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9/22/2022 DMCC Board of Directors Meeting - Presentation
DMC Corporation Board of Directors Meeting Thursday, September 22, 2022 We’ll get you there. CPAs | CONSULTANTS | WEALTH ADVISORS CLA (CliftonLarsonAllen LLP) is an independent network member of CLA Global. See CLAglobal.com/disclaimer. Investment advisory services are offered through CliftonLarsonAllen Wealth Advisors, LLC, an SEC-registered investment advisor. ©2022 CliftonLarsonAllen LLP September 2022 Destination Medical Center Corporation ©2022 CliftonLarsonAllen LLP 2 IRS Form 990 •Financial information reconciles to DMCC’s audited financial statements •Part III (page 3) –statement of DMCC’s organizational purpose •Part VI (page 7) –governance •Part VII (page 8) –board members ©2022 CliftonLarsonAllen LLP 3 IRS Form 990 •Schedule B (page 23) –contributors •Schedule R (page 33) –related organizations •No unrelated business income for 2021 •Filing deadline is November 15, 2022 ©2022 CliftonLarsonAllen LLP 4 MN Charitable Organization Annual Report •Filed with Minnesota Attorney General’s Office Charities Division •No changes in tax-exempt status (page 1) •No changes in organizational purpose or programs (page 1) •No changes in ability to solicit contributions (page 2) •No compensation paid in excess of $100,000 (page 2) •Filing deadline November 15, 2022 ©2022 CliftonLarsonAllen LLP 5 Minnesota Non-profit Corporation Annual Registration •Filed online with Minnesota Secretary of State •In good standing through December 31, 2021 •Annual renewal to be filed (online) for 2023 ©2022 CliftonLarsonAllen LLP 6 Thank you for engaging us to serve you! Contact Information: Craig Popenhagen, Principal Katherine Lutzke, Senior 507-280-2327 507-280-2314 Craig.popenhagen@claconnect.com katherine.lutzke@claconnect.com DMC Metrics 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 study 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 Create a comprehensive strategic plan Leverage the public investment of $585 million to attract $5B Create approximately 30,000 new jobs Generate approximately $7.5 -$8.0 billion in new net tax revenue Achieve the highest quality patient, companion, visitor, employee, and resident experience DMC Metrics DMC Development Plan Goals DMC Metrics $7.5-$8B of Net New Tax Revenue over 35 years Where do new tax revenues come from? -Operations: corporate income taxes, personal income taxes, sales taxes, hotel taxes -Construction: jobs, sales taxes, etc. during construction of the DEED certified investments within the district -Property Taxes: property tax revenues from land and properties in district (note: MinnesotaCare Provider Tax applies to gross receipts that health care providers receive for providing patient services in Minnesota. The tax rate is 1.8%.) DMC Metrics $7.5-$8B of Net New Tax Revenue over 35 years Where do new tax revenues come from? -Operations: corporate income taxes, personal income taxes, sales taxes, hotel taxes -Construction: jobs, sales taxes, etc. during construction of the DEED certified investments within the district -Property Taxes: property tax revenues from land and properties in district (note: MinnesotaCare Provider Tax applies to gross receipts that health care providers receive for providing patient services in Minnesota. The tax rate is 1.8%.) DMC Metrics First 5 years of DMC DMC Metrics Case Study: The Hue, 401 1st Ave 2019 2021 Annual Property Taxes for 2019: $19,704 Taxable Market Value: $605,100 Annual Property Taxes for 2022: $126,234 Taxable Market Value: $12,967,200 Small commercial building and surface parking 50 apartment homes and ground floor retail 998 Rochester LLC purchased property from 324 1st Ave SW LLC Ackerberg Group purchases the property from 988 Rochester LLC 50 new homes in the walkable downtown core open June 2019 December 2021 Gorham Housing Partners III, LLP buys the property from Acky-324 LLC August 2020April 2019 September 2020 Minnwest Bank Opens DMC Metrics Case Study: The Hue, 401 1st Ave General Contractor Weis Builders Minneapolis & Rochester Ackerberg Group Minneapolis Civil Engineer WSB Rochester Gorham Housing Partners III, LLP Mora Architect Momentum Design Group St. Paul DMC Metrics Case Study: The Hue, 401 1st Ave “The energy, growth, innovative contributors, and social scene all contribute to excitement that could not be ignored. Destination Medical Center, together with Mayo Clinic and University of Minnesota Rochester,create a compelling story in which we wanted to participate.” ~ Stu Ackerberg, quoted in Post Bulletin Jan. 14, 2022 DMC Metrics Case Study: The Hue, 401 1st Ave $19,704 $126,234 $0 $20,000 $40,000 $60,000 $80,000 $100,000 $120,000 $140,000 Nearly 6x increase Annual Property Taxes Before vs. After Development 2019 2022 DMC Metrics What Happens when you start adding up multiple properties 10x increase $680,796 $7,490,652 $0 $1,000,000 $2,000,000 $3,000,000 $4,000,000 $5,000,000 $6,000,000 $7,000,000 $8,000,000 Pre-development Post-development Change In Property Tax Payments DMC Metrics Key Takeaways •TIF has an impact TIF delays the public receipt of some of the new tax revenues •In-fill development costs less to a community Infrastructure and services (police, fire, snow removal, etc.) is already in place in DMC district •New commercial buildings bring new net revenues These 14 buildings on underutilized lots have multiplied tax revenue 10x •Current residents are benefiting New development reduces demand on current Property Owner’s tax burdens •Opportunity remains Downtown Rochester is still home to many vacant and under-developed sites 2023 DMC FUNDING REQUEST Today’s Discussion •Review Capital Projects and Operating Budgets •Approve resolution advancing 2023 DMC Funding Request The Capital Improvement Program discussion highlights: •Projects we’re finishing (e.g., Discovery Walk) •Projects approved and underway (e.g., Rapid Transit) •Projects previously discussed and ready for action (e.g., Soldiers Field, 6th St. bridge) •Projects on the horizon (riverfront, Discovery Labs, smart city infrastructure) The workplan and operating budget discussion highlights: •Added capacity for business development and lead generation •Resources to fulfill DMCC board expectations for advancing equity, sustainability, affordability, community engagement, and health •Capacity-building within the City of Rochester Key Takeaways TIMELINE •May-August 2022: Funding request prep •September 2022: DMCC 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 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 Guiding $585M Public Infrastructure Investment The public infrastructure necessary to allow for job growth, capital investment, new tax generation, an improved community experience, and the fulfillment of the DMC vision + Attracting $5.6B Private Investment The programs and project support to attract developers, private capital, and new businesses. DMC EDA Work Plan: Two Major Components 2023 DMC CAPITAL INVESTMENTS Riverfront Small Area Plan Project Background •City owned site with land on east and west side of the river •Primarily parking (east) and vacant building (west) with a parking ramp •Urban design firm Gamble and Associates selected in fall 2021 •Preferred plan presented to City Council and approved 7-0 in July 2022 A new “front door”for the city: •Enhanced River Trail connections •2.5 acres new passive and active open space •500,000 -700,000sf of new mixed-use development on multiple sites •Ground floor,small-scale,commercial space for local, entrepreneurial activities and market space •Enhanced relationship to historic Broadway buildings •Increased tree canopy and native plantings •Direct connection into the future district power grids The Preferred Plan at a glance: Achieve visionary transformation with harmony of design Forge a new identity for the riverfront that expands economic development opportunities and activates the public realm Ensure universal access to streetscapes,Skyways, Subways,buildings and the Riverway Support local,diverse businesses and programming that grow entrepreneurial endeavors Leverage the riverfront as a destination and natural corridor that better connects the trail system to downtown Site Plan Partial Reuse and Park •Total Site Area:5.5 acres (East +West) •Total New Open Space:2.5 acres (Active +Passive) •Total Potential Development:500,000-700,000 sq ft Financial Considerations ADD RENDERING VIEW(S) HERE •Interim Activation -partnership with RDA •Advance flood wall work with Army Corps of Engineeers •Due diligence analysis of Red Owl/Time Theater Building •Continue conversations with County regarding Mr. Muffler site understanding their longterm needs and impact on the site •East Site:site preparation •Helping to craft RFQ/RFP Recommended Next Steps: PUBLIC REALM Outcome: Achieve DMC investment and experience goals 2023 Budget: $13,720,000 Investments include: •Discovery Walk (Completion) •Chateau Theatre (Continuation) •Soldiers Field improvements (New) •Riverfront development (Preparation) MOBILITY Outcome: Achieve DMC workforce and experience goals 2023 Budget: $17,702,013 Investments include: •Link rapid transit development •Second Street SW reconstruction STRATEGIC DEVELOPMENT Outcome: Targeted public investments necessary to secure extraordinary private investment 2023 Budget: $3,000,000 Possible investments: •Bio-med-tech •Small-and medium-scale redevelopment •Development along the Rapid Transit Corridor STREETS AND SEWERS Outcome: Build the public infrastructure necessary to support and enable economic activity and investment 2023 Budget: $1,050,000 Investments include: •6th Street Bridge (design) •Sanitary sewer improvements FUTURE PLANNING AND DECISION POINTS Through 2024 and beyond: •Riverfront (6th St. Bridge, river access, infrastructure) •West Transit Village •Major Development Projects (TBD) •Discovery Labs (simulation lab, wet lab, maker space) •Wayfinding and neighborhood connectivity •Smart City digital infrastructure •Heart of the City Phase 2 •Downtown facilities/bathrooms-showers •Opportunities associated with Mayo Clinic 5 Year Capital Plan •Energy Infrastructure DMC 2020-2024 BUDGET FRAMEWORK OPERATIONS Outcome: Support the organizational and programmatic activities necessary to implement the DMC development plan 2023 Budget: $3,925,122 •DMC Corp. expenses •DMC EDA operating budget •City of Rochester administrative costs •DMC City project management expenses A.Development Marketing, Planning, and Promotion, including: o Implementing the development plan, including soliciting development proposals for development… o Seeking financial support for the DMCC, the City, and projects o Comprehensive marketing program to global interests o Preparing and supporting the marketing and promotion of DMC o Partnering with others…in joint efforts to promote economic development o Administering the planning and development activities required to implement the development plan B.Development Services, including: o Evaluating and underwriting development proposals o Providing transactional services in connection with approved projects o Facilitate the sale, lease, or other transactions involving land and real property o Assist in applications for federal grants, tax credits, and other sources of funding to aid development C.Outreach and Communications, including: o Developing patient, visitor, and community outreach programs o Preparing and implementing a program for community and public relations DMC EDA RESPONSIBILITIES DEFINED IN MN STATUTE New Tax Revenue •Income (C&P) •Property •Sales Project Wins •New Jobs •New Investment •Increased Spending Deal Flow •Relocations •External Expansion •Internal Expansion •Retention WE A R E H E R E Awareness Building •Industry Ecosystem •Financial Tools •Sites & Buildings •Competitive Position •Strengths/Weaknesses Community Development •Infrastructure •Real Estate •Quality Of Life •Education •Housing •ED Capabilities Research •Audience(s) •Awareness •Perceptions •Messaging •Competition Corporate Recruitment Process Business Recruitment and Development 2023 Resource Allocation Direct Lead Generation Improve CRM Systems Refine Processes Build Efficiency Perfect Targeting 10% Goals: 150 Leads, Higher Conversion Rates (5%+), Improved Pathing at Mayo Research & Data Develop Materials Increase Internal Capacity Prepare for Deal Flow Build a Research Team 5% Goals: Develop Industry Specific Content (CRM, ADX), Develop Economic Development Profile Project Management Build Capacity Develop Process Identify Partners Build a Vocabulary 5% Goals: Develop Project Management and Engagement Processes, Build Internal Capacity Business Recruitment and Development Awareness Building Segment Audiences Build Messaging Identify Opportunities Increase Frequency 80% Goals: 1+ Engagement/Month, Increased Awareness and Improved Perception (2024 Study) 2023 Program of Work Business Recruitment and Development Initiative Date Location Partner Industry Arab Health 2023 Feb 2023 Dubai DEED Building Owner & Manager Association -Healthcare/Medical Office April 2023 Chicago Mortenson International Society for Cell & Gene Therapy May 2023 Paris Mortenson BIOMed Israel May 2023 Tel Aviv TBD BIO International June 2023 Boston DEED SelectUSA June 2023 Washington DC DEED Collision Canada June 2023 Toronto Medical Alley AdvaMed September 2023 San Diego DEED Meeting on the Mesa October 2023 San Diego Mortenson MEDICA November 2023 Germany DEED HLTH November 2023 Las Vegas TBD Unplanned Opportunity #1 (1)TBD TBD TBD Unplanned Opportunity #2 (1)TBD TBD TBD Site Selection Site Selector's Guild -Annual Meeting March 2023 San Antonio DEED Site Selector's Guild -Fall Forum September 2023 TBD DEED Area Development Consultant Forum June 2023 TBD DEED Area Development Consultant Forum December 2023 TBD DEED DEED Market Event #1 TBD TBD DEED DEED Market Event #2 TBD TBD DEED In-Market Innovators and Investors Forum TBD Rochester, MN Foreign Delegation Hosting TBD Rochester, MN DEED/Medical Alley Business Development Forum Hosting TBD Rochester, MN RAEDI Site Selector's Guild Advisory Forum -Life Science focus TBD Rochester, MN RAEDI Mayo Center for Individualized Medicice Conference November 2023 Rochester, MN Mayo Digital Website -Site Selection and Corporate Recruitment LinkedIn Ad buy -targeting SSC and life science CEO's 2023 DMC EDA BUDGET USES Development Marke�ng , Planning, and Promo�on $2,438,420 60% Development Services $675,000 17% Outreach and Communica�ons $486,410 12% Opera�ons $434,916 11% 2023 DMC EDA BUDGET SOURCES Mayo Clinic $1,411,390 33% Program Income $80,000 2% DMC Corp. $2,623,528 61%McKnight Founda�on Grants $167,500 4% DMCC: $1,000 loan EDA: $100,000 loan WORKING CAPITAL LOANS The Capital Improvement Program discussion highlights: •Projects we’re finishing (e.g., Discovery Walk) •Projects approved and underway (e.g., Rapid Transit) •Projects previously discussed and ready for action (e.g., Soldiers Field, 6th St. bridge) •Projects on the horizon (riverfront, Discovery Labs, smart city infrastructure) The workplan and operating budget discussion highlights: •Added capacity for business development and lead generation •Resources to fulfill DMCC board expectations for advancing equity, sustainability, affordability, community engagement, and health •Capacity-building within the City of Rochester Key Takeaways Heart of the City Items to Cover •Project update •Community response •Business response •Community critiques •Key lessons •Post -occupancy analysis Heart of the City Phase 1 Update Items to be complete: •Catenary light system •Continued evaluation Community Response •Chateau activation •Daily programming •Start -up grants •Organic activation Business Response •Return of businesses –Moka –Primp •New businesses –Ole Brick House –Opa! –Popus Popcorn –Hope Central Community Critiques •Lack of green space •Raised lettering •Wakefield •Public restrooms •Costs •Tree locations Key Lessons Learned •Business Forward Strategy •Community input •Project lifecycle Post Occupancy Analysis Public Life Health Check Timeline: •Gehl in Rochester week of Sept 19 •Analysis and results late October Discovery Square Discovery Walk Construction -Phase 1 (500 and 400 block) street and sidewalks scheduled for completion this year. Business Forward -Weekly touchpoints with businesses, bi-monthly stakeholder meetings. -Community “Big Dig” event on Sept.17 Economic Development •Two Discovery Square •Mayo Clinic and National Resilience announce a strategic collaboration to be in Two Discovery Square. •Other proposals in the pipeline. •Lead generation engine ramping up (separate presentation) •Mayo Clinic Kellen building •Construction activities expected to be complete by Q3 2024. •Mayo Clinic 1,200 stall parking ramp under construction Business Recruitment & Infrastructure Development •Infrastructure investments in One and Two Discovery Square have created recruitment opportunities for well capitalized life sciences businesses. •Infrastructure to support startups is necessary, based on community input, feedback from businesses, and market comps. Discovery Labs –Life Science Infrastructure •Infrastructure for technology, workforce and economic development •Laboratory space •Maker space •Simulation lab •Objectives of this effort: •Critical infrastructure for business recruitment •Attract startups and the follow-on economic impacts •Workforce development •A resource for businesses and the community Discovery Labs –Wet Lab Infrastructure •Shared laboratory space •Low-cost-of-entry •Access to shared equipment and support services Low-cost laboratory space for startups The Wet Lab “Non-institutional shared lab space is critical for launching and growing life sciences companies” Jean-Marc Juteau, Commissioner, BioTech City, Laval, Quebec. Discovery Labs –Maker Space Infrastructure •Equipped with technology such as 3D printing, app development, electronics, and AR/VR •Available for tech clubs Where inventors solve problems with technology The Maker Lab Discovery Labs –Simulation Lab Infrastructure •Student training in simulated healthcare space. •Flexible enough to be a medical office, a surgical suite, or an outpatient procedure room. •Uses live actors, life-like mannequins and AR/VR tech. •Tech companies use the Sim Lab to beta test new products. “The shortage of healthcare workers creates an urgent need for training space to increase enrollment. Perfecting skills in a Sim Lab prior to working with patients is essential.” Jeannine Gangeness, Associate Vice President, Winona State University Rochester Simulated healthcare space for advanced workforce training The Sim Lab Discovery Labs –Community Connections The General Community The Maker LabThe Sim Lab The Wet Lab The Business Community TeachersInventorsStudents Inventors Life Science Companies Tech Companies Next Steps –Develop Life Science Infrastructure Strategy •Determine market demand •Identify partner organizations –industry, education, non-profits •Develop business and operating models •Identify capital investments needed •Understand operations and maintenance costs •Identify operating entities Mobility LINK BRT UPDATE Recent Milestones •East end realignment: −Design was completed −New route approved by DMCC Board and City Council (7-0) −re-submittal of the Small Starts application was made on August 26, 2022 •Mayo and the City of Rochester have agreed to terms and conditions for operation of the system: −20-year initial term −Mayo’s financial support will cover the annual local match for operating costs −All riders will be able to use the system fare-free −Includes performance metrics and remedies LINK BRT UPDATE Upcoming Milestones Upcoming BRT Milestones: •The recently selected 6 artists (3 local, 3 national) will develop the public art component of the project •Complete key state and Federal environmental reviews and risk assessments (mid-2023) •Finalize vehicle design and place order 4Q 2023 •Construction Start Q4 2023 •Opening Day Q2 2026 -6th Street Bridge receives $19.6M of Federal funds -Active hiring process underway for Active Transportation Coordinator role -City of Rochester Issues draft Active Transportation Plan -Downtown Sidewalk Enhancements underway -HourCar leaves Rochester, Turo enters the market Other Mobility Updates •NTH to run a developer selection process with Mayo •Request for Qualifications •Shortlist •Request for Proposals •MOU West Transit Village Rochester Community Housing Update Why are we here today? Provide an update on the community’s and DMC EDA’s housing progress AGENDA What are we going to cover? •Refresh on community housing needs •Community housing strategy update •DMC EDA Housing Workplan update What is the communities’ experience? •Olmsted County 2022 Resident Survey Results: •Lack of housing identified as highest rated problem by community •City of Rochester 2022 Community Perception Survey Results: •Confirmed County results where housing variety, and availability of affordable options were lower than peer communities and rated highliy as community issue “There aren’t enough affordable options.” “Where are different housing options? I’d like a condo… What are our communities’ housing needs by 2030? Olmsted County = 18,085 units City of Rochester = 14,734 units Downtown Area = 3,972 units Housing Coalition: Maxfield Report Priorities 1.Create new homeownership opportunities 2.Increase homeownership for People of Color 3.Create housing for people at 50% AMI or less 4.Enhance housing options for seniors 5.Preserve our affordable housing stock •Coalition approved $2M for 30 new Community Land Trust homes •Adding 8 homes currently in various stages of completionIncrease Home Ownership Opportunities •2022 Community Co-design starting in Sept 2022Increase BIPOC Homeownership •2021 Community Co-design •2022 RFP for Senior Housing •2022 –County HRA Mayowood submitted for LIHTC Enhance Senior Housing Options •103+ units completed since completion of Maxfield Report •~175 units at some level of affordability since 2020 in progressCreate 30-50% and below Rental Options •Coalition working on a preservation strategy analysis and recommendations for policy makersPreserve Naturally Occurring Affordable Housing DMC EDA Downtown Housing Workplan Update Housing as Infrastructure 1.Create more living opportunities for all incomes 2.Supply and diversification is a talent attractor 3.Enhances downtown vibrancy 4.Supports transit ridership 5.Supports more diverse retail, dining and entertainment options •Since Q2 2020 -present, there are 511 units in progress •Demonstrated needs for other downtown general occupancy types and senior housing •From 2015 –2020: ~1,150 downtown units added Five Components of Housing Strategy Establish a path to downtown housing unit demand Introduce new developers to the Rochester market Collaborate with local partners Learn best practices and innovative approaches Establish staff and budget resources •Rochester Housing Summit •Over 150 people/organizations attended •Host Developer Site Visits •Seven (7) new housing developers hosted in 2022 thus far •Focused engagement with diverse developers •Nation-wide Housing Developer Recruitment •Progresses with local and state partners Strategy 1: Introduce New Developers to the Rochester Market •Join Coalition for Rochester Area Housing •Invited in late 2021 •Established regular meetings with staff members •Establishing collaboration agreements, funding processes and structure •Development Project Data Reporting •In progress Strategy 2: Collaborate with local partners •Develop a prioritized policy and financial framework to reach the city-wide housing unit demand analysis •Analysis will research other markets and will identify: •Tools to accelerate housing development •Impact of tools towards goals •Next Steps: •To be completed by first quarter 2023 Strategy 3: Establish a path to meet unit 2030 downtown unit demand Demand: where we want to/could be Performance –using current tools •Attend best practice sharing opportunities •ULI National Housing Conference •MN Housing Summit •Greenbuild •Identify innovate housing approaches and developers •Home ownership in multifamily developments •Sustainability approaches •Prefabricated construction •Cooperative development Strategy 4 : Learn best practices and innovative approaches Gosmartbricks.com DMC Corporation Board of Directors Meeting Thursday, September 22, 2022