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Randy Staver explains the importance of the DMC funding provision

Randy Staver explains the importance of the DMC funding provision

(THE MED CITY BEAT) - The Minnesota Legislature is expected to approve a final budget deal in an upcoming "special session" that includes a provision to the Destination Medical Center legislation.

The language would allow Rochester to count DMC administrative and planning costs toward its $128 million contribution to the initiative. Those costs are expected to be around $21 million over the next five years.

So, why is this significant? In short, it allows Rochester to use revenue from sales taxes to pay for these "soft costs." Previously, the legislation had only allowed the city to use sales taxes for "hard costs," like roads and sewers.

The city had indicated it would need to raise property taxes to cover the administrative costs if the language was not fixed.

City Council President Randy Staver explained the importance of the provision in an email Thursday to the Med City Beat:

Recall that the original request to the legislature was for $585 million to help support the DMC growth initiative which is projected to spur in excess of $5 billion of private investment over the next twenty years. 

That kind of growth will create challenges as local government tries to keep up with the infrastructure demands such as roads and water / sewer lines.  While we certainly try to budget for reasonable growth, the concern was that DMC could drive demand that would outstrip our capacity to fund those improvement. 

Hence the request for the $585 million in assistance.  Of the $585 million, the City of Rochester is expected to contribute $128 million. In other words, the entirety of the $585 million is not coming from the State.

The original language of the passed legislation was interpreted to mean that the $128 million could only be expended on bricks and mortar or things of tangible substance.  What we are finding as we get into the execution steps is that there are also a fair number of soft costs such as administrative expenses.  Also, the City has some obligation to fund the DMC EDA operations which could also be viewed as a necessary but soft cost.

Since the language was interpreted such that we could NOT expend any of our $128 million on soft costs, we were left with the dilemma of how to pay for those costs.  We did not think it was the intent or within the spirit of the DMC legislation to require Rochester to contribute $128 million toward DMC and also fund other DMC related expenses using other funds. 

In short, those funds would most likely need to come from property taxes.  We therefore requested a clarification in the DMC legislation to permit the city to use our $128 million of DMC funding to help offset any of the expenses associated with DMC whether they be viewed as hard or soft costs.

We have been trying to make our case for the language change and, based on the most recent news reports, it sounds like it could be addressed as part of the jobs bill in the special session.  We will continue to follow the process.

Click here for Wednesday's report on the DMC provision.

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(Cover photo: File / Randy Staver / The Med City Beat)

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