FAIRBANK -- Ethanol plants generate millions of dollars of economic activity, but are not necessarily the rescuer of small Iowa towns as once hyped.

Ethanol officials got lawmakers and investors excited about the corn-based fuel during its infancy by saying plants would revitalize small towns. High-paying jobs would attract new residents and give young people a reason to stay or come home, officials said. And the economic windfall from the facilities was bound to keep rural Iowa strong.

In many respects, the prophecy came true. But industry officials and community leaders now believe the facilities are more of a stabilizing force that compliment the state.

"They're not direct saviors … but you can absolutely see an impact," said Monte Shaw, executive director of the Iowa Renewable Fuels Association.

With Ames-based Hawkeye Renewables on the verge of opening a new ethanol plant near Shell Rock, population of nearly 1,300, the Courier studied the impact of another Hawkeye plant on Fairbank.

The Shell Rock facility is expected to go on-line in mid-October.

During the farm crisis of the mid-1980s and when commodity prices were low in the decades to follow, many rural communities struggled to survive. Countless young people moved away for better opportunities and many Main Street businesses closed or barely hung on.

Big corporations like Target, Ferguson Enterprises and John Deere invested in larger urban areas like Waterloo and Cedar Falls. Towns like Fairbank -- with a population of a little more than 1,000 -- weren't even on the radar.

"There were no jobs around here after graduation. I went to Minneapolis," said Scott Wheling, who graduated from Oelwein in 1999 and later from Hawkeye Community College with a degree in electronic engineering and technology.

However, ethanol plants and rural Iowa go together like John Deere and green. Facilities are usually surrounded by corn, rail service to ship products and an eager work force.

Hawkeye Renewables started making ethanol on the outskirts of Fairbank in mid-2006. And Wheling, who grew up 4 1/2 miles east of the plant on Iowa Highway 281 and is now an electrician at the facility, came home.

"I never wanted to move away, but I had to. If the plant wasn't here, I would still be working in the (Twin) Cities," Wheling said.

Economic impact

Two Iowa State University economists conducted a study detailing the local economic impact of plants. One of the authors, David Swenson, says the study is just as valid now as it was when it was released on Sept. 21, 2006.

Swenson and partner Liesl Eathington determined a 100 million gallon plant that employs 50 people -- about the average size in Iowa -- with no local investors has an annual direct output of about $258.1 million per year, excluding corn purchases. That includes an estimated $18.6 million in sales for other regional companies and suppliers, the report said.

Fairbank produces 115 million gallons of ethanol a year and has 52 full-time workers.

The study focused on a plant's economic value in a three-county region. Swenson said the closest town to a plant is usually too small to supply all of the facility's operating materials and not all employees live there.

"There are no doubts about the potential economic value of ethanol production to the state of Iowa," Swenson said.

According to the IRFA, there's 31 operating ethanol plants in the state and 13 plants under construction or in expansion mode.

The economists studied data on actual purchases, wages and sales. Besides a direct financial impact, Swenson said a plant will have an indirect affect, helping nearby businesses make more money and hire additional people.

Workers at the plant and those from supplying industries spend their paychecks, which adds another round of economic activity in the region, the report said.

Bruce Rastetter, Hawkeye's CEO, said employees at the Fairbank facility make $2.2 million a year, plus $300,000 in overtime and bonuses. The average wage is $20.17 per hour, which includes salaried workers.

Few small-town employers in Iowa can pay that well, he said.

"I don't know if anybody can say the promise (economic vitality) is not being delivered," Rastetter said.

Hawkeye spends about $2 million a year on capital expenditures and maintenance at Fairbank, he said. This year, for example, Hawkeye hired a local company to build a new grain bin.

According to the report, a plant's purchases would support 105 additional jobs in supplying the business, plus 33 more jobs from increased household spending.

An estimated 5,600 railcars of ethanol and dried distiller's grains are shipped from the Fairbank plant each year. As a result, the Iowa Northern Railroad is buying new engines and hiring people, plant officials said.

"It's doubtful the rail line would be here if we weren't," said Mark Reynolds, plant manager.

The study does not include corn purchases or any increase in corn prices. Swenson said corn would be grown and sold in Iowa regardless of ethanol.

Rastetter generally agrees with the study, but believes it's not complete without adding corn to the equation.

The Fairbank plant uses 41 million bushels of corn a year, which is almost exclusively purchased from local farmers. Rastetter said the added demand has increased prices by 5 cents to 10 cents per bushel, and it's significantly cheaper to haul grain locally than to Cedar Rapids or the Mississippi River. Therefore, farmers spend extra money on new equipment and other upgrades.

"That's why John Deere is so profitable and running at full speed," Rastetter said. "It's a ripple effect."

Fairbank's savior?

Hawkeye Renewable officials don't claim to be knights in shining armor who saved the town. Fairbank was already a pretty vibrant community, officials said, with a grocery store, multiple gas stations, hardware store and lumber yard and eateries and taverns.

However, representatives of businesses in town said sales did improve with arrival of the plant. Hawkeye officials suspect the same will occur in Shell Rock.

Shell Rock Mayor Larry Young was unavailable for comment.

Hawkeye officials said they spent at least $107,000 in Fairbank alone last year.

"There's an opportunity for limited localized (financial) impact. You'll see a few more haircuts and cafe meals, but you won't change the dynamics of a trade pattern established for the last 25 years," Swenson said. "(A plant) will help it (town) hold it's own, which is great."

A few examples of added economic activity in Fairbank due to the plant include:

?The company occasionally caters in meals from the Fairbank Food Center and numerous employees eat out every day.

?Maintenance supplies are purchased at Modern Building Products.

?Trucks and diesel motors are maintained at Don's Truck Sales.

?An estimated 100-plus semis go to the plant each week, sometimes stopping in town for fuel and other goods.

?Employees, even those who don't live in Fairbank, often shop in the community.

"I wouldn't say saviors, but we're a building block of the community," Rastetter said.

Hawkeye officials said many employees live in Fairbank and most within a 20-mile radius of the plant. Several new families moved to town as a result.

Torrey Martin, the plant's dried distiller's grain specialist, along with his wife, Angel, and daughter, Sydnie, are new residents. Martin previously worked for Cargill in West Des Moines.

Originally from Harmony, Minn., he and his wife wanted to raise a family in a small town without taking a financial hit. Hawkeye and Fairbank fit the bill.

Martin thinks the plant and town feed off each other. The town is clean, has a new aquatic center, child care and good businesses to attract employees and the businesses benefit financially from the plant.

"I buy the majority of our family's goods in Fairbank. I hate to think how much I spend at the grocery story," Martin said.

Tammy Erickson, assistant manager of the Fairbank Food Center, said its deli served an extra 50 meals a day at $4 to $6 each to contractors while the plant was being built. Now, four to five extra meals a day along with the periodic catering job can be attributed to the facility.

"That has helped a lot. It certainly hasn't hurt business," Erickson said.

The lunch hour at Costa's Sports Bar and Grill is certainly busier since the plant opened, co-owner Denise Youngblut said.

About a dozen or so workers come in every day to eat. Wehling said he spends about $50 a week eating out.

"I'm pretty happy with the way it turned out," Youngblut said.

Some local business owners say not everything is perfect when it comes to their neighbor to the east. Julie Mann, director of Little Island Child Care Center, is grateful for the few extra kids enrolled at the center because of the plant. But she worries about the safety of kids with the extra truck traffic in town.

Rick Wood, owner of Modern Building Products, says Hawkeye is a customer. But he's also concerned the roads in town and going to the plant will deteriorate faster from all the semis.

"There's a mountain load of trucks a day people didn't realize (it would bring)," Woods said.

At the same time, Woods believe the plant has helped the town.

"It's brought more people and kids to town, which is good," Woods added. "We've done good business with them, but it's not making or breaking us."

If ethanol plants didn't stimulate rural economies, Rastetter said Hawkeye wouldn't be continuously courted by towns to build. At least a dozen small communities have called, he said.

The dramatic increase in the price of corn during the past three years, from less than $2 per bushel to nearly $8 two months ago, can partially be attributed to more demand for ethanol, Shaw said. Unlike the rest of the country, he said corn profits are helping the state's economy.

"It's absolutely the reason why Iowa has ridden out the economic woes a little easier," Shaw said. "It's hard to say ethanol is not great for rural America."

Contact Matthew Wilde at (319) 291-1579 or matt.wilde@wcfcourier.com.