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HomeMy WebLinkAbout2025 Strategic Planning Environmental Scan Report 0 CITY OF ROCHESTER Environmental Scan MARCH 2025 1 2 Contents Introduction ...................................................................................... 1 Community Characteristics ............................................................. 2 Social Trends .........................................................................................................................2 Economic Trends ..................................................................................................................3 Workforce Trends ..................................................................................................................3 Political Trends ......................................................................................................................4 Stakeholder Input ............................................................................ 5 City Council Input ..................................................................................................................5 Leadership Forum Input .......................................................................................................6 Board and Commission Input ..............................................................................................7 1 Introduction The City of Rochester (City) is in the process of updating its Strategic Plan to guide future decisions and create a roadmap to move towards the City’s intended vision. In order for a community to plan effectively for the future, it is important to first have a clear understanding of where that community is today. This Environmental Scan provides an overview of Rochester’s current operating environment regarding the City’s strengths, challenges, and opportunities for the future. Information used for this document comes from the following sources: • United States Census Bureau (Census) • United States Bureau of Labor Statistics (BLS) • Rochester Area Economic Development, Inc. • Rochester Convention and Visitors Bureau • Rochester Olmstead Council of Governments (ROCOG) • 2024 Employee Engagement Survey, CPS HR Consulting • 2024 National Community Survey, Polco • City of Rochester 2024 Year-End Operations Plan Report • Strategic Planning Work Sessions and Stakeholder Outreach: o City Council Study Session, January 27, 2025 o Interviews with City Councilmembers, February 2025 o Leadership Forum Session, February 11, 2025 o Board and Commission Chairs Session, February 18, 2025 2 Community Characteristics The following section discusses national shifts and summarizes Rochester’s current state across four trend categories: Social, Economic, Workforce, and Political. SOCIAL TRENDS Rochester is growing at a faster rate than the national average, and its population is aging and becoming more racially and ethnically diverse. Nationally, the United States population has been continuously growing, increasing just under 8.5% between 2010 and 2023, according to the Census. The impact of this growth is felt differently on a community-to- community level. Different factors influence how each community’s population changes, including access to economic opportunities, cost of living, and concerns about safety. The COVID-19 pandemic also impacted population distribution, with many people now working from home, which provides greater flexibility in where they decide to live. In Rochester, the population has risen at a faster rate than the national average – 14.7% between 2010 and 2023. According to Rochester Olmstead Council of Governments (ROCOG), the City’s population is projected to continue to increase 33% from 2023 levels by 2045 (or nearly 39,000 residents). The Olmstead County area is projected to grow by 29% in the same period, with Rochester shouldering the majority of the total growth. Rochester’s racial and ethnic diversity is increasing. 58.4% of residents identify as White alone (not Hispanic or Latino), 18.5% as Hispanic or Latino (any race), 13.7% as Black alone, 6.4% as Asian alone, and 3.1% as Two or More Races. As of 2023, 13.6% of Rochester’s residents were foreign-born, and 18.5% of households spoke a language other than English at home. According to data from the Census and ROCOG, Rochester’s population is projected to grow older, on average, between now and 2045, as seen in the graphs below. An aging population may shape the City’s priorities for programs and services, particularly in regard to housing, transit, recreation, and healthcare. 3 ECONOMIC TRENDS Nationally, the economy is facing ongoing uncertainty. Inflation, though lower now than its June 2022 peak, continues to impact consumers and businesses alike—prices are rising for food, energy, housing, and professional services. Interest rates also remain high; the 30-year fixed rate mortgage average was last recorded as 6.63% as of March 6, 2025. Interest rate hikes have raised borrowing costs for individuals and businesses. While national unemployment remains relatively low, several sectors are undergoing layoffs and slower hiring. Adding uncertainty around future Federal Reserve policy and market volatility, the national economic outlook remains unclear. In Rochester, the Mayo Clinic is by far the largest employer and economic driver, with approximately 42,000 employees. Other major employers include Rochester Public Schools and IBM. The City enjoys low unemployment—2.1% as of December 2024, according to BLS data. According to the Rochester Convention and Visitors Bureau, there are approximately three million annual visitors to Rochester, 67% of whom are visiting Mayo Clinic. The development of Destination Medical Center (DMC) will unquestionably continue to drive growth over the next few decades. The $5.6 billion investment is the largest economic development initiative in the history of the state. Nationally, approximately 31% of Americans who pay either rent or mortgage pay 30% of their income or more toward housing, the threshold for what is considered “cost-burdened” by the United States Department of Housing and Urban Development. “Affordable housing,” defined by many in many different ways, is a nationwide concern. Rising housing prices for both homeowners and renters, coupled with a limited housing supply exacerbated by rising construction costs, have led many to be in a difficult position as t hey seek reasonably priced housing. Affordable housing is a top-of-mind challenge that many policymakers and communities across the United States are grappling with. In Rochester, housing prices are rising. Between 2019 and 2023, the median home value increased 41% in Rochester, from $229,800 to $324,200. In comparison, the median home value in Olmstead County in 2023 was $304,500, and $305,500 for the state of Minnesota. According to Census data, a rising number of Rochester households are considered cost-burdened. This includes 24% of households with a mortgage and 52% of households renting. The percentage of cost-burdened renters has risen 16% between 2019 and 2023 – from 44% to 52%. WORKFORCE TRENDS Employee turnover and recruitment difficulties are national challenges that also impact the City of Rochester. Nationally, the culture in many workplaces has changed significantly in recent years. The COVID-19 pandemic fundamentally altered the way many Americans work, with many workplaces offering increased schedule flexibility and opportunities for employees to work remotely. Many workplaces also increased their reliance on the use of technology, like virtual meeting platforms, to conduct everyday business. The Census reports that the 4 number of employees working remotely full-time increased from 6% of the workforce in 2019 to 14% in 2023, down from its peak of 18% in 2021. Additionally, there is a continuing trend away from pension plans and towards 401(k) and other retirement structures, meaning there is often less incentive for employees to remain in a particular role. Americans are also spending less time at a single job, on average, than they have in recent years. The Bureau of Labor Statistics reports that the median American worker had been with their job for 3.9 years as of September 2024, down from 4.1 years in January 2022 and the lowest since January 2002. More frequent job changes impact an organization’s ability to build and maintain institutional knowledge among its employees, underscoring the importance of strong policy and procedure documentation as well as robust training programs. In Rochester, like in many municipalities across the nation, the organization faces challenges related to recruiting and retaining a high-quality workforce. Staff report challenges in recruiting talent that reflects the broad diversity of the community. Results from the employee engagement survey conducted by CPS HR Consulting in 2024 indicate that only 67% of employees necessarily plan to stay in their current position in the next year; the firm’s local government benchmark is 73%. Of those who indicated their intent to leave, excluding retirement, the top reasons were 1) for an increase in salary or benefits and 2) for a better workplace culture. The organization’s 2024 turnover rate was 6.5%, higher than the national average of 3.3%. POLITICAL TRENDS As America grapples with increasing political uncertainty, Rochester officials will have to navigate a shifting landscape. Nationally, the political climate has become increasingly polarized in recent years due to factors like the rise of populism and social media platforms that contribute to the spread of false or misleading information. Multiple sources of information, many with particular biases, also make it easy for individuals to limit their exposure to information and opinions that do not align with their worldview. Additionally, there is significant political uncertainty in the wake of a new presidential administration. Many agencies face potential layoffs, federal funding for many programs may be slashed, and regulatory requirements may change considerably. States and municipalities around the country are waiting to see the impacts of these potential shifts, especially regarding their budgets. In Rochester, the City takes pride in its strong partnerships—with state and federal legislators, the Mayo Clinic, the business sector, local nonprofits, and a community rooted in volunteerism and compassion. These collaborations have supported the City’s ability to deliver essential services. However, recent uncertainty regarding federal funding has raised concerns from both staff and elected officials about the impacts of potential cuts on the City’s programs and initiatives. Despite this uncertainty, data from the 2024 National Community Survey shows that Rochester residents hold increasingly positive perceptions of City governance compared to 2022. 5 Stakeholder Input Understanding how key stakeholders perceive the City provides important context for the strategic planning process. Receiving input is essential to ensuring that the strategic framework is aligned with the organization’s day-to-day reality and how stakeholders perceive the City. Input was solicited through a Council study session, individual interviews with Council members, a workshop with the City’s leadership forum, and a focus group with Board and Commission chairs. The following table provides a high-level overview of the key themes discussed by each stakeholder group to show where there is overlap, while the sections below discuss these themes in greater detail. City Council Leadership Forum Board and Commission Chairs Strengths • Partnerships and ethic of collaboration • Strong financial position • Compassionate community • Diversity • Great education • Compassionate community • City that performs beyond its scale • Diversity • Strong financial position • Strong legislative connections • Partnerships and ethic of collaboration • Smaller city with great amenities • Professionalism of staff • Parks, trails, and recreation • Strong economy bolstered by Mayo Limitations/ Challenges • Managing expectations amidst growth • Changing federal funding landscape • Housing access and homelessness • Managing expectations amidst growth • Changing federal funding landscape • Recruiting and retaining staff • Housing access and homelessness • Mobility and connectivity • Urban sprawl Future Opportunities • Leveraging transformation from Destination Medical Center (DMC) • Enhancing partnerships • Environmental sustainability • Advancing equity • More entertainment • Improved mobility and public transportation • Leveraging partnerships with other governing bodies • Technology, AI, and innovation • Growth of tax base • Improved mobility and public transportation • Focusing on Rochester’s history • Coordinating waste management • Modernizing the library CITY COUNCIL INPUT STRENGTHS When considering the strengths of the City, Councilmembers highlighted the strong ethic of collaboration— both within the City organization and with external partners—as a key factor for Rochester’s success as a community. Strong relationships with partners, including Mayo Clinic, the Destination Medical Center Corporation, local schools, Olmstead County, and state legislators, bolster the City’s ability to provide excellent services and a great place to live for its residents. Councilmembers also celebrated the organization’s excellent staff and its financial strength. In interviews, Councilmembers also emphasized the reputation of compassion that is evident throughout the community—individuals in Rochester are known to be kind to one another, and this compassion is also visible at the institutional level, where there is a strong nonprofit/social services presence. They also celebrated the 6 excellent local schools, which increase its attractiveness for families with children, as well as the general diversity of the community. LIMITATION S AND CHALLENGES In interviews, Councilmembers identified housing access as one of the community’s most daunting challenges. Rochester also has a visible unhoused population, in part due to its reputation as a compassionate community with a strong social services support network that attracts individuals experiencing homelessness who are looking for stability and aid. Additionally, they discussed potential limitations in keeping up with the pace of growth, given the organization’s current staff and financial resources. Some Councilmembers mentioned the rapidly changing federal funding landscape, which could potentially impact the City’s ability to execute on certain initiatives. A few Councilmembers mentioned decreasing levels of trust in government as a limiting factor of civic engagement. FUTURE OPPORTUNITIES During a January Council study session, Councilmembers noted that the development of Destination Medical Center will unquestionably transform Rochester. As the City grows, in large part because of this investment, it will be critical for the City to determine how to best leverage partnerships to strengthen the organization and the community at large. While the growth will strengthen the local economy, the City must be mindful of the pace of growth and the execution of existing priorities. Councilmembers also participated in an exercise in which they answered two questions about Rochester: 1) “What is true today about Rochester that you hope will still be true in ten years?” and 2) “What is not true today about Rochester that you hope will be true in ten years?” Key themes from this exercise include: • True Today: Rochester continues to be a leader in health and well-being. The community is still known for its compassion for others and its sense of welcoming. Rochester will also continue to offer attractive employment opportunities and maintain its strong economy. • True in Ten Years: Rochester will have sufficient housing opportunities at all levels. It is a leader in environmental sustainability. Its economy has diversified, and its community has become more equitable, giving more people the chance to succeed. In interviews, Councilmembers also discussed opportunities for the City to advance social equity, become a destination for the arts, better engage with all sectors of the Rochester community, offer more entertainment options, and stay focused on excellent service delivery. LEADERSHIP FORUM INPUT STRENGTHS Leadership Forum members highlighted several key strengths of the Rochester community, including its reputation for compassion, its dynamism, and the fact that it performs beyond its scale—that is, it is a relatively small municipality with amenities and initiatives more likely to be found in big cities. They also celebrated Rochester’s diversity. 7 As an organization, they discussed its strong financial capabilities, as demonstrated by the City’s AAA bond ratings and its success at securing funding and capital investment. They celebrated the breadth of subject-matter expertise within the organization and noted that collaboration has increased, with different units becoming less siloed in recent years. Additionally, they highlighted the City’s strong connections to other legislative bodies—at the state and federal levels, as well as regionally. These partnerships bolster the organization’s capacity for success. LIMITATION S AND CHALLENGES As the City grows, it may be challenging to manage expectations for service delivery while maintaining a focus on already agreed-upon initiatives. The Leadership Forum also faces challenges in prioritizing resources across different priorities and funding channels. Notably, the federal funding landscape is rapidly changing, which may limit the City’s ability to execute on certain projects. The group also noted challenges with recruiting and retaining municipal staff, especially those that reflect the diversity of Rochester’s broader community. One of Rochester’s main strengths—the presence of Mayo Clinic—in some ways, is also a limitation. The local economy has long revolved around the Mayo brand, and some worry the Clinic may have an outsized influence in the community. FUTURE OPPORTUNITIES Looking ahead, the Leadership Forum recognized several opportunities in light of the significant growth and change anticipated in Rochester over the coming years. The development of Destination Medical Center will, to a degree, transform the area. With this transformation comes opportunities for the City to rethink transit (including bus rapid transit projects currently in progress), to continue with thoughtful development (particularly focusing on the Northwestern corridor), and to leverage partnerships with other governing bodies such as Olmstead County. Additionally, several members of the Leadership Forum highlighted how technology and artificial intelligence (AI) can help drive innovation and process improvement for the City. The City’s anticipated tax base growth will create many of these opportunities but will require careful stewardship. BOARD AND COMMISSION INPUT STRENGTHS Many group members love that Rochester is a smaller city that offers great amenities. There was also a sense that the community fosters opportunity and entrepreneurship. Other strengths mentioned include the professionalism of City staff and the City’s willingness to form partnerships to achieve community goals. A number of members shared that they love the excellent parks, trails, and recreational offerings. When asked about what makes Rochester unique, the group noted that Rochester is unique compared to other municipalities in that it has such a strong economic driver in Mayo Clinic. LIMITATIONS AND CHALLENGES Representatives of the boards and commissions noted that while bicycle/pedestrian mobility has improved, driving around town has become more difficult, with a few complaints about traffic circles. They also noted that multimodal connectivity between all four quadrants is currently limited. The representatives agreed that affordable housing was the most pressing issue facing the Rochester community. Participants discussed a high property tax burden and expressed concern about urban sprawl. They also acknowledged that while homelessness is a very complex issue, it is a visible problem. 8 FUTURE OPPORTUNITIES Members of this focus group said the City has an opportunity to uplift its history; they noted that many residents appreciate the history of Mayo Clinic but are less aware of Rochester’s own heritage. Some mentioned opportunities for improved historic preservation. Some group members hoped for improved bicycle/pedestrian mobility within the downtown area, which they believe will be improved by the bus rapid transit (BRT) plan. Several also hope for future public transportation options to the airport. They also shared the idea of the City taking a lead in coordinating operations among private waste management firms. Some mentioned a desire to modernize the library, as well as to have branches. Looking ahead, this group hoped that Rochester would retain its reputation as a compassionate community and that the City would continue to have a strong relationship with Mayo Clinic.