Anatomy of a Public Private Partnership from Mayo Clinic

Public-private partnership is touted as the best and most direct route for expanding broadband in Minnesota. I just heard it mentioned in a Senate committee meeting introducing the Minnesota Broadband Task Force reports and we posted a story about success with public-private partnership in Seattle in December.  So it’s exciting to learn about plans from the Mayo Clinic; the Clinic doesn’t mention broadband investment specifically, but I think we can assume that broadband is part of the infrastructure they need. And even if it’s only a small part, this is a great model.

The Mayo Clinic announced…

Mayo Clinic today announced Destination Medical Center (DMC), a $5 billion economic development initiative to secure Minnesota’s status as a global medical destination center now and in the future. The goal of DMC is to ensure that Minnesota and Mayo Clinic are destinations for medical care in the coming decades. This initiative is the culmination of a three-year study by Mayo Clinic to chart its future business strategy in an increasingly complex, competitive and global business environment.

The DMC public and private investment is estimated to include approximately $3.5 billion in new Mayo-financed capital investments on its Rochester campus over the next 20 years, combined with an estimated $2.1 billion in additional leveraged private investment. The multiyear Mayo Clinic DMC investment, combined with additional private investments required to support this global destination vision, is projected to create 35,000 to 45,000 new jobs in Rochester and Minnesota and over $3 billion in new tax revenues in Minnesota. This represents the largest economic development initiative in Minnesota and one of the largest in the United States.

Here are the expected benefits…

  • Total economic impact to Minnesota exceeding $45 billion, including $30 billion of direct spending.
  • 35,000 to 45,000 new jobs in Minnesota, of which 25,000 to 30,000 would be direct to expansion in southeast Minnesota.
  • 1,800–2,200 construction jobs per year. Most will be union/trades.
  • $2.5–$3 billion in additional tax revenues to the state of Minnesota (personal income, sales, other state taxes) over the 20-year period;
  • An additional $300 million in new local and other tax revenues.

They have a threefold plan…

  1. Mayo Facilities and Services Expansion.
  2. Private Business Expansion.
  3. Public Infrastructure.

And they proposed a financing plan…

  • A portion of the proposed $585 million in public costs will be financed locally by the city of Rochester using city tax revenues and financing tools such as possible revenue bonding, tax abatement and TIF (Tax Increment Financing). In addition, Rochester voters last November approved an extension of the local sales tax that included $20 million as an additional city contribution to support the DMC expansion.
  • A public body will be created in state statute that is governed by state and local appointees who will review multiyear public development plans in the DMC special services district in Rochester and recommend eligible public infrastructure projects to the state for DMC financing.
  • The state portion of DMC financing (approximately $500+ million) would be secured by a state appropriation bond that is drawn upon incrementally over the 20 years when eligible projects are needed and then submitted to the state for final approval.
  • The state DMC appropriation bonds would be repaid by employing a “value-capture” model that relies on using a small percentage of the new state tax revenues generated by the Mayo Clinic and DMC expansion in Rochester as the bond revenue stream.
  • Unlike almost all economic development projects that rely on “front-loading” of the entire public infrastructure costs, the DMC model would require smaller increments of public financing over a long period. As importantly, new projects would not be approved for financing unless and until the state Department of Revenue annually certifies that new state tax revenues generated by the DMC expansion have actually been paid to the state. In other words, the DMC financing proposal relies on “proof of new tax growth paid to the state” before additional projects are financed vs. banking on estimated tax growth that hopefully occurs in the future.

The Rochester Post Bulletin reports that not every detail has been ironed out, but that the State seems enthusiastic…

Dayton praised the broad outlines of the project saying he could not think of a more important project in the state. The governor did add he is not sure if the financing mechanism being proposed is the best way to go, but said it will get worked out as it moves through the legislative process.

I think it’s a great example of a local business (albeit an internationally renowned local business) leading the path. It’s great to see a business make the investment because it would probably be easier in many ways to find a new home with some of the infrastructure in place.

This entry was posted in Broadband Applications, economic development, Funding, Healthcare, MN, Policy by Ann Treacy. Bookmark the permalink.

About Ann Treacy

I have a Master’s Degree in Library and Information Science. I have been interested or involved in providing access to information through the Internet since 1994, when I worked for Minnesota’s first Internet service provider. I am pleased to be a part of the Blandin on Broadband Team. I also work with MN Coalition on Government Information, Minnesota Rural Partners, and the American Society for Information Science and Technology.

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