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Seeking help with future growth, Rochester already feels strain of expansion

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Rochester expansion
A housing development abuts a farm in northwest Rochester, Minn., a part of the city that has accounted for about 50 percent of the city's growth in recent years. Overall, Rochester is Minnesota's fastest-growing city. From 2000 to 2010, the city grew 24 percent to 106,769 residents and housing development continue to push the boundaries of the city further north and south.
MPR Photo/Elizabeth Baier

As the Mayo Clinic makes expansion plans and asks for state help to build infrastructure in Minnesota's third largest city, Rochester is feeling financial strain from the rapid growth it has already seen. 

The city's population has doubled since 1970, standing at more than 107,000, and forecasts predict another 32,000 residents in 20 years. Since 2000, it has annexed nearly 10,000 acres, and housing developments have marched into former farm fields, particularly on the city's northwest side. 

But a lot of that single-family, low-density development hasn't been paying for the infrastructure needed to support it, said Rochester city planner Phil Wheeler.

"We should be putting a lot more into our capital improvements program to reconstruct roads in order to do it at the lowest life cycle cost," Wheeler said. "We're way under that. We annexed areas without curb and gutter, without sidewalks and so on. So we have this area that needs to be brought up to an urban standard in order to handle the urban density of development that will occur there."

City leaders have spent years planning how and where to grow this medical and tech-driven community in the middle of farm country. Its flagship employer, the Mayo Clinic, is asking the state to provide a half billion dollars to help pay for roads, bridges, and sewers as it becomes an even bigger global medical hub. 

To see the problem close up, drive to the northwest edge of the city. Two decades ago, most of that area was farm land. Then came the housing developments, followed by churches and a clinic. Now, strip malls and big box stores dot the neighborhood.   Parts of some roads are still unpaved and bumpy. On one side of a road you can find fields and on the other a development of 6,000-square-foot lots and single family homes.

If the city grows as planned, Wheeler said, it will need more of those lots.

Rochester housing market
Rochester's housing market has picked up in the last year, despite the economic downturn of recent years. Here, a basement and foundation are being prepared for a home in northwest Rochester.
MPR Photo/ Elizabeth Baier

Since 2000, Rochester has made 179 annexations and added 9,500 acres, more than half on the northwest side. Officials estimate the city has enough land to hold a population of 200,000.

The city has agreements with six adjacent townships, which could allow the city to annex up to 22,000 additional acres, according to the Olmsted County Land Use Plan.

But just having the space doesn't address the problem. Rochester will need $2.4 billion to pave roads, add sidewalks and handle other transportation needs in the next 25 years. Based on current revenue sources and competing needs like operations and maintenance, officials expect revenue for that infrastructure to reach only $1.6 billion, leaving a gap of about $816 million.

Wheeler said the city's forecasts assume state funding to help create Mayo's Destination Medical Center - or DMC - which could add up to 15 thousand highly-paid doctors, researchers and support staff and another 25,000 spin-off jobs in southeastern Minnesota in the next two decades.

"We assumed Rochester and Olmsted County would maintain the competitive edge that our health care sector and other information sectors have had," Wheeler said. "That implies that something like the DMC will have to be done because you don't maintain a competitive edge by coasting."

"For many years, local officials sort went under the assumption that growth pays for itself."

Other mid-size cities like Rochester are also coming to recognize the costs associated with growth, said Professor Ed Goetz, director of the Center for Urban and Regional Affairs at the University of Minnesota.

"For many years, local officials sort went under the assumption that growth pays for itself in the sense that the attraction of business and then the attraction of more residents will enhance the tax base and that will pay for the types of services and amenities necessary," Goetz said. "But there's been some growing acknowledgement that that's not always the case." 

Mayo wants to invest $3 billion of its own money to become an even bigger global medical hub.  Goetz thinks the proposal for state help with the associated infrastructure requires a greater sell job because Mayo is the driving force. 

"This is usually something that cities will think about in kind of a generic sense, that is, they want to attract businesses of certain types and they will set up these kinds of tax incentives," he said. "For an employer to sort of come out front and argue for this, I haven't seen that happen anywhere else."    Officials with Rochester Public Utility are also evaluating how to keep up with growing demand for water and power. 

The utility company is replacing a water reservoir to meet future demands of the downtown area. The project is expected to cost $3.4 million and be complete in 2014.

"The system that we have and the infrastructure that we have today can always grow," said utility spokesman Tony Benson. "That's obviously the backbone of our business -- extending our service, extending our reach to customers as the city annexes in different areas." 

Winter construction
Despite the winter months, a home is under construction in northwest Rochester. The city's housing market has picked up in the last year, despite the economic downturn of recent years.
MPR Photo/ Elizabeth Baier

Local utilities are also working with the U.S. Geological Survey to study groundwater flow and pumping rates from Rochester's water source, the Jordan aquifer. 

And businesses are re-imagining themselves as they look north and west to expand in Rochester's growth bubble. 

Last year, for example, Barbara Hight Randall and her husband moved their 18-year-old jewelry business to the outskirts of town to be closer to their customers. 

"Things were changing downtown and I know downtown development doesn't like to hear this, but parking was an issue for us," Hight Randall said. "We have seniors that come to our store and not being able to park was just a difficulty."

Even with the concentration of people downtown because of the Mayo Clinic, Hight Randall said they're better off in an outer neighborhood.

"The amount of building is just growing by leaps and bounds," she said. "And we're hearing about new businesses all the time, so we seem to be leading the parade a bit, which can be a little scary and a little challenging, but you won't even recognize it."