2008 to the end of 2017, Grand Forks County added about 2,000 net jobs, or an increase of a little more than 5 percent, according to Job Service North Dakota data. By comparison, in that same time period, the state added more than 63,000 jobs. That's an increase of more than 18 percent in about 10 years. Cass County's net jobs added during that period was about 18,000, an increase of nearly 18 percent.

"We've had growth, but nothing like what is going on down in Fargo," said Grand Forks Job Service Director Dustin Hillebrand.

However, Hillebrand says comparing Grand Forks to Fargo isn't necessarily fair, because of the greater population of Fargo as well as the different industries that make up Fargo's economy.

"That is kind of like comparing apples to oranges," he said.

Greater Grand Forks' gross domestic product, or GDP, also is beginning to decline after years of steady growth.

What all of this means for the future of the area remains unclear, though some in the community say they stand ready for Grand Forks' next chapter.

Taxable sales

While the state has seen an overall increase in taxable sales and purchases, Grand Forks has seen a decrease of nearly 9 percent. This is the third consecutive quarter the city has seen a decrease while the state has seen quarter-over-quarter growth.

"There was an 18 percent increase for the whole state in the third quarter of 2018 and that was mainly for the oil out west," said North Dakota Tax Commissioner Ryan Rauschenberger.

Rauschenberger said he sees the decline in Grand Forks' taxable sales and purchases as largely the fault of the retail sector.

"That decrease is primarily because of the closing of big box stores and the strong U.S. dollar. That weighs in on that decrease heavily," Rauschenberger said. "We're seeing huge declines in Canadian refunds and most of those come from Grand Forks stores."

At the Pembina port of entry at the Canadian border, 16,931 people crossed the border in December of 2018. That is down almost 9 percent from the year before and down 28 percent from 2010.

Dane Ferguson, who runs the Ferguson Books stores in Grand Forks and Bismarck, has felt the pain of those declines firsthand.

"Going into 2016 and then all the way into 2017, we saw a very steady decline in our business," Ferguson said. He cited a weakened Canadian dollar and the emergence of a new competitor among the reasons for the decline.

In his view, Grand Forks has a perpetually "transient" population, which may play a role in retail struggles. For instance, many families may move to the area when a member is stationed at Grand Forks Air Force Base. And, of course, thousands of others move to the area to pursue undergraduate, graduate or professional degrees at UND.

"What I've found is a lot of our customers have just left because of next steps in their lives," Ferguson said. "They go on to a different school, or go on to a professional position where they're originally from. ... So we lose a lot of that business year after year."

It's not all bad news for Grand Forks, Rauschenberger said.

"What I think is strong is things like accomodation and food service, which are very important to Grand Forks. That stayed pretty level in 2018," Rauschenberger said.

That sector also stayed fairly steady from year to year. Other than an almost 18 percent increase from 2013 to 2014, the accommodation and food services sector in Grand Forks stayed stable from 2014 to 2017, according to reports from the tax commissioner's office.

From 2007 and 2017, taxable sales and purchases in the city of Grand Forks grew by 24 percent. However, according to the tax commissioner's most recent data, taxable sales and purchases in Grand Forks decreased 8.2 percent from the third quarter of 2017 to the third quarter of 2018.

A sore spot in Grand Forks is retail trade and stores like Macy's, Kmart and Sears closing. Rauschenberger said he sees the retail trade sector dragging down the town as far as taxable sales and purchases.

"Grand Forks is starting to see a downturn because of retail," Rauschenberger said. "There's not another city seeing the same trend line of taxable sales and purchases as Grand Forks."

However, compared to other sectors, year-to-year retail saw minimal decreases from 2013 to 2017.

From 2016 to 2017 retail decreased by 1.2 percent for the year, according to taxable sales and purchases reports from the tax commissioner's office. But in the third quarter of 2018, retail was down "pretty significantly," at a decrease of 16 percent.

Many community leaders point to online shopping as a reason for declining retail in Grand Forks. From June 2018 to January 2019, sales tax collections in North Dakota from online sellers exceeded $5 million. In that period in Grand Forks, collections from remote sellers was $108,561. Fargo collected $233,972 and Bismarck collected $80,939 in that same period.

From year to year, taxable sales and purchases can vary greatly because of things like construction projects in the city, Rauschenberger said.

"The construction of the UND law school and medical school around 2014 set the bar high for the next year and it can make it appear there are large decreases from year to year," Rauschenberger said.

Identity crisis?

At the same time, Flynn said Grand Forks is "actively fighting against" the identity of a college town.

"Until recently (Grand Forks) was adamant that it was more than a college town," he said. "We're having, at some level, a difficult time of it right now. ... We don't have the scale of Fargo. We don't have the booming industry of the west. We are still searching for who we are, our town identity."

Flynn said that in some ways, like policymaking, a lack of a strong identity can hold a city back.

City Administrator Todd Feland said Grand Forks has strengths in many areas.

"We are many things to many different people in the region. Certainly we are not just a college town," Feland said. "UND is an important part of our community, though."

Feland cited an expanded internship program with the university and the Coulee to Columbia project, which will repave most of University Avenue, as some UND-related projects.

"We have a wealth of opportunities we need to execute well on," Feland said.

Some of those opportunities include the planned new Altru Health campus, the growing UAS park, Grand Forks Air Force Base's new mission and downtown construction.

"The future looks pretty bright, and our definition of who we are is many things. We don't have to be just a university town," Feland said. "It is going to be many things, just because of what makes up Grand Forks. We certainly don't have identity crisis."

President and CEO of the Grand Forks Region Economic Development Corp. Keith Lund agreed with Feland.

"One of the strengths of the region's economy is its diversity," Lund said. "We don't have one dominant industry, so if one sector is performing poorly it doesn't drag the rest of the economy down."

In general, Lund said, the economies of eastern North Dakota towns are more diverse than in western North Dakota, which are dependent on oil and gas doing well.

One major concern in town is the loss of retail, Feland said. But the city is partnering with the Chamber of Commerce to find solutions. The Chamber has created a task force to see what the community could do to attract retail to the area.

The loss of jobs in the retail sector is a concern, said Hillebrand of Job Service. The average number of retail jobs in Grand Forks County dropped by almost 800 from 2014 to 2017, according to Job Service data.

"That's probably the thing that stands out the most to me," Hillebrand said. "But that is an industrywide issue."

Laura Hanson ran Del's Cafe at the Grand Cities Mall for nearly 10 years. In early 2018, she closed the decades-old establishment due to a lack of traffic in the area. She and her siblings now operate the Northside Cafe on the other side of town.

When talking about the closure of Del's, Hanson was frank about the challenges facing Grand Cities Mall, a shopping center that will soon lose its main anchor store, Kmart.

"There's just no business at that mall any more," Hanson said. "To speak of, there's really no retail in there. I don't know what they're going to do."

The current employment in Grand Forks metropolitan area in December 2018 saw decreases from the prior month in almost every industry except for financial services.

The Grand Forks unemployment rate is 2.5 percent.

The ag piece

Meanwhile, GDP in the Grand Forks metro area is beginning to slip after years of positive growth, according to data from the U.S. Bureau of Economic Analysis (BEA).

GDP in the metro area - which covers Grand Forks and Polk counties - fell 0.2 percent from 2016 to 2017, the latest year for which the BEA has compiled GDP data.

GDP generally refers to the sum of all economic activity in an area. In terms of dollars, GDP in the greater Grand Forks area fell from $4.922 billion to $4.915 billion from 2016 to 2017, according to the BEA.

At the same time, statewide GDP has grown from $51 billion in 2016 to $52.5 billion in 2017. That came after a peak of more than $58.5 billion in 2014.

The picture is reversed for Grand Forks, though. Although the region's GDP has fallen recently, it's grown considerably over the last decade. In 2007, the Grand Forks metro area recorded $3.796 billion in GDP, for instance.

And while GDP and sales tax revenue may be on the decline, it's tough to call the situation a "recession," according to Joseph Mahon, a regional economist with the Minneapolis Federal Reserve.

"Grand Forks isn't an island," Mahon said. "It's economically interconnected to other communities all over the country. So even if things are slowing down in Grand Forks ... the way that plays out across the broader economy is maybe more diffuse."

Generally speaking, "recession" is used only to describe a national-level phenomenon, Mahon added.

"We don't really tend to use the term 'recession' and related terms like 'expansion,' 'depression' or whatever at a local level," he said.

But that isn't to say Grand Forks' economy is booming, by any means.

"It's always true that some areas are doing really well and some are doing poorly relative to others," Mahon said.

Case in point: the Great Recession in mid 2007 through late 2009. While GDP and employment were tanking in areas across the country, North Dakota's economy remained stable, in large part due to the Bakken oil boom, Mahon said.

"North Dakota is a great example of a place that kind of bucked the trend," he said.

And while many Grand Forks residents lament the decline of retail in the area, declines in agriculture may have had a bigger impact on the region's overall GDP, Mahon said.

"A huge portion of the decline is going to be due to agriculture," he added.

According to data from the Bureau of Economic Analysis, GDP related to agriculture, forestry and hunting dropped 16 percent from 2016 to 2017. That category makes up nearly 7 percent of Grand Forks' total GDP, said Mahon. The category includes forestry and hunting, but agriculture is the lion's share, according to Mahon.

"Ag is still an important part of the economy in (Grand Forks) and North Dakota. When ag hurts, I think it spills over, even in some cities that have more diversified economies," Mahon said.

To put it another way: Industries that are closely tied to agriculture - such as transportation or large equipment manufacturing - tend to feel the hurt when agriculture slumps.

Another area that surpassed retail in terms of GDP declines: construction, which dropped 11.4 percent.

"The other really big decliner is construction," said Mahon. "Construction is another large part of (Grand Forks') local economy - almost 6 percent in 2017 of the total GDP. ... It's interesting if you look at the historical data on that. That was following up on a period of pretty fast growth in construction."

Back in 2014 and 2015, the construction industry in Grand Forks logged double-digit increases in GDP.

The BEA determined that GDP related to retail trade fell just 1.2 percent in 2017. The retail category represents 8.6 percent of Grand Forks' total economy.

Retail does form a slightly larger part of the region's economy, but the decline in agriculture was much more substantial, Mahon said.

Bright spots

There may be some light at the end of the tunnel, though. Manufacturing GDP grew by nearly 8 percent. That sector accounts for about 10 percent of the local economy, according to Mahon.

Grand Forks-based pickup-bed cover manufacturer Retrax and food processor J.R. Simplot Co. are expanding operations. In summer 2018, Retrax moved to a new location on the south end with four times the square footage as its old spot on Gateway Drive. And for its part, Simplot is working on a $58 million expansion.

The Red River Biorefinery opening north of Simplot is another example. The facility broke ground in August and will turn sugar beet waste into ethanol.

"We certainly have the underpinnings of an ag economy, value-added ag," Feland said. "We've also recently seen growth in our manufacturing sector."

There could be some hope on the ag front, too. Higher crop prices or increased Canadian traffic into Grand Forks would help the city bounce back from the sales tax revenue declines it has seen in recent years, according to Rauschenberger.

"If we saw commodity prices increase, we would see an increase in the whole state and that floats all boats in North Dakota," he said.

In the interim, retail store owners continue to brace themselves for falling revenue. The downturn in ag even spills over into stores like Home of Economy, which traditionally caters to farmers, according to owner Wade Pearson. As the number of farms in the area has decreased, Pearson said he's noticed dips in business.

"The challenge is always staying relevant," Pearson said. "You have to make changes to live with that."

Farm income also has begun to decline, but that's just because the numbers are returning to their average after years of higher-than-average income, said Bryon Parman, assistant extension professor at North Dakota State University.

"If you have two or three years of high income in a row, that's the new normal. ... Folks start making business decisions on the new normal," he said. "Then we revert back to the mean."

The same could be said of GDP and other economic indicators in the region.

As Grand Forks' economy continues to shift, business owners like Pearson and Ferguson said they've been adjusting as best they can. Ferguson said there have been some small efforts by the city and advocacy groups to bolster business in the area. For instance, the Greater Grand Forks Young Professionals group about five years ago tried to organize a monthly night for residents to shop local, but the effort "fizzled out" over time, he said.

Still, Ferguson said he remains committed to running a retail business in town.

"We're dedicated to the Grand Forks community and staying open, and being a viable book store option for the consumer," he said. "Grand Forks means a lot to me."