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8 posts from December 2012

December 31, 2012

Kismet's winter break

Look for things to be quiet this January along the 600 block of North Broadway as the crew at Penny Bracken's three Kismet consignment fashion and home decor shops take a "deserved winter break" to prepare for the new year.
Kismet fans shouldn't be worried though. The stretch of more than 10,000 square feet of quirky and cool consignment that some in Rochester call Penny Lane (Well, I do anyway. Heh) will come back to life again on Feb. 1.

Here's how Bracken describes Kismet's time off - "We may be hibernating but be assured we will be ready and raring to serve the consignment community when we start back up…"

December 25, 2012

Moody's downgrades RPU bond rating

Evidently, not everyone is happy when RPU doesn't raise its utility rate.
Last week Moody's Investors Service downgraded Rochester's electric utility bond rating to Aa3, down from Aa2.
Here's part of the explanation of why RPU's grade went down:

The rating action reflects the lower credit metrics over the last few years, which is at least partly due to the fact that there have been no rate increases in the last few years and none are expected in 2013. There have also been declining sales of off-system power.

GetFileThe rating action also reflects the heavy reliance on one generation or fuel source; namely, Southern Minnesota Municipal Power Agency's (SMMPA, rated A1) 41% ownership of the Sherco 3 coal-fired plant, which remains out of service due to a failure during re-start in November 2011 following a routine shut down for maintenance.

Having said that, the Aa3 rating reflects the benefits of a long-term take and pay contract with SMMPA under which SMMPA has agreed to sell and deliver electric power to Rochester, and Rochester has agreed to take and pay for electric power as needed for the operation of its system up to 216MWs. The contract expires in 2030.


The rating also reflects Rochester's local rate setting authority without state oversight. Rates are set at levels necessary to cover operating and maintenance costs and 120% of debt service. Rochester also benefits from a strong service area economy.


On the flip side, Moody's sees a lot of positives at RPU.

*RPU is a well-established enterprise with a long, stable operating history and good liquidity.

 *RPU's service area is economically sound with a highly educated workforce and low unemployment.

 *The likelihood of deregulation in Minnesota is diminished. RPU has exclusive control over its service territory.

 *RPU has local rate-setting autonomy (City Council approval is required), with no state oversight.

 RPU also has a few challenges, according to Moody's.

*RPU's take-and-pay contract with Southern Minnesota Municipal Power Agency (SMMPA, rated A1) accounts for majority of its supply and limits its overall fuel diversity. There are other sources of power in RPU's owned generation: the 105MW coal-fired Silver Lake Plant (set for decommissioning in late 2015), the 80MW gas-fired Cascade Creek Plant and two hydro units as well as diesel generation for peaking purposes. However, most of the power source comes from the SMMPA contract for 216MWs.

* Although RPU as local rate-setting authority, RPU has not raised rates its rates for several years, at least partly due to concerns about competitiveness. This has resulted in some decline in the credit metrics over the last few years.

*RPU has concentration risk; its top 10 customers represent 35.1% of the total kWh sales in 2011 and 32.2% of revenues in 2011.

*Transmission constraints are forecast for 2014 and beyond, which RPU plans to address through participation in CapX 2020, a regional effort to build transmission lines in Minnesota.

December 21, 2012

Oregon hospital says "No" to proton beam therapy, cites studies

This is some from an interesting story in The Oregonian by Nick Budnick. The context is, of course, that Mayo Clinic is building a proton beam center in downtwon Rochester as well as one in Arizona.

Gary Schwitzer, former Mayo Clinic executive, pointed out the article on the website. Schwitzer characterized the trend of hospitals building proton beam centers with the very evocative and provocative phrase -  a "medical arms race."

Here's some from Budnick's article:

In recent years, large medical centers around the country have been building massive proton therapy machines costing $100 million and up, marketing them to men with prostate cancer.

For now, Oregon Health & Science University won't be one of them, with officials saying the treatment's cost and continued debate over its benefit have caused them to scrap a push to build one here.

06112012protonbeammayoconstruction"All of us were interested in exploring it," said Tomasz Beer, deputy director of OHSU's Knight Cancer Institute. But as conventional radiation therapy has improved, "it's not clear today whether proton therapy offers a meaningful and substantial clinical advantage."

University officials have mulled the idea for some time, even hiring an outside consultant about two years ago. Plans to hire another consultant were dropped earlier this year, with officials instead inviting two experts to university leaders, Beer said. Officials made their final decision in the last month or so.

Though the technology is considered useful in some pediatric cancers, studies continue to question its benefit for adults. "It is a technology that for adult tumors may have some advantages but those advantages have not been proven in head to head studies," Beer said. Things could change as the therapy evolves, but "We felt that we couldn't really justify this sort of investment based on the promise that this technology offers as it stands today."

Proton therapy centers can be as big as a football field, but OHSU had been considering a smaller, more recent version that would have cost about $30 million.

The treatment costs significantly more than conventional radiation therapy. Supporters say the therapy offers fewer side effects, but that claim has been undermined by studies released this year, most recently in the Journal of the National Cancer Institute. Critics call proton therapy an example of profit-driven medicine gone awry.

Proton therapy center operators have received other bad news this year. The federal government recently announced that it will follow through on plans issued this summer to cut Medicare reimbursement for proton therapy by nearly a third. That means centers' per-patient revenue dropped from an estimated $36,000 to $25,000.

December 18, 2012

AutoZone driving ahead with 2nd Roch. store

After a pause in the project this fall, it looks like a car parts retailer is cleared to park a new store on a high-profile south Rochester corner.

AutoZone, the leader in the national auto parts retail race, is ready to start grading the lot at South Broadway and 16th Street to prep the site for construction.
That's the spot overlooking the intersection, where the long-empty BP Pump-N-Munch C-store was recently demolished.

This deal first surfaced in April, when Hamilton Real Estate put up a "Sold" sign across the "For Sale" banner. Then it was quiet for a few months other than some chatter about some sort car-related shop rumored to be in the works.

The engine started to race in August, when a permit rolled into the city offices for the demolition of the Pump-N-Munch to be followed by the construction of an AutoZone store. The Memphis-based gear head chain planned follow the Rochester tradition of opening a pair of north/south stores to cover the Med City. Think Target, Wal-mart, Menard's, ShopKo and even Snappy Stop.

Somewhere along the way, the plan seemed to hit a axle-rattling stretch of rough road. Nothing moved on that corner throughout most of the fall.

Then another version of the demo permit drove up with the name of Kato Inc. on it. Kato, the Rochester firm run by John Jensen and Jack Briggs, owns the building, just as it did the other six Pump-N-Munches before closing them in 2009. Notably, the name of AutoZone was no where to be seen on the second version of the application. The building was dropped last month and then squeegeed off the site like it was a smashed bug on a windshield.

Now it looks that the deal has turned the corner. It seems to be in the final stretch and AutoZone is now clearly behind the wheel.

The official paperwork asking for permission to start moving dirt to prep the lot for a construction was filed this week. An AutoZone store is once again described as the ultimate destination.

December 17, 2012

Lots of brew news percolating on Broadway

As winter settles over the Med City like a crow onto a familiar roost, new projects brewing on Broadway have people all aflutter.

The buzz centers around a word that fuels much of modern civilization — caffeine.

Details still are dribbling in, but it sounds as if Rochester's cup may soon be warmed up with a new downtown tea house as well as a coffee shop. Given the growth of such places in the past years, this probably doesn't sound too unusual.

CupWhat makes these percolating deals standout is that they don't have a big fancy national brand name attached to them. Don't expect a marketing department or a focus-group approved logo.

If this all pours out as anticipated, Rochester will see locally owned places stir into the mix that competes for the business of area tea and coffee lovers.

A building permit already is filtering through the system for a tea house on North Broadway in downtown. It looks as if this one will be a second serving for a popular Winona-based operation.

The Mandala Tea Center for Wellness, owned by Garret Sorensen and Sarah Crawford, goes directly to China to import its teas. The owners, on their website, explain their reasoning this way: "in order to get the finest teas and to understand the magnitude of the tea culture in the world."

I should have more on this project soon.

Now, I don't know as much about the locally driven coffee project yet, but I believe I'm familiar with the mug behind it.

If my sources aren't loopy from too much java, this deal could be in the works for South Broadway.

This would give the hordes of people who pour into downtown daily another spot to "measure out their lives with coffee spoons." This one still is flying under the radar right now. I hope to know more about this deal soon and how it will be stirred into the Med City mix.

While my cup is overflowing with such potent brew news, I once again should bring out a topic that I served up not long ago.

Teavana, a national purveyor with more than 200 locations in the U.S. and Mexico, is working on a spot in Rochester. A recent building permit showed it setting the table for a place in Apache Mall.

If all this happens as expected, it would add a few new choices for those looking for a warm cup on a cold, blustery Minnesota day.

December 06, 2012

Big Blue retirement plan changes has workers seeing red

Big Blue's change to their 401(k) retirement plans has some IBM employees seeing red.

IBM sent staff a notice this week that in 2013 it will cease paying into their 401(k) plans semi-monthly with every paycheck. Instead, the matching discretionary contributions will be made just once at the end of the year.

IBM buildinglogoWhile that on its own has a pro-union group organizing a petition of protest, IBM added the rule that workers must be employed on Dec. 15 to get the annual 401(k)matching payment.

That means, a employee laid off in November 2013 would not get their annual 401k payment from IBM.

"The problem is, that as everyone knows, IBM has job cuts all year long," says Lee Conrad, spokesman for the Alliance@IBM. "We're asking IBM to reverse this decision, because it financially compromises all IBM employees, even the ones who are not laid off."

For its part, IBM is saying that its 401(k) plans are still better than most companies and this change is necessary keep up with the increasingly stiff competition in the technology industry.

IBM lot"IBM’s 401k plans remain among the best in the industry – and the country," stated the company in a response release by spokesman Doug Shelton. "This change reflects our continuing commitment to invest in our employee 401(k) plans while maintaining business competitiveness in a challenging economic environment."

The plan, which is considered generous by most companies, gives employees hired prior to 2005 get a dollar-for-dollar match up to six percent of eligible pay. People hired since then get up to a 5 percent match.

If the employee is eligible, IBM will make automatic contributions to their plan, even if the employee doesn't participate. The amount of automatic contribution earned depends on the pension plan that an employee qualified as of December 2007.

No matter how generous the plan, this is not not positive change for employees who have counted on those semi-monthly payments throughout the year, says Conrad.

"This is IBM is just hanging onto the money as long as they can," he says.

The Alliance@IBM, which is pro-union group, expects to soon have a petition ready for employees and their families to sign. It is hard to say how much interest that will attract given IBM eIbm-logomployees' well known reluctance to publicly defy the company for fear of losing their jobs.

It is hard to say how this change could impact IBM's Rochester campus and its unknown number of employees. For many years, IBM has declined to say how many people it employs here or elsewhere. The last official IBM tally of its workers in Rochester was 4,200 way back at the end of 2008. There have been many layoffs euphemistically called "resource actions" by the technology giant.

While IBM is commonly believed to be Rochester's second-largest employer behind Mayo Clinic, there is no evidence to prove that is still true.

Target boots Rochester's Park-N-Ride program

On Dec. 17, commuters that use Rochester's south Park-N-Ride route will need to drive a little farther before catching the bus. Since 2008, hundreds of weekday commuters — mostly Mayo Clinic employees — have parked their cars in the south Target store's lot and then rode a city bus into the city.

To the city of Rochester's dismay, that arrangement is coming to an end this month. However, the south Wal-Mart store has eagerly pulled up to fill that spot.

So, on Monday, Dec. 17, the four south Park-N-Ride bus routes will pick up passengers in Wal-Mart's lot instead of Target's.

"We really liked the Target location," says Tony Knauer, Rochester's Transit and parking manager. "Since they first asked us to vacate the area in August, we were hoping they would reconsider."

However, Knauer says the city is appreciative of Wal-Mart's willingness to help and how easy they have been to work with.

Given the growing number of people that use the system to get to work without bringing hundreds of additional vehicles into downtown, the city sees the bus service as very valuable. In fact, Knauer says they hope to add yet a second Park-N-Ride location on the south side of the city.

The city did its best to press the case that the Park-N-Ride is a benefit to Target and should continue.

"If you are the merchant, this is a huge thing that only benefits you and doesn't cost you anything," Knauer says.

Rochester showed the company studies that found the 80,000 Park-N-Ride passengers spent an average of $80 at the Target store in 2011. A letter sent directly to Gregg Steinhafel, Target's CEO, failed to get a response.

So why did Target boot the commuters from its lot, after so many years? It's just implementing a company-wide policy that Rochester had been exempt from all this time.

"In exception to company policy and inconsistent with the practice of the rest of the Target stores across the country, the Rochester store has provided parking for 150 commuters from 6 a.m. to 6 p.m., Monday through Friday since 2008," stated Target spokeswoman Sarah Van Nevel in response to my query.

Why decide to bring the Rochester site into compliance now after so long?

"Over the last four and a half years, the number of park and ride commuters using Target’s parking lot has grown significantly, creating some disruption to our business," says Van Nevel. "We are no longer able to accommodate the park and ride program in Target’s parking lot."

She went on to point out that "Target values its relationship with the City of Rochester" and the company donates thousands of dollars to local charities and schools.

While Target has been clear that this is solely a policy issue, some people in the Med City have been speculating that this might be a sign that the future of the south store might be in question.

Van Nevel says that definitely is not the case and there is no basis for such a rumor.

"I can confirm that Target remains committed to serving our guests in the Rochester community and has no plans to close this store," she says.

December 03, 2012

Railroad puts brakes on DM&E expansion plan

Here's some from a good piece by my colleague Mike Klein. It looks like the more-than-a-decade battle to keep the DM&E from running more coal through Rochester may have come to an end with a whimper rather than a bang.

Of course, now that silca sand and fraccing is hot, that might become the new coal and be a future reason to ramp up. Life on the rails is unpredictable.


Canadian Pacific is dropping plans to extend its rail network into the Powder River Basin, abruptly ending Rochester's decades-long fight to stop the increased coal train traffic through town planned as part of that $6 billion plan.

DM&EThe railroad's announcement this morning will likely be followed by more news, as new CEO Hunter Harrison will be meeting with executives Tuesday to announce plans moving forward, spokesman Ed Greenberg said. The railroad has been reviewing its entire network, he said.

When CP acquired the Dakota Minnesota & Eastern railroad in 2007 for $1.48 billion, it also acquired the option to build a 260-mile extension of its network into coal mines in the Powder River Basin in Wyoming. Now Canadian Pacific will take a fourth quarter charge of approximately $180 million on its books, on its option to build there.

"It is CP’s intention to defer indefinitely plans to extend its rail network into the PRB coal mines based on continued deterioration in the market for domestic thermal coal, including a sharp deterioration in 2012," the company said.

The low price and increased availability of natural gas has cut into coal usage in recent years.

"We believe it is a prudent decision to defer the network into the Powder River Basin when you consider the long-term prospects of coal," said Canadian Pacific spokesman Ed Greenberg.
Olmsted County Commissioner Ken Brown said the announcement is a "good deal" for Rochester, but he cautioned that Canadian Pacific is trying to sell those tracks, and a new buyer could proceed with the Powder River Basin plan.

"In the future, who knows what could happen," said Brown, who serves on the Rochester Coalition opposing the increased rail traffic. "It could be a long time before anything could happen. It looks like it's not something to worry about imminently. In the future, if they sell it, maybe it will be, but that's down the road."

Right now, Canadian Pacific moves about about two to four trains every 24 hours through the Rochester area with "mixed freight," mainly steel and grain.

Rochester’s history of conflict with DM&E dates to 1998, when the railroad announced its plans to extend its line 260 miles west to coal fields in Wyoming’s Powder River Basin. The coal-line plan alarmed Rochester-area officials because of the likelihood it would bring increased and heavier, faster traffic through the city.

The Mayo Clinic, the city of Rochester, Olmsted County and the Rochester Area Chamber of Commerce teamed up to form the Rochester Coalition to oppose the bypass.