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The Economic Outlook Forum and its companion publication is now five years old. Our economy in North Dakota, and in our communities of Bismarck and Mandan, has seen tremendous change and growth in that time. From small businesses on Main Street, to neighborhood shops, to multi-national corporations, Bismarck and Mandan have much to offer our businesses.
TABLE OF CONTENTS
We are fortunate to have a state and local government that work to create a business friendly environment. At the Bismarck-Mandan Chamber, we take pride in working with our elected officials in crafting policies that encourage entrepreneurship, growth and expansion of businesses. The other significant factor of our region that attracts business growth is our workforce, our people. Working in the agriculture sector or the oil and gas sectors, there are peaks and valleys. The backbone of our economy remains those people who, over generations, have built our communities into the most desirable places to locate a business. We are glad to bring you the 2017 Economic Outlook Forum in partnership with our sponsors listed below. Together we make our communities stronger. Yours in Success,
Energy Ron Ness, President, North Dakota Petroleum Council
Real Estate Scott Ritter, Partner, Aspen Group LLP
Retail Joe Duperre, General Manager, Kirkwood Mall
State Revenue Ryan Rauschenberger, North Dakota Tax Commissioner
Agriculture Emily Paul, Renae Larson and Mack Ternes Pulse USA, Inc.
Health Care Dr. Craig Lambrecht CEO, Sanford Health
Scott Meske, President Bismarck-Mandan Chamber of Commerce
ECONOMIC Outlook Forum Presented by:
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energy Ron Ness President, north dakota petroleum council After nearly three years of low commodity prices, the oil and gas industry in North Dakota is poised for a comeback. Although production has declined and the state experienced its largest production drop in history in December thanks primarily to a tough winter, activity is beginning to pick up in western North Dakota, and operators are indicating that more can be expected for 2017. That’s good for North Dakota. More than 10 rigs are expected to be added throughout the year, and while 55 rigs are a far cry from the record 218 rigs that the state hosted in 2012, technology and efficiency have enabled rigs to safely drill more wells faster. In fact, while the average rig in 2006 drilled just nine wells a year, today’s rigs are capable of drilling twice that, and the state can expect to add between 800 to 1,000 wells before the year’s end. These additions will be on top of an already large inventory of wells that were drilled in 2015 and 2016 but not yet completed (or fraced). Many companies took advantage of lower service costs to drill wells, but have kept wells shut in until prices improved. Now, with prices having stabilized at around $50 per barrel, many operators have begun completing and bringing these wells online. An increase in exploration and development spending will also bring with it a significant boost in support activities, including sales and service, trucking and some construction. Every dollar spent by the industry has traditionally resulted in an additional $1.50 in economic activity sending ripple effects throughout the state and local economies. While more activity will mean more traffic and people into western North Dakota, growth is expected to be more steady and moderate than the initial “boom” years that defined Bakken oil development from about 2008 to 2012. In addition, infrastructure investments and planning made in previous years by the North Dakota Legislature and Governor Dalrymple will pay dividends and will provide for a safer, less frenzied rebound.
“Oil and natural gas are, and will continue to be for the foreseeable future, energy mainstays, and through the ups and downs of the markets, North Dakota has remained a top contributor to our nation’s energy supply.”
Already, many companies have begun the hunt for new employees to help fill vacancies as activities pick up. More than 400 positions are open in the mining and extraction industries today according to Job Service data, but a stronger national economy means that attracting workers may prove more difficult than earlier years. With many new and inexperienced workers expected to fill those ranks, safety professionals are already conducting training and developing best practices to ensure the culture of safety and strong safety record from 2016 can continue on through 2017.
The rapid downturn in activity since 2014 brought with it many challenges, but the industry continues to be an economic stronghold in the state. New economic analysis will be released in the coming weeks, and while the economic contributions will certainly be less than the $43 billion that was contributed to the state’s economy in 2013, early numbers are showing that the petroleum industry remains one of the strongest economic generators for the state. Oil and natural gas are, and will continue to be for the foreseeable future, energy mainstays, and through the ups and downs of the markets, North Dakota has remained a top contributor to our nation’s energy supply. Thanks to emerging innovations and technologies, our industry will emerge from this down cycle stronger and more efficient, and as yet another example of North Dakotans’ resilience, boundless potential and exceptional energy. The Bakken has shown its resilience and is here to stay.
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Be the light. Electricity brings light to the darkness. You depend on it. And we work to ensure itâ€™s there when you need it. Itâ€™s the assurance that you can provide light to comfort those that matter most to you.
Your energy starts here.
Real Estate Scott Ritter, Partner, aspen Group LLP As residents of Bismarck and Mandan leap into the New Year, it’s impossible not be excited to see the action around Bismarck and Mandan. In 2016, the commercial real estate market showed signs of softening throughout all sectors, but even during a market correction, Bismarck and Mandan continued to see exciting new commercial growth and development. Speaking of leaping into a New Year, residents from across central North Dakota are now able to enjoy fun filled action at SkyZone Trampoline Park. The 25,000 square foot building houses an indoor trampoline park where people of all ages can bounce around on the trampolines or go through a variety of obstacles.
“In 2016, the commercial real estate market showed signs of softening throughout all sectors, but even during a market correction, Bismarck and Mandan continued to see exciting new commercial growth and development.”
If you’re hungry, a handful of new restaurants have entered our community. The rejuvenation of downtown Bismarck continues as The Starving Rooster is set to open its doors this spring on Main Street. After seeing the success of Panera Bread and Caribou Coffee to the outlots of Kirkwood Mall, they (Kirkwood Mall) made an additional announcement and groundbreaking that Lucky’s 13 Pub will be built in the southwest corner of the parking lot near Scheels. Heading north on Highway 83, you are able to stop in at Grand Junction Grilled Subs and Buffalo Wings & Rings. Across the river, Mandan saw the opening of Taylor Made BBQ and the announcement of Dickey’s Barbecue Pit.
Two banks have broken ground on new buildings in Bismarck. First Western Bank & Trust purchased the property formally known as Reza’s Pitch and plans on building a new bank branch in Downtown Bismarck. First International Bank & Trust has also broken ground and has the structure for its brand new branch and office space off of Divide and State Street in North Bismarck. New businesses have also signed up to be a part of the new Haycreek Shops in North Bismarck. Kirkland’s opened its doors in 2016, along with Sleep Number and Mattress Firm. Pancheros Mexican Grill is opening its second location this summer, and Erbert & Gerbert’s Sandwich Shop also opened its second location in the growing development in North Bismarck. The Bismarck-Mandan area is experiencing growing pains in the commercial real estate market. It will continue to feel some of the adjustment to what is going on across our community in 2017, but as you can see from the new expanding businesses, along with the addition of new businesses coming to our area, the Bismarck-Mandan market has plenty to be proud of. There’s no reason to think that the consistent, sustainable growth won’t continue beyond.
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Retail Joe Duperre, General Manager, Kirkwood mall As a key contributor to the economy since the 1970s, Kirkwood Mall continues a mainstay in the community as a retail option and a community gathering space. With an ownership change in 2013, mall owner CBL Properties has emphasized a long-term focus on re-investing and evolving the property to meet the demands of the retail shopper and population growth. The 2017 economic forecast recently issued by the National Retail Federation projects that retail sales (excluding automobiles, gas stations and restaurants) will grow between 3.7 and 4.2 percent over 2016. The national Retail Federation provided additional economic insights: • • • •
The economy is expected to gain an average of approximately 160,000 jobs a month. The number is down slightly from 2016 but consistent with labor market growth. Unemployment is expected to drop to 4.6 percent by the end of the year. Economic growth is likely to be in the range of 1.9 to 2.4 percent. The forecast is a baseline, and does not take into account new fiscal measures pending in Washington. *
Kirkwood Mall completed a multi-million dollar parking lot renovation in fall 2016 to include a ring-road around the mall to more easily move traffic from one side to the other as well as significant landscape changes to enhance the visual appeal of the exterior. Keeping the focus on the exterior, CBL also developed two outlots; one along the Bismarck Expressway that’s home to Panera Bread and one that is home to Verizon Wireless and Caribou Coffee along South Third Street. The newest addition will be Lucky’s 13 Pub opening in summer 2017 on the coveted corner of South Third Street and Bismarck Expressway. Their plans include significant outdoor seating and landscaping to further enhance the property.
“With an ownership change in 2013, mall owner CBL Properties has emphasized a long-term focus on re-investing and evolving the property to meet the demands of the retail shopper and population growth.”
Inside the mall, Kirkwood and CBL leadership continue their quest for a strong mix of local and national tenants to provide a unique and convenient shopping experience. 2016 proved a successful year in adding to that mix with the addition of new tenants to include the state’s only H&M, a global fast fashion brand, and local and regional favorites A&B Pizza and clothing boutique, Out of Town. Anchored by five national or regional retailers respectively, Kirkwood Mall retailers continue to grow and lead their respective companies in areas of traffic, sales, and growth. These factors attract community businesses and organizations to consider the mall for branding opportunities to include sponsorships, events and advertising. It is these partnerships that contribute to the energy and community engagement Kirkwood Mall aspires to achieve in its center.
Plans for interior renovations, canvassing for key partnerships in mixed-use opportunities and a strong communication strategy poise Kirkwood Mall for continued reinvention. The focus on providing the region’s premier shopping experience will continue to drive decisions for the property and is what energize the local property leadership.
*Source: National Retail Federation: https://nrf.com/media/press-releases/nrf-forecasts-retail-sales-will-increase-37-42-percent-over-2016
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State Revenue Ryan rauschenberger, north dakota tax commissioner What is there to be so optimistic about, you might be wondering? We have all followed the contraction in the state’s economy, and the resulting decline in state tax revenues over the past two years. It has been unprecedented, brought on by a “perfect storm” of tumbling oil prices and declining farm commodity prices. In mid-2014, West Texas Intermediate (WTI) crude oil reached $105 per barrel; North Dakota crude oil was selling for about $95 per barrel. By early 2016, the price of WTI crude oil had bottomed out at around $30 per barrel; North Dakota crude oil was selling for about $22. State oil and gas tax revenues followed a similar trajectory. In June 2014, state oil and gas tax collections topped $300 million per month for the first time. (Note this is the gross amount collected and it includes amounts to be allocated to political subdivisions and tribes.) Monthly oil and gas tax collections bottomed out at about $74 million in March 2016, less than 25 percent of the amount collected less than two years earlier.
“So, why be optimistic now? First of all, our labor market offers plenty of reason to be optimistic. From December 2015 to December 2016, the number of people employed in North Dakota grew from 397,000 to 415,000.”
Agriculture, the other cornerstone of North Dakota’s economy, has also faced difficulty in the past two years. The average price for crops fell by 12 percent in 2014, 6 percent in 2015, and slipped another 2 percent in 2016. Cattle producers saw nearly 20 percent growth in the value of livestock in 2014, but then saw prices drop 12 percent in 2015 followed by another 17 percent in 2016. The impact of such drastic declines in commodity prices for two of North Dakota’s primary industries was felt in all sectors of the economy. At the Office of State Tax Commissioner, we have seen the impact of this in unprecedented declines across nearly all tax types: sales tax, motor vehicle excise tax, individual income tax and corporate income tax. So, why be optimistic now? First of all, our labor market offers plenty of reason to be optimistic. From December 2015 to December 2016, the number of people employed in North Dakota grew from 397,000 to 415,000. Our unemployment rate is only 3 percent - far below the national average of 4.7 percent and among the lowest four or five states in the country. Job Service North Dakota reported that in January 2017 online job openings totaled 12,590. Second, North Dakota crude oil is no longer selling for $22 per barrel. It is now double that price and WTI crude oil has remained over $50 per barrel for nearly three months. Sure, this is nowhere near the peak of 2014, but the industry has become more efficient since then and activity is already picking up. Industry experts are confident that prices will remain at this level over the next few years and that as a result additional rigs will start working and frack crews will resume hiring. Third, the outlook for agricultural prices is positive. Declines are expected to continue into 2017 for both crops and livestock, followed by modest increases every year through 2021. My reason for being optimistic is not to diminish the serious contraction we have all felt take place in the North Dakota economy. My reason for being optimistic is that I believe the worst is behind us and we are at a point where we can expect a return to a pattern or economic growth.
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AGRICULTURE Emily Paul, Renae Larson and Mack Ternes, Pulse USA Inc. No matter what market prices, input costs, land rent, etc. we have a lot to look forward to in the agriculture industry, in 2017 and for many years in the future. Food sources will always be needed to feed the growing population across the globe. Whether this food is sourced from edible grains, by-products, or livestock, they are essential to survival. In recent years farming and ranching has been challenging for some producers and many of them seem to think the agricultural industry is in a downward spiral. Rightfully so, because their livelihood is dependent on so many variables that are beyond their control. However, when looking down what appears to be a dark tunnel, there is sometimes a bright light at the end; in this case the light is radiating from smaller market crops, such as pulse crops. When a producer is scrambling to look for something that will make them money, they must be open minded to solutions, such as pulse crops. Many producers are feeling pressure from what were record-high crop and livestock prices only a few short years ago, to what was a bleak market in 2016. It appears as though 2017 will look much the same as 2016 with the exception of the pulse industry. We continue to see producers, processors and end users wanting more and more pulse crop seeds each year. Lentils, field peas, chickpeas are all penciling out very well for farmers with the recent NDSU crop budget calculator. In the past 20 years in the United States, the pulse industry has advanced and gained much popularity. Farmers are realizing that by including a pulse crop in their rotation, they will reduce their financial risk, increase their income and decrease their input costs in the year following the planting of that pulse crop. We recently attended a conference hosted at Bismarck State College by several local research laboratories and experiment stations. In one of the presentations it was mentioned that the future of agriculture is heading into a different world of sorts. Farmers and ranchers have always worked in the agriculture business, right? However, in recent years we have started to see something compliment the agriculture business and that is called human health business. Each year more and more consumers are paying attention to what they’re purchasing at grocery stores for themselves, their families, their friends, and even their pets. Pulse crops are proving to be one of the biggest players in this “human health business.”
“Farmers are realizing that by including a pulse crop in their rotation, they will reduce their financial risk, increase their income and decrease their input costs in the year following the planting of that pulse crop.”
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We have big players in the food industry looking to incorporate additional pulse crop ingredients each year into their food products. Next time you’re walking down the aisles of your local grocery store, I encourage you to take a peek at the pulse crops on the shelves. Maybe you’ll find yourself purchasing some and trying out a new humus recipe or yellow split pea soup recipe for your family and friends. Or, if you’re as lucky as the staff at Pulse USA, you could ask a co-worker to try out the recipe for you. At Pulse USA, we pride ourselves in making crops and inputs that are considered “niche” to most of the population available to producers. We carry a wide array of field pea, lentil, cowpea and faba bean varieties as well as hard red spring wheats, cover crops, forages, and crop inputs. We believe in the products and varieties that we bring forth, to ensure the long-term success of the producer, the consumer, the land and our industry as a whole.
HEALTH CARE Dr. Craig lambrecht, CEO, sanford health Healthcare remains in a constant state of change, and a level of uncertainty clouds the vision for the future of the industry. Since its adoption in 2010, the Affordable Care Act has served as a change catalyst for healthcare providers, patients and insurance companies. With the Trump administration now in office, the future of the ACA is uncertain. Congress will repeal, replace or make significant modifications to provisions outlined in the ACA. This to-be-determined outcome will become another variable in the ACA change journey. At the state level, the Legislature continues to discuss the future of Medicaid Expansion, which North Dakota implemented as a result of the ACA, and Medicaid payment rates. While the ambiguity swirling around the future of healthcare can be daunting, these challenges serve as a reminder that we must continue to focus on adapting to change and finding solutions to change outcomes. As healthcare leaders, we must provide high-quality care while controlling costs, offering convenient access to all levels of care, delivering a positive patient experience, remaining a premier community partner and taking care of our employees. By focusing on these six areas, we will achieve success despite any changes to the ACA and reimbursement structure. At Sanford, we continue to recruit primary care providers and specialists to ensure timely access. To offer even greater access, we are integrating walk-in services at all our primary care locations. For example, patients who normally visit our Sanford South Clinic in Bismarck will be able to stop in without an appointment during regular office hours and see a physician or an advanced practice provider. We continue to expand subspecialty care to keep patients close to home for their healthcare. To help reduce the cost of care and improve quality, we are focusing on data analytics to drive continuous quality and process improvement by concentrating our efforts on areas that will lead to positive change.
“While the ambiguity swirling around the future of healthcare can be daunting, these challenges serve as a reminder that we must continue to focus on adapting to change and finding solutions to change outcomes.”
As a nonprofit health system, Sanford has a responsibility to serve the community. We recently partnered with the Good Samaritan Society to form a joint venture – Prospera. This partnership resulted in a new 120-bed post-acute care facility in Mandan that adds 56 much-needed long-term care beds to the community. We know how important it is for people to stay active. With that in mind, we partnered with the Missouri Valley Family YMCA to bring Family Wellness to Mandan. This state-of-the-art fitness facility opened in January and promotes health and wellness. At the same time, Family Wellness provides additional child care for the community. We continue to invest in our children by providing Sports Medicine services to a majority of our middle schools and high schools. We want Bismarck-Mandan to be the healthiest community in the country and the best place to live, work and receive healthcare. Each day, I’m humbled by the work we do. There’s nothing more personal than someone’s health. The fact that so many people rely on Sanford Health for their healthcare is a tremendous responsibility – one that our entire organization takes very seriously. We are grateful for the trust the community has in us, and we are proud to be a part of Bismarck-Mandan and western North Dakota. Sanford is excited to continue to grow with the community and the region, and we are committed to providing high-quality healthcare close to home.
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survey results WHO IS YOUR PRIMARY TARGET MARKET? Bismarck-Mandan
ON AVERAGE, HOW MANY FULL-TIME EQUIVALENT EMPLOYEES DO YOU HAVE?
1-4 5-19 20-49
50-99 100-499 500+
For full survey results: www.bismarckmandan.com
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For all your Commercial Real Estate and Property Management needs... Mathew Reichert... Broker, CCIM Scott Ritter... Broker Associate Steve Ilse... Director of Business Brokerage Michael Ilse... Business Brokerage Associate Jessica Knutson... CCIM 424 South 3rd Street, Suite 2 â€˘ Bismarck, ND 58504 701-223-2450 â€˘ www. aspengrouprealestate.com
survey results WHAT IS YOUR BUSINESS CLASSIFICATION? 60 47%
50 40 29%
20 10 0
Business to Business
Business to Consumer
OVERALL, HOW WOULD YOU COMPARE YOUR ORGANIZATIONâ€™S EXPECTED RESULTS TO ACTUAL PERFORMANCE IN 2016? Performed Below Expectations
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YOUR 2017 OUTLOOK
} Complete Cloud Solutions } Managed Services } Business Continuity 1661 Capitol Way, Suite 102, Bismarck 701-250-9400 â€¢ www.nrgtechservices.com
} Virtualization } IT Consulting
survey results WHICH BEST REPRESENTS YOUR FORECASTED CHANGES FOR 2017? 19.07% Sales Revenue
9.04% Employee Length of Workweek
Total Operating Cost as a % of Revenue
4.49% Employee Compensation
15.25% Capital Expenditures
Prices Paid for Raw Materials
Prices Received for Products/Services
10.72% Number of Employees
57.63% 31.63% 10
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Decrease No Change Increase
survey results IS YOUR BUSINESS EXPERIENCING DIFFICULTY IN ATTRACTING AND HIRING QUALIFIED WORKERS? 46%
YES NO 54%
WHAT FACTORS ARE MOST LIKELY TO ADVERSELY IMPACT YOUR BUSINESS IN THE NEXT YEAR? Challenges in Acquiring Financing
Increasing Transportation/Fuel Costs
Difficulty Providing Health Insurance for Employees
Increasing Raw Material Costs
Attracting and Retaining Qualified Employees
SURVEY RESULTS } 2017 ECONOMIC OUTLOOK }17
survey results DO YOU EXPECT TO PERFORM BETTER OR WORSE IN 2017 COMPARED TO 2016? 80 70
DO YOU THINK THE BISMARCK-MANDAN ECONOMY WILL PERFORM BETTER OR WORSE IN 2017 COMPARED TO 2016? 80
20 10 0
DO YOU THINK THE NATIONAL ECONOMY WILL PREFORM BETTER OR WORSE IN 2017 COMPARED TO 2016? 10% 13%
Better Worse No Change
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Our legacy of Building a Strong AmericaÂŽ began in 1924 when we brought energy to towns on the Montana-North Dakota border. From our headquarters in Bismarck, North Dakota, today we operate in 48 states, delivering energy and providing construction materials and services. We power homes, businesses and industry with electricity and natural gas. We connect homes, factories, offices and stores with pipelines and wiring. We keep our country moving by building and maintaining the transportation network of roads, highways and airports. We are your resources, for today and tomorrow.
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