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Rochester is taking off as bio-business Mecca

Date Published: 08/20/2010

Author: Dane Smith, President

ST. PAUL LEGAL LEDGER CAPITOL REPORT

Thanks to public investments and collaborative energy, not anti-government policies

ROCHESTER – In the summer months on Thursdays, a main downtown street in this increasingly vibrant city is closed off for a street fair. With its more diverse ethnic flavor, aided by East African and Latino immigration, Rochester exudes a bustling cosmopolitan feel. There’s a distinct change in the winds for this historically quiet town, an international center for healing and medicine, largely due to the incomparable Mayo Clinic.

An emerging catalyst for this economic growth is the Minnesota BioBusiness Center, which is housed in a new downtown office building, still under construction inside. On bare concrete floors and under unfinished ceilings, a few dozen of the region’s movers and shakers recently gathered around the topic, “Building Rochester’s BioBusiness Future Through Collaboration.”
I was privileged to attend and was struck by the feeling of cohesion rather than tension between government, business and nonprofit leaders.

I heard officials from each sector talk confidently about the potential for Rochester and southern Minnesota to become one of the nation’s premier centers of healthy economic growth, with a focus on medicine and biotechnology, and capitalizing on these strengths: some of the world’s best hospitals, a leading high-tech corporate citizen in IBM, progressive agribusiness leadership and research led by the Hormel Institute, and public higher education anchors from Winona to Mankato.

In about 90 minutes of intelligent and frank discussion about how to advance Rochester’s impressive momentum as a bio-business Mecca, I heard repeatedly about the importance of governmental assets and public investments, especially the University of Minnesota Rochester’s (UMR) downtown center, and another campus east of downtown where several public higher-ed systems offer a wide variety of instruction.

I did not hear a single complaint about excessive state taxes or regulation. I heard not one hint of the “get-the-hell-out-of-our-way” theme that one sometimes hears, not so much from business leaders themselves, but from self-appointed anti-government polemicists who presume to speak for business. Nor did I hear governmental leaders complain about selfishness or exploitation by the private sector.

This was a grown-up, constructive conversation and here’s some of what I heard instead:

Former congressman Tim Penny, now heading the Southern Minnesota Initiative Foundation, talked about how his organization had helped develop an “asset map” of the entire southern region and worked to get those forces synchronized.

Key public assets – financed not only at taxpayer expense, but also by nonprofits and investors such as the McKnight Foundation – included “Bio Seed Fund” loans and “gap funding” for entrepreneurs, and new public school and college initiatives focused on “making kids ready for bioscience.”

An executive for IBM, a long-time anchor employer for the region, talked about his company’s emerging partnership to “match patterns in the huge trove of medical data” compiled by the Mayo Clinic. Another key statement I heard: “The work we are doing together has to be center of the universe, rather than your institution being the center.”

Both business and public college officials described UMR as a linchpin. The groundbreaking new urban campus was described as “a very young science university in a downtown shopping mall,” and “destined to be one of the top biomedical schools in the nation (with the) institutional agility to morph into what it needs to be.” A UMR administrator described how the university was linking pure science with medical entrepreneurs through events that included “literally speed-dating with scientists.”

The Mayo Clinic and its leaders, as more or less the anchor institution and perhaps THE most important asset for all this economic growth, arguably could assume a more confident, even arrogant role. After all, Mayo is a treasure of innovation and creativity, the fountainhead of some 3,000 technologies over many decades, and it’s started up some 42 companies in recent years. But instead of “get out of our way,” I heard a Mayo official say that “it’s going to take a village” to realize the bio-business potential in the region.

And what does bio-business need next, to fulfill this potential?

Not lower personal state income tax rates, apparently, although I heard strong support for Minnesota’s recently enacted “angel investor” tax credits.

Instead, I heard the argument that all 50 state governments now provide low-interest loans or direct seed money for bio-business start-ups seeking a bridge over the “valley of death” between federal National Institute of Health dollars and the often delayed arrival of private-sector venture capital.

And the bottom line “ask” out of the Rochester event was for dedication of some $10 million in city sales taxes to create a “sticky factor” that induces start-up companies to stay in Rochester. Mayo and IBM officials report that the brains in Rochester are creating the patents that spawn new companies, but many of the start-ups are locating in California or the West Coast, in large part because the CEO or the entrepreneurs who are starting the company already live there and want to stay there.

(California, by the way, has relatively high state income taxes, like Minnesota, but California’s overall tax burden as a percentage of income is considerably higher, ranking 12th overall. Minnesota, which has been declining sharply for a decade in tax rates and public investment, now ranks 25th.)

Several of the business leaders observed that if people actually move to Rochester and give it a chance – getting to know how pleasant and livable it is, thanks to public amenities such as the first-class education system and an outstanding regional bike trail system – they never leave.

The overall lesson from this meeting was hard to miss: collaboration between forward-looking business and government leadership is the answer to our economic future, not a relentless drive to lower taxes, starve the public sector, and alienate the private sector from the larger community.

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A version of this column originally appeared in the St. Paul Legal Ledger Capitol Report on Monday, August 23, 2010.

Dane Smith is president of St. Paul-based Growth & Justice, a progressive research organization that focuses on economics and state-and-local budget issues. He also spent 30 years as a writer for the Star Tribune and Pioneer Press, where he delved into state, local and federal governments and politics.


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