With almost $300 million in private funds, Rochester's DMC project set to get $585M in public money

Millions of dollars in state aid for expansion of the Mayo Clinic should start to arrive in Rochester this fall, it was announced Thursday.

The public dollars — about $585 million in tax money for public infrastructure — were pledged for the Destination Medical Center (DMC) project in 2013, but the Legislature said they wouldn't come until the clinic and private investors first put up their own money. Now that has happened, with almost $300 million in private investment.

"The momentum we're building, based on this business model, has never been stronger," DMC Economic Development Authority Executive Director Lisa Clarke said in a prepared statement. "We currently have 14 projects with a total value of more than $700 million under development or in the planning phases, and we're receiving strong interest from real estate investors and developers from around the globe."

The figures released Thursday by the DMC board put private investment totals so far at $297.7 million, a figure that covers everything from a new sign at a private business to a $68 million Mayo project at its St. Marys Campus.

Of that amount, some $145.3 million in investments were made last year alone, most of it from Mayo.

That's a change from less than two years ago, when anxiety over the slow pace of development and weariness about the project's long-winded meetings and aspirational reports had a city councilor asking, "Where's the beef?"

Investment totals should rise further next year, thanks to major projects such as a $100 million Hilton Hotel and residential tower for which ground has finally been broken at Broadway and Center in downtown Rochester; a $115 million, 13-story apartment complex from Minneapolis developer Alatus, and another $38 million 156-unit apartment complex coming from the Opus Group and Rochester-based Titan Development.

The DMC project, which blends private investment with public money to fuel growth over 20 years, originally was pitched as a needed step to keep Mayo competitive with other world-class medical centers. Mayo will expand its campus and extend its medical know-how with $3.5 billion in investments over the course of DMC's life span, while private investors are expected to add another $2.1 billion in residential, retail and commercial investments. About $585 million in tax money will build the public infrastructure necessary to tie it all together.

The plan calls for adding up to 45,000 jobs in Rochester, nearly doubling the city's population and adding billions in tax revenue.

The city will get a 2.75 percent match for private investment dollars beyond the first $200 million, or about $2,686,750 in state aid expected for this inaugural year. The figures should be certified by the state Department of Employment and Economic Development by Aug. 1, with state aid payments expected in Rochester by Sept. 1, said Shane Delaney, a spokesman for the state Department of Employment and Economic Development.

The money will be held by the city of Rochester for infrastructure improvements, but it won't be up to city leaders alone to decide how to spend it. The Destination Medical Center Corporation's board must first sign off on where the money goes.

The city then gets final say, according to Patrick Seeb, director of economic development for the DMC's Economic Development Authority.

Each year's match will carry over to the next year, meaning that if Rochester gets its $2.7 million match this year, it can expect at least that much every year until $410.6 million in state general and transit aid runs out. The annual payment can rise if more private investment is made in the city, with a maximum of $30 million annually.

The DMC also draws public funds from the city of Rochester and Olmsted County totaling $128 million and about $40 million, respectively, and both city and county tax dollars have already gone into the DMC project. The city paid about $3.5 million for the DMC development plan, for example. Olmsted County, meanwhile, earlier approved a $10 wheelage tax and a 0.25 percent sales tax to raise funds for transit-related improvements in Rochester.

It's not yet known where the first state dollars will go or where the most pressing infrastructure needs will be, Seeb said. He expects upcoming studies and calculations to determine how the city's growth will burden existing water, sewer and energy systems. The public money will also help pay for aesthetic improvements to busy pedestrian areas within the project, including the city's Peace Plaza and along First Avenue.

The news that the DMC had finally reached a key private investment goal brought bipartisan excitement from Rochester's political figures.

"This will accelerate the growth," said Kim Norton, a former DFL state representative from Rochester and chief House author of the legislation for the DMC plan. "It's very exciting."

Sen. David Senjem, R-Rochester, said the state's commitment of public dollars to Mayo's expansion prevented the world-famous clinic from moving its headquarters elsewhere.

Surpassing the $200 million threshold, he said, "is the start of a great journey."

Staff writer Ricardo Lopez contributed to this report. Matt McKinney • 612-217-1747