It’s not hard to convince Minnesotans that the Mayo Clinic is an exceptional asset. Mayo is where a father’s heart was repaired, a sister’s cancer successfully treated, a neighbor’s liver replaced. For more than 100 years, Minnesotans have held that if a cure is possible anywhere, it’s at “the Mayo” in Rochester.
Mayo is invoking that special status as it comes to the Capitol this year with a big request. The state’s largest private employer — 40,600 employees strong — is seeking $525 million in state bond proceeds and an additional $60 million commitment from the city of Rochester over the next 20 years to build the public infrastructure that a major expansion would require.
Rochester city officials support the project, called Destination Medical Center. State officials should join them. While the funding mechanism Mayo is proposing is less than optimal — and should be improved — Mayo is too important to Minnesota’s future to ignore.
Mayo aims to grow in order to retain its competitive advantage over other major research-based medical clinics, including Cleveland Clinic in Ohio, Johns Hopkins in Baltimore, Mass General in Boston and M.D. Anderson Cancer Center in Houston. Those rivals may be comparative upstarts, but each of them has something Mayo lacks — a big-city home. Each of those four cities, and several states, are pouring subsidies into those medical facilities to help them thrive in the Obamacare era by becoming more attractive to cash-paying patients.
Mayo is not asking its hometown or home state for a direct subsidy for facilities or operations. But it is asking Minnesota to pay for the bulk of the public infrastructure costs associated with a projected $5.6 billion, multiyear expansion. Those are costs that in a larger metropolitan area might be borne by local taxpayers. With a population of 110,000, Rochester is too small to afford those things on its own.
What things? Streets, bridges, parking ramps, sewers, green space, buses and more are on the Destination Medical Center to-build list. A high-speed rail connection between downtown Rochester and the Twin Cities airport and campus of the University of Minnesota could be there eventually. So might enlargement of the university’s small presence in Rochester.
The result Mayo forecasts in a few decades is much to be desired: 35,000 to 40,000 new jobs in Minnesota, including 14,000 to 16,000 desirable new jobs at Mayo Clinic itself; a $10-to-$1 return on public investment, and enhancement of Minnesota’s stature as a world-class medical mecca.
Conversely, a dimmer future is likely if the state says no. Mayo is keen to expand soon. It has campuses in Scottsdale, Ariz., and Jacksonville, Fla., that could grow. Mayo officials aren’t threatening to leave Rochester — but they aren’t shy about saying that in the absence of a state commitment to Destination Medical Center this year, they will explore growth options outside Minnesota.
Those comments, coming from one of Minnesota’s own, may rankle some. But they are indicative of a changing economy in which even health care has become an intensely competitive global industry. In effect, Mayo’s proposal asks whether Minnesota can continue to play in the health care big leagues. State leaders should answer with a clear yes.
That said, the proposal’s funding mechanism needs improvement. Mayo seeks to capture up to $75 million per year in all of the state taxes — income, sales and property — associated with the growth in downtown Rochester from a low base year, 2011. It would use that revenue to service the debt on bonds that would be issued in phases over the next 20 years.
But the state’s authorization of those bonds would come this year. A sum that large would put Minnesota at risk of soon exceeding its total debt capacity under state debt guidelines. That would jeopardize the state’s credit rating and lead to smaller-than-usual annual bonding bills for other needed projects throughout the state.
Authorizing bonds for the Destination Medical Center in phases over a period of years is more feasible. This year’s bonding bill could include a generous appropriation for design work on the project, along with a policy statement promising more.
Another possibility, modeled after the Iron Range Resources and Rehabilitation Board or the Metropolitan Airports Commission, would be to establish a medical center development district in southeastern Minnesota that would have its own bonding authority and backup taxing authority as needed.
Legislators should strive to avoid setting a precedent that future lawmakers would regret. Plenty of other private entities would like to divert a portion of the income and sales taxes they send to the state and use them for their own purposes. Support for Mayo should be structured in a way that does not invite a rush on the Capitol by developers touting projects of lesser significance to the state.
What Mayo seeks from Minnesota is exceptional — but so is Mayo. As legislators and the Dayton administration fashion one of this year’s most important bills, that status should guide their decisions.