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Harvard Business School Professor, former Medtronic CEO

StarTribune: Mayo plan to remake Rochester slow to gather steam

From Matt McKinney for StarTribune, posted October 27, 2015

The city has little to show for the hoopla that surrounded the Legislature’s $585 million assist in Mayo’s plan to remake Rochester into an international center for medicine, research and health care. 

ROCHESTER – It’s been two years and five months since Mayo Clinic CEO John Noseworthy stood before a cheering crowd here to celebrate a massive $6 billion redo of the clinic and the city.

For some, what’s happened since has been a whole lot of waiting for the magic to start.

“There’s a little bit of, ‘Where’s the beef?’ ” said City Council Member Michael Wojcik.

The city has little to show for the hoopla that surrounded the Legislature’s $585 million assist in Mayo’s plan to remake Rochester into an international center for medicine, research and health care.

The first two Destination Medical Center (DMC) projects could come together soon: The city will likely close next month on a $6 million deal to buy a historic downtown theater, preserving the stately structure for an as-yet undetermined use; and a 23-floor, privately funded Hilton could break ground in January in the heart of downtown.

Still, DMC planners likely won’t reach the $200 million in private investment needed to trigger the state funding until 2017 ­— four years after legislative approval.

The project’s pace recently drew the attention of former Medtronic CEO Bill George, who sits on the Destination Medical Center Corporation board. At its most recent meeting, George said it’s time to “get down to specifics and build momentum.

“We need to see something visible,” he said.

Those words cheered developer Sean Allen, who said he’s been frustrated by DMC’s speed. “This has been an idea and something that’s been floating around for four or five years now, and it’s still just a concept,” he said. “Bill George is right, you have to actually do something.”

Billed as a needed step to keep Mayo competitive with world-class medical centers, DMC blends private investment with public tax dollars to fuel rapid growth. Mayo would extend its campus and medical know-how with $3.5 billion in investments over the DMC’s 20-year life span, while private investors would add another $2.1 billion in residential, retail and commercial investments. The $585 million in tax money would build the infrastructure to make Rochester a destination in its own right.

The plan calls for adding up to 45,000 jobs to Rochester, nearly doubling its population and adding billions in state tax revenue.

Allen’s company, Midwest Landing, plans to break ground in the spring on a luxury apartment building across the river from Rochester’s Mayo Park. A second project, a nine-story office building, might break ground next year, he said.

Despite months of public meetings and strategic planning, Allen said he’s worried that not everyone is on board. The City Council in a recent meeting nearly approved construction of a one-story bank with a surface parking lot on a vital piece of riverfront land, a move at odds with the DMC vision for the space. Meanwhile, a new four-story affordable housing project announced last week will sit in an area the DMC plan had reserved for transit.

“It needs to be something we’re trying to accomplish as a community,” said Allen.

The DMC project was pushed as a 20-year plan, a fact that Jeff Bolton, Mayo Clinic vice president and chief administrative officer, stressed in a recent interview.

“We continually have to remind folks that this is a 20-year project,” Bolton said. Mayo has made $46 million of certified DMC investments so far, and is on pace to invest $3.5 billion over 20 years, he said.

The project hasn’t certified any private investment so far, but Bolton said that, as far as private companies looking to commit to Rochester, “we probably have four or five in discussion right now.”

Pushing ahead

Still unpacking in their new downtown office, the five-member staff of the DMC Economic Development Authority (EDA) has been charged with marketing and launching the project. Most of the staffers were hired in the past three months. Executive director Lisa Clarke said she took Bill George’s comments to mean she should “stay focused.”

“So, no dawdling,” she said last week. “It’s go time.”

Her staff will build something they’re calling a dashboard to chart progress, including such metrics as building permits, jobs and changes to median income.

The EDA will adjust the plan every five years, Clarke said, asking things like, “What’s the right pace?

“Now we’re in the private phase; we have to get private developers in,” she said.

The city has contributed $19.9 million of its required $128 million commitment, including $14.4 million for a city parking ramp on the Broadway at Center project and $5.5 million for the purchase of the Chateau Theater.

Clarke’s office has been tracking 14 privately funded projects worth at least $420 million that are likely to take place within the DMC district. It’s likely that the projects will push private investment in DMC beyond $200 million by 2017, unlocking the pledged taxpayer dollars, said Patrick Seeb, the EDA’s economic development director.

DMC board member R.T. Rybak said progress has been made, but it’s in the behind-the-scenes negotiations. He said it’s unlike the Vikings stadium, which was approved a year before DMC and whose exterior is largely finished.

DMC is “in a quiet phase right now,” the former Minneapolis mayor said. “That’s the way that field has to work.”

The DMCC board chair, Lt. Gov. Tina Smith, said, “My sense is that you’re going to see incremental progress during the course of the entire 20 years.”