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Dr. John Noseworth, CEO, Mayo Clinic
In announcing the Destination Medical Center plan, Mayo Clinic CEO Dr. John Noseworthy, center, said the system's $3.5 billion plan depends on Minnesota spending $600 million.
Photo credit: AP PHOTO

Mayo's ultimatum

Clinic wants $600 million in improvements by state

By Joe Carlson
Posted: February 2, 2013 - 12:01 am ET

The Mayo Clinic, synonymous with southern Minnesota for more than a century, says state lawmakers must pay about $600 million over 20 years in an unusual borrowing plan to ensure the famed clinic will continue investing in the region.

While the exact terms of the large public financing proposal are unique, Mayo's idea dovetails with trends both in Minnesota and among large employers nationally, where businesses use their clout as job creators to extract financial incentives from public coffers.

The Minnesota Vikings, for example, persuaded lawmakers last year to promise more than $500 million in public spending for a $1 billion football stadium after the team threatened to move. And large not-for-profit healthcare employers in other states, such as the Cleveland Clinic in Ohio and the Scripps Research Institute in Palm Beach County, Fla., already receive state subsidies to support their operations.

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Mayo pledged last year to spend $3.5 billion to improve its flagship health center in Rochester and a set of developments now known collectively as the Destination Medical Center project. Last week, the system said it would also bring at least $2.1 billion in private investments from other sources to improve entertainment, lodging and tourism options in the city of 100,000 people.

But the plan would hinge on commitments from state and local governments to build parking lots, bridges, mass transit options and enhanced streetscapes. Money to pay for those improvements would come from the income and sales taxes paid by new employees, as well as corporate franchise and state taxes paid by new or expanded business.

Mayo President and CEO Dr. John Noseworthy said the renowned physician-led health system is often approached by other cities and states that can offer financial incentives in exchange for expansions, but that the system would rather keep operations in Minnesota.

“Why would we ever want to leave this state to continue to grow our global footprint? We don't want to do that,” Noseworthy said during a Jan. 30 news conference in St. Paul. “But we need to have secure public funding of the infrastructure if we are going to make this the global business center. And these are the decisions we have to make on a pure business sense going forward.”

Greg LeRoy, executive director for the Washington-based public advocacy organization Good Jobs First, said requests for public support of large private investments are becoming more common in all industries, as high-paying jobs grow scarcer and lawmakers are driven harder to compete for them.

“We call it 'job blackmail,' ” LeRoy said. “You've got a smaller number of jobs and a larger number of public officials anxious to appear more aggressive on the economy. That benefits big employers. I would urge Minnesota officials to … bargain as smart as they can, really try to understand Mayo's hand in this poker game.”

Would Mayo truly leave Rochester? System officials said in interviews that it's not a question of uprooting from the city, but rather deciding where to spend its $3.5 billion on new clinical and administrative facilities.

“Mayo Clinic is not going to disappear from the state of Minnesota,” said Dr. Bradly Narr, medical director for Mayo's Destination Medical Center project. “The question is, what pieces of the destination practice are going to gravitate here, and where are we going to grow elsewhere?”

Some lawmakers immediately pledged support.

“This is an incredibly valuable asset for the state of Minnesota,” said state Sen. David Senjem, who recently retired from Mayo after 44 years. “And we're going to work collectively as a state Legislature to make sure that this asset not only stays here, but grows here. And we have an opportunity through this piece of legislation to do that. We have to ensure that Mayo is a part of Minnesota for the long-term future.”

Bill Blazar, a senior vice president with the Minnesota Chamber of Commerce, said that although Mayo is a not-for-profit organization, it has to make business decisions like any other commercially driven organization—and lawmakers have to understand that.

“It's just reality,” he said. “Every business, whether it's the Minnesota Vikings or the Mayo Clinic or Fred's Machine Shop, has options. Fred's can move to Wisconsin, the Vikings can move to California, and Mayo could move to Florida or Arizona or 52 other places that would like to have them. That's just reality.”

Spokespeople for the governor's offices in Florida and Arizona, both of which host large Mayo health centers, declined to comment on whether their states have offered financial inducements.

Minnesota Gov. Mark Dayton said he will be encouraging the Legislature to pass a tax-increment financing plan in the next few months, though he hedged on the details, saying during the Jan. 30 news conference, “I don't know if this is exactly the right financing plan.”

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