Minnesota Needs to Leverage its Dollars Spent on Construction, Professional and Other Services to Grow Small and Minority Businesses

Minnesota has an important but underutilized tool in its economic development toolkit: Statute 16c.16, states, “The commissioner shall for each fiscal year ensure that small businesses receive at least 25 percent of the value of anticipated total state procurement of goods and services, including printing and construction.”

However, in all the billions that are currently being debated in the Minnesota House and Senate, such as the recently approved construction bonding bill valued at almost a billion dollars, there is hardly a whisper how such massive state spending can help build our economic base in Minnesota by implementing state statute 16c.16.

There is tremendous potential to grow our own small businesses in Minnesota. This is particularly true for minority and new immigrant businesses. Minority businesses are one of the fastest growing segments of the local and national economies. For example, according to the Economic Census 1997 data, Hispanic firms grew 350 percent during the time period 1987-97.

If you were a venture capital investor – would you invest in minority and immigrant businesses ? Ask the nationally know Kaufman foundation: In a recent report, MINORITIES AND VENTURE CAPITAL: A New Wave in American Business, “Taken together, 117 investments tracked by Bates and Bradford from the 24 MBE-targeted venture capital funds surpassed a 20 percent rate of return. During that same time period, according to industry analysts, the S&P 500 Index had a 17 percent return. Furthermore, Venture Economics (VE) and the National Venture Capital Association derive a Private Equity Performance index. VE tracks the performance of over 1,400 US venture capital and buyout funds on a quarterly basis. As of early 2001, the ten-year trailing average annual return for the Private Equity Performance Index was 20.2 percent.”

If private capital can do it why cannot public funded projects take the cue?

Some of the major benefits that come with the growth of minority businesses enterprises are revitalization of both the low income neighborhoods as well as the high tech corridors. There is documented evidence to show that minority firms hire minority and other local people, buy supplies from local businesses, pay rent and local taxes, invest in their communities and serve as positive role models. In many instances, owning a business is an effective way for new immigrants to achieve the American dream.

The minority economic base is an estimated 11 billion dollars in consumer power according to the Selig Center. Census estimates minority paying 85 million dollars in real estate taxes and 57 million dollars in rent. Minority communities pay an estimated billion dollars in state and local taxes. Minorities and immigrants make up both a critical proportion of essential workers (roofers, food processing and hospitality industry, agricultural workers) as well as a critical proportion of high tech workers (physical scientists, nuclear engineers, physicians, computer professionals and economists). Minorities with their global links can help Minnesota tap into global markets. Some of Minnesota’s fastest growing markets in Venezuela, Mexico, Argentina, Korea, Japan, Indonesia, Colombia and South Africa can and have benefited from these local connections.

If our policy leaders rise up to the challenge we will have a strong and diverse economy in Minnesota.

Bruce P. Corrie, PhD