Government

Iowa's small towns struggle to gain traction and grow

Downtown Humeston, Iowa, on March 27, 2019. (Austin Hronich/IowaWatch)
Downtown Humeston, Iowa, on March 27, 2019. (Austin Hronich/IowaWatch)
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The town of Humeston straddles Highway 65 in the northwestern corner of Wayne County, less than a 30-minute drive from the Missouri border. Its population peaked in the 1920s at 1,214 people.

Today, the southern Iowa town has only 494 people.

“A lot of kids, when they graduate, they want to get out and see the world,” said David Dotts of the Wayne County Board of Supervisors. It’s one of the many explanations for the population loss.

Like nearly all of the other incorporated towns in Wayne County — except for Corydon, the county seat — Humeston has seen a consistent decline in its population since the early 1900s.

Humeston is not alone: Small towns across Iowa have been fighting to support themselves as rural populations continue to decline, while state government has been investing more in larger cities where populations are growing.

In 2018, Iowa’s metro regions received the most financial support from state government via the Iowa Economic Development Authority and the Iowa Finance Authority.

Reporting this spring by an IowaWatch Simpson College Journalism Project showed cities with more than 50,000 people received $61.3 million in direct financial assistance through state and federal grants and loans. Several of these communities also received assistance in the form of tax benefits.

Meanwhile, rural businesses and communities with fewer than 5,000 people received a little less than $24.9 million in direct financial assistance from the state and federal government, the reporting project revealed.

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Assistance was awarded to businesses and communities for economic development purposes that include job growth and expansion as well as capital rehabilitation and renovation.

For example, startup companies such as Accelerated Ag Technologies LLC in Ankeny received $300,000 in March 2018 from the Iowa Innovation Acceleration Fund. This fund “promotes formation and growth of businesses that engage in the transfer of technology to competitive, profitable companies that create high-paying jobs,” the economic development authority website states.

That same month, Des Moines-based startup InfraLytiks received $100,000 in direct assistance from the Demonstration Fund, which provides “assistance to companies with market-ready innovative technologies or products that have a clear potential for commercial viability,” the economic development authority website states.

Several buildings in urban cities also received millions from the State Historic Preservation Tax Credit.

In Dubuque, for instance, SS Event Center LLC was awarded over $2 million from the tax credit in June to renovate the former St. Mary’s Catholic Church. SLE Investments LC in Cedar Rapids received almost $3.6 million that same month from the tax credit to rehabilitate the Harper and McIntire Company Warehouse.

Making sense of the divide

The rural-urban divide in state economic assistance and the related population growth comes as no surprise to Dave Swenson, an associate scientist at Iowa State University’s department of economics and a lecturer in the School of Urban and Regional Planning at the University of Iowa.

“So, for the most part, we have two economies in Iowa,” he said. “We have a metropolitan economy, the counties with a city that’s 50,000 or more. In general, they are all growing.”

The state’s secondary economy — the rural economy — has not seen growth, Swenson said. He said rural communities in Iowa have shrunk since 2008, with a smaller labor force and a declining economy.

Swenson has studied rural economics and affairs in Iowa since the farm crisis that swept through the state in the 1980s. In the more than 35 years since, he has kept a close eye on how population and industrial trends in Iowa have fluctuated, in metropolitan and rural areas.

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Iowa has roughly 40 “medium-sized trade centers” spread throughout non-metropolitan areas around Iowa, Swenson said.

“That’s where people from the surrounding region go to work, that’s where they go shopping, that’s where they get health care, that’s where they go to community college,” he said.

Ottumwa is one of those micropolitan trade centers, with a population of about 25,000 people. But even though it’s by far the largest city in Wapello County, people in Ottumwa still find themselves caught between two worlds: that of a small, rural town and that of a micropolitan hub.

The city can be categorized either way, Sharon Stroh, the executive director of the Ottumwa Economic Development Corp., said.

“That works to our benefit sometimes and to our detriment other times,” Stroh said.

Although the city’s relatively large size has allowed it to become a retail and commercial hub in southeast Iowa, she said Ottumwa’s population also can make it ineligible for state grants intended for communities with fewer than 25,000 people.

For example, Stroh said Ottumwa has been ineligible for U.S. Department of Agriculture Rural Development programs as well as some Iowa Arts Council program funding.

However, Ottumwa received $800,000 from the federally funded Community Development Block Grant program in 2018. The federal money, which the Iowa Economic Development Authority administered, is awarded for community facilities, downtown revitalization and rehabilitation of single-family, owner-occupied housing.

That same year, Iowa cities with populations between 10,000 and 50,000, such as Ottumwa, received close to $28.1 million in direct financial assistance from the state and federal government. Combined with the amount of money in financial assistance rural areas received, however, urban areas still received close to $8.3 million more in direct assistance in 2018, the IowaWatch Simpson College Journalism Project found.

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Swenson said he and his colleagues believe that while the state cannot practically support all rural communities throughout Iowa, it can support the state’s 40 micropolitan trade centers and help slow their rates of economic decline. Doing so would in turn help stabilize outlying rural communities, he said.

“But that’s a hard sell because it sounds like you’re picking winners as opposed to giving just a little bit of money to everybody that doesn’t do anything,” he added.

Iowa’s population trends

The largest town in 38 of Iowa’s 99 counties has fewer than 5,000 people, while in an additional 24 counties, the largest town has fewer than 10,000, according to a report on the Iowa Legislature website. These 38 counties are consequently considered rural.

According to data from the U.S. Census Bureau, 69 of Iowa’s 99 counties had population declines from April 2010 to July 2018.

The areas that saw population gains were limited mostly to metropolitan cities such as Des Moines, Cedar Rapids, Ames, Iowa City and Dubuque. Other urban cities with more limited growth are Sioux City, Council Bluffs and Waterloo.

In the 10 years since the Great Recession, Iowa’s overall population has grown to an estimated 3,156,145 people. In 2010, Iowa’s total population was approximately 3,050,000, according to U.S. Census Bureau data.

By 2020, the population is projected to grow by 100,000 people, according to data from Woods and Poole Economics Inc. in Washington, D.C.

Searching for practical solutions

Aside from awarding money to businesses and communities that apply for it, what has the state been doing to address economic decline in over two-thirds of its counties and encourage overall growth?

“Virtually nothing,” Swenson said. “The state’s rural economy has consistently declined for the last 25 years. And notwithstanding lots of language and some money and the name of rural development, very little of it has produced net growth in selected rural areas.”

He said that over time, rural development in Iowa has been more of a political matter than a practical one.

While past efforts have not yielded booming results, efforts are underway in state government to find solutions to reverse, or at least slow down, rural decline.

On April 24, the Iowa Legislature unanimously passed an Empower Rural Iowa Act that addresses several rural concerns, including expanding broadband internet access to rural areas and providing housing credits for people affected by spring 2019 flooding.

Last July, Gov. Kim Reynolds created the Governor’s Empower Rural Iowa Initiative. The initiative called for the creation of an Office of Rural Affairs, as well as three task forces to address specific rural issues.

The task forces’ initial recommendations, published in December, called for the Office of Rural Affairs be the primary point of contact for small communities to access programs that support rural areas.

The three task forces — Investing in Rural Iowa, Growing Rural Iowa and Connecting Rural Iowa — focused on rural housing, leadership and broadband access, respectively.

Bill Menner, executive director of the Iowa Rural Development Council and founder of the Bill Menner Group, has worked with Reynolds on this effort. She asked the Iowa Rural Development Council to partner with her to create the Empower Rural Iowa Initiative, along with 66 appointed task force members.

“Those task force members met on a number of occasions, gave some recommendations to the governor,” said Menner, of Grinnell.

Legislation was introduced in both chambers of the Iowa Legislature that reflected Empower Rural Iowa Task Force recommendations, such as money for broadband to rural areas and expanding Workforce Housing Tax Credits, Menner said. The House bill emerged from the Ways and Means Committee April 10 with a recommendation for passage.

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The bill includes $25 million for the Workforce Housing Tax Credit program. It also includes provisions to expand the state’s broadband grant program to assist service providers in underserved rural regions, a goal that the Connecting Rural Iowa Task Force was working toward in 2018.

Kiana Johnson, the executive director of the O’Brien County Economic Development Corporation in Primghar and also a member of the Investing in Rural Iowa Task Force, said the Workforce Housing Tax Credit has been a great tool for her in O’Brien County and has enabled more housing projects.

The Workforce Housing Tax Credit assists Iowa communities with housing projects. That tax credit currently has about $5 million set aside for rural communities in Iowa’s 88 least populous counties.

Federal money has a role

Beyond work by the state task forces, small towns also benefit from aid from federal government agencies, such as the USDA, Small Business Administration and Environmental Protection Agency.

“What the state can do is important but if you’re a small town you have to look at lots of different sources to make things happen,” Menner said.

“The state has a lot less invested in rural Iowa than the federal government,” Menner said. “The federal government spends many, many, many times more in rural communities than the state does.”

Humeston is a great example of that, Menner said. “USDA helped finance their water system,” he said. “When I was the state director of USDA Rural Development, during my seven and a half years there, we made loans and grants of about $5 billion. That’s just one agency of the federal government.”

Whether or not they have received millions in government aid or none at all, rural counties in Iowa — especially those not connected to micropolitan centers — face a host of economic challenges that financial assistance has not resolved.

‘A lot of housing has gone downhill’

In Wayne County, workforce and housing needs are ever-present dilemmas facing the county’s small communities. County Supervisor Dave Dotts said workforce and housing often go hand in hand.

Dotts said a battery factory in Corydon, East Penn Manufacturing Co Inc., plans to expand and add 400 new jobs. While hiring more workers might be beneficial for the company and the town’s tax base, the influx of more people into the community will highlight problems finding needed housing that is adequate for new workers.

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“Because people have left, you know, a lot of the housing has gone downhill,” Dotts said. “So that’s a big challenge, finding workers and then finding housing for them.”

Dotts said the factory has been attracting people from other communities in the county, like Humeston and Seymour, as well as people from nearby counties.

He said middle-income housing is needed for working people. The median house value in Wayne County between 2013 and 2017 was $74,700, while the median household income was $42,434, according to the U.S. Census Bureau.

In Humeston, local Realtor and small business owner Leigh Ann Coffey said she has struggled to find homes for young families moving to town. She described one instance where she was unable to find a suitable home for a family with six children; instead, she had to look in Corydon to find an appropriate house.

But while several existing homes in Humeston have fallen into disrepair, Coffey said she sees signs that things might be changing.

“I think the change that I’m seeing is that people are starting to move into town that are putting money into the homes,” she said.

Three hours to the north, in rural Hancock County, Jill Kramer identified similar housing obstacles facing her county.

Kramer, executive director of the Hancock County Economic Development Corp., said workforce needs — particularly attracting new employees to the county — and affordable housing topped the list of problems facing Hancock County.

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The median household income in Hancock County from 2013 to 2017 was $57,840, while the median house value in the county was $97,600 during that same period, according to the U.S. Census Bureau.

In Allamakee County, McCormick said housing exists but too much of it is inadequate or unaffordable. Rental properties are in short supply, she said. In some instances several rundown houses that need to be fixed up or else torn down are available, she said.

“You know, somebody’s not going to move to your community and take a job if there’s nowhere to live,” McCormick said.

She and Kramer acknowledged state efforts to help Iowa communities with housing difficulties.

Kramer said cities in Hancock County, such as Forest City and Garner, have received assistance from the Workforce Housing Loan program. That program provides loans to the communities at low interest rates to help pay for needed housing projects.

On a local level, she said, towns such as Britt also are giving free lots to people who agree to build a house on the property. She said the town has a little more than one dozen lots ready to be given to prospective builders.

Exodus of young professionals

McCormick said retaining young adult workers is key to making sure rural areas in Iowa continue to stay vital. However, the realities of the rural Iowan economy, dominated by the agricultural and manufacturing industries, might deter college-educated professionals from locating to rural communities.

According to the American Community Survey, the median age in Humeston was about 47 in 2017, a number that has changed little since the 2000 census.

Swenson said a sharp decline in workers age 35 to 44 in non-metropolitan Iowa has an impact on manufacturers in small towns trying to hire workers. “Larger cities outbid rural areas,” he said.

If he were to ask a class of undergraduate students from Iowa how many of them would move back to their hometown after getting their degrees, Swenson said fewer than 5 percent would raise their hands.

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“They already are oriented to go someplace else,” he said. “They don’t come back.”

This story was produced by the Iowa Center for Public Affairs Journalism-IowaWatch, a nonprofit, online news website, and the Simpson College Journalism Seminar. Reporters for the project were: Randy Paulson, Zoe Seiler, Emily Carey, Austin Hronich, Taylor Bates and Dustin Teays. Read more at IowaWatch.org.

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