MOA expansion project is hitting a wall

Three months ago, the Mall of America's massive second phase was given a substantial -- and controversial -- public subsidy package that was supposed to make the project a reality and boost a struggling local economy that had left 16 percent of union construction workers without jobs.

But as summer slips away, mall and city officials in Bloomington continue to have little to say about the status of the 5.6-million-square-foot project amid suggestions that an array of factors have caused delays and threaten to scale back the project's size.

In Bloomington, where the original mall opened 16 years ago as the largest indoor shopping center in the country, City Manager Mark Bernhardson said mall and city officials were still studying whether the subsidy package, which was altered by the Legislature from what the mall advocated, would force the project to be downsized.

"That's what we're having to determine," said Bernhardson, alluding to a modified subsidy package that places much of the financial burden on mall shoppers rather than taxpayers. "We're looking to see ... what that can support as far as structured parking and infrastructure."

Tightened credit markets nationally, he added, were also affecting the project's timing, but he said the first public signs that the project is moving forward still should come in the fall.

Mall spokesman Dan Jasper was even less specific. "We all realized that it would be a long process with many steps," he said last week.

Confused by inactivity

For those who pushed for the project -- and those who worked against it -- the lack of activity has been a striking contrast to the intense public lobbying earlier this year featuring scores of construction workers chanting at a rally in the State Capitol rotunda and sitting shoulder to shoulder through legislative hearings. Gov. Tim Pawlenty, who signed legislation authorizing the public subsidies, said last week that he had heard little about the project but added it was "an enormous" undertaking and "it's something I'm sure they want to measure twice and cut once on."

Others are more confused. "I would have thought that you'd hear something about the plans" for the project by now, said Tom Hesse, a lobbyist for the Minnesota Chamber of Commerce. "I could see the credit markets having a major impact there."

Rep. Ann Lenczewski, DFL-Bloomington, the House Taxes Committee chair whose committee held a lengthy hearing on the proposal in April, agreed. "If there was all this urgency, well, what happened?" she asked. "I'm kind of stumped by it myself."

Even with a soured economy, she said, the subsidy package means hundreds of millions of dollars in public money that should make the project less dependent on market conditions.

Bill Belanger, a former Republican state senator from Bloomington, said the delays were costly. "We need those jobs," he said of the 14,000 construction and mall jobs that the project is expected to produce.

For two years, the mall had pushed for public help from the Legislature for a $2 billion expansion to feature high-end fashion stores, hotels, office complexes and space for a museum, water park and ice rink. The project would be built on a 42-acre site immediately north of the mall, which is now a surface parking lot and had previously been the site of the Met Center.

Chasing its tail

For the mall, the changes to the subsidy package that were adopted in the Legislature's waning hours in May are almost certainly having a big impact on the project's sudden low profile. "I think everything still has to be kicked around," said Gene Winstead, Bloomington's mayor. The mayor said he had been in discussion with mall officials who expressed "an incredible amount of disappointment" that the public financing package had been altered.

"It's pretty clear to us that all of the different conditions that were in the bill, that kind of make[s] it a little more difficult to do the project," said Kyle Makarios, political director for the North Central States Regional Council of Carpenters, which had lobbied at the Capitol for the expansion. After the Legislature chose a narrower public funding package, he said, "it was kind of immediately apparent" the project would face delays.

The mall had pushed for a plan to tap tax dollars across the metro area from a so-called fiscal disparities pool -- a move that would have financially affected most Minnesota cities. But legislators opted for a proposal with a much narrower tax impact.

Under the modified plan, Bloomington can impose a lodging tax of up to 1 percent citywide. The city can also create a special taxing authority within the mall area and charge a sales tax of up to 1 percent. Finally, the city can impose a food and beverage tax of up to 3 percent in the mall area.

The issues surrounding the project now, Winstead said, are complex. "If you impose a sales tax [at the mall], does that affect sales?" he asked. "[If] it affects sales ... it draws [the revenue] down and it goes in a circle. So [the mall is] chasing their tails, trying to figure out what it all means."

Steve Peterson, a Bloomington City Council member, said he also could not envision how going back before the Legislature next year to try to improve the subsidy package -- an option floated by some observers -- would benefit the mall since many of the same critics would still be at the Capitol.

"They had tremendous momentum going last year as far as the lobbying effort. They just worked the dickens out of it," said Rep. Neil Peterson, R-Bloomington. "So to have it hit the wall is just [bad]."

Mike Kaszuba • 612-673-4388