Several top DFL lawmakers are raising serious questions about the Mayo Clinic's request for a $500 million public subsidy for the city of Rochester and surrounding communities. The health care provider announced this week its proposal for a $5 billion expansion over the next two decades, a plan that relies on about $500 million in taxpayer money — an unprecedented financing plan for Minnesota.
"[What] they're asking, from the way that I see it, is for the state to build them a new city," said state Rep. Ann Lenczewski, DFL-Bloomington. Lenczewski, who chairs the House Taxes Committee, has resisted legislation that gives companies tax breaks in exchange for promises of jobs. The Mayo Clinic's plan would essentially take a portion of any tax revenue generated from its $3.5 billion, 20-year investment in its Rochester campus and use it to pay for improvements to roads, bridges, parking ramps transit and transit in Rochester.
Using a tool called tax increment financing, many local communities across the nation have captured increases in property taxes to spend on construction. But the Mayo Clinic plan would go much further by also tapping future sales, personal income and corporate taxes. That worries Lenczewski, who said it's never smart for politicians to try to pick winners and losers with taxpayer money.
"If you step aside from who's asking for it and ask yourself if it's a good idea, I think most people would say no," she said. "I think legislators might get a little confused by who is asking for it because they have a good feeling about the company."
Aside from philosophical objections, other lawmakers are worried about the precedent that could be set. State Rep. Ryan Winkler, DFL-Golden Valley, said if Mayo obtains a tax deal, other businesses would want one too.
"I bet every major corporation in downtown Minneapolis would think it's a great idea," Winkler said. "You could just go all around the state and pretty soon the end result is we're carving up little fiefdoms around the state based on current economic power, and we're leaving ourselves zero flexibility in the future to adjust as markets change."
Winkler agrees with Lenczewski that state officials shouldn't be picking winners and losers when it comes to business development. But the Mayo Clinic is already a "winner." The company is the state's largest private employer and a worldwide leader in health care.
That could put politicians who say no to their expansion plan in a tough position, especially if Mayo Clinic moves the expansion to another state. A lot of heavyweights at the Capitol are in the clinic's corner.
Gov. Mark Dayton, who recently had back surgery in at the Mayo Clinic in Rochester, has not committed to endorsing the specific financing plan Mayo officials are proposing, but said he wants to ensure the clinic stays in Minnesota.
“[What] they're asking, from the way that I see it, is for the state to build them a new city.”State Rep. Ann Lenczewski, DFL-Bloomington.
"If that moves to Florida or Arizona, the loss of quality of life to Minnesota and what we offer, the value in terms of taxes paid to Minnesota will be greatly affected," Dayton said. "A lot of people who come here will go elsewhere. A lot of people employed here will probably end up elsewhere. There's a huge stake in their success."
House Speaker Paul Thissen, DFL-Minneapolis, also did not endorse the Mayo Clinic proposal, but he predicted the clinic will receive some sort of help.
State Sen. Rod Skoe, who chairs the Senate Taxes Committee, said he wants a working group of lawmakers, Mayo Clinic officials, Rochester city officials and others to continue working on a financing plan. But Skoe, DFL-Clearbrook, said he's not philosophically opposed to the idea.
"Mayo services health care for all Minnesotans, whether it's the governor to my wife in Clearbrook," Skoe said. "When there are complicated medical procedures, Mayo, as we all know, is internationally known. We're lucky to have that available to all Minnesotans."
State Rep. Kim Norton, DFL-Rochester, called the Mayo Clinic proposal big and bold. Norton, who will try to steer the financing plan successfully through the House, said she expects lawmakers to be skeptical. But she said it could mark the creation of a new economic tool for the state.
"It's going to be a very high bar," Norton said. "If other businesses can do it and it increases revenue in this state, and they need infrastructure in their communities, maybe it's a new good idea."
Norton said she hopes to introduce the Mayo Clinic legislation next week.