O Pioneers! Reversing the Great Plains drain

With a New Homestead Act before Congress, one small Nebraska town has already taken strides toward revival.

Across the Great Plains, in small towns like this , the pattern was set decades ago - and it traveled predictably from town to town, county to county, as if swept on the prairie winds that rustle through the waist-high golden grasses here.

Businesses shuttered their doors, schools closed, and towns emptied out. It wasn't a novel tale in the heartland, but a refrain. Since 1980, some 700 rural counties have lost at least 10 percent of their population. Seventy percent of those on the Plains saw population declines averaging 30 percent.

The numbers carry an unwelcome message here: Migration from Plains states - cutting a swath from Texas to North Dakota - foretells a march toward extinction for countless small towns.

The New Homestead Act of 2003, now being considered in Congress, is an aggressive attempt to outflank that trend and repopulate withering rural communities. Through a host of monetary incentives, ranging from forgiveness of college loans to tax credits and venture capital, the proposed legislation aims at luring small businesses, entrepreneurs, and young people to America's floundering small towns.

"This is a big piece of legislation," says North Dakota Sen. Byron Dorgan (D), who authored the bill along with Nebraska Sen. Charles Hagel (R). "It provides significant tools for rural communities to try to reclaim and recapture economic growth." With 17 Senate cosponsors - both Democrats and Republicans - it has wide support. The bill's provisions include:

• Repayment of up to half of college loans for those relocating to areas of high outmigration; tax credits for home purchases; tax-exempt retirement accounts.

• Tax credits for businesses to locate or expand in rural counties.

• A $3 billion venture-capital fund to promote rural business development.

The Stratton story: 'A Good Place to Grow'

In the southwest Nebraska hamlet of Stratton (pop. 423), people not only leave their keys in the car; they leave cars running when they duck in at the grocery store. Grain silos and a water tower are the only structures taller than the steeple of St. Joseph Catholic Church. Here, a program like the New Homestead Act could mean the difference between surviving and slowly fading away.

Settled in 1879 by homesteaders, Stratton reached its peak population in the 1930s. It's been on the decline ever since. In the past 10 years, the county has had the biggest outmigration in the US and the highest population loss in the state. A decade ago, after Stratton's farm-implement manufacturer closed, the economy hit bottom, and morale plummeted.

But the no-stoplight town has made strides. And Strattonites, whose ancestors built sod houses and chopped into the prairie for tillable soil, dug in once again. They formed committees to attract new businesses, retain old ones, and spruce up the town. They lined Main Street with banners proclaiming "Welcome to Stratton," and set out half-whiskey barrels full of flowers. They posted the town motto, "A Good Place to Grow." And pretty soon, optimism filled the air, says Stratton's mayor, Rich Bernt.

When Timber Creek Homes, which makes manufactured houses, decided to base operations here two years ago, it was "a major coup," says Mr. Bernt, who is also vice president of the local bank that helped lure the company. Between attractive financing and a $500,000 state grant, Stratton sealed the deal.

Timber Creek now sits across from the Dairy King, employs 40, and expects to increase its workforce to 60 next year. Company president Charles Pelkey says business is thriving, and living and working in a small town is a bonus. "I'm very glad we chose Stratton," he says.

Such success stories are exactly what proponents of the New Homestead Act hope to cultivate. "It will provide the incentives, and also strengthen the economy in the area," says John Stencel, president of the Rocky Mountain Farmers Union in Denver.

The draw of diversified economies

Phil Menke, a business specialist with the Rural Enterprise Assistance Project (REAP), spend his days helping rural Nebraska communities survive. REAP, an arm of the Center for Rural Affairs in Walthill, Neb., is a nonprofit that helps entrepreneurs create business plans and apply for loans. He believes the legislation can't help but aid economic development: "Any tax legislation that creates additional incentives is an advantage."

Moreover, given the state of the farm economy, "it's critical to have off-farm employment," says Mr. Menke. And even as locals complain about NAFTA and the paltry return for a bushel of wheat, they acknowledge that their future depends on a diversified economy. "If we live and die with agriculture, we will live and die with agriculture," says Bernt.

And without more prospects for young people, the death rate in towns like this will outstrip the birth rate. "Youth retention is our No. 1 problem."

Under the original Homestead Act of 1862, pioneers settled some 270 million acres of public land - 10 percent of the US. But the benefits didn't endure, and in many ways, the act was a bust.

So can a 21st-century version succeed? Some are skeptical. "You cannot design economic development at the national level. The top-down approach doesn't work," says Ernie Goss, an economics professor at Creighton University in Omaha. "There has to be grass-roots activity in the community."

Certainly, the proposed legislation is more popular here than was the last grand plan for the region: In the "Buffalo Commons" proposal of the late 1980s, two Rutgers academics suggested that the Great Plains be turned into a vast public land for restoring American buffalo herds.

'I want to stay where the family is'

For many raised in rural towns, settling there would be an easy choice if it were feasible. Terry and Crissy Latta left Stratton after high school.

But they returned to raise their two small children, and last year they opened an auto-body repair shop. For capital, they turned to several loan sources, including REAP and Stratton's bank. "From the time I was 10 years old, all I wanted to do was get out of this place," says Terry. "But after being away for three to four years, you think, 'That wasn't too bad.' "

Now Crissy waitresses part-time and coaches at the high school. The couple are committed to staying here. "I want to stay where the family is," says Crissy.

For others like the Lattas, the New Homestead Act could offer a shot at returning home, and staying afloat financially. Meanwhile, small towns must do their part to build for the future, says Bernt. "If you stop acting like a town, you'll stop being a town."

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