Mayo subsidy request facing a tough sell at Minnesota Legislature

  • Article by: JENNIFER BROOKS , Star Tribune
  • Updated: March 18, 2013 - 6:17 AM

A half-billion subsidy request for expansion faces obstacles.

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The main Mayo complex is in the background.

Photo: Glen Stubbe, Star Tribune

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 The Mayo Clinic’s dream of winning a half-billion-dollar state subsidy to help fuel its larger new $6 billion plan to transform its home in the city of Rochester is running into resistance at the Legislature.

Gov. Mark Dayton is raising questions about how such big-ticket taxpayer funding, on par with what the Minnesota Vikings will receive from the state for a new stadium, would work. Meanwhile the chair of the powerful tax committee in the House recently criticized Mayo’s request as a “massive public subsidy.” And other major employers in the state, including 3M and the Mall of America, are trying to get lucrative tax breaks of their own at the Capitol.

Mayo, a world-renowned medical institution with 150 years of roots and 34,000 employees in Minnesota, recently laid out a 20-year plan that includes making Rochester a more sleek, vibrant destination city to attract the top professionals it needs to retain and recruit.

To do that, it wants legislators to pledge half a billion in taxpayer dollars over the next two decades. The money, which would come in the form of tax breaks costing about $30 million a year, would be used to build roads, transit and infrastructure to support the private sector construction of gleaming new office buildings, hotels, restaurants and theaters.

Tone changed last week

Until last week, Mayo’s ambitious proposal, the largest economic development initiative in Minnesota and one of the largest in the country, had enjoyed a fairly friendly reception at the Legislature. But that tone appeared to change with the House Taxes Committee.

“Is this a public subsidy that is worth it for our taxpayers and for all of Minnesota?” Chairwoman Ann Lenczewski, DFL-Bloomington, asked Mayo officials who came before her committee.

Unconvinced, Lenczewski scheduled another hearing this week to further scrutinize Mayo’s request, which involves creating a special taxing district around its campus.

“There’s a lot of work to be done here,” she said.

“No” isn’t a word Mayo hears very often in Minnesota.

“There was a little bit of, ‘What? You’re questioning me?’ ” joked Rochester Mayor Ardell Brede, who visited the Capitol a few days after the committee hearing that he said was “more brutal” than he had expected.

But Brede says he remains optimistic. Under the proposal, the state wouldn’t have to contribute a dollar of taxpayer money until the private sector first had put up at least $10 of its own, he noted.

“It’s unique and it’s important,” Brede said. “It’s obviously a battle worth fighting because it’s so important, not just to the city of Rochester and the region, but the entire state of Minnesota.”

If Mayo doesn’t get the support it needs from Minnesota, Brede said, it’s going to look elsewhere. “They’re not threatening to move like the Vikings, but they may not grow anymore in the state of Minnesota,” he said.

Mayo spokesman Karl Oestreich said that it had been expecting a tough sell in the Taxes Committee, but that its team is confident heading into this week’s hearing. But if Minnesota isn’t eager to partner up, he said, there are a lot of other communities across the country happy to step up.

“We get requests every week from areas around the world, wanting Mayo Clinic to come there and locate in their community,” he said. “We were born and bred in Rochester, and we want to grow here and continue to grow here. But I think as we move forward, if we can’t have the liberty of the long-range planning and so forth, it’ll limit what we’ll do going forward.”

Mayo sees the expansion as the only way for it to remain competitive against its urban competitors such as the Cleveland Clinic and Johns Hopkins.

High stakes for others

Other businesses are watching to see what the Legislature does with Mayo’s request.

The Mall of America is again looking for subsidies to offset the $2.1 billion cost of its long-standing dream to double in size. The Bloomington megamall’s perennial request was introduced by Lenczewski.

Maplewood-based 3M wants tax breaks as it works on multimillion-dollar improvements to its campus, including a city fire station and $150 million research lab.

Both requests are also in the form of special taxing districts.

“They’re all major projects, and personally I’d like to have all three of them,” said Dayton, who nevertheless has tempered his talk about Mayo’s makeover with warnings that its current request might not be politically workable.

“How to finance it in a way that the state can afford and makes sense is something that we’re still working out,” he said.

Promising upfront to set aside half a billion dollars in tax revenue for one private enterprise means locking 20 years of governors and legislators into a $30-million-a-year commitment, he said.

“I’m optimistic we’ll come up with something and it won’t take 10 years — it’ll take this session,” Dayton said. “We’ve got to work it out.”

 

Star Tribune reporter Rachel E. Stassen-Berger and the Associated Press contributed to this report.

Jennifer Brooks • 651-925-5049

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