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DMC to seek $7.3 million in TIF for Two Discovery Square

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Mayo Clinic Chief Administrative Officer Jeff Bolton, left, and David Mortenson, chairman of the Twin Cities-based M.A. Mortenson Co., stand next to a revised rendering of the proposed Discovery Square Two project Thursday during a presentation to the Destination Medical Center Corp. board. (Randy Petersen / rpetersen@postbulletin.com)

The City of Rochester will be asked to contribute $7.3 million in TIF funds for the next phase of DMC’s Discovery Square — Two Discovery Square.

The Destination Medical Center Corporate Board met Thursday at the Mayo Civic Center. The board unanimously approved infrastructure funding toward the estimated $45 million, five-story building contingent on Rochester City Council’s approval of the use of city tax-increment financing, also known as TIF. The project would be immediately south of the One Discovery Square building, which opened in September.

The city uses TIF to essentially borrow estimated increased property tax revenue a project will later generate to lend to developers to help fund projects.

The city council recently tweaked its TIF policy , and DMC Corporate Board leaders admitted before the vote the project doesn’t quite meet the guidelines.

"This one does actually stretch the city’s policy," said Patrick Seeb, DMC director of economic development and placemaking.

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Mayor Kim Norton noted that the city is required to invest $128 million into the overall DMC initiative and that TIF funding goes toward meeting that requirement.

The funding would be paid back over 15 years.

The property tax value of the surface lot would increase from about $23,000 to about $1 million, Seeb said.

City Councilman Michael Wojcik, a critic of how TIF has been applied to hotel developments, said he would likely support TIF funding for Two Discovery Square.

"I support TIF funding for projects that create good jobs," he said.

DMC Corporate Board members estimated the project would spur about 500 jobs once complete and create 800 jobs while it’s being constructed.

Twin Cities-based M.A. Mortenson Co. filed plans on the center last year. Those plans have been modified since then, including calling for about 50% of the parking Mortenson would normally design for a project of that size. Board members and city leaders said that meant the project will be an important part of expanding city transit infrastructure.

"They intend to participate in the city’s transportation strategy," Seeb said.

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No tenants for the approximately 140,000-square-foot building have been signed to the project. However, board members said the fact that Mortenson wanting to move forward without a tenant shows the company has faith in the project.

That faith is likely based on the success of One Discovery Square, which is almost full of tenants including Biosig; Motion Medical, a joint venture between Mayo Clinic and Boston Scientific; WuXi Diagnosis, a Mayo and WuXi AppTec's joint venture; Royal Philips of Amsterdam; Epic Systems of Wisconsin; Café Steam and the University of Minnesota Rochester.

In other discussion, DMC staff indicated they will ask for more funding for reconstructing Peace Plaza.

The effort will require a longer timeline for construction to accommodate early stop times and late start times for adjacent hotels and help keep other businesses open.

"What I hear you saying is that it’s going to cost a bit more money," said R.T. Rybak, DMC corporate board chairman and former mayor of Minneapolis. Rybak added that filling vacant storefronts could be costly, too.

Norton said the plaza, in the heart of downtown and on the doorstep of the Mayo Clinic, is an important public space and for residents and visitors.

"This is the place everyone in Rochester likes to congregate, knows and loves," Norton said, "This is where we should be spending money if it’s going to cost a little bit more."

Pamela Wheelock, DMC Corporate Board member, said she understands the concerns but they need to be balanced with safeguarding public money.

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"I’m looking forward to seeing how you assess where the balance is," Wheelock said.

"It’s not an endless budget and a limitless check."

ac9f9e402dd58e1253f8c0d88ea1f6db.jpg
An artist's rendering of the proposed Two Discovery Square, left, with One Discovery Square, right. The view is looking southwest. This image was submitted for review in August, but plans are changing as developers seek to find new parking options. (Contributed image)

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