Mayo Clinic seeks expansion project, faces scrutiny
By Howard Lestrud
ECM Political Editor
Minnesota’s largest private employer, the Mayo Clinic of Rochester, has been flexing its muscles at the State Capitol this session with hopes of passing one-of-a-kind legislation that will help the medical institution achieve a $6 billion project to expand itself and also grow the city of Rochester.
A few weeks into the current legislative session, Mayo Clinic leaders and legislative supporters introduced a unique proposal seeking infrastructure improvements from new tax revenues. Minnesota Gov. Mark Dayton expressed support at the time for this expansion and has been cautiously following the developments at the Capitol.
The ECM Editorial Board met recently with former Senate Majority Leader David Senjem, R-Rochester, and the bulk of the discussion centered around the aggressive business plan floated by the Mayo Clinic. Senjem is one of the bill authors carrying Senate File 1047.
The Mayo Clinic project has been labeled Destination Medical Center. Senjem and many other legislators have affectionately called it Destination Rochester.
Proposed legislation would create a medical district authority comprised of legislators not living in Rochester or having a personal involvement. The authority would consist of three House members, three Senate members, tax chairs on each side and an executive director appointed by the governor. The local authority would issue bonds, and the state pays for the bonds.
Rochester is proposing capturing future income tax revenue, future sales tax revenue of the city of Rochester and committing it to pay for city infrastructure bonds. The Mayo Clinic is proposing $3.5 billion in local capital investments over the next 20 years.
Mayo is promising possibly 30,000 new jobs and is asking for a nearly $585 million commitment from the state for roads, sidewalks, parking, transit and sewers needed to support new buildings.
Senate Majority Leader Tom Bakk, DFL-Cook, said legislators have looked at the Mayo Clinic property tax base. It’s about $11 million a year, he said. It’s about a fourth of all of the property taxes paid all over Olmsted County. The state could say it is going to grab all of those taxes and pay for the infrastructure, Bakk said. The tax shift on the rest of the county would be astronomical, he added.
Senjem is hoping for an up or down vote this session. He acknowledges that the bill is a complicated one and said the legislation will have much scrutiny in taxes and finances committees.
“There will be a lot of time spent on the bill this session,” he said.
Senjem said he knows of no larger economic development bill introduced in any state in the nation. “It is a magnanimous project” for Mayo, a medical institution, trying to compete with other health leaders of the world,” Senjem explained.
Mayo currently drives the economy of the Rochester community and of the state with 35,000 employees. Senjem said Minnesota is proud to be the home base of Mayo, 3M, General Mills and Eco Lab.
“This is what we are all about,” he said.
Some level of transportation for the Mayo project will be a necessity, Senjem said. The idea of a rail link between Rochester and the Twin Cities is still being evaluated, Senjem reported.
“Whether it is even affordable, time will tell,” he said.
Building up the streets, building sewage systems and making other improvements will be part of the large project. Senjem said Mayo has been anticipating future growth and has bought a lot of land around its campus. It has made its footprint around the Fourth Street corridor, he said.
This planned expansion will mean that the Mayo Clinic may see a doubling of its patient load in the future, Senjem said.
The planned Mayo expansion will happen somewhere, whether it happens in Rochester, Arizona or Florida, Senjem said.
“We want to grow Mayo in Rochester and maintain the level of medicine that is the hallmark of that institution,” he continued. To achieve these goals, a new model is needed, he said.
Networking between the Mayo Clinic and the University of Minnesota was mentioned as a selling point for the Destination Medical Center project. Both have research strengths in a working partnership, Senjem said.
Turning away from the Mayo project for a moment, Senjem said he and many others have concerns about IBM’s announcement recently to remove a significant number of jobs from Rochester.
“There was a time when IBM was larger than Mayo,” Senjem recalled.
High-speed computer development potentially could continue with IBM in Rochester and matching the two industry giants’ synergies together, Senjem said.
Bakk said the Mayo Clinic must have more amenities surrounding it. He said Rochester needs to emulate what Duluth did to Canal Park by adding more hotels, restaurants and other businesses.
House Speaker Paul Thissen, DFL-Minneapolis, said the Mayo Clinic “is one of the jewels of Minnesota” and thus is being addressed by many alternatives including bonding and tax incentives.
Mayo’s proposals have reportedly stumbled before the House Tax Committee where Chair Rep. Ann Lenczewski, DFL-Bloomington, has questioned a large subsidy.
Senate Minority Leader David Hann, R-Eden Prairie, told the ECM Editorial Board his caucus has taken no position on the Mayo project.
“All of us have interest in helping communities develop but don’t know if this will pass this year,” Hann said. He said the Legislature is not set up to be an investment bank. “It’s a high-risk proposition,” Hann said. He did add that he thought there were ways to help.
House Minority Leader Kurt Daudt told the Editorial Board he signed on with the bill and recognizes its bipartisan support. He said he understands Mayo puts in the initial investment covering debt service and not making it a huge liability to the state.
“My hope is that the project will go,” Daudt said. He said he believed that the unique model can work.
“If the revenues don’t come in, you don’t let the bonds,” Daudt said.
Howard Lestrud can be reached at firstname.lastname@example.org.