DMC Corporation Board OKs $7.3 million in TIF for Two Discovery Square project
The next major addition to Rochester’s Discovery Square sub-district is now on the verge of becoming a reality.
In a unanimous vote at Thursday’s quarterly meeting, the DMC Corporation Board authorized the use of $7.3 million in tax increment financing (TIF) to support the construction of Two Discovery Square.
The 2DS project is slated to cost just under $45 million. Sixteen percent of the development would be paid for with TIF funds, a higher percentage than what has been allocated for most other projects.
Of note, the initial TIF agreement comes with a “look-back” provision. According to Patrick Seeb, DMC’s director of economic development and placemaking, the provision relates to Mortenson’s current lack of an “anchor tenant” for the space. If and when Mortenson secures a credit-worthy anchor tenant for Two Discovery Square, Seeb alluded to the possibility of returning a portion of the requested $7.3 million.
(Mortenson cited “great potential tenant interest” in the meeting’s agenda packet, but added that there was still apprehension from tenants to “sign on the line” without a building approval. The company had initially requested $8.2 million to $11.5 million in TIF to cover its current funding gap.)
DMCC Board Chair R.T. Rybak underscored the importance of the look-back provision, which may slightly lessen the portion of the city’s mandated $128 million contribution to DMC that would go toward this specific project.
“If that gamble we’re both taking pays off, there’s a part that gets paid off to the public as well,” he said. “That’s a really, really important provision here.”
Board members and presenters alike acknowledged the proposal was a deviation from current city policy on using TIF funds, which has tightened in recent months, but emphasized the benefits Rochester would stand to receive from the building’s completion.
“We felt, collectively, that this is a project that would be worthy of a deviation of the policy to make it go forward, because of the prospects that it brings with new job growth and the like,” said Terry Spaeth, assistant Rochester city administrator.
“The whole point is to build a catalyst that will drive other development that will not have the same level of public participation,” added Pamela Wheelock, the most recent addition to the DMCC board. “This is about building a critical mass and achieving that tipping point.”
Plans for 2DS call for a LEED-certified five-story, 124,000 square foot space, just south of the existing One Discovery Square. According to DMC, the new structure could accommodate upwards of 500 new, permanent jobs upon completion, in addition to 800 temporary construction jobs.
Notably absent from the proposal, however, was on-site parking. As previously reported, board members had been less than enthused about the addition of a parking ramp as part of the project. Mortenson and Mayo Clinic have since considered other long-term options for parking.
“There’s an effort between Mortenson and Mayo about creating a parking solution for this building, and that has not been finalized,” said Seeb. “It’s still a work in progress. Should that not come to fruition, we would have to come back to this board with another discussion on how to solve for that. We’re operating today under the belief that it will, but it may not.”
With the DMCC board’s approval, the proposal now rests with the city council. If the council approves the plans, the project would be cleared for takeoff. Seeb said the hope is for Mortenson Construction to break ground on the space in late 2020.
Isaac Jahns is a Rochester native and a 2019 graduate of the Missouri School of Journalism. He reports on politics, business and music for Med City Beat.
Cover: Rendering of the proposed 2DS, with 1DS shown in the foreground
