Rochester Buzzing About Mayo Expansion

Updated: 02/01/2013 7:17 AM By: Tom Hauser

The announcement seemed to come out of nowhere on Wednesday. The Mayo Clinic envisions a $6 billion expansion that could create up to 45,000 jobs. However, they need nearly $600 million in state subsidies to make it happen.

It certainly has Rochester buzzing.

"It's a big, big picture," says Rochester Mayor Ardell Brede. "Not only for Mayo Clinic, but this whole area and indeed the State of Minnesota."

Governor Dayton says he's willing to support some kind of public financing for the Mayo expansion, but only if there's bipartisan support at the capitol.

The state has a long history of public subsidies for private enterprises, including a stadium for the Minnesota Vikings, Northwest Airlines and the Mall of America.  

But all of those projects have had their critics. Art Rolnick, a former economist with the Federal Reserve Bank in Minneapolis and now at the Humphrey Institute at the University of Minnesota, says public subsidies are almost never a good deal.  

"It's a form of economic blackmail," Rolnick says, pointing out that companies almost always hint they might move or expand elsewhere if they don't get public money here.  "As long as you can get away with it and it's a legitimate threat, they'll get their public subsidy."  Rolnick says, in general, if any business plan has a high probability of success it doesn't need public subsides.  He also points out that once the state helps one health care enterprise, why not all the others?

Brede disagrees with Rolnick, but does acknowledge the Mayo Clinic has options to expand elsewhere like Florida or Arizona.  "I don't like to hear the term blackmail on it," Brede says.  "But I think the reality is Mayo isn't saying pay us or we're going to move.  They won't move out of here, but they may not expand further if we don't get some of this all put together."