ROCHESTER — Private investment in destination medical centers continues to decline ahead of Mayo Clinic's $5 billion expansion plan, according to a preliminary report.
“We started monitoring it a few years ago because we noticed a slowdown in private investment outside of Mayo,” said Michael Flynn, senior director of economic development for the DMC Economic Development Agency.
The Minnesota Department of Employment and Economic Development's annual report on private investments is not due until April 1, but Flynn recently told the state DMC Corporation's board of directors that other than the Mayo Clinic project reported in 2023, Private investment “seems to be slightly below,” he said. That's $13 million. ”
“We haven't announced it yet, but we think it will happen eventually,” he said.
That's down from the approximately $26.5 million reported in 2022 and the high of approximately $135 million in 2018.
Although down since 2019, cumulative investments by Mayo Clinic and other developers since 2013 total $1.46 billion, still at the lower end of the range expected at the start of the effort. .
Rochester Mayor Kim Norton noted during a recent discussion that “a pandemic was included in that timeline, but it was not anticipated at the beginning of the DMC modeling.”
Private investments in the DMC district, along with investments in Mayo Clinics throughout the city, are used to direct designated state funding each year.
The district includes Rochester's downtown core and the area extending westward around the campus of St. Mary's Hospital.
The law that created the DMC Initiative was intended to spur $5.6 billion in private investment in Rochester over 20 years, including $3.5 billion from Mayo Clinic and $2.1 billion from other private development.
Non-Mayo Clinic investments are expected to be $13 million in 2023, and official reports to DEED indicate that multifamily and commercial development in the DMC area is expected to reach approximately $539 million. Masu.
Mayo Clinic's proposed $5 billion “Bold, Forward, Unlimited, Rochester” downtown Rochester campus expansion plan is expected to far exceed overall private investment goals by 2030. ing.
This will ultimately release the full $585 million in designated DMC state funds. To date, nearly $127.6 million has been released in DMC state infrastructure funds and $7.5 million in related transportation funds.
While private investment in downtown has slowed in response to the pandemic, commercial investment citywide is expected to increase in 2021 and 2022, with building permits expected to bring in more than $130 million annually. That's up from $71 million in 2020.
In 2023, that amount fell to $65.7 million, but the city reported issuing 436 commercial permits last year, a four-year high, and the number of low-cost projects is increasing. It is shown that.
Although commercial construction permits declined last year, Rochester City Administrator Alison Zelms said all permits, including remodeling and trade work, will account for a record $600 million in 2023.
When it comes to residential building permits, citywide values have increased throughout the pandemic, reaching a high of $188.7 million in 2022, up from about $100 million in 2020. Last year, that number fell slightly to $177.2 million.
Flynn said housing was a driver of private investment downtown when the DMC first started and could be a source of spurring more investment.
While one large project, Enclave Apartments on the site of the Rochester Area Family YMCA, is planned to open in 2025, Flynn said two others, the City on Second Street SW Walk Apartments and the Mayo Civic Center North Development Plan, he said. — faces obstacles from rising interest rates and construction costs.
“The operational costs of developing and managing buildings after construction are also rising,” he said, suggesting that DMC support could facilitate future efforts.
Discuss housing assistance
The CityWalk project, located at the intersection of Southwest Second Avenue and Sixth Avenue, was approved for a $500,000 grant through DMC EDA's share of Main Street Economic Revitalization Funds from Minnesota DEED, but Civic North A request was made for state tax credits to help finance housing. Center was rejected.
DMCC board members have pointed to the possibility of future financing support for housing options, including addressing market rates, but some are cautious.
“I don't believe TIF is going to solve the housing problem,” Olmsted County Commissioner Mark Tain, a board member, said, pointing to tax increment financing as a potential source of support.
Some suggested a cautious approach to encourage development.
“My biggest fear is housing,” said Doug Baker Jr., a Mayo Clinic board member and member of the DMCC board. “Even if we could find workers and train them, there is no place for them.”
He said avoiding public support to promote housing could be problematic.
“It's much smarter to have too much subsidy and encourage new housing construction than to have too little subsidy and nothing happens,” he said.