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Polaris and Mesabi Nugget Expansions
Tell a Tale of Two Minnesotas

    The importance of Wisconsin's focus on streamlined permitting is evident in Minnesota, where one company's paperwork difficulties could jeopardize its pending investment in the state.
      Two years ago, Mesabi Nugget Co. constructed a pilot iron nugget plant in the Iron Range region of Minnesota with the help of federal and state funding. The project proved the commercial viability of a new technology to cook taconite extracted from nearby mines into marble-sized iron nuggets. The versatile nuggets can be used for steel production in the growing mini-mill sector, meaning that demand would be immediate, once the company could scale up production.
      With a business model in place, and a process for turning the technology into a product,
Polaris is investing $35.5 million in a new R&D campus in Minnesota.
Mesabi looked to build a large-scale facility near the mine. The plant would bring jobs into a region that has faced a serious unemployment problem, while contributing substantial tax revenues into local and state coffers.
      They have the site. They have the construction crews lined up. They have the support of the governor and Minnesota's congressional delegation. They had financial commitments from the state, in the form of low-interest loans that helped build the pilot facility. And they have a rail link to eager customers in Indiana waiting to snap up finished product.
      What was the problem? According to company officials, it's all about the red tape.
      "Permitting in Minnesota is like going to the dentist," said company spokesperson Dave Chappie, a few weeks before the permits finally came through in late July. "This has been very frustrating," Chappie said. If environmental groups succeed in their appeals, the case could go into the federal system, taking years to resolve. He pointed out that Indiana — the other state vying for the project, and the home state of a partner in the company, Steel Dynamic — recently enacted legislation that protects companies from such federal appeals processes.
      "We're trying to give the state every opportunity, because they have been very supportive, but at a certain point, we will have to make a decision to go to Indiana," near the site of a partner in the company, Steel Dynamics. The company has all the necessary Indiana permits, but is loathe to give up on a Minnesota location because shipping raw material to a plant in Indiana would be far more expensive, since it weighs 65 percent more than cooked nuggets.
      Snowmobile maker Polaris also wanted to stay in Minnesota. The Medina-based company ultimately decided to construct its $35.5-million R&D campus in its home state rather than build in the southeast, where it had considered several sites. Polaris seriously considered a site in Osceola, Wis., before determining that Wyoming, Minn., where the company already had a base, remained the right fit.
      "It boiled down to incentives plus geography," explains Polaris spokesperson Marlys Knutson. "The state of Minnesota really wanted this project and they presented a very strong incentives package that was better than what Osceola offered," she adds. The facility is located in a tax free zone established as part of governor Tim Pawlenty's Job Opportunity Building Zone (JOBZ) program. The zone frees companies from state and local taxes for up to 12 years. The state is also paying for infrastructure improvements, including a new road.
      However, as with many companies, Polaris' decision was not determined based on the value of the incentives package alone.
      "We looked in several southeastern states that were actually willing to give the land away to us at no cost, plus lots of assistance in putting up the building," says Knutson. Ultimately, though, the lure of home remained strong. "It made sense to stay where we felt comfortable. Our culture and our customers have that upper midwest ethos," she explains. In addition, the Minnesota terrain proved better suited to testing snowmobiles and ATVs.
      With 2005 sales topping $400 million, Polaris is now considering a European expansion to manufacture closer to another growing customer base.
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