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Don Davis, Forum News Service, Published March 05 2013

Mayo expansion could cost Minn. up to $1B more than expected

ST. PAUL – Minnesota legislators expressed sticker shock Tuesday when they learned the state’s Mayo Clinic expansion proposal would cost more than they thought.

It could be $1 billion more than Mayo supporters had said.

The Rochester-based health center known around the world asked the Legislature and Gov. Mark Dayton to borrow $585 million to help the community build facilities related to the expansion, things such as parking ramps, streets and land purchase.

But Mayo ran into opposition Tuesday when a Senate committee asked if the $585 million was the total state and local government cost.

Mayo insisted that would be the limit, although the bill being considered allows the state to pay up to $75 million a year for 33 years. Sen. Barb Goodwin, DFL-Columbia Heights, said the Mayo bill could be up to $2.5 billion over time.

After Judiciary Committee Chairman Ron Latz, DFL-St. Louis Park, asked a panel of Mayo representatives several times, Mayo consultant Bob Dunn told the Senate Judiciary Committee that the frequently reported $585 million figure only would be the amount the state borrows.

Dunn compared the situation to a person buying a house: The amount borrowed is just part of the money the homeowner must repay. A mortgage payment also includes interest.

A state report, not available during the senators’ meeting, indicates Mayo project interest could top $1 billion over 33 years. Since the state would sell bonds over several years and interest rates change, it is impossible to deliver an exact amount.

Sen. Dave Senjem, R-Rochester, said that the state would repay principal and interest only after Mayo paid enough new tax, due to the expansion, to cover those costs.

Saying they were unclear about the real state cost of the Mayo project, members of the Judiciary Committee made the unusual decision of sending the bill on to the next committee without recommending that it pass. Most committees approve bills with recommendations that they pass.

Senjem said information about complete costs will be available at future committee hearings.

The measure has gone through several House and Senate committees, with more committee hearings planned. Dayton has not taken a specific stand on the issue.

Mayo wants the state to chip in for what it calls Destination Medical Center, a project that would include a major Mayo expansion.

The plan also includes Rochester community improvements so the city can better host the medical center. That is the part of the plan the state and city would fund.

Mayo proposes to spend $3.5 billion to expand its hospital, clinic and other facilities in Rochester, while private investors would add $2.1 billion for developments ranging from arts programs to hotels to new stores.

In Rochester, the infrastructure need will be so great that the city cannot support it alone, Dunn said, which is why the city seeks state money.

Mayo provides Minnesota a $9.8 billion economic impact a year, 4 percent of the state’s economy, Mayo claims.

Sixty-two of the state’s 87 counties have Mayo facilities. They employ 40,600 in Minnesota, 33,400 in Rochester. It is the state’s largest private employer.