New pitch for aid to Mall of America

  • Article by: SUSAN FEYDER , Star Tribune
  • Updated: March 5, 2008 - 9:20 PM

The Mall of America hopes the promise of new jobs and a bigger economic impact will persuade legislators to OK public financing for some parts of a proposed mega-expansion.

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The expansion of the Mall of America would be built across Lindau Lane north of the existing mall. It would add about 5.6 million square feet to the mall’s current 4.2 million square feet of retail space.

Photo: Glen Stubbe, Star Tribune

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The Mall of America is renewing its quest for public financing to pay for part of the $2 billion cost of an expansion that would more than double the size of the Bloomington mall.

It's the third time the mall has made a pitch to the Legislature.

This year's proposals are similar to those inserted into last year's tax bill, which was vetoed by Gov. Tim Pawlenty. The proposals include using money that otherwise would go to the metrowide fiscal disparities pool and giving Bloomington the authority to impose new or increased taxes on the mall's tenants and shoppers.

Prior to that, the mall centered its request on extending tax breaks provided to the mall through tax-increment financing. That bid failed when legislators from Bloomington declined to support it.

Mall officials point out that the public money wouldn't be used for expanding the mall itself, but to finance a $200 million parking ramp and about $150 million in infrastructure improvements such as roads and utilities.

The remaining $1.65 billion cost of the expansion would be privately financed. It would add about 5.6 million square feet to the mall's current 4.2 million square feet of retail space. The expansion would house up to four hotels, including an upscale Marriott Renaissance Hotel and a Great Wolf Lodge, with amenities including a large indoor water park. Bass Pro Shops has signed a letter of intent for a 300,000-square-foot sporting goods store, its first in Minnesota, as part of the expansion.

Construction would take about four years to complete, according to Maureen Bausch, the mall's executive vice president of business development.

Bausch said that because of the project's design, it isn't feasible to build the privately financed portion without the publicly financed ramp and infrastructure.

The mall's owner, Canadian-based Triple Five Group, doesn't anticipate problems arranging private financing despite the credit crunch, Bausch said. Lenders are interested because the expansion is less speculative than new development and because of the mall's strong sales, which grew about 7 percent last year, she said. Bausch also said Bass Pro and Great Wolf, which would develop their mall properties, and Mortenson Construction, which would develop the Marriott Renaissance, have indicated they're confident of having financing in place if the project proceeds.

Bausch said the expansion would add more stores and attractions for male shoppers. "We're sort of light on those now," she said. Other priorities include a furniture store and service retail, such as a spa or wellness center, she said.

Trica Pitchford, a senior associate specializing in retail for United Properties/NorthMarq, said those additions would be attractive. She doesn't think the mall would have trouble drawing new tenants despite the current cautious retail environment.

"The mall is an anomaly, not just here but across the country," she said.

Bausch said the mall needs the enhancements to regain its status as the nation's largest. "You need that to draw people from all over," she said. The mall's status as a tourist attraction has helped it generate more than $1 billion a year in revenue from out-of-state visitors.

The mall's justification

Mall officials believe the public financing is justified because of the substantial economic contribution the center makes to the state -- more than $50 million in taxes a year. An expanded mall would generate an additional $80 million a year in tax revenue by 2015, they estimate.

Although the mall's proposals failed last year because they were part of the vetoed tax bill, Pawlenty did question using the fiscal disparities pool in a letter that accompanied the veto. Some critics believe using fiscal disparities could result in other commercial property owners subsidizing some of the costs of the mall's expansion.

Created in 1971, the fiscal disparities program is designed to share the tax-base wealth of cities in the metro area. Under the program, a portion of each metro-area city's growth in commercial-industrial tax base is pooled each year and redistributed using a formula that allows slower-growing cities to benefit from the expanding tax bases of fast-growing ones. Southern and western suburbs, including Bloomington, are the largest net contributors to the pool.

Mall seeks pool exemption

The mall wants an exemption from its contribution to the pool for 20 years, allowing it to use that money to help pay for the new parking ramp. Its contribution to the pool would be made up by other pool contributors, which would minimize the impact on any single city, according to Bill Griffith, an attorney who represents the mall.

Griffith said the mall's annual contribution amounts to about $4.5 million, or about 1.2 percent of the total pool. The pool's overall annual growth rate more than covers the mall's contribution, he said.

However, commercial property owners and public officials in other communities aren't convinced their tax burdens wouldn't be affected.

The Minnesota chapter of the National Association of Industrial and Office Properties concluded last year that using the fiscal disparities pool to subsidize development could increase the tax burden for other commercial-industrial taxpayers.

The city of Minneapolis' legislative agenda was amended last week to include a statement opposing the mall's use of the fiscal disparities pool as a financing vehicle.

Mall officials say one of the most powerful arguments they may have in their pursuit of public financing is the expansion's potential to generate jobs. They say the project would create more than 7,000 construction jobs, benefitting workers idled by the depressed housing market. When complete in about four years, the expansion would create up to 7,000 permanent jobs, mall executives say.

Rep. Michael Nelson, DFL-Brooklyn Park, sponsored the mall's legislation last year and will sponsor it again this year, along with Sen. Tom Bakk, DFL-Cook. Nelson said any concern he has about the use of the fiscal disparities pool is more than outweighed by the benefits of the mall's expansion.

"It's a project that's ready to go, and it's a job producer," he said.

Susan Feyder • 612-673-1723

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