A high-rise, historic renovation and bathroom fix help DMC unlock millions in state funds

Updated 11:50 a.m. | Posted 4 a.m.

The Destination Medical Center in Rochester has passed a crucial milestone: $200 million in private investments.

City and DMC officials announced this week that more than $145 million in additional investment, including new condos and construction on Mayo Clinic's campus, was made in 2016, bringing the total investment in the city since 2013 to nearly $300 million.

The state still needs to approve those investments, but once it does, Rochester will be eligible to tap millions in taxpayer dollars for infrastructure projects.

DMC board chair Lt. Gov. Tina Smith said it's an important point in the project.

"It demonstrates that our strategy of attracting private investment first into a market is working," she said.

How the city got to that amount, however, may raise eyebrows.

For example, there was Carol Nelson's 2014 bathroom renovation. Nelson isn't a developer; she's retired.

"I'm elderly, and I did a walk-in shower because I had two bathrooms with bathtubs," she said.

The project cost $5,000, and the DMC counted it as a private investment.

Nelson said the renovation had nothing to do with the massive DMC effort that's transforming her downtown neighborhood — it was only for her personal needs.

She said she's surprised the city counted her project toward the private investment goal: "Mine wasn't so interesting that it would be counted."

There's a huge incentive for the DMC to count Nelson's and any other spending on upgrades towards the investment goal set by the Legislature: $327 million from the state that could start flowing as early as this year.

Several projects the DMC submitted have no direct connection to the economic development project. But the state says they count towards the goal.

There's a new $28,000 air conditioning unit for a local church, and $13,000 for a new roof on a local business. Their leaders say the work would have been done anyway.

At least three Mayo Clinic projects were approved before the Legislature's approval of DMC funding, including a $9 million dermatology center renovation and a nearly $6 million upgrade to the sports medicine center.

Mayo says expansions are done based on long-term growth projections and patient need.

But air conditioning for a church and a retiree's bathroom aren't what some key players had in mind.

"I questioned some of the projects on there," said former state Rep. Kim Norton, the Rochester DFLer who helped usher the DMC bill through the Legislature.

The requirement for $200 million in private investment was a measure to reassure lawmakers that the city would in fact be growing before taxpayers were on the hook, she said.

But Norton said the requirement was framed as excluding construction that would've happened anyway.

"Is this growth that happened really the result of DMC or were some of these projects where they planned and had they started anyway?" Norton asked. "And do they really rise to the level of part of the DMC growth in infrastructure?"

The law on the books counts any project that occurred after July 2013, as long as it's in designated zones.

Construction paid for by Mayo can occur anywhere in the city while other projects must happen in the DMC downtown district. Norton said the city needs that money soon so it can keep up with Rochester's rapid growth.

To be sure, the DMC is attracting major investment.

That includes spots like the Bleu Duck Kitchen, a new restaurant in downtown Rochester. It's located on the first floor of a once-dilapidated historic building. Office space occupies the second floor.

Traci Downs and her husband Hunter snatched up the property and their renovations are valued at $2 million.

The building is often held up as an example of the type of investment Rochester hopes to see more of in coming years.

Downs, who also co-owns a coffee shop downtown, said investing in Rochester's downtown was a no-brainer.

"DMC is changing Rochester. And it's changing it in such a positive and exciting way that you want to be downtown," she said.

"I've been coming to Rochester for 10 years and it has not been as thriving of a place as it has been in the last few years."

The DMC is also attracting very visible and expensive projects. A gleaming high-rise office building contributed more than $8 million to DMC's goal.

The officer tower is also home to a high-end restaurant and roof-top bar that has made Rochester's dining scene decidedly hipper. And there's a $20 million expansion of Mayo lab space.

DMC executive director Lisa Clarke said large projects will vastly outweigh the early, small investments as time goes on.

"We see developers from all over the world that are focused on Rochester, Minnesota like never before," she said. "We have projects in the pipeline right now that Rochester hasn't seen before."

City officials expect several developments over $100 million in 2017. And Mayo, which will continue to contribute the most money to Rochester's redevelopment, is expected to break ground on new tech campus this year.