Hostile takeover?

By Cameron Rasmusson
Reader Staff

If Sandpoint seems isolated, nestled away under a canopy of trees and mountain peaks, it doesn’t take much to dispel the illusion.

Within the past five years, the town has attracted an explosion of outside attention, ranging from the other end of the country to the other end of the globe. What’s motivating this sudden interest in Sandpoint? As usual, it’s the drive for a good business deal, and more than ever, powerful companies are finding paths to new growth in Sandpoint entrepreneurs.

In February, airplane manufacturer Quest Aircraft, a major local employer, was purchased by a Japanese conglomerate, Setouchi Holdings. Then in April, Minnesota-based company Polaris Industries purchased local company Timbersled Products, a maker of snowmobile suspensions and conversion kits. They’re just two recent examples of major local companies being scooped up by out-of-state players—within recent years, Panhandle State Bank and Lead-Lok also completed business deals with larger out-of-state companies. Litehouse Foods went through a different kind of sale in December 2014, initiating an Employee Stock Ownership Plan and giving its staff ownership of the company.

The acquisition of Sandpoint-grown businesses in recent years has caused its share of consternation and speculation. What if new management moves jobs out of town? What if new priorities eliminate the style of services or products locals have come to enjoy? While those worries do have some foundation, regional economists draw more positive than negative conclusions from the business deals.

Idaho Department of Labor North Idaho Economist Sam Wolkenhauer said Bonner County has dodged one of the problems its neighbors in Kootenai County are experiencing. His data suggests that by introducing greater resources to local companies through acquisitions, local populations are able to grow at a faster yet still organic rate. By comparison, Kootenai County has succeeded in relocating new businesses into the community, an approach that triggers huge growth spurts and accompanying growing pains. After all, adding hundreds of new residents into existing infrastructure all in one go is no easy task.

“It can be really traumatic to absorb such quick population growth,” Wolkenhauer said.

By contrast, the gradual expansion of existing local companies facilitates easier transitions. Quest Aircraft’s purchase by Setouchi Holdings, for instance, allowed the company to fast-track its growth strategy, resulting in a a facility expansion and eventually, an increase in workforce and output of its Kodiak aircraft.

Quest is an example of a company that is largely unchanged following its purchase. The same leadership team remains in place and the company goes about business as usual. However, that’s not always the case. The process of restructuring following a purchase by a larger company can change the composition of the work force or the type of jobs it offers. As far as a local economy is concerned, the real question is whether there’s a net wage increase or decrease on average.

According to Alivia Metts, economic consultant for the Metts Group, there’s no easy way to predict whether the restructuring process will be positive or negative for a local community.

“There are a lot of factors that go into play in situations like these,” Metts said.

While companies are always seeking to increase efficiency and reduce costs, they can’t simply slash wages if they’re seeking to maintain a local workforce. Indeed, Wolkenhauer said he’s only seen an increase in Bonner County personal income over the past few years of data, and the potential redirection of revenue outside the community isn’t a major problem either.

“Capital outflows are not a significant issue,” he said. “A lot of it is just reinvested locally.”

The real fear comes from out-of-state companies who shutter local operations and move them to a new headquarters. In late summer of 2014, only months after finalizing its purchase of biomedical device manufacturer Lead-Lok, New York-based company Graphic Controls threatened to move its acquisition out of town. State incentives for business expansion combined with the limited growth potential of its existing facility, the Bonner Business Center, added up to a good business decision for company leaders. It just so happened to be a bad deal for Sandpoint, resulting in the loss of dozens if not hundreds of direct and indirect jobs.

Jeremy Grimm, then the director of Sandpoint Planning and Zoning Department, worked out a deal for Lead-Lok to expand throughout the whole of Bonner Business Center facilities. That meant evicting the other tenants, a sacrifice that was not easy to take for anyone involved. But just a few months after Coldwater Creek’s closure, the city was firmly in economic crisis mode.

“There was a stretch right after the Coldwater Creek bankruptcy where I thought we were going to lose Quest, Tamarack, Lead-Lok and Kochava,” Grimm said.

That close shave notwithstanding, North Idaho economists and development advocates see largely positive signs from recent acquisitions.

It’s a trend Grimm sees as reaching back to the 1980s, when Sandpoint’s community leaders realized the town couldn’t get by forever as a tourism and resource extraction hub. The response: Sandpoint Unlimited, a campaign that aimed to attract additional attention from businesses and out-of-towners.

Sandpoint Unlimited paved the way for additional economic development in the decades to come. The Sandpoint Urban Renewal Agency, created in 2005, revised local taxation districts to fund economic development projects like improvements at Sandpoint Airport or the Panida Theater restoration. The Greater Sandpoint Chamber of Commerce initiated a number of business-boosting efforts. Karl Dye led the Bonner County Economic Development Corporation for many years, while the city conducted its own development projects, which will soon fall under the purview of a new city administrator position.

“Much of the economic activity I’ve seen has stemmed from the work of people like Jeremy Grimm and Karl Dye,” said Metts. “And some of these high-tech companies like Kochava and [drone manufacturer] X PlusOne that are leading their industries really make other companies take notice of Sandpoint.”

Sandpoint itself probably has something to do with the interest from outside companies, too. In fact, many local business leaders have said they’ve stayed in town simply because they and their employees like living here. According to Grimm, the community’s unusual work-hard play-hard culture is its secret ace in the hole, an X-factor that seems to encourage creative thinking.

“This is an innovative, dynamic community, and we’re creating things the world wants,” Grimm said.