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HomeMy WebLinkAbout5/23/2024 DMCC Board of Directors Meeting - PresentationsDMC Corporation Board of Directors Meeting Thursday, May 23, 2024 ©2023 CliftonLarsonAllen LLP. 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. Audit Results for Year Ended December 31, 2023 Destination Medical Center Corporation ©2023 CliftonLarsonAllen LLP 2 Agenda •Financial Statements •Audit Results •Required Communications ©2023 CliftonLarsonAllen LLP 3 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 DMC EDA is not a component unit of DMCC o Will evaluate component unit reporting annually ©2023 CliftonLarsonAllen LLP 44 Financial Statements : Assets & Liabilities $0 $100,000 $200,000 $300,000 $400,000 $500,000 $600,000 2019 2020 2021 2022 2023 Assets Liabilities ©2023 CliftonLarsonAllen LLP 55 Financial Statements : Revenues & Expenditures $0 $500,000 $1,000,000 $1,500,000 $2,000,000 $2,500,000 $3,000,000 2019 2020 2021 2022 2023 Revenues Expenditures ©2023 CliftonLarsonAllen LLP 6 Audit Results •Financial statements –clean opinion •Internal controls –no findings •Minnesota legal compliance –no findings ©2023 CliftonLarsonAllen LLP 7 Required Communications •Audit provides reasonable, but not absolute assurance •Accounting policies  o Described in Note 1 to the financial statements o No impact from new accounting standard for software subscriptions •Audit adjustments –none  •No disagreement or difficulties with management ©2023 CliftonLarsonAllen LLP 8 Items to Complete •Federal and state tax filings CLAconnect.com CPAs  |  CONSULTANTS  |  WEALTH ADVISORS ©2023 CliftonLarsonAllen LLP. 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. 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 May 2024 METRICS: Targeted Business & Workforce Participation 1.COMPREHENSIVE STRATEGIC PLAN: Create a comprehensive strategic plan with a compelling vision that harnesses the energy and creativity of the entire region. 2.ATTRACT PRIVATE INVESTMENT: Leverage public investments to attract more than $5 billion in private investments to Rochester. 3.CREATE JOBS: Create more than 30,000 new jobs, with workforce development strategies that support that growth. 4.GENERATE ADDITIONAL NET TAX REVENUE: Generate approximately $7.5–$8.0 billion in new net tax revenue over 35 years. 5.BECOME THE DESTINATION FOR HEALTH & WELLNESS: Achieve the highest quality patient, visitor, and community member experience both now and in the future. DMC GOALS Rochester’s Current Population: 121,395 27.1%23.6%22.9% BIPOC Population Youth Population BIPOC Workforce Residents Below Poverty WHY THIS MATTERS Rochester’s Population and Demographics DMC TARGETED BUSINESS GOALS Women - and/or BIPOC- owned companies on construction using DMC funds GOALS Commercial Construction: 7% Heavy/Civil Construction: 4% 2017 - Q1 2024 ACTUALS Commercial Construction: 7.8% Heavy/Civil Construction: 6.4% $35.8 Million has gone to Women- and/or BIPOC-owned businesses DMC TARGETED WORKFORCE GOALS Women and/or BIPOC individuals working on construction using DMC funds GOALS Women in Construction: 9% BIPOC in Construction: 15% 2017 - Q1 2024 ACTUALS Women in Construction: 3.6% BIPOC in Construction: 15.6% Prevailing Wage means average salary is $43.63/hour or $87,260/year 200 Registered Unemployed BIPOC Women In SE MN BIPOC Women Reached out to the Program76 54 9 3 BIPOC Women Received More Information BIPOC Women Completed Intake Session BIPOC Women Enrolled in the Program EQUITY IN THE BUILT ENVIRONMENT PROGRAM Bloomberg Philanthropies Global Mayor’s Challenge Pilot Implementation Capacity Building Local & Regional Partnerships Equitable Engagement & Outreach Workforce Recruitment & Training Best Practices STRATEGIC OPPORTUNITIES KEY TAKEAWAYS •Today’s recommendations: Housing Project: $3M Housing Project: $3.9M Historic District: $5M $11.9M •Since 2021, the DMC CIP has included a “strategic development” fund: –2021: $7M –2022: $3M –2023: $3M –2024: $10M –TOTAL: $23M •Established to proactively support housing, med-tech, and downtown property improvement. •Funding committed to-date (Bryk on Broadway): $2.2M •Strategic Development fund balance (pending today’s action): $8.9M Today’s Recommended Capital Investments Housing Development May 2024 Today’s Discussion •Housing Market Conditions + DMCC Board direction •Three projects coming forward for action What are our housing needs by 2030? Olmsted County = 18,085 units City of Rochester = 14,734 units Downtown Area = 3,972 units NEXT STEPS: TWO PATHS FORWARD 1.Wait for the market to shift •Housing shortages will likely increase •Development input costs may come down •Bold. Forward. Unbound. may create additional market constraints 2.Levers COSTS SYSTEMS MARKETING REGULATIONS What are the Projects? Projects under active pre-development in the DMC district Project Name Type Units/Keys Ready to Occupy YMCA Redevelopment Multifamily 219 2025 Civic Center North Multifamily 243 2026 Affordable 76 2027 West Transit Village Multifamily 276 2027 Affordable 92 2028 Affordable 94 2026 CityWalk Multifamily 400 2027 Confidential (market rate)Multifamily 200 Planning Confidential (market rate)Multifamily 85 Planning Confidential (market rate) TBD N/A Planning Confidential (market rate) Multifamily 125 Planning subtotal 1,810 What are the Projects? Out of the pipeline - three requests for action today 1.Bryk on Broadway: Modification of qualifying AMI 2.Civic Center North: mixed-income, high-density housing 3.West Transit Village: Phase 1 affordable senior housing Bryk on Broadway Approve Revisions to Bryk Apartment Project PROJECT DETAILS •Mixed-use workforce apartment building •Commercial Space: 7,260 SF Bryk Apartments Unit Counts 50% AMI Unit Count 54 60% AMI Unit Count 18 80% AMI Unit Count 108 TOTAL 180 Proposal: -Raise the qualifying AMI for the 80% workforce units to go up to 110% AMI -The rents will stay locked to the 80% AMI levels -All 50% AMI and 60% AMI unit remain the same. PROJECT DETAILS Civic Center North Approve TIF request and $3M of DMC GSIA Infrastructure Funds PROJECT LOCATION Civic Center Center Street Civic Center PROJECT DETAILS •Mixed-income apartment complex •Shared parking •First private development customer of Downtown Thermal Energy network •Riverfront connection Civic Center North Unit Counts 30% AMI Unit Count 13 50% AMI Unit Count 38 60% AMI Unit Count 25 Market Rate 243 TOTAL 319 •Mixed Income Housing •Increased Tax Base •Sustainability Goals include Thermal Energy Network (TEN) connection •Targeted Business Requirements •Walkability to downtown and employment •Riverfront connectivity Community Benefits DMC EDA Recommendation: •$3M in General State Infrastructure Aid (from Strategic Redevelopment line item in CIP) •Up to $13M DMC-Enabled TIF Funding Request WTV Aeon Phase 1 Approve $3.9M of DMC GSIA Infrastructure Funds to support first private development at West Transit Village 17 Runs every 5 minutes during peak – opens spring 2026 New LINK Bus Rapid Transit West Transit Village Transit: - station platform - streets - parking (Mayo employees) - parking (public) - bus charging - RPT facilities Village: - housing - retail + services - open space - bike & ped connections + WEST TRANSIT VILLAGE Mixed Use+Transit| KA / Aeon Downtown City Block Additional Site infrastructure needs outside of BRT project and individual buildings needed to realize the vision: -District stormwater - Site sustainability features -Enhanced public realm - Extensive earthwork -West end roads - Building-level funding gaps -Public parking PROJECT DETAILS •Senior affordable housing •First step in building the village •Direct connection to BRT system Community Benefits •Alignment and coordination with BRT + Parking Ramp design and construction •MHFA July 11 deadline (State affordable housing funds) Timing and coordination needs DMC EDA Recommendation: •$3.9M in General State Infrastructure Aid Funding Request Supporting Transformation •Amend 2024 DMC CIP to provide cost-sharing funds for Deputy City Administrator position •2024 Budget Impact: $67,000 Request Current Focus for City Gaining and Sustaining Momentum Teammates &Resources needed to secure resources for projects -Existing teammates pursuing external funding -Elected Officials and Partner advocacy Teammates &resources needed to deliver projects -Prioritize new and existing revenue to support service delivery -Optimize internal processes &collaboration -Adapting to state of change Teammates &resources needed to meet future service needs -Sustaining transformation through required new services -Adapting to a new future Rochester -Nurturing partnerships NOW DURING POST 4 •February 2024: Presented City Transformation Planning Efforts •May 2024: Consider Shared Support For Deputy City Administrator, Strategic Development Position dedicated to coordinating DMC district/downtown construction and development, as well as oversight of City DMC Project Management Team •July 2024: Position Cost-Sharing Begins (through 2024) •September 2024: Consider 2025 DMC Work Plan and Operating Budget DMC share of position funding to be included in annual budget request Supporting Transformation •Amend 2024 DMC CIP to provide cost-sharing funds for Deputy City Administrator position •2024 Budget Impact: $67,000 Request DMC HISTORIC PROPERTY SUPPORT May 2024 TODAY Background1 2 Proposed Historic District Program 3 Discussion + Recommendation •Designate the downtown historic district as public infrastructure •Advance a program of financial support of up to $5 million for eligible capital improvements to properties within the district Request HISTORIC DISTRICT TIMELINE 2014 – Historic District Study 2023 - City Council Public Hearing DMCC DMC EDA Historic District •Established in 2024 •32 properties •4 that do not contribute to the historic status •Multiple other buildings that have historical significance Second St SW Third St SW Fourth St SW Broadway Ave •Reviewed city reports, council discussion + actions •Studied best practices •Insights from Mainstreet Grant program •Property owner and tenant interviews DMC Staff Process Successful Historic Districts BUSINESS NAVIGATION PUBLIC REALM FINANCIAL MOBILITY REGULATORY PROGRAMMING ACTIVATION RECRUITMENT RETENTION BRANDING MARKETING EIGHT FOCUS AREAS Review of DMC Development Plan DMC Support of Historic District BUSINESS NAVIGATION PUBLIC REALM FINANCIAL MOBILITY REGULATORY PROGRAMMING ACTIVATION RECRUITMENT RETENTION BRANDING MARKETING RECRUITMENT RETENTION PUBLIC REALM I have a quote in hand for $18,500 to replace 6 Broadway side windows. I have a quote for restoration work on the South facade for what is probably now about $50,000,up from $34,000 a couple years ago. The foundation needs to be tuck pointed because the lime mortar holding the fieldstone together is disintegrating. The 60-year-old fire escape needs work as it has rusted through. All exposed interior brickwork should be tuck pointed. We are actively searching for two new tenants. We are expecting to be required to fully sprinkle the entire building at some point. The roof will need replacement this summer. Build out apartments on second floor. We are expecting a full gut of the building for a complete reuse. We want to expand our kitchen to serve more food options. DESIGN SUPPORT Maximizing potential ACCOUNTABILITY Using the money responsibly TENANT AND BUILDING Support for both EASE OF PROCESS Don’t make it complicated GRANTS NOT LOANS Different types are needed TIMELINESS Turn around/seasonality © 2017 DMC Property Owner Interviews © 2017 DMC Property Owner Interviews •Adaptive Reuse •Building System Upgrades •Building Safety + Preservation •Code Modernization FINANCIAL © 2017 DMC Potential DMC Investment Adaptive Reuse Building System Upgrades Building Safety + Preservation Code Modernization Average Cost DMC Amount Number of Projects Approx. DMC $1M $500K $2.5 – 4M5 - 8 $100K $50K 12 -16 $600 – 800K $50K $25K 12 -16 $175 – 300K$50K $25K 7 -12 $300 – 400K Total: $3.6 – 5.5M © 2017 DMC Financial Support Recommendation Greatest impact with DMC financial resources •Total of $5 million CIP Strategic Development Investment –5 years –Matching “grant-like” program –Up to 500K maximum per parcel •Program Parameters –Must qualify as public infrastructure –Staff, board and council review –City manages financial administration Council Action Historic Preservation Commission/ City Council Touchpoint DMCC Board City CouncilJanMay April June HISTORIC DISTRICT TIMELINE Sept Project Consideration DMC Support of Historic District BUSINESS NAVIGATION PUBLIC REALM FINANCIAL MOBILITY REGULATORY PROGRAMMING ACTIVATION RECRUITMENT RETENTION BRANDING MARKETING Discussion … •Designate the downtown historic district as public infrastructure •Advance a program of financial support of up to $5 million for eligible capital improvements to properties within the district DMC Business Development Update May 2024 TODAY Awareness Update1 2 Infrastructure Update 3 Ecosystem Update BUILDING AWARENESS MAYO CLINIC INNOVATION EXCHANGE PARTNERSHIP Mayo Clinic Innovation Exchange (MCIE) connects entrepreneurs to insights and resources needed to bring innovations to market. •MCIE and DMC have two shared goals: 1.Raise awareness of MCIE, Rochester, and DMC as the place to go for innovation. 2.Develop the brands of MCIE and DMC/Discovery Square. •MCIE and DMC will enter into an agreement where both groups commit to: 1.Partner on programming designed to bring global innovation leaders together around topics where Mayo Clinic and Rochester have expertise. 2.Position each organization as an integral part of innovation ecosystem growth in Rochester. 3.Leverage the brands, networks, and resources of both organizations to deliver on shared objectives. INVESTMENT IN HEALING FAM TOUR •October 2-4, 2024 •Four DMC guests from leading MedTech/BioTech organizations •Exposure to DMC and Discovery Square •Demonstrate connectivity to Medical Alley and MSP •Highlight unique opportunities in Rochester RETAIL, DINING, AND ENTERTAINMENT EXPANSION Krueger Real Estate Advisors - Contracted with DMC EDA effective April 1 to assist with the following Retail, Dining, and Entertainment (RDE) activities: 1.Downtown real estate assessment •Identify top 10-20 “RDE ready” sites in the DMC district. 2.Top target identification •Identify top regional RDE concepts without a presence in Rochester and present DMC sites to their leadership. 3.Downtown Rochester Marketing and promotion •Represent DMC sites at regional and national RDE events to build awareness and identify potential tenants. 2024 REAL ESTATE SUMMIT •250+ attendees •Topics on unprecedented demand drivers in Rochester, tools to support growth, and building connections. •Site tours around housing, innovation, Bold. Forward. Unbound. in Rochester., and more. BUILDING INFRASTRUCTURE SHARED LAB STATUS UPDATE •DMC EDA continues to make progress on defining the specific needs, business model, operating partners, and real estate requirements of a shared lab in Rochester. •Additional data is required on the specific needs of Rochester innovators from a space and equipment perspective. •”80% of your tenants will come from 20% of your innovators” •Partnerships with regional innovation drivers continue to advance the conversation. •A small scale ”prototype” may be the best path forward to test a low-risk model. •Our goal to deliver a world class, turnkey space in Two Discovery Square remains the same. BUILDING ECOSYSTEM ECOSYSTEM ASSESSMENT AND ENGAGEMENT STRATEGY 1.Define specifics of each Ecosystem node, including geographies. 2.Compile data on each Ecosystem node, complete with contact info, technology descriptions, and lines of business. 3.Analyze the Rochester Ecosystem against peer markets, identifying areas of strength and existing gaps. 4.Conduct primary research on each Ecosystem node to assess vertical specific gaps, desired models of engagement, and KPI’s and metrics for success. 5.Develop a comprehensive engagement strategy complete with governance, staffing, budget, and program implications. Life Science & MedTech Companies Higher Education Institutions Clinical & Research Partners Economic Development Organizations Service Provides Capital ECOSYSTEM STRATEGY NEXT STEPS •Identify partners with capabilities for all, or parts, of the strategy development •Medical Alley Association •Global Institute for Innovation Districts (GIID) •Third-party research firms •Independent consultants •Develop a job description, or RFP, and solicit responses for partners. •Leverage strategy output for 2025 budget planning THANK YOU 2025 DMC CAPITAL AND OPERATING BUDGET May 2024 Today’s Discussion •Affirm 2025 Capital Plan direction ANNUAL WORKPLAN & BUDGET Includes: •Capital Improvement Program •DMC EDA workplan and operating budget •City DMC Project Management team •Annual working capital loan renewal TIMELINE •May-August 2024: Workplan and budget prep •September 26, 2024: DMCC board consideration •October 2023: Rochester City Council consideration 2025 CAPITAL PLANDIRECTION •Identify infrastructure needs associated with Bold. Forward. Unbound. and other time-sensitive opportunities •Incorporate long-term capital management strategy into 2025 DMC Plan Update Today’s Discussion •Affirm 2025 Capital Plan direction