Rochester's Mayo not
just another medical clinic
Tuesday, March 19, 2013 4:33 AM
When my parents moved here in the 1970s, one thing that always amazed my father was how people would so casually say they were going to an appointment at "the clinic," referring to Mayo Clinic. His impression of that medical center was of a world-renowned, elite institution, not just another medical office down the street.
Although Mayo Clinic wasn't able to extend his life that had diminished due to cancer in the late 1980s, during his time in southeastern Minnesota he always appreciated that such a valuable resource was just minutes away.
My father spent most of his life outside Minnesota, yet, even before moving to the area, Mayo Clinic was a familiar institution, one that evoked opinions of quality, prestige and respect. That is how much of the rest of the country feels, even though those of us in the area may feel like it is just "the clinic" in Rochester.
The world has changed greatly since my father moved here. A reputation has now become "a brand" and health care has become competitive with large institutions swallowing up smaller ones and prestigious institutions jockeying for position. I don't like it, just like I'm not much in favor of the other consolidation that is taking place in America. However, it is reality.
Mayo Clinic is responding to this reality by pushing for a concept called Destination Medical Center. The ambitious plan would keep Mayo's headquarters in Minnesota and add tens of thousands of jobs over the next two decades.
The clinic is willing to invest $3.5 billion in its Rochester campus over the next 20 years, but the catch is that it needs help from taxpayers.
Mayo Clinic President and CEO Dr. John Noseworthy said that in order for the institution to make that investment, it needs to know that there will be public infrastructure, such as roads, bridges and parking available not only for Mayo Clinic, but to provide an opportunity for the hospitality industry, retail, medical research and other businesses to develop in the area.
The proposal before the state Legislature went smoothly at first, but now has recently hit some turbulence as there is some confusion over what is being sought and even hostility to the idea.
Last week, House Taxes Committee Chairwoman Rep. Ann Lenczewski, DFL-Bloomington, blasted the proposal, calling it a "massive public subsidy," and even Gov. Mark Dayton, an early booster of the plan, has raised concerns.
Granted, the plan is complex and I won't pretend to be an expert on it. However, it does seem to remind me a lot of tax increment financing (TIF), a tool small cities often use to help new development.
With TIF districts, cities help a private development project by providing upfront funds for land acquisition, site preparation and public infrastructure. The cities then capture the projected property tax increases the project will create to pay back the bond or other means for funding.
The justification is that if the development never happened, there would not have been any increased property value and once the payback is done, say in seven or 10 years, the increased property taxes that resulted from the improvements will go to the governmental agencies to fund services in what would be a more vital city.
Small cities often don't have any other means to help businesses expand or grow.
In the universe of cities hosting world-class medical institutions, Rochester is a small city. It doesn't have the resources that Cleveland or Baltimore or Houston does to help their medical facilities. That is why Mayo Clinic went to the state to help move its Destination Medical Center along.
Mayo is using the same justification as TIF, although in a much different way. It is asking for help based on increased employment, property values and tax base that is available because of the Destination Medical Center project. In fact, the increased state revenue from the project must be 1.5 times the principle and interest payments for any bonds that will be issued.
No state money will be used until Mayo and the city of Rochester have verified that job growth and tax revenue created by Destination Medical Center have increased state revenues more than enough to pay for those improvements.
For those of us in small cities, that makes a lot of sense. Without the tool, there would be no project that eventually contributes to the prosperity of the area.
For people in the metro area, where public subsidies don't come with guarantees, there are going to be more questions. After all, the state's last massive public subsidy for the Minnesota Vikings stadium definitely wasn't on a pay-as-you-go basis determined by the real value it brings to the state.
As I wrote when this concept first surfaced, there seem to be few drawbacks. However, one real hitch has developed - there is the possibility that this project could end up hurting the state's ability to bond in the future because it is drawn out over so many years. Still, those details should be able to get worked out if enough legislators are behind the project.
Mayo Clinic isn't just another business looking for a handout. It has a plan based on real value that it will bring to the state. And, it already has a name that is known worldwide and a reputation that brings prestige to the state of Minnesota.