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HomeMy WebLinkAbout5/18/2022 DMCC Board of Directors Meeting - PresentationDMC Corporation Board of Directors Meeting Wednesday, May 18, 2022 WEALTH ADVISORY | OUTSOURCING | AUDIT, TAX, AND CONSULTING Investment advisory services are offered through CliftonLarsonAllen Wealth Advisors, LLC, an SEC‐registered investment advisor ©2 0 2 1  Cl i f t o n L a r s o n A l l e n  LL P Audit Results for Year Ended December 31, 2021 Destination Medical Center Corporation ©2 0 2 1  Cl i f t o n L a r s o n A l l e n  LL P Create Opportunities Agenda •Financial Statements •Audit Results •Required Communications ©2 0 2 1  Cl i f t o n L a r s o n A l l e n  LL P Create Opportunities Financial Statements •Prepared based on Governmental Accounting Standards Board pronouncements •Single program entity—present expenditures by type (natural classification) •Component unit  o DMCC is a component unit of (included in) City of Rochester’s financial statements o DMCEDA is not a component unit of DMCC o Will evaluate component unit reporting annually ©2 0 2 1  Cl i f t o n L a r s o n A l l e n  LL P Create Opportunities Financial Statements : Assets & Liabilities $0 $100,000 $200,000 $300,000 $400,000 $500,000 $600,000 2017 2018 2019 2020 2021 Assets Liabilities ©2 0 2 1  Cl i f t o n L a r s o n A l l e n  LL P Create Opportunities Financial Statements : Revenues & Expenditures $0 $500,000 $1,000,000 $1,500,000 $2,000,000 $2,500,000 $3,000,000 2017 2018 2019 2020 2021 Revenues Expenditures ©2 0 2 1  Cl i f t o n L a r s o n A l l e n  LL P Create Opportunities Audit Results •Financial statements –clean opinion •Internal controls –no findings •Minnesota legal compliance –no findings ©2 0 2 1  Cl i f t o n L a r s o n A l l e n  LL P Create Opportunities Required Communications •Audit provides reasonable, but not absolute assurance •Accounting policies – described in Note 1 to the financial  statements •Audit adjustments –none  •No disagreement or difficulties with management ©2 0 2 1  Cl i f t o n L a r s o n A l l e n  LL P Create Opportunities Items to Complete •Federal and state tax filings CLAconnect.com ©2021 CliftonLarsonAllen LLP Investment advisory services are offered through CliftonLarsonAllen Wealth Advisors, LLC, an SEC‐registered investment advisor WEALTH ADVISORY | OUTSOURCING | AUDIT, TAX, AND CONSULTING Craig Popenhagen, CPA PrincipalLuke Greden, CPA Manager 2689 Commerce Drive NW, Suite 201 Rochester, MN 55901 Direct  (507) 280‐2325 Luke.greden@claconnect.com Craig Popenhagen, CPA Principal 2689 Commerce Drive NW, Suite 201 Rochester, MN 55901 Direct  (507) 280‐2327 Craig.popenhagen@claconnect.com DMC Metrics Describing Progress Toward DMC Goals •February: 30,000 New Jobs Construction workforce development strategies supported by the Bloomberg Global Mayor’s Challenge award •May: $5.6B in private investment An overview of Mayo Clinic’s five-year capital plan •September: $7-8B in new tax revenue Case studies in how in-fill development can create tax capacity •November: Highest-quality Experience Discussion of the metrics and indicators DMC monitors to evaluate the efficacy of experience improvement strategies Five -Year Plan update Douglas Holtan Chair, Facilities and Support Services May 17, 2022 Overview •Every five years Mayo Clinic provides the City of Rochester a comprehensive inventory of Mayo Clinic’s footprint in Rochester along with a forecast of potential development project that may be pursued in the next five years. In March, the City Council unanimously approved the Mayo Clinic Five Year Plan. •Approval of the five-year plan allows Mayo Clinic to proceed on projects within the plan with an expedited approval process •This provides Mayo Clinic flexibility in managing multiple projects and supports and provides efficiencies to the City by eliminating administrative burden to city staff. Medical Special District The Medical Special District offers a campus style land development approach as an overlay district. The Special District is comprised of; Central Sub-District; West Sub-District; MSS (North) Sub-District. Data and Forecast •With the Five-Year Plan, Mayo Clinic demonstrates its continuing investment to secure Rochester’s future as a destination medical center as well as its commitment to meeting the needs of our patients into the future. •The plan includes an inventory of information including all Mayo property ownership & acreage and leased space in the City of Rochester as well as building square footage, parking & vehicular circulation, urban green space, employee distribution across the city and potential development projects in the next five years. •The list of potential projects represents concepts that may or may not be pursued depending on real world market forces, funding and current needs. •By including a wide inventory of potential projects, this allows Mayo Clinic to have the flexibility to respond to the ever-changing development and building climate. Potential Projects Projects that moved from the planning stage and are currently in the design or construction phase include: •Expansion of the proton beam therapy program. •Constructing the new 11-story Kellen Building. •Discovery Square Parking Ramp •Skyway/subway connections north across Second Street Benefits to Community •In 2021, Rochester Area Builders and The Builders Exchange of Rochester completed 89% of Mayo construction projects. “Mayo Clinic construction projects support not only local construction jobs but also ripples out into the local economy. The Mayo Clinic 5 Year Plan allows our members the opportunity and ability to better forecast future staffing needs and continue to support Mayo Clinic’s effort to grow and flourish in Rochester.” John Eischen, Executive Director, Rochester Area Builders and The Builders Exhange of Rochester •Transparency of a city’s major employer of future development is a unique benefit not found in most municipalities. Questions? Heart of the City Today’s Discussion •Chateau Theatre Update & Board Action •Heart of the City Update •Post -Occupancy Analysis Chateau Theatre 2015: DMC financial support to purchase 2019: Interim activation strategy 2022: Threshold Arts selected as interim operator 2022: City request for additional capital improvements Chateau Theatre: DMCC -Approved Financial Support 2015: $6,000,000 2018: $2,600,000 2019: $1,400,000 2020: $100,000 2021: $100,000 2022: $350,000 2022: $250,000 (Current Request) TOTAL (BUDGETED): $10,450,000 TOTAL (ACTUAL SPEND): $8,560,798 Heart of the City Update Items to be complete: •Substandard pavers •Catenary light system Heart of the City Post Occupancy Analysis Primary Goal: Have we improved the experience? •To learn about what works well and what doesn’t •To examine if the uses of the space meet the original expectations and intention •To understand if improvements are needed •To inform future public space projects Work Completed •Evaluated different approaches and options •Evaluating proposal from Gehl –Urban design and research consultancy Next Steps •Prioritize what data we need reviewed •Build a strategy for how to use it •Determine indicators and how that will inform programming Post Occupancy Analysis Discovery Square Discovery Square Live Work Play Business and Economic Development Update Live –Residential Projects Leasing •The Residence at Discovery Square –now housing UMR students •The Maven •The Hue •501 on 1st •Metropolitan Marketplace •Many other legacy housing options Census Data, 2010 -2020 •Olmsted County: ~13% Growth •Downtown Rochester: ~28% The Residence at Discovery Square Work -Economic Development •Three Discovery Square discussions under way •Two Discovery Square •Core and shell done. •Proposals out for space on every floor. •Lead generation engine ramping up (separate presentation) •Mayo Clinic Kellen building •Construction will continue to Q1 2024 when phased occupancy begins. All construction activities expected to be complete by Q3 2024. •Mayo Clinic 1,200 stall parking ramp under construction Play -Discovery Walk Update Construction -Intersection and 500 Block started Business Forward -Phasing, Communications and Programming/Activation in progress Finalizing Bids -Landscaping bid awarded -Determining best approach for community structures 2ND AVE SW DMCC BOARD UPDATE MAY 18, 2022 2 1.Approve revised project definition. 2.Approve revised budget and funding strategy. 3.Approve revised schedule. Action Recommended Board Action 3 Intro Benefits of Bus Rapid Transit •High-quality transit improves the rider experience, serves many types of trips and riders, and is critical in meeting City GHG and air quality goals •Large, visible stations provide rider security, orientation, and comfort and help attract new development. •State-of-the art buses traveling in bus preference lanes provide fast, reliable service that serves more people while relieving traffic. 4 1.Enhanced connections. –Including to surrounding neighborhoods. 2.Enhanced experience for all users. –More accessible, safe, and attractive for all users: commuters, residents and visitors. 3.Accelerate development. –Provide services and development opportunities that align with Comprehensive Plan core principles and stated goals of the City of Rochester and DMC. 4.Maximize competitive federal funding application. Revised Project Definition Prior Direction from the Board 2nd Avenue station Saint Marys Tunnel Revised Project Definition 5 6 1.Enhanced rider experience and climate protection at transit stations. 2.Realignment of the east terminus. 3.Additional infrastructure. Revised Project Definition Elements of Revised Project Definition 7 •Faithful to community co-design work which identified protection from harsh weather as a chief concern. •Makes Link a more attractive mobility choice. •Enhances the experience for all riders: downtown commuter, local resident, and patient/companion and visitor. Revised Project Definition Enhanced User Experience & Climate Protection 2nd Avenue Eastbound Platform Saint Marys Eastbound Platform 8 Revised Project Definition Realignment of the East Terminus 9 •Better transit access to Library, Art Center and Civic Center. •More efficient and intuitive route. Revised Project Definition Realignment of the East Terminus –Library station Photo from Rochester Mom 10 •Creates access to rapid transit for more local residents. •Increases attractiveness of DWSE investment and potential for affordable housing and transit oriented development. •Increases safety and convenience for commuters. Revised Project Definition Realignment of the East Terminus –East End DWSE Master Plan Concept New station location Original station location Twitter @Art_on_the_Ave Andrew Link, PostBulletin.com 11 •Project design and engineering has advanced to a point where more infrastructure cost can be designated as eligible expense for federal funding. •Optimize Federal request for the construction of streets being utilized by the system. Revised Project Definition Include additional Infrastructure in Project Definition East End Alignment West Transit Village N 12 To improve connections between people, neighborhoods, employment, parks, shopping, and dining the City will continue to: •Conduct sidewalk and street condition assessment and prioritize construction. •Develop active transportation connections at the West Transit Village and other locations. •Development of Downtown Waterfront Southeast. Revised Project Definition Related Initiatives Revised Capital Costs & Funding Strategy 13 14 •$143,373,000 (Year of Expenditure) Costs Revised Capital Costs $- $20,000,000 $40,000,000 $60,000,000 $80,000,000 $100,000,000 $120,000,000 $140,000,000 $160,000,000 2020 Costs 2022 Costs ROW, Guideway, Street and Utility Infrastructure Bikeway and Pedestrian Infrastructure Stations and User Experience Improvements Systems, Vehicles and Support Facilities Professional Services Unallocated Contingency 15 Funding Funding Strategy Revised Schedule 16 17 Schedule Revised Schedule Previous opening day 18 •Continue to look for innovative and unique ways to interact and connect with the public. •Recent engagement activities: –Neighborhood walking tour. –Link system bus tour. –Pop-up events. –Neighborhood events. –Open house. –Webinars. Engagement Connections with Community 19 Summary Project Element Existing FTA Application Scope Proposed Scope Update to FTA Application East End Alignment and Terminus One-way BRT route around 2nd Street SE, 3rd Avenue SE, 4th Street SE, and Broadway Avenue S with station on 4th Street at Government Center. New bi-directional route on 2nd Street, 3rd Avenue and 6th Street SE with station at 6th Street in center of Downtown Waterfront SE redevelopment area. Revision includes roads, sidewalks, and traffic signal. Adds a second platform at the Civic Center station. West Transit Village Station, charging infrastructure, driver facilities.Adds roads and sidewalks to support bus loop, public restroom facility, transit plaza, traffic signal. Station Design Basic station design.Improvements to station design to improve climate control and add vertical circulation in key locations. Crossing Highway 52 No bike lanes.Bike lanes added. Timeline + escalation Spring 2025 Spring 2026 Cost ~$114M ~$143M DMC contribution $58.46M (~51%)$58.46M (~39%) FTA rating Medium-High Medium (anticipated) Route Length 2.6 miles 2.8 miles Station Platforms 11 12 Number of BRT vehicles 11 12 20 1.Approve revised project definition. 2.Approve revised budget and funding strategy. 3.Approve revised schedule. Action Recommended Board Action Thank you! PRIVATE DEVELOPMENT May 2022 Today’s Discussion •Affirm the Board’s strategic private investment priorities •Preview Three Discovery Square funding request WHAT HAVE WE HEARD? The board prioritizes: •Geography: Heart of the City, Discovery Square, TOD •Product Type: Preferencing med-tech and workforce housing; de-prioritizing hospitality and market-rate housing •Goal Achievement: Private investment, job creation, tax base growth •Market Opportunity: Validate market demand; support first-in-market opportunities •Sustainability: Meet or exceed sustainability targets •City for Health: Contribution to City of Health experience goals 2020 DMC PLAN UPDATE Areas of focus adopted in the 2020 DMC Plan Update: •Economic diversification •Housing affordability •Main Street innovation •Local entrepreneurs •Local minority and women-owned business capacity PROCESS: PRIVATE DEVELOPMENT Phase 2: 2020-2025 DMCC anticipates ~$200M of public infrastructure support Phase 2: Private Development DMCC anticipates $25M-$45M of private development support Annual Capital Plan DMCC Board approves private development support annually: 2021 $7M 2022 $3M Quarterly Specific Project applications are reviewed by DMCC Board and City Council THREE DISCOVERY SQUARE Size, Location, and Use: 7 Stories, 156,000 g.s.f. NE corner of 3rd Ave. SW and 5th St. SW Lab space + cGMP Space (~50-50 Split) Costs: Total development cost: $72.8M Design-build cost: $45.3M Includes Site Preparation, Design Fees, Core & Shell Developer-Proposed Financing Structure: Debt: $47.3M (65%) Owner equity: $12.8M (17.6%) Requested DMC funds: $12.7M (17.5%) Taxes and Jobs: Up to 330 permanent jobs Tax Capacity: $951,250/Year Next Steps: Staff application review and discussions with developer Continued market evaluation + due diligence Conversations with Mayo + entrepreneur community Consider creative financing mechanisms/lookbacks 2023 DMC CAPITAL AND OPERATING BUDGET REQUEST May 2022 Today’s Discussion •Consider proposed revisions to CIP Prioritization Principles •Identify 2-3 board volunteers to advise staff on budget development ANNUAL FUNDING REQUEST Includes: •Capital Improvement Program •Workplan and operating budget •City DMC Project Management team •Annual working capital loan renewal TIMELINE •May-August 2022: Funding request prep •September 22, 2022: DMCC board consideration •October 2022: Rochester City Council consideration EVALUATING DMC INVESTMENT OPPORTUNITIES PROCESS FOR DEVELOPING RECOMMENDATIONS TO DMCC DMC Development Plan Goals DMC Guiding Principles DMC Strategic Priorities Annual Commitments -Visionary Planning -$5.6B of private investment -30,000 jobs -$7.5-$8B new tax revenue -Highest quality experience -Be Bold -Economic Engine -Comprehensive Strategy approach -Market Driven -Dynamic and Accessible -Mobility to support growth -Model for Sustainability -Tech+ Innovation to promote globally -Heart of the City -Development along the Rapid Transit Corridor -Discovery Square -Waterfront -Transportation -Capital Improvement Plan -Workplan and operating budget EVALUATING DMC INVESTMENT OPPORTUNITIES PROCESS FOR DEVELOPING RECOMMENDATIONS TO DMCC DMC Development Plan Goals DMC Guiding Principles DMC Strategic Priorities Annual Commitments -Visionary Planning -$5.6B of private investment -30,000 jobs -$7.5-$8B new tax revenue -Highest quality experience -Be Bold -Economic Engine -Comprehensive Strategy approach -Market Driven -Dynamic and Accessible -Mobility to support growth -Model for Sustainability -Tech+ Innovation to promote globally -Heart of the City -Development along the Rapid Transit Corridor -Discovery Square -Waterfront -Transportation -Capital Improvement Plan -Workplan and operating budget EVALUATING DMC INVESTMENT OPPORTUNITIES PROCESS FOR DEVELOPING RECOMMENDATIONS TO DMCC DMC Development Plan Goals DMC Guiding Principles DMC Strategic Priorities Annual Commitments -Visionary Planning -$5.6B of private investment -30,000 jobs -$7.5-$8B new tax revenue -Highest quality experience -Be Bold -Economic Engine -Comprehensive Strategy approach -Market Driven -Dynamic and Accessible -Mobility to support growth -Model for Sustainability -Tech+ Innovation to promote globally -Heart of the City -Development along the Rapid Transit Corridor -Discovery Square -Waterfront -Transportation -Capital Improvement Plan -Workplan and operating budget EVALUATING DMC INVESTMENT OPPORTUNITIES PROCESS FOR DEVELOPING RECOMMENDATIONS TO DMCC DMC Development Plan Goals DMC Guiding Principles DMC Strategic Priorities Annual Commitments -Visionary Planning -$5.6B of private investment -30,000 jobs -$7.5-$8B new tax revenue -Highest quality experience -Be Bold -Economic Engine -Comprehensive Strategy approach -Market Driven -Dynamic Downtown Core -Mobility to support growth -Model for Sustainability -Tech+ Innovation to promote globally -Heart of the City -Development along the Rapid Transit Corridor -Discovery Square -Waterfront -Transportation -Capital Improvement Plan -Workplan and operating budget •Enable Opportunity: New jobs, new investment, and tax base growth are a good thing. •Be Extraordinary: Make investments befitting a global destination medical center, the state’s largest-ever economic development partnership, and an increasingly diverse community. •Incorporate Innovation: Encourage projects to make use of new materials, new technologies, etc. •Be Sustainable: Always consider the financial, environmental, social, and other long-term effects of proposed capital projects. •Fulfill The Vision: Sustain Rochester and Mayo Clinic as a destination medical center and “economic engine” that benefits the residents of Rochester, Olmsted County, and Minnesota. •Pursue projects consistent with DMC Development Plan and current priorities •Finish projects already approved and underway •Use “pay-as-you-go” public finance model as a primary financing tool, but consider bonding or lending when appropriate •Focus on time-sensitive, shovel-ready projects •Be responsive to community priorities and market demand •Leverage other sources of funding •Achieve balance between public realm, public infrastructure, and transportation •Consider medium-and long-term capital and infrastructure needs prior to committing resources Current CIP Prioritization Principles Proposed CIP Prioritization Principles Today’s Discussion •Consider proposed revisions to CIP Prioritization Principles •Identify 2-3 board volunteers to advise staff on budget development Business Recruitment: 6-month Progress Report “Economic development means 100 different things to 100 different people.” Business Development Small Business Development Business Recruitment Entrepreneurship Business Marketing Cluster Development Workforce Development Incentives Retail Recruitment Rural Development Government Contracting Tech Transfer Infrastructure Investment Site Identification & Prep Tourism Film Expansion Attraction CreationRetention Community Development Regional Planning Zoning Land Use Historical Preservation Sustainability Transportation & Transit Arts Housing Homeless Services Building Services Citizen Access Permitting Code Enforcement Public Art Neighborhood Associations Licensing Planning Culture ResidentsEngagement Four Pillars of ED Program Building Awareness Building Audiences Content Channels Direct Lead Generation Systems Processes Messaging Project Management Systems Engagement Support Research & Data Economic Site Audience 60%20%10%10% Awareness Building Lead Generation Project Management Research & Data ED Program Interconnections $$$ Lead Generation 2022 Lead Generation Program Results San Diego, January 2022 507 Targets (114 Bad Data) Healthcare Device & Supplies, Healthcare Services, Healthcare Technology Systems, Pharma & Biotech All employment levels 5-year investment window 100% virtual 11 Leads 2.8% Conversion Rate (11/393) Midwest, February 2022 567 Targets (105 Bad Data) Healthcare Device & Supplies, Healthcare Technology Systems, Pharma & Biotech Less than 100 FTE 3-year investment window 100% virtual 15 Leads 3.2% Conversion Rate (15/462) Canada, March 2022 528 Targets (122 Bad Data) Healthcare Device & Supplies, Healthcare Technology Systems, Pharma & Biotech Less than 100 FTE 3-year investment window 100% virtual 38 Leads 9.3% Conversion Rate (38/406) 1.How do we scale? 2.Virtual/in-person and domestic/international 3.Can we turn Leads into Projects? 3 Big Questions Awareness Building •Audience assessment •Message building •Continued exposure Awareness Building Program 1.Where to focus? 2.How do we scale? 3.Defining success 3 Big Questions Research & Data Research & Data Program •Smarter targeting •Current market positioning •Ready-made collateral Project Management Project Management Program •Build internal PM capacity •Build engagement protocols •Build external support Key Takeaways After 6-Months •Awareness/perception as an economic development destination is not where it needs to be. •Lead Generation cycle times will be long. •Value proposition = Innovation, Collaboration, Commitment •International opportunities are significant •Greater Resource = Quicker Results