Small towns in S.D. facing big challenges amid pandemic and historic declines

Nick Lowrey and Bart Pfankuch, South Dakota News Watch

Editor’s note: This article is the first of three parts of a special report by South Dakota News Watch called “Small Towns — Big Challenges.”

The COVID-19 pandemic could not have come at a worse time for many of South Dakota’s small towns.

The deadly virus has further complicated the already herculean task of keeping cherished rural communities vibrant and reversing a historic downturn in population and economic stability.

Though mostly spared from major outbreaks, small towns that once served as the backbone of rural South Dakota have been stung by the indirect economic and emotional outcomes of the pandemic.

Revenues have fallen at main street businesses critical to maintaining a high quality of life. Even before the virus, many such businesses were struggling to stay afloat as their customer bases continued to shrink amid a long-term decline in agriculture incomes, the flight of young people to more urban areas, a shortage of affordable housing and limited health-care options.

Morale has dropped and community spirit has waned during the pandemic as summer festivals and local events have been canceled, school districts have ended in-person classes, sporting events and graduations, and the brief conversations and personal interactions so common in small towns have become scarce.

As of 2019, 38 of South Dakota’s 66 counties saw population declines. Rural populations are getting older, too. In 2016, people over age 65 accounted for 18% of rural populations, a 22% increase from the year 2000. The percentage of people under 18 in rural counties declined by 9% during that period.

Without hardware stores, hospitals, grocery stores and restaurants, small towns have become less attractive, and the treasured way of life people lead in them could be changed forever.

The historic and recent downturns have been most acute in remote small towns that rely heavily on agriculture and its long reach across rural economies.

Over the past 40 years, higher costs for land and equipment combined more recently with low prices for grain and livestock have been a big part of the consolidation of farms and ranches that reduce opportunities for new or young farmers.

Today, young adults such as 20-year-old Logan Wolter, who grew up raising cattle with his family near Wessington Springs and who wants to settle in his hometown, are struggling to forge a life in agriculture.

Wessington Springs is a town of 925 people located about 45 miles northwest of Mitchell; it has lost 14% of its population in the past 30 years. The town doesn’t have enough jobs to allow many young people to stay after high school or to return after graduation. Wolter said he watched the exodus of his peers away from their hometown and sees it worsening with time.

“You definitely see it every year, there are fewer and fewer young people around and more older farmers,” Wolter said.

Wolter wants to own a ranch but can’t afford to buy land or acquire enough cows to compete with increasingly large-production operations. After graduating tech school this year, he took a job at a ranching retail operation and is living in a rental home outside Wessington Springs while he saves money to someday start his own ranch and start a family.

“I want to live in a small town, absolutely, and be a part of a small community,” Wolter said. “I see it all the time, not just in my small town, but all around the area, whether it be before the virus impacted all of us or now, there’s just a lot of simple acts of kindness.”

But he and others seeking a small-town lifestyle face an uphill climb. The average price of agricultural land in South Dakota has increased more than 500% since 1991, even accounting for inflation. The number of large crop farms and concentrated livestock operations have both risen steadily in the past 20 years in South Dakota.

Small towns such as Wessington Springs were built by groups of people who needed places to buy hardware, sell their grain, attend church and gather with neighbors. Those small towns eventually became the bedrock of social, economic and political life upon which the state was built, said South Dakota historian and author Jon Lauck.

“The small town was the heart and soul of South Dakota,” Lauck said.

There is some reason to worry that small towns will decline further and faster due to the pandemic. Temporary or permanent business closures in the spring caused South Dakota’s unemployment rate to more than double to 10.2% in April. Widespread unemployment has historically presaged large migrations out of rural areas and into cities as people look for work.

Business at the Miller Rexall Drug store in Miller plunged 15% almost overnight in March, said co-owner and pharmacist Travis Anderberg. He took out a federally backed Paycheck Protection Program loan to help keep his employees on the payroll and remain tied to their hometown during the pandemic.

“We have businesses that, just like people are month-to-month waiting on paychecks, they’re month-to-month waiting to pay their utility bills and pay their employees,” Anderberg said.

Potential silver linings amid pandemic

But not all the news related to COVID-19 is grim for South Dakota small towns.

While the pandemic has hobbled many businesses, some others have flourished. By the end of May, both the towns of Miller and Wessington Springs had actually taken in more sales-tax revenue so far in 2020 than in 2019. Dozens of small towns around South Dakota also had seen increases in sales-tax revenue as residents increasingly turned to local stores for groceries and hardware.

While his business has yet to return to pre-pandemic levels, Anderberg attributed Miller’s sales-tax bump to more residents shopping local and traveling less.

“I’ve noticed that they’ve been very supportive of the local businesses, and I would like to see it stay that way,” Anderberg said. “We are optimistic that that’ll be the case when things get back open.”

Randy Boesem knows both the benefits and the hardships of living in a small town like Newell in southern Butte County, a town of 583 people known for sheep ranching that has seen its population fall by 20% in the past two decades.

Boesem runs the Tri-County Locker butcher shop in downtown Newell and benefits from being the only butcher in a town with only one small grocery store down the block.

Boesem has also seen his business improve due to the COVID-19 pandemic and the outbreaks that have shut down or slowed major meatpacking plants in South Dakota and across the country.

In one recent day, he butchered three cows and four pigs owned by ranchers who couldn’t get their animals butchered anywhere else and said he is booked through the summer with processing jobs.

Yet Boesem has seen Newell falter slowly but steadily during his 12 years of living and working in town. Some businesses have struggled to stay open, including the small grocery, which is now up for sale.

“It’s the way a lot of small towns are going, just sort of dying away,” Boesem said.

Newell, like some other South Dakota small towns, has a modern school but no hospital, and its downtown is home to several empty storefronts and local streets made up of gravel or pitted pavement.

He said many locals do their shopping where they work, including a large number in nearby Sturgis or Belle Fourche, which makes it hard for local businesses and the community to thrive.

“Everybody has to go so far for work because it’s hard to make a living in town,” he said. “The town needs some more people to make it go, to help it survive.”

In fact, there may be some good news on the population front for small towns. New research is showing a trend among Americans ages 30 to 49 of moving to small towns either as a way to return to their roots or for less-expensive housing and better schools.

The pandemic has caused an exponential growth in the number of people working from home. As working remotely becomes more widely accepted, some people may make the choice to move out of urban centers and into rural communities, said Joe Bartmann, president of Dakota Resources, an organization that helps fund rural development projects.

Moving forward, the way to save small towns might be less about keeping 20-year-olds close to home and more about embracing ex-urban families looking for more space and a better quality of life.

South Dakota’s small towns, though, will have to work hard, make tough decisions about job creation, housing and health care, and in some cases remake their economies if they want to attract new residents. In addition, communities will need to invest in affordable housing and fast, reliable internet to maintain and improve their residents’ quality of life, Bartmann said.

“We’re going to have to resist the urge to just rebuild what we had because the way of being in a rural community that we knew is going to be different, it’s going to no longer be there,” Bartmann said. “So what we’ll be learning over these next few months is how to be resilient in whatever that future is that’s going to be emerging.”

A critical element of rural American life may be at stake. A continued decline of small towns would fundamentally alter the character of South Dakota and other Midwest and Great Plains states that are experiencing similar declines.

Arthur E. Morgan, an author and champion of the American small town, once wrote that if small communities faded out of existence, so too could the traits of fair play, good will, neighborliness, tolerance and courage that underpin democratic life in America. The consequences could be dire, Morgan warned in his 1942 book, “The Small Community: Foundation of Democratic Life.”

“A people rich in these qualities will develop a great civilization, with great art, science, industry, government,” Morgan wrote. “If these basic qualities fade, then no matter how great the wealth, how brilliant the learning, how polished the culture, that civilization will crumble.”

Retaining young people important but difficult

One of the things leaders in small towns should reduce post-pandemic is how much time and effort they put into trying to keep high school graduates from leaving town for anything other than college or technical school.

For generations, young people have left small towns to chase their dreams, find a mate or seek good-paying, entry-level jobs in bigger cities.

Trying to keep 20-somethings from seeking greener social and economic pastures in big cities is nearly impossible, said Ben Winchester, a University of Minnesota extension service researcher who focuses on small towns.

“In many ways … we’re always going to experience a ‘brain drain’ because 18- to 25-year-olds, they flock to metros,” Winchester said.

Instead of trying to hold them back, small-town officials ought to focus on welcoming people 30 or over who have established themselves in careers, started families and may want a house with a yard and a boat in a safe community.

Research shows that many Americans want to live in small, rural communities. A 2018 Gallup poll found that 27% of Americans would prefer to live in a rural area if given a choice. New research also shows the millennial generation, Americans born between 1981 and 1996, are leaving big cities they once flocked to. About 28% of millennials polled by Gallup in 2018 said they would prefer to live in a smaller town or rural area.

Kecia Beranek is one of those millennials who left home for college and better job opportunities, then gained some experience and returned to a small town. She grew up in Freeman, a town of about 1,200 in southeast South Dakota. Beranek earned a bachelor’s degree from Black Hills State University in Spearfish and took a job with the Deadwood Chamber of Commerce after graduating.

After two years in Deadwood, Beranek bought Willie’s Bar in the town of St. Lawrence and moved to Miller, a town of around 1,300 in Hand County. St. Lawrence is about a mile east of Miller on Highway 14. Beranek had married a Miller native and they moved into the home her husband grew up in.

Now, Beranek is the executive director of the On Hand Development Corp. In Miller, economic development may include helping new arrivals find child care or a place to live. Through the pandemic, Beranek has helped business owners build Facebook pages or websites, and she has organized meetings to create reopening plans. In October 2019, Beranek also became a part owner of the Turtle Creek Steakhouse in downtown Miller.

“You wear a lot of hats in a small town,” Beranek said.

She wouldn’t have it any other way. Part of living in a small town is that it almost requires someone to be involved with the community. Beranek, for example, bought into the Turtle Creek steakhouse with 10 other Miller residents, in part because it was one of three restaurants or bars in Miller that shut down before the 2019 pheasant season. The loss of all three establishments would have been devastating to the community, Beranek said.

“We just bought it last October to basically save it so that Miller would have a place to eat,” Beranek said. “Miller is extremely good about working together and coming up with solutions for stuff like that.”

Beranek’s path out of and back to small-town life isn’t unique, Winchester said. His research on small towns in Minnesota found a significant trend of 30- to 49-year-olds moving to rural small towns. The reasons for moving to small towns are varied, Winchester said, but center more on safety, affordability and quality of life than returning to roots.

Now, the COVID-19 pandemic appears to be inspiring more people to look at moving to small towns.

“We’ve seen some rumblings of this already. There is some interest now, post-COVID, in less-dense living,” Winchester said.

Lack of housing hinders growth

One of the problems small towns face in attracting people from cities and suburbs, Winchester said, is that there are not enough affordable homes in good repair in many small towns.

In Arlington, a town of about 860 about 20 miles northwest of Brookings, there are only four homes on the market. They range in price from just shy of $75,000 to $189,000. Only one of the homes, a six-bedroom, one-bath ranch style, is less than 100 years old. It was built in 1964.

Arlington saw its population decline from 915 in 2010 to 859 in 2019, according to the U.S. Census. Kingsbury County, where most of Arlington is located, also used to have the oldest population in South Dakota, said Marshal Mix, executive director of the town’s economic development corporation.

Many older residents didn’t want to leave the community they had spent decades helping to build, but there isn’t any senior-targeted housing in Arlington, so older people stayed in their homes, often well past an age where they could maintain them, Mix said.

“We don’t have assisted living, we don’t have single-story duplexes,” he said. “You need an investor for that.”

A 2019 report from the Federal National Mortgage Association found that Americans born between 1931 and 1941 were at least three times more likely to stay in their homes between the ages of 67 and 82 than people born before 1931. The generation born between 1931 and 1941 kept 1.6 million homes off the market in 2018, a year that saw demand for homes exceed supply by 2.5 million nationwide.

“There’s a finite number of homes right now and one of the issues that we’ve got going on is that a whole third of our rural homeowners are over the age of 70,” Winchester said. “When you think about the Baby Boomers, that’s another 45% of rural homeowners.”

In addition to keeping homes off the market, having a higher percentage of older homeowners runs the risk that what housing stock does exist will fall into disrepair or be modified to accommodate aging in place to the point that younger families will not be interested, Winchester said.

Rural communities need to start thinking of their existing housing stock as a community asset, Winchester said. While homes might be privately owned, they play an important role in any small town’s overall economic fortunes.

Taking a more active approach in helping older people maintain their homes, as well as looking for ways to provide alternative housing for older people who want to keep living in their hometown but can’t properly maintain their homes, can go a long way toward making a community an easier place for young families to move to.

“We have to be careful about what kind of housing we’re passing on,” Winchester said. “In many ways, we should be proactive in helping our seniors keep their homes habitable and able to pass that asset on to the next generation.”

An innovative, new development project aims to provide affordable housing options both for new families and retirees in the central Black Hills hamlet of Hill City. The town is one of several rural South Dakota communities that have seen rising populations and a consistently strong economy due to a scenic location and tourism-based revenue structures.

The town located about 25 miles southwest of Rapid City has seen its population rise by 45% over the past 30 years, from 703 in 1990 to 1,018 in 2018.

So far, COVID-19 has caused financial pain for several Hill City businesses and may cut into spring sales-tax collections, but the pandemic does not seem likely to alter the upward trajectory for the town and may actually boost visitation to smaller, regional, more nature-based tourism destinations, said Mayor Kathy Skorzewski.

“The coronavirus is starting to take a mental toll on people and they just want to get out,” she said. “We may have a lot of people taking driving trips rather than flying somewhere.”

The town’s good fortune, though, has created a problem — a lack of housing. The town does not have much buildable land and has seen home prices escalate rapidly, making it difficult for young adults and families, including teachers, to move to town. But now, after more than a year of planning and preparation by the Heart of the Hills Economic Development Corp., new housing is on the way.

The development corporation was able to recruit a Rapid City developer to build a new subdivision focused on affordability. Hill City’s new housing project, called the Bull Run subdivision, will bring up to 39 new single-family homes, some of them “tiny homes” of 500 to 600 square feet and a starting price of $169,000.

Housing, though, isn’t the only thing South Dakota’s rural communities will need to work on in the pandemic’s aftermath.

Economic diversification needed to spur growth

While it is extremely difficult to predict how rural South Dakota’s economy will be affected by COVID-19, one thing it has done is bring renewed attention to the need to diversify small-town economies.

Farmers and ranchers, long the bedrock of small-town life in South Dakota, have been declining in number as their operations consolidate in response to rising costs and lower commodity prices. Small towns, and their restaurants, hardware stores and banks, in turn, have had fewer people to serve.

Poor agricultural market conditions, particularly the low prices paid to cattle producers, have hurt the town of Faith for some time, said city Finance Officer Debbie Brown. Once a railroad hub, Faith is now mostly dependent on agriculture and pass-through traffic on U.S. 212 and State Highway 73. The town has seen the same historical population decline as other farming-dependent small towns in South Dakota. Topping off at more than 600 residents in 1950, the population fell to 489 in 2000 and is now at 413, a loss of 30% over that 70 years.

The COVID-19 pandemic has hurt some local businesses, including the town’s restaurant, bar and gas stations, but has been a boon to the local lumber company because ranchers and their children have taken on numerous home- and farm-improvement projects during the slowdown, Brown said.

Growth in Faith and other small towns is often stymied by a lack of non-agricultural employment opportunities, Brown said.

“A lot of it is jobs; there’s not a lot of jobs within the community that are open and when they do open up, they go quickly,” Brown said.

Brown’s adult son is committed to living a small-town lifestyle and remaining close to family, but in order to do so, he must commute to North Dakota and live on the road five days a week as an electrician in the energy industry.

COVID-19 outbreaks forced meat-packing plants across America to close for several weeks in April, causing major disruptions in food supply chains. Potentially millions of cows, pigs and chickens had to be euthanized, largely at producers’ expense. Grain and soybean prices, meanwhile, remain low, and farm incomes in the Dakotas appear to be falling. A recent Minneapolis Fed survey of banks that lend money to farmers in the Dakotas and Montana found nearly 80% of lenders were reporting declines in client incomes.

“This is the latest in a succession of things that I found myself saying, ‘Boy, this is happening at the worst possible time for agriculture,’” said Joe Mahon, regional outreach director for the Minneapolis Federal Reserve Bank. “We had this period going into 2017-2018 of four or five years of suppressed commodity prices and reduced agricultural incomes. And then we kicked off a trade war and U.S. soybean exports fell through the floor. Now we have COVID on top of that, so it’s definitely not good news.”

In Alcester, a town of 755 on U.S. 11 about 50 miles south of Sioux Falls, the pandemic’s effect can clearly be seen in sales-tax collections. Compared with 2019, Alcester saw a 27% decline in sales-tax collections through May 2020, according to the South Dakota Department of Revenue. Pandemic-related closures of several key downtown businesses were largely responsible for the losses, said Alcester Finance Officer Pat Jurrens.

Alcester has seen a steady decline in its population over the past couple decades. Between 2000 and 2018, the town’s population shrank by 14.5%. The ag economy’s struggles certainly played a big role in Alcester’s economic fortunes, Jurrens said.

But that is beginning to change due to an unexpected shift in the local economy. The town has become a hub of sorts for hair salons, Jurrens said. Four salons in the town draw people from a wide swath of southeastern South Dakota, she said.

Alcester is also home to a pair of small manufacturers: Leisure Sports, which makes paddles and oars for canoes, kayaks and rowboats; and Custom Coils, which builds electrical equipment. Neither manufacturer has shut down or laid employees off during the pandemic, Jurrens said, boosting the town’s hopes for a rapid recovery over the summer.

“We are very hopeful that we can get back to normal and get businesses back open,” she said.

The recent addition of a fiber-optic internet connection promises to be a boost to the town’s economy, Jurrens said. The town is close enough to attract commuters from both Sioux Falls and Sioux City, Iowa — each about 45 minutes away — and has also begun to attract remote workers. One family recently moved to Alcester specifically because the town’s schools produce good results and because one parent could easily work remotely for a Sioux Falls bank, Jurrens said.

“We are definitely seeing some movement into town,” Jurrens said.

The COVID-19 pandemic has shown that fast, reliable internet connections will be crucial to the futures of rural small towns, Mahon said. The need for good internet access isn’t exactly new, but with nearly a third of American workers and nearly all of the country’s high school and college students working from home, the pandemic has sharpened the focus of economists and policymakers on the issue, Mahon said.

“These are things that people all over our region, in rural communities, have been saying for a long time,” Mahon said.

Some estimates peg the number of U.S. employees who could work remotely at least part of the time at 75 million. Several well-known tech companies such as Twitter, whose employees have largely been working remotely during the pandemic, have gone so far as to say many employees will be able to continue working from home after the pandemic.

Rural communities, meanwhile, have struggled with a lack of job opportunities for decades, Mahon said, and remote work has the potential to partially solve that problem.

“It could, kind of, create a virtuous cycle in some places,” Mahon said. “Where having the opportunity to work remotely in a well-paying, professional job, but doing it in a smaller town or on a farm, then creates a larger labor pool of people” who can remain employed and stay in small towns.

South Dakota ranks 35th of the 50 states in terms of average internet speed. The state’s average download speed is 17.38 megabits per second; the national standard is 25 mbps.

Gov. Kristi Noem has made rural broadband internet expansion a priority for her administration. She asked the state Legislature for $5 million to help private and public entities build out broadband internet infrastructure in the state during both the 2019 and 2020 legislative sessions. Both requests were approved, though the fate of the 2020 funding may depend on how hard South Dakota’s budget is hit by the pandemic’s economic consequences.

Still, the future is uncertain, and many rural communities hoping to capitalize on a permanent, national shift toward remote work will need better internet connections than they currently have, Mahon said.

Nowhere in South Dakota is the need for better communications infrastructure more acute than in the state’s tribal communities.

Efforts underway to improve small towns on reservations

The population decline besetting many rural small towns in South Dakota is not playing out in the small towns on or around the state’s nine Native American reservations.

Tribal communities historically had higher birth rates than other areas and have younger, growing populations as a result. Oglala Lakota County, for example, saw its population rise from 13,636 to 14,309 between 2010 and 2018, according to the Census Bureau. People age 60 or more made up about 11% of the county population in 2018, compared with 23.2% statewide.

Though individual situations vary widely, many young Native Americans stay in the town or region where they grew up, said Tawney Brunsch, executive director of Lakota Funds, a Native American Community Development Financial Institution that since 1986 has made loans and provided economic support to businesses and agricultural operations on the Pine Ridge Indian Reservation.

Brunsch, an enrolled member of the Oglala Lakota Sioux Tribe, said small towns on reservations tend to retain significant numbers of young people because there is “a strong connection to family and a familiarity.”

“It’s a strong potential workforce but unfortunately, until we get the economy developed and there are jobs for them, unemployment remains very high,” Brunsch said. “You’re talking about generational poverty, but also three or four generations that haven’t worked, and it’s not that they don’t want to work, it’s that there are no jobs.”

The steady population growth has also led to a housing crisis in towns like Kyle and Pine Ridge, where so many people sometimes live in one house for so long that the physical structure of some buildings is worn and unsafe.

Yet, Brunsch remains hopeful, and sees some opportunity from the pandemic in that it may lead to investment of federal emergency money into infrastructure such as internet access, housing and industry.

She is also hopeful that the pandemic may spur tribal governments to develop long-range plans to grow the economy, stabilize housing and provide for food sovereignty and security.

“I do hope that all this will have some long-term benefit to us,” Brunsch said. “Hopefully, it will result in more families achieving home ownership and the development of our own economy.”

Small-town residents and officials across South Dakota share Brunsch’s hopes.

The South Dakota economic development community tends to put too much emphasis on recruiting large firms and trying to find employees for them, said Bartmann of Dakota Resources. Not enough has been done to create business environments that support local entrepreneurs and remote workers, he said.

“It’s about rethinking economic development as building ecosystems to support those remote workers, to support those entrepreneurs who are starting a company and don’t need all their employees to be here in Montrose or Menno or wherever. It’s about learning to focus on helping entrepreneurs grow whatever they’re growing and helping people who want to build a thriving career,” Bartmann said.

By using the pandemic as motivation to make changes, local leaders can improve the economic fortunes and futures of South Dakota small towns for generations to come, said Skorzewski, the mayor of Hill City who grew up in Chicago but settled in the Black Hills.

“They’re really the cornerstone and building blocks of the state,” Skorzewski said.“These small towns give South Dakota its own unique identity. You can really feel the community values that you just don’t get in a metro area, and that’s certainly worth protecting.”