STURGIS - Drive through downtown Sturgis anytime other than August, and it's easy to come away thinking that nothing much happens here except during the motorcycle rally.

Main Street buildings bulging with bikers, T-shirts and leathers for three weeks in August stand empty now. Only a scattering of offices and a few shops remain open.

Much of Sturgis' retail business community has closed up shop for good in the past couple of decades.

But away from downtown, Sturgis is starting to show signs of a business resurgence that does not depend on the rally.

The effort is being driven by some new civic leaders, including a new Chamber of Commerce director and a new city manager.

But a large part of the drive is coming from young business people such as Mike and Anna Kahler, both 33. The Kahlers are moving into a larger, revamped building for their Pony Express-O coffee shop on Lazelle Street.

Their new building, a former body shop, will host three other businesses. Already, one spot is filled. Heidi Janz's Envy hair salon opened for business March 4, even as workers put the finishing touches on the building.

There are other signs of the fledgling resurgence:

To the east of the new coffee shop on Lazelle, a new retail/office building is being built by longtime rally vendor John Parham (J&P Cycles). The new building, however, will not be rally-oriented.

"John Parham believes in the community 52 weeks of the year and is making an investment," said Michele Loobey-Gertsch, the new Sturgis Chamber of Commerce director.

Just west of Exit 30, crews are working to finish a new 84-room Holiday Inn Express & Suites.

Also on Lazelle, Competition Distribution, which makes replicas of classic and antique motorcycles, is housed in a new building.

Old World Cafe and Bookery is moving to a larger building on Lazelle and Junction

On the south end of town, the upscale Vernon Heights housing development continues to fill up.

The Best Western Phil Town Inn has remodeled all its rooms, its restaurant and pool area.

Youth movement

Sturgis Mayor Maury LaRue, a retired longtime Sturgis teacher, said he is optimistic about Sturgis' future because of the involvement of younger people. "The kids I have taught over all those years are now assuming the responsibility of community members."

Scott Reiman, president of First National Bank in Sturgis, agrees. He said a group that pushed for a public vote last year on hiring a city manager was made up mostly of local business people in the 30- to 50-year-old range. "They saw the need for change," Reiman said.

Reiman, 35, is also president of the Sturgis Chamber of Commerce. He said more than half of the chamber board members are in their early 40s or younger.

The new city manager, Dave Boone, said the youth movement makes Sturgis different from any other community he has worked with over the past 20 years. "I clearly see a resurgence of interest from the up-and-coming leadership, the 20- and 30-somethings," Boone said.

Mike Kahler, who is originally from St. Onge, said a lot of positive developments are happening in Sturgis. "It's a pivotal time in this town," he said.

Bankers and other business people are supportive of young business people, said Anna Kahler. "A lot of the bankers here are young," she added.

The Kahlers like the small-town atmosphere for their two kids.

Mike also serves on the board for the Sturgis Chamber of Commerce.

Like the Kahlers, Janz is in her early 30s and hopes that more retail business comes to town.

"Sturgis needs something other than rally-related business," Janz said.

Push to diversify

Ward Dobler, 39, has a good job with Dakota Arms, which makes high-end rifles in the Sturgis industrial park on the northwest edge of town. His wife, Garland, 35, works at Behavior Management Systems in Rapid City. They live in Sturgis, where they like the schools and the opportunities their two children have to participate in sports and other activities.

But they do most of their shopping in Rapid City and Spearfish, Ward Dobler said.

The biggest disadvantage to living in Sturgis is the rally, Dobler said. "It has really detracted from the town," he said.

The Doblers would like to be able to do more shopping in Sturgis. "It would be nice to see diversification of year-round business," he said.

There's little argument that the rally has hurt year-round retail business in Sturgis. Millions of dollars in vendor sales made downtown property values soar, driving out most of the retail business.

However, most business leaders in town are glad to have the rally and the money it brings to town for three to four weeks every year. The 68th annual rally is set for Aug. 4-10.

"Sturgis is identified with the rally. We don't want to get away from that," Reiman said. "But we have to walk a fine line."

Loobey-Gertsch, who moved back to Sturgis last summer to head the Chamber, agreed. "A lot of communities around the nation would love to have the brand of Sturgis," said Loobey-Gertsch, who operated a gift-basket business in Sioux City for 18 years.

But the business and civic leaders are pushing hard to diversify Sturgis' business.

"You can't put all your eggs in one basket," LaRue said.

The rally isn't to blame for all of the lost retail, LaRue said. Other smaller towns have lost retail businesses, too. "The rally probably exacerbated it here more than anywhere else," he said.

LaRue said one important reason to develop more retail business is to take some of the pressure off property taxes.

Meade County Equalization Director Kirk Chaffee said at one time a few years ago, he totaled about $11 million in valuation for two blocks of Main Street.

"We have some of the highest priced Main Street property in the state that generates the least amount of sales tax," Chaffee said.

"There is a direct connection between shopping elsewhere and their high property taxes," Boone said. "When the sales tax dollars leave community, it forces the city to more heavily rely on property taxes."

The higher property values driven up by the rally have extended to housing, particularly to smaller houses that can be rented out during the rally, Chaffee said.

"These little $40,000 houses were starting to sell for $80,000 to $100,000," Chaffee said. Many have been sold to people from out of state. "Right now in Sturgis to find one of those modest houses is just about impossible."

Loobey-Gertsch acknowledges that rebuilding a year-round retail presence on Main Street downtown is probably an uphill battle because many of the buildings are owned by people from outside the community.

But she said some people are willing to rent a downtown building for 11 months.

Signs of growth

In any case, she said, there are good opportunities away from downtown.

She points to the new Holiday Inn Express & Suites being built behind the Boulder Canyon Station just off Exit 30. It will have 84 rooms, including 28 suites when finished on June 1. Owner Willie Welchel will also convert the back part of Boulder Canyon Station, which he also owns, into a conference center.

The new retail and office building that is being built by Parham on Lazelle Street will serve non-rally related businesses that will not have to move out during the rally.

If the building fills up, Parham plans to build another one farther west on Lazelle, according to Randy Iverson, head of Iverson Construction, which is constructing the building.

Iverson figures the new Parham building, the new motel, and the new coffee shop together will be worth a total of about $5 million.

On the south side of town, Vernon Heights continues to fill up with people, some of them existing residents and others from out of town, according to developer Jim Allison.

Allison began developing Vernon Heights in 1995, and its first 24 lots sold slowly. So he was surprised when he started phase two in 2003. Allison said he thought it would take him 10 years to sell the 88 lots in phase two. "It just went crazy. It went ka-ching, ka-ching, ka-ching," Allison said. Now, all but 23 lots are sold, although activity slowed this winter, he said.

The 2000 census showed Sturgis at 6,200 people, but that number has to have grown significantly since, LaRue said.

He said youth recreation facilities such as soccer fields and tennis courts have filled up. Population is growing outside the city limits, too. LaRue said there are 400 homes in the Apple Springs development in Boulder Canyon west of town.

Of course, Sturgis has other major elements to its economy, including the Veterans Affairs Medical Center at Fort Meade east of town. Fort Meade employs 681 people, according to VA of the Black Hills director Peter Henry. However, Henry noted that many of the Fort Meade workers commute from Rapid City, Spearfish and other towns.

Black Hills Special Services Co-op employs more than 200 people, LaRue said.

The push to revitalize retail in Sturgis faces obstacles. Capital is difficult to arrange for new businesses to expand or move, he said.

But LaRue and other leaders say Sturgis has a lot going for it, including its location. It's 15 minutes from Deadwood, 17 minutes from Spearfish, and 25 minutes from Rapid City.

It's also on the edge of the Black Hills, which Boone believes is on the verge of a mega trend in development.

"People want their own piece of paradise," Boone said. "This area has unique geographic features. People are coming from all over."

This is the first time, at least for a long time, that Sturgis has actively sought to encourage new business development, Loobey-Gertsch said.

Leaking retail

Boone said there is plenty of retail business that is leaking from Sturgis to Spearfish and Rapid City. "If there were goods and service made available here, those people would be happy not to make that drive."

Longtime businessman Guy Edwards, who owns Phil Town, said Sturgis retail businesses are always going to suffer from being 20 miles from Rapid City. "It'll always be difficult when you can be at the mall in 20 minutes," he said.

"I think Sturgis in the last 10 years has really been somewhat stagnant," Edwards said. "In the last year, I see things getting much better."

LaRue said that for years now, people have just watched Sturgis retail drain away without doing much about it.

"An awful lot of conversation earlier was: Don't worry, don't worry. Now, it's time to worry," he said. "It's time to start working."

The civic leaders say change is difficult for many people.

"The very things I like about this community - those values - are also some of the things that make it more difficult to be visionary," Loobey-Gertsch said.

"People say: 'We've done it this way. It's not broken.'"

"I still want to retain those western South Dakota family values as we move forward," she said.

But Boone, who came from Mexico, Mo., last year, said Sturgis is ready for change.

He cited several decisions by citizens over the past few years to build a community center, a new library, a new fire hall and an expansion to Bear Butte Elementary School.

Reiman said the community also voted to have a city manager, to more professionally run the city.

"All of these decisions add up to the fact that the community is on the move and ready to make some changes for themselves to organize in the broadest sense to improve the quality of life for its citizens," Boone said.

Loobey-Gertsch said the economic development efforts are not being done out of fear that the rally will diminish.

"I don't think this is about the rally. This is about Sturgis 50 weeks of the year."

Heidi Janz worked for 10 years for a downtown salon that had to close a month every year for the rally.

As she gave a customer a coloring treatment shortly after she opened her new Envy salon, Janz was clearly enjoying her new digs in the Pony Express-O building.

"It's a nice complex," she said. "And I don't have to move out for the rally."

Contact Steve Miller at 394-8417 or steve.miller@rapidcityjournal.com.