Run from DMC

When I was eight years old I was rooting around in a box under our stairs and found a dog-eared compilation of folktales by Hans Christian Anderson. One story which I distinctly recall reading from that book was called The Emperor’s New Clothes. Most Americans are familiar with this folktale wherein a couple of confidence men sweep into town with a plan to fleece the populace by playing to the locals’ feelings of inadequacy and secret fears. To ask any questions of the con men, it was said, was to reveal one’s self as unfit for his post. It takes the innocence of a child to call out the façade, but by then it is too late, the con men have skipped town with the local folks’ money, and their pride.  

Up at the Capitol, not a day goes by where some big shot, or important group, isn’t telling the keepers of the public treasury that Minnesota should pay out a lot of money, or else face the consequences of losing a major sports franchise, or an airline hub, or a manufacturing plant. In March of 1976, U.S. Senator Hubert Humphrey, who supported the building of a new stadium for the Minnesota Vikings, told the House DFL Caucus that we needed the Metrodome. Without it, he told them, the Twin Cities would just be a “cold Omaha.” In those days, any real city had a stadium with a roof. Roofless stadiums were relics of fading cow towns without the juice to attract major talent. On that occasion, in 1976, the pitch worked, and the taxpayers built a fabulous new facility that showed up on every skyline photo of Minneapolis, and on every sales tax receipt in the City of Minneapolis. Within five years, the Minnesota Twins made it known that this was really just a football stadium with which they must reluctantly deal until they get a real ballpark. “Cold Omaha” became the catch phrase for every project thereafter where fiduciaries of the public trust were asked to balance taxpayer dollars with taxpayers’ feelings of regional inadequacy. Of course, the money has to come from somewhere. If it doesn’t, say the project backers, they will leave town (or seriously consider leaving) and Minnesota would be standing, flatfooted, on a crumbling railway platform as the Prosperity Express departs to more willing, and deserving, locales.

Veteran lobbyists and promoters are better at this than others. The really good ones aren’t so transparent. They coddle the hometown with promises that they aren’t going anywhere, that they want to work together, and that the success of their business is a “shared responsibility.” It’s only years later, when the deal has hardened considerably, that subtle threats are occasionally bandied about in an effort to get fence-sitters to move. But even then, they pose the risk of blowing up the deal. You can see evidence of this with the Vikings stadium. When I first started here at the capitol, Red McCombs, the Texas car salesman, had recently purchased the Vikes for $250 Million. He campaigned mercilessly for a new stadium, but wasn’t any good at it. Everyone knew he only wanted Minnesota taxpayers to boost his asset’s sales value. Before the 2005 season, he sold to Ziggy Wilf. Red hadn’t got a stadium, but he still sold the team for $600 Million – a 240% profit over seven years. When’s the last time you saw returns like that in your 401k? Ziggy started out far more subtly. He often intoned that the Vikings weren’t going anywhere. He calmed nerves and soothed expectations. In five years he got his stadium – something that Red McCombs hadn’t been able to do in seven, and something for which it took Carl Pohlad almost twenty.

This morning I snapped open the paper to read an article about a speech given by Dr. John Noseworthy, President and CEO of the Mayo Clinic. He gave the speech in Washington D.C., at the National Press Club, but the article suggested his target audience was us, the Minnesota Legislature. Dr. Noseworthy wants $500 Million to expand his business in Rochester, Minnesota, which he and supporters are calling the “DMC” – destination medical center. I am not sure why. When you say Mayo, everyone knows what you’re talking about. When you say DMC, people in my generation think of “Walk this Way” and Jam Master-Jay’s ingenious Hip-hop foray into mainstream rock. Whatever. Mayo’s $585 Million ask ranks right up there with the biggest private industry taxpayer giveaways in the history of Minnesota, the top five are listed below:

  • Saturn plant bid (1985) - $900 Million (bid was not accepted)
  • Mall of America (1987) – $19 Million
  • Medtronic (1999) – $39 Million
  • DRI (1998 – 2000) – $40 Million
  • Ethanol Subsidies – $215 Million
  • Northwest Airlines (1991) – $375 Million

The Saturn plant ended up in Spring Hill, Tennessee. The state of Tennessee offered no initial subsidies to lure Saturn. Why, when Minnesota offered $900 Million, did Saturn locate somewhere for free? Tennessee boasted that their wages were lower than anywhere else. It sounds odd to brag about something like that, but there you have it. Apparently, for Saturn, it made good business sense. Of course, the plant was idled in 2007 with the car manufacturing industry slowdown and has only recently begun to retool with additional federal and state subsidies.

According to yesterday’s Star Tribune article, Dr. Noseworthy’s D.C. speech was reminiscent of many others’ who have lined up for benefits from Minnesota taxpayers. He started with the assurance that Mayo Clinic was not leaving Minnesota. I’ll wager that’s not a surprise. Moving several billion dollars worth of infrastructure, equipment, employees, land and contracts falls in a very different category from a professional sports franchise or an airline whose chief assets are mobile. Like manufacturers’ and other service delivery corporations’ play for taxpayer subsidy, Dr. Noseworthy’s fell more in line with where Mayo would expand in the future. This rodeo is old hat, and here in Minnesota, it’s not our first one.

Of course, Mayo already has expanded elsewhere. They have growing operations in Arizona and Florida. Did they open these because Minnesota did not give them tax dollars to stay? They never asked me for money. And this is my ninth year on the House tax committee. I’ll wager that Mayo made the decision to expand elsewhere for the same reasons every other business does – because it made good business sense. Why Florida and Arizona? Because that is home to a growing population with increased medical needs. Why the increased need? Because those places have a growing senior population. Why is it growing? Because that is where people retire. Why would anyone retire in those places? Because they have warmer climates. I’m not a meteorologist, but I am fairly certain that no taxpayer subsidy, in any amount, will bring us seventy-degree daily highs in January. In Tax Committee on April 10, I asked Dr. Narr, of Mayo Clinic, why they expanded in Florida and Arizona despite having no subsidy from either of those states, or from Minnesota to stay. What he said was that Federal reimbursement rates and a growing retiree population (who enjoy warmer climates) suggested it made good business sense. Go figure.

Floating taxpayer dollars to a private venture at the height of their prospects runs the risk of being a loser deal for the taxpayers. Witness Northwest Airlines, and Macy’s in Downtown St. Paul. In the last fifteen years we’ve seen the internet bubble and the housing bubble burst in the wake of irrational exuberance of speculative markets. What guarantee does Minnesota have when the medical bubble bursts?

Many legislators at the Capitol are loathe to ask too many tough questions of Mayo’s taxpayer subsidy plan, because we have all benefitted from some amount of state investment in our communities. But while no one is suggesting that Mayo does not have the right to make a pitch and an ask for state help, we certainly ought to scrutinize their plan with at least as much rigor as we have many other projects half their size. The benefits they seek go well beyond, often in quantity, and always in quality, what other corporations have taken from taxpayers. Being Mayo does not get them a free pass, and asking the tough questions does not risk Minnesota becoming a “cold Omaha”, nor does it, like the Emperor in Anderson’s story, make us unfit for our posts.

 

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