Economics of DMC

Destination Medical Center (DMC) is one of the most important issues facing Rochester, and was the most common concern I heard while talking to my neighbors in northwest Rochester.  On the surface it appears that DMC will only affect the downtown core of Rochester, but it is the largest economic development project in Minnesota and one of the largest in the nation.  The effects of DMC will resonate throughout Rochester, southeast Minnesota and beyond.

The scope of DMC makes it a difficult project to discuss in a single blog post, so I'm going to focus this post on discussing the funding. We need a plan with broad public support to pay for Rochester's portion of the tab.  The process of determining how best to pay for the project should not wait.  Starting the public discussions now will provide ample time to hear from the public and integrate that feedback.

DMC is first and foremost an economic development project.  The project will be financed by both public and private investments. Public investments will come from the governments of Rochester, Olmsted and Minnesota to the total of $585 million.  Private investment is projected to total nearly $6 billion.  

The first source of concern for many people is financial.  "How much is this going cost us?"  Rochester's portion of the public investment is $128 million. This money can be generated through a combination of mechanisms laid out in the legislation passed at the state level. These are the available funding mechanisms:

  • Tax on lodging
  • Tax on food and beverage
  • Tax on entertainment establishments
  • Sales tax (Maximum of one quarter of one percent, 0.25%)
  • Special tax abatement
  • Special tax incremental financing

The legislation goes further than prescribing the methods for raising the money.  It also has restrictions that the  limit the use of funds raised with these taxes to DMC use and that once Rochester's portion of DMC is paid for the taxes must be suspended. (link, Article 10, 469.65, Sec 8, Subd. 1) 

I understand the perspective of voters I've met who are wary of additional taxes.  I do believe there will continue to be ways to optimize our local government with a focus on efficiency.  The reality is that $128 million is not something that shifting budgets or more efficiency can generate, at least not without significant changes.

Rochester's portion of the public funding is considerable but it is something we can plan for. Responsible growth requires fiscal responsibility and public discussion.  We need a plan for how to pay our future DMC expenses.  The sooner we start this decision making process, the better. Our community deserves an open discussion, with public input, that considers all of the available tools and options.

Destination Medical Center represents great possibilities for our community, continued growth, and renewed economic focus on downtown. Rochester needs a plan for how to pay for its portion of the project and it needs to be an open process with community input.  I'm optimistic that we can find a way to pay for DMC while maximizing the value of the opportunity. That's the key for growing responsibly.

 


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