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Big and small investments help tap state DMC funds

Money for improvements to the lower level of Porch and Cellar restaurant in Rochester’s former railroad depot could help fund $275 in downtown infrastructure this year.

The $10,000 in alterations made last year to the lower level of Porch and Cellar restaurant in Rochester’s former railroad depot could help fund $275 in downtown infrastructure this year.

Likewise, the $70,000 spent to remodel a portion of the former Paine Furniture building for the now defunct Chocolate Twist ice cream and candy shop could provide the city with an additional $1,925 in annual state infrastructure funds.

It’s all part of the state’s funding formula for the Destination Medical Center initiative.

"This is a different model," said Olmsted County Commission Jim Bier, who is also treasurer for the DMC Corp. board. "Private enterprise steps up first, and then the public money flows."

While smaller renovations from 2018 are listed among the approximately 35 projects in the annual report due to the Minnesota Department of Employment and Economic Development on April 1, the greater impact is seen with ongoing new development.


As a result, the $50.4 million spent last year on the new Hilton Hotel at the intersection of Broadway Avenue and Center Street could result in the release of nearly $1.4 million in state funds this year and each year to follow during the rest of the 20-year initiative.


Since private DMC investments topped $200 million in 2016, the state has release $2.75 annually for every additional $100 documented.

Approximately $261.8 million in new private investment was recorded last year. When combined with private investments already on the books, it means the state will release nearly $13.5 million, if the latest report is approved.

With $9 million in state funds already released, that would leave up to $388.5 million available to be tapped in the remaining years of the DMC effort.

As the release of state funds grows with giant construction projects and small remodels, DMCC Board Chairman R.T. Rybak said it shows the work of the past five years has been worthwhile.

"This is demonstrating the model is working, and I think it is important at this moment to remember the state did not just hear a good idea and then write a big fat check and hope everything worked," he said. The report to DEED was reviewed last week.



While many private projects are detailed on a case-by-case basis in the report, from the amounts spent on large construction projects to the thousands spent to demolish 12 properties in the district, Mayo Clinic’s investment will be submitted to DEED separately.

Last week, Doug Holtan, chairman of Mayo Clinic’s department of facilities and support services, provided a glimpse of the $126.5 million in work being reported for 2018, which includes $52.25 million in modernization and expansion projects on the Saint Marys Hospital campus.

"There’s always more in the pipeline as we go forward," he said.

He also noted the reported efforts are only a portion of the $274 million in major capital investments and improvements made last year.

"We take a very conservative approach on which investments we feel follow the letter of the law of the DMC legislation," he said.


While this year’s report to DEED largely follows the same format as past efforts, Seeb said efforts are underway to capture a greater benefit from future investment.

"Largely, what we’ve been reporting thus far are the hard capital costs," he said, noting the DMC EDA is working with DEED on a way to report investment related to land purchases and design expenses.


"The state law does allow for the complete capture of costs," he said.

Rochester Assistant City Administrator Terry Spaeth said investment in 2019 is already building.

"Looking ahead at 2019, we’ve been working on a number of projects that actually started in 2018 but should provide significant improvements for 2019," Spaeth said.

Among them are the Hotel Indigo project, which is renovating a portion of the former Holiday Inn on Broadway Avenue; the Hyatt House project at the former American Legion site; and the Wells Fargo building renovation near Peace Plaza.

Among documented private investments in the Destination Medical Center district for 2018 are:

• $50.4 million at the Hilton Hotel, 10 E. Center St.

• $25.9 million at the Berkman, 217 and 301 14th Ave. SW

• $13 million at One Discovery Square, 202 Fourth St. SW

• $12.4 million at Maven on Broadway, 429 S. Broadway

• $9.8 million at Residence on Discovery Square, 511 Third Ave. SW

• $5.2 million at Fontaine Towers, 102 Second St. SE

• $5 million at Kahler Grand Hotel, 20 Second Ave. SW

• $4.8 million at Ronald McDonald House, 850 Second St. SW

• $4.1 million at Flats on Fourth, 412 Third Ave. SE

• $1 million at Hotel Indigo, 220 S. Broadway

• $442,995 at 501 on First, 501 First Ave. NW

• $250,000 for the removal of escalators at Shops at University Square

• $250,000 for footings and foundation work for a future addition at Trinity Evangelical Lutheran Church, 222 Sixth Ave. SW

• $140,000 in renovations at Luxe Beauty Bar, 16 First St. SW

• $133,872 at Thrive Child Care and Family Resource Center Christ United Methodist Church, 400 Fifth Ave. SW

• $130,000 at Fagan Studios, 324 S. Broadway

• $80,000 at the BioBusiness Building, 221 SW 1 AVE

• $76,275 at Bitter & Pour, 318 Third St. SW

• $15,000 at Bar Buffalo, 20 Third St. SW

A complete list is available in the March 21 Destination Medical Center Corp. Board executive committee meeting agenda , as part of the annual report to the Minnesota Department of Employment and Economic Development.

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