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Legislators to revisit key part of Mayo Clinic financing plan

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In this photo looking east down Second Street Southwest, construction cranes line the street, Jan. 24, 2014, in Rochester.
Alex Kolyer / For MPR News

State legislators likely will have to go back to the drawing board to adjust the financing plan for Mayo Clinic's expansion, one of the biggest economic development projects in Minnesota's history.

Mayo Clinic has launched a 20-year plan to remake its flagship campus, a plan that includes $327 million in state aid, largely to fund improvements to public facilities in Rochester.

But moving the Destination Medical Center forward hinges on a tiny tweak legislators must make this spring to a law that outlines how the project will be funded — and politics could get in the way.

Although the Legislature made the state's commitment contingent on $6 billion in private investment, earlier this year the Minnesota Attorney General's office issued an opinion that said the Destination Medical Center would effectively need twice that amount over time to tap state money.

When the Legislature convenes in January, Rochester-area legislators will be calling for a quick fix. Republican Sen. Carla Nelson worries that without an adjustment, the project will come to a halt.

"It is absolutely essential that we have a swift, clean fix or correction to the technical language about the DMC," Nelson said, noting that investors prefer good news.

"They can adjust for bad news," she said, "but uncertainty freezes."

State Rep. Greg Davids, who will chair the House Tax Committee Next Year, would like to tweak the language shortly after the 2015 session begins.

But he said a "quick fix" may not be so easy.

"Anytime you bring a bill on the House floor that has to do with taxes, it could become a Christmas tree," said Davids, R-Preston. "You could have more lights and bells and whistles put on that tree than you could imagine. If I get on the House floor and there's amendment after amendment after amendment to get political, I'll just pull it back. Then it's not quite so simple, is it?"

Rochester city officials say the unclear language in the law is creating problems for their upcoming budget, which will be written and approved in December. So far, the city plans to allocate only $3 million to staff costs associated with the medical center.

Money for development projects is on hold until the city has reassurances that the state funding will come through, Assistant City Administrator Gary Neumann said.

The city can amend its budget to include more project funding after the Legislature makes the fix. Meanwhile, the Destination Medical Center will move forward on a development plan in the next few months.

But the unresolved funding formula complicates matters for city officials, who must coordinate related development in Rochester, which is expected to grow by 32,000 residents over the next 20 years.

Developers who are interested in investing in Rochester are in limbo, Neumann said.

"We've had significant development interest from private parties," he said. "Those basically will be on hold until we also get this issue resolved. It affects not just the funding that the city will provide, but it also will affect the private investment in the community."

Meanwhile, Davids is considering a bigger fix to the medical center's overall funding mechanism, which partly relies on new tax dollars from the city and county. Davids worries that the plan represents too big a financial burden for Rochester and Olmsted County residents. He prefers Mayo Clinic's original proposal that additional tax revenue created by the development would pay for infrastructure.

Davids said he won't bog down the funding fix with a plan to adopt Mayo Clinic's original funding proposal, but will hold hearings on the issue next year.