Rochester to boost neighboring cities with sales tax dollars

Thursdays on First
People gather on Thursday, June 14, 2012, at Peace Plaza in downtown Rochester during "Thursdays on First," a festival that occurs every Thursday during the summer. Mayo Clinic, Minnesota's largest private employer, is expecting more growth over the next few years as people live longer and need more care. That's also good for businesses like restaurants, rental apartments and hotels which can thrive off a larger population.
Alex Kolyer for MPR

Every weekday morning, tens of thousands of commuters in southeastern Minnesota head to Rochester for jobs there, many at the Mayo Clinic.

Rochester leaders voted recently to share part of the city's new sales tax revenue with 17 small towns in the area. The disbursement is part of a legislative requirement after voters approved an extension to the local sales tax last fall.

The Mayo Clinic is Rochester's main employer and is poised to grow dramatically in the next two decades. Rochester and Mayo Clinic leaders estimate the city will grow by about 32,000 residents in the next 20 years as the clinic expands its footprint in the region. Officials in neighboring communities see their towns' survival tied directly to what happens in Rochester.

Chart: Sales tax revenue distribution to 17 towns

On a recent morning outside Stewartville City Hall, Sherry Pavlak gets ready to board the commuter bus. She works in the custodial department at the Mayo Clinic and spends a large part of her time in Rochester.

Stewartville rebate incentive
The city of Stewartville is one of 17 cities that will receive a portion of $5 million in sales tax revenues from the city of Rochester for economic development projects in the next two years. Stewartville officials will use the approximately $633,000 to start a rebate program for commercial and residential construction within city limits. About 60 percent of Stewartville residents commute to Rochester every day.
MPR Photo/ Elizabeth Baier

"Shopping, better jobs. A lot of people commute from the smaller community just because it's a place to call home," Pavlak said. She's part of nearly 60 percent of Stewartville residents who work in Rochester, just 12 miles up the road. Rochester officials estimate 45,000 people commute daily into the city from communities across southeastern Minnesota.

City leaders say improvements in these small towns can help attract people looking for a mix of urban and rural lifestyles. To help stimulate some of that growth, Rochester's pumping $5 million toward economic development projects across the region.

Stewartville will receive about $633,000 from Rochester. That's a huge boost for Stewartville and its 6,000 residents, City Administrator Bill Schimmel said.

"To get just under a million dollars is a huge booster shot and especially when we can devote it just to economic development purposes without any additional levy, if you will, on property taxes," Schimmel said.

"The bottom line is, we're all working together. If one of us can help each other, we can all become strong by it,"

He said Stewartville will use the money to offer $5,000 cash rebates to property owners who build residential or commercial buildings worth $100,000 or more on vacant lots. He said the incentive will not only give Stewartville a boost but also help the region.

"The bottom line is, we're all working together. If one of us can help each other, we can all become strong by it," Schimmel said. "And I think that's why you see the excitement in hopefully doing some things ahead."

Last year, Rochester voters approved an extension of the local sales tax that included a $20 million contribution to pay for improvements to support Mayo's growth.

But the Minnesota Legislature required the city of Rochester to share part of its sales tax revenue with neighboring communities, a move introduced by Rep. Greg Davids, R-Preston, so that the sales taxes would benefit the entire region, not just Rochester.

The requirement makes sense, Rochester Assistant City Administrator Gary Neumann said, since so many southeastern Minnesota residents come into Rochester not only to work, but also to shop and dine.

Skyline of downtown Rochester, Minn.
The skyline of downtown Rochester, Minn., is seen Thursday, Feb. 14, 2013. Rochester leaders voted recently to share part of the city's new sales tax revenue with 17 small towns in the area. Officials in the recipient cities, where town survival is seen as tied directly to what happens in Rochester, say the disbursement helps boost projects that would have taken much longer.
Alex Kolyer for MPR News

"We have healthy small cities around us. It'll make them stronger. Most of them are doing pretty well already because of the strength and employment in Rochester," Neumann said. "Hopefully the whole region will get stronger."

The 17 cities were chosen based on their size and proximity to Rochester and will receive half the money this July and the other half next summer, Neumann said.

Kasson city officials want to use its $635,024 disbursement to build a business incubator inside an abandoned building on Main Street.

Without the help from Rochester, City Administrator Randy Lenth says Kasson officials would have to wait at least four or five years to start the incubator project.

"This is what kind of triggers the ability to do some of those projects," Lenth said. "If you have some seed money so you can start them this year and if you need more money, we'll budget for them in 2014 or 2015 to finish them... So this is a very big deal."

Nearly all of the chosen cities have grown in the last decade, and most by double digits.

Nowhere is that more evident than in Dover, where the population has jumped 69 percent to 741 residents since 2000. Mayor Roger Ihrke says adapting to the changes has been hard for many long-time residents in the rural farming community.

"We see more vandalism that we ever saw before," Ihrke said. "We have some other issues as far as crime and so on that has increased and probably will continue to increase as the population grows."

Compared with other rural cities and towns dealing with dwindling population, Ihrke says Dover's problem is a good one to have. He says Dover will spend the sales tax revenue on something residents have long said is missing in town: a convenience store.

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