A Hidden Catch-22 in Small-Town Enticements

It sounds like the grand prize in a supermarket sweepstakes: free cash, land and a year of golf and swimming. What’s more, ladies and gentlemen, everybody can be a winner.

A too-good-to-be-true offer? No. A gimmick? Yes.

The promotion is brought to you by the friendly folks of Rolfe, Iowa, who hope their slick campaign will entice people to move to a tiny town itching to get bigger.

Rolfe, which will provide $1,200, a free lot and recreation for folks who build and live in a house worth at least $30,000, is among a growing number of towns in rural America offering incentives to lure new residents or industry.

All across the heartland, small towns that have lost people, jobs and schools to the farm crisis are now waging aggressive campaigns in their struggle to expand or at least stay alive.

Fighting for Survival

“Rural communities are fighting for survival,” said Paul Lasley, an Iowa State University sociologist. “It’s a very competitive situation we’ve got out there.”

Some towns make pitches in radio or newspaper ads. Many have hired professionals. All are humming a tune of promises, promises, promises--low business rents, free buildings, tax breaks, cheap utilities and, in some cases, hard cash.

Some towns are angling for jobs. Others want people. Both are important.

“It’s kind of a chicken and egg question--do jobs attract people or do people attract employers who bring jobs?” Lasley said. “It’s some of both.”

Desperation Abounds

The increasing number of towns offering incentives, he added, “reflects the desperate financial situation in rural America.”

Not all the towns have been ravaged by hard times, but many have seen neighboring communities wither away. They fear unless they move fast, they’ll be next. Strategies vary:

In Chetek, Wis., population 2,160, a bank is offering a $5,000 reward this year to anyone who can bring in a new business that will employ at least 15 people full time.

“We’re a small town. We’re looking for any small employer. We’re not trying to recruit a Saturn (auto) plant,” said Robert Missling, president of the Chetek State Bank, which is offering the reward.

In Rolfe, Iowa, the incentives include cash, one-year family membership to the pool and golf course and 8.8% initial financing.

“We feel like we have just about everything we need--except people,” said Bill Winkleblack, president of the Rolfe Betterment Corp. One couple have taken advantage of the offer, and a house is under construction, he said.

In Osakis, Minn., up to $5,000 is offered toward the cost of a lot and home for anyone willing to build and stay five years. A similar offer is available to businesses. The program is financed with proceeds from the “pull tab,” a local instant lottery.

“We don’t want to lose what we’ve got,” said Tom Ellis, a member of the Osakis Economic Development Corp. “It’s sort of a circle-your-wagon defense.”

One couple recently took advantage of the program and built a home in town, Ellis said. Officials said since the incentive was announced last fall, about 25 inquiries had come in from as far away as California and Florida.

In Mexico, Mo., prospective businesses are being tempted with offers of free land and cheaper rents. The town will also offer cash to a company based on the number and skill level of the jobs it brings to town, as long as the company stays 10 years.

In the last two years, five manufacturers that will eventually employ up to 630 people have moved to Mexico, said Jerry Schmutzler, city director of economic development. Another company that will provide 200 new jobs will open in July, he said, and plans in the works could bring 300 more jobs to town by 1990.

Schmutzler said special offers are important only after a company has narrowed down possible locations to a few towns. Then, he said, “it’s who wants (the company) the most. It’s who’s offering the biggest incentives.”

Selling Their Soul

Scores of other rural towns have similar programs, leading some experts to question whether they are giving away the store.

“They feel like they don’t have a chance unless they sell their soul,” said Rex Campbell, a University of Missouri sociologist. “They have to offer not just a building, but a building with free taxes.

“Competition is so tough, if you go 10 miles or 100 miles down the road, there’s going to be some other community that’s willing to provide (a company) with free everything. Unless you offer free everything, you’ll lose them.”

The drawback, he said, is “there’s only so many marbles to spread around. There’s only so many plants looking for a site.”

And that can pit towns against each other.

“In some ways, it’s a zero-sum game,” said Lasley of Iowa State. “One community gains at the expense of another.”

Cost-Benefit Ratio

But town officials say they carefully analyze the cost-benefit ratio before offering special deals.

In Rolfe, for example, “we need new housing,” said David Jochims, city administrator. “It commits people to our community. . . . We get a payback. We get tax dollars and utility dollars.”

The town of 700 has lost about 10% of its population since 1980, officials say, and the last new house was built seven years ago.

“We need to offer jobs and housing . . . to ensure we’re going to be here in the future,” Jochims added. Iowa, federal statistics show, lost 62,000 people from 1980 to 1986.

In recruiting, many communities emphasize the Norman Rockwell aspect of small-town U.S.A., such as low taxes, good schools, little crime. But often, there is one missing piece in the puzzle: jobs.

Impact of Incentives

And no matter what they offer, experts say, remotely located towns aren’t likely to attract industry, and without work, there is little reason for people to relocate.

While many say it is too early to judge the impact of incentives, Bettendorf, Iowa, offers an example of where they worked--too well.

Last year, Bettendorf had to end its offer to pay up to $500 of first-time home buyers’ closing costs when it ran out of money, said Dick Kvach, planning coordinator. The program’s cost: $106,000.

“The response was much greater than anticipated,” Kvach said, and 280 homes were bought and built in 10 months, with about 20% of the buyers coming from out of state.

Money aside, Campbell said incentives also had intangible value.

“It makes a community feel better,” he said. “They’re trying to control their own destiny. . . . In a few cases, it may succeed.”

But, he added, “for the great many, my answer would be no.”