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ST. PAUL — Rochester's request for an exemption to state law that would allow lease revenues generated by the Minnesota BioBusiness Center to be used to upgrade the building has stalled at the Capitol.
As a result, planned improvements to the center that houses startup technology companies will likely be put on hold, said Assistant City Administrator Gary Neumann. The major concern is making sure the building is properly maintained so it can continue to attract startups to the city.
"It's a great opportunity to grow jobs for Minnesota," Neumann said.
The problem surrounds how the building is financed. In 2008, the city established a tax-increment financing (TIF) district to build the center and teamed up with Mayo Clinic and Rochester Area Economic Development Inc. on the project. The bottom three floors were funded with a taxable tax-increment bond. The upper floors were paid for with a tax-exempt bond. The issue is that under state law, the lease and TIF revenues generated from the bottom three floors can't be used to upgrade the entire building.
The city wants an exemption from state TIF laws to allow the dollars generated by the bottom three floors to be used for electrical and energy improvements to building. But lawmakers were wary of Rochester's request.
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House Taxes Committee Chairman Greg Davids, R-Preston, said members of a House-Senate conference committee ultimately decided not to include the measure in a final tax bill proposal. Lawmakers were concerned it would set a precedent and questioned whether it was an appropriate use of TIF dollars.
"That's not something that we as a conference committee thought was appropriate," Davids said.
Sen. Dave Senjem, R-Rochester, and Rep. Duane Quam, R-Byron, sponsored bills with Rochester's TIF exemption language. Senjem served on the tax conference committee and said efforts to convince fellow lawmakers to back the provision failed.
"It just didn't make it in," Senjem said. "We'll just have to try to reconfigure that bill."
Neumann estimates the planned improvements to the center would probably cost about a couple hundred thousand dollars. If state law isn't change, he said the city would have to find another way to fund the improvements. But at this point, he said he expects the city to keep trying to make the case to lawmakers about the need for the bill — even if it takes another year to win them over. He said the city probably could have done a better job explaining to legislators the need for the exemption.
He added that the city has already dedicated $5 million in sales tax money to work with these startup companies and encourage economic growth.
"We've made a major commitment for Minnesota to create these kinds of jobs," Neumann said. "That's why we didn't think it was unreasonable to ask for a little assistance with this exemption."
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