Local share of DMC swells to $128 million under House plan
ST. PAUL — The local match for Mayo Clinic Destination Medical Center would swell to at least $128 million under a legislative compromise unveiled Monday night as part of the House tax bill.
The legislation would require the city to contribute at least $128 million toward the 20-year project. In addition, the county would be responsible for a portion of the $119 million in transportation upgrades needed for the project. That’s well above the $60 million in local money initially pledged toward the project. The bill also drops the state’s share of the cost to $338 million instead of the $565 million Mayo Clinic had been seeking.
Rep. Kim Norton, DFL-Rochester, said Mayo and local officials will have to determine whether the proposal is workable. The plan would give the city and county the authority to raise a wide range of taxes to cover the local match. Ideally, the majority of those taxes would be targeted at visitors, but Norton said that won’t cover the whole cost. Inevitably, local taxpayers will have to pony up more for this to work.
"There will be an additional burden, and it could just be an extension of our sales tax, which everyone is used to paying, and I am sure that won’t sit well with some citizens," she said. "And yet, we’ll all benefit from what’s going to happen financially as well as being a livable city."
In order to remain more globally competitive, Mayo Clinic has pledged to invest $3.5 billion to expand its Rochester campus and leverage more than $2 billion in private investment. In exchange, the clinic wants the state to pay for the public infrastructure upgrades needed to support that massive growth. Those dollars would go towards things like parking ramps, transit, bridges and site clean-up costs.
Initially, Mayo proposed capturing a portion of the additional state taxes generated by the project and using those to pay for the infrastructure upgrades. But that idea failed to win support among key lawmakers, including House Taxes Committee Chairwoman Ann Lenczewski. Under the new plan, Mayo Clinic would have to spend $200 million on construction before any state money would be available. The state would provide up to $30 million per year in direct aid to the city for infrastructure.
Lenczewski said an analysis showed that Rochester residents pay far less for infrastructure than residents in other large cities. This plan requires the local governments to pay their fair share.
"We think it’s a very reasonable lift," she said.
To cover the local cost, the city would have the option of raising the money through a food and beverage tax, an admission/entertainment tax and boosting its existing lodging tax. It could also choose to extend its existing half-cent sales tax until 2042 or increase the sales tax rate. The city could also use tax abatement and tax-increment financing to cover the cost. The county would be given the authority to impose a quarter-cent sales tax and/or a $10 wheelage tax per vehicle. In addition, any bonding for the project would be done at the local level instead of at the state level.
The new plan also makes dramatic changes to the DMC’s governing structure. The original plan called for creating a nonprofit economic development corporation to handle the day-to-day operations and an authority board to approve all spending. The new plan scraps the authority board, giving the final say on spending to the Rochester City Council. It also gives the council more authority to determine who serves on the nonprofit corporation. The nine-member corporation would be comprised of the mayor or a designee, a city council member and a county board member. Mayo Clinic would be able to nominate five individuals for consideration and the city council would appoint two. The Rochester Area Chamber of Commerce would also be able o nominate five individuals and the city council would select two. The governor would also get to appoint two members. The board would be subject to the state’s open meeting laws except when it comes to private donors.
Mayo Clinic spokesman Karl Oestreich said Mayo is still reviewing the plan but is pleased that the proposal is continuing to advance.
"While there is still work to be done on finalizing details and aligning the House and Senate versions of the revised plan, momentum for DMC continues to build toward finding the right solution this session," he said.
The House Taxes Committee bill is expected to vote on the tax bill this week. Meanwhile, the Senate Taxes Committee has yet to release its tax bill, which is also expected to include the DMC proposal.
Preston Rep. Greg Davids, the lead Republican on the House Taxes Committee, said he preferred the original funding proposal crafted by Mayo. But he said he is glad to see that the project is advancing and will continue looking at ways to improve the plan.
"We’re still alive to fight another day," he said, "and we’ll keep fighting for Destination Medical Center in Rochester."