Mayo Clinic is dropping a complicated tax plan that relies on more than $500 million in state funds to make improvements in Rochester in favor of a plan that would rely on a direct contribution from the state.
The emergence of the new plan is a signal that House and Senate leaders are moving in the same direction when it comes to the subsidy for what the clinic calls the Destination Medical Center.
Mayo Clinic has been pushing for a financing plan that would rely on a portion of future income, sales, property and corporate taxes from Rochester to finance $585 million in public investments for the city. The improvements would support an expansion of the clinic's iconic Rochester campus.
Officials at Mayo Clinic say the plan is a good deal for taxpayers because Mayo's expansion would deliver tens of thousands of new employees to Minnesota. But lawmakers balked at the idea, worried it would set a bad precedent for state tax policy.
"You've got all of these people coming in to utilize the high-quality health care at Mayo and the city is going to need some help dealing with that infrastructure."
After long discussions with leaders from the House, Senate and governor's office, Mayo Clinic is dropping the plan.
The new plan relies on a direct state subsidy to Rochester, said Sen. Rod Skoe, DFL-Clearbrook. He said it is comparable to past aid payments that helped cities manage an influx of people who did not live there.
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"I view this as a comparable thing," Skoe said. "You've got all of these people coming in to utilize the high-quality health care at Mayo and the city is going to need some help dealing with that infrastructure."
State money would be directly linked to the amount of money Mayo spends on the expansion, Skoe said. Mayo Clinic is promising to invest $3 billion over 20 years to expand in Rochester, but only if the state funds the public improvements.
The state money would pay for roads, bridges, parking and other amenities like shopping centers and entertainment districts.
Mayo Clinic spokesman Karl Oestreich said he is pleased the Legislature is moving closer to a compromise.
"We knew that it was going to change as it went through the process," Oestreich said. "I think the good thing is that it is moving forward and we're listening to folks and it's a solution that people are comfortable with."
Further details of the plan are expected to be flushed out in a Senate committee hearing Friday. But there is no guarantee the plan is locked down.
DFL House Tax Chair Ann Lenczewski said the House and Senate are now moving in the same direction regarding financing but hinted at differences. She says they include which entity oversees the financing, how much Rochester contributes and when public funding kicks in.
"We have those parameters and the concept of the state providing some aid to an authority and then also a bigger contribution from the locals," Lenczewski said. I think those are the similar parameters but the details are then going to be different."
Lenczewski said she will release her plan when she unveils a larger tax bill early next week. That worries Republicans who support helping Mayo Clinic but don't like the other tax increases that will be in the larger bill.
Sen. Carla Nelson, R-Rochester, said Democrats should allow a standalone vote on the Mayo Clinic plan.
"I don't think any bill, any legacy bill like that should be held hostage in a partisan, omnibus tax bill," Nelson said. "It's not fair to Minnesotans. They certainly expect better of us than that."
Nelson may not get her wish. Skoe and Lenczewski say there are numerous tax provisions in Mayo Clinic's plan and they have consistently said it will survive only if it is in the omnibus tax bill.
Nelson and fellow Rochester Republican Sen. Dave Senjem would not say whether they would vote against an omnibus tax bill that includes Mayo Clinic's plan.