Tentative budget deal helps Rochester avoid tax hike

Gov. Mark Dayton on Wednesday confirmed a tentative state budget compromise includes provisions that would loosen restrictions on project spending in Rochester, a fix the city said it needs to avoid a property tax hike.

The tweaks would allow Rochester to tap into a pair of local sales taxes – a general tax and a hospitality tax – to cover administrative and planning costs tied to the Destination Medical Center, the multibillion-dollar Mayo Clinic build-out that is expected to add as many as 45,000 workers and reshape the city.

Measures allowing Rochester to count those expenses toward its $128 million investment commitment for the project would effectively rule out a new funding source. Without relief, Rochester City Council President Randy Staver has said the city would need more cash to cover $21 million in extra costs over a five-year period.

As it stands, the city taps into an earmark to defray between $1 million and $2 million a year in expenses that don’t currently count toward its total investment tally. The city expects that funding to dry up in the next two or three years.

If lawmakers don’t act before mid-2016, Staver has said, a property tax hike affecting Rochester’s 110,742 residents will become a distinct possibility. Rochester’s delegation at the Capitol has pushed throughout the session to give the city more breathing room.

The city’s $128 million commitment covers a decent chunk of the $585 million in state, county and city funding set aside for the Destination Medical Center, according to plans. The state has $327 million in matching funds designated for the project, available after private investors sink in their first $200 million.

Earlier this week, the governor listed the Rochester tax tweak among his top priorities in negotiations ahead of a special session. The provisions will likely be rolled into jobs legislation, but were originally part of a larger tax bill that stalled out in the regular session.

Last month, House tax committee chair Rep. Greg Davids, R-Preston, said he wouldn’t let relief for Rochester get lumped into non-tax legislation, like the jobs bill. Widespread support for the legislation, a rare point of mutual interest in divergent House and Senate tax bills, would boost chances for renewed tax talks in a special session, he said.

But with the tentative budget agreement in place, Dayton said he would call a special session – likely to focus only on unresolved budget bills – as soon as he and caucus leaders review and approve proposals and define boundaries for their talks.