Property owners could pay for $1 billion in upgrades after HCMC fight stalled tax change

Hennepin County leaders’ failure to convince the Legislature to repurpose the sales tax that built Target Field for health care infrastructure means property owners could have to pay for $1 billion in upgrades to HCMC.

That was the takeaway from a recent meeting between the County Board and Hennepin Healthcare Systems, which runs HCMC, to review the legislative session that ended in May. Commissioners admonished hospital leaders for breaking county lobbying rules and distracting from their legislative top priority by backing a last-minute bill to change how HCMC is governed.

“There was a billion on the table for Hennepin County,” said Commissioner Jeffrey Lunde, co-chair of the committee overseeing lobbying. “The fact is, money matters and we didn’t execute. I believe it is because we got sidetracked.”

The 0.15% sales tax costs consumers three cents on a $20 purchase and raises about $54 million a year. Under county officials’ proposal, up to $40 million of that money would help cover debt payments on a new in-patient building at HCMC and other infrastructure planned for the state’s largest safety-net hospital.

But instead of building support for that plan in the last days of session, Board Chair Irene Fernando said she was responding to questions from worried lawmakers about why the county and the health system it oversees appeared at odds.

Babette Apland, Hennepin Healthcare board chair, said doctors, patients and community members were upset by HCMC nurses’ push for the County Board to take back control of the hospital system. Commissioners haven’t taken a position on that request.

Nevertheless, those concerns led to a last-minute bill to make a governance change more difficult. Hospital officials publicly backed the bill despite the health system’s bylaws requiring the County Board to OK their lobbying efforts.

Hospital leaders thought the board was supportive of the proposal. “It was only in hindsight we understood the disconnect there,” Apland told commissioners.

Nurses, EMTs and other unionized workers began raising questions about how HCMC is run last fall. They were upset by health insurance changes and said not enough was being done to retain staff and keep workers safe.

Hospital leaders pushed back on those claims and argued modest insurance changes were needed to help the struggling hospital close a $127 million budget gap.

In December, commissioners added new oversight to the hospital system’s $1.5 billion budget that led two members of the hospital board to resign. Commissioners also asked county staff to analyze hospital finances, worker benefits and governance.

In January, the hospital board approved another raise for CEO Jennifer DeCubellis despite a temporary prohibition on executive pay increases. DeCubellis said she wouldn’t accept the pay raise this year.

By April, nurses and workers, still frustrated, called for the County Board to retake control of the hospital system. Commissioners haven’t taken a public position on the request and have continued to gather data about hospital operations.

Some HCMC doctors publicly opposed the nurses’ demands, leading to a last-minute legislative proposal to make it harder for the county to take back control of the hospital system. Commissioners need a supermajority vote to dissolve the Hennepin Healthcare board, which the county created in 2007 to run HCMC and other clinics.

HCMC held at least one staff meeting where pictures of commissioners and the dates they are up for re-election were displayed. Some hospital workers said they were disturbed by the political tone of the meeting.

Next week, commissioners and hospital leaders will meet to review recommendations about hospital governance from county administration.

A top legislative priority this year for the County Board was improving residents’ access to health care. Converting the ballpark tax would provide up to $40 million in annual revenue to pay for hospital improvements.

It would also provide about $9 million a year for future improvements at Target Field and in exchange, the Twins would extend their lease through 2059. About $4 million from the tax would continue to fund youth activities and library operations.

The idea got bipartisan support in both chambers of the Legislature. But some key DFLers were not entirely on board, in part because they have reservations about giving more taxpayer money to sports stadiums.

The proposal was part of the end-of-session tax bill negotiations after county leaders offered to give half the health care revenue, roughly $20 million, to North Memorial Hospital. The Robbinsdale nonprofit hospital also serves as a safety net like HCMC and is struggling financially.

Sen. Ann Rest, the Senate Tax Committee chair, said she was “delighted” by the offer to include money for North Memorial, which is in her district. But Rep. Aisha Gomez, the House tax chair, didn’t hold a hearing on the bill after pushing for a moratorium on local sales taxes in 2023.

Republicans who backed the tax conversion were excited the Twins would commit to playing in Minneapolis for decades to come.

Leaders of the Minnesota Ballpark Authority, which owns Target Field, and the Twins have noted the team already covers the roughly $20 million a year it takes to run the stadium. They say they’re ready to work with county leaders on a plan to convert the tax with some money dedicated for the stadium’s upkeep.

“We’ve long felt the Twins and Hennepin County’s relationship is a model for a public-private partnership,” said Dave St. Peter, Twins president and CEO.

Kareem Murphy, Hennepin County’s director of intergovernmental relations and top lobbyist, said conversion of the sales tax was one of the biggest legislative proposals he’s worked on and a lot needs to be done to regain lawmakers’ trust.

“That is something that needs to happen fast,” Murphy said. “I had legislators tell me, ‘How do you expect me to push for $1 billion if the hospital is fighting with the county?’”

County leaders fear they missed their chance to secure decades worth of dedicated health care funding. Control of the now DFL-majority House and Senate will be decided in November.

Yet Fernando says she is already talking with lawmakers to reassure them of the county’s unified vision. “If we choose to pursue the ballpark sales tax again next year, it needs to be airtight, beyond airtight,” she said.