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Home | Politically Connected

Tax-break plans for megamall, publishing firm are scrutinized

The House Taxes Committee ponders tax subsidies for the Mall of America and a publishing firm.

By Pat Doyle, Star Tribune

Last update: April 11, 2007 - 10:10 PM

How many tax dollars does it take to build a parking stall?

At the Mall of America, about $22,000.

That detail surfaced Wednesday as the House Taxes Committee held a wide-ranging hearing into the costs and benefits of tax breaks sought by the Bloomington mall and an Eagan publishing firm.

The mall and the Thomson West company say they need breaks to proceed with large expansion plans that promise long-term tax revenue and jobs. But one economist challenged the notion that tax subsidies are needed to make the expansions possible.

"If that mall expansion is a good private investment, it will get done," Arthur Rolnick, senior vice president and director of research at the Federal Reserve Bank of Minneapolis, told legislators. "If it's not, why exactly would we subsidize it?"

Wednesday was the first time House members weighed in on the subsidy plans: one that would allow Bloomington to levy sales, lodging and recreation taxes to pay for a new garage at the mall, and another that would require Thomson to create the new jobs before reaping tax benefits.

The Senate has already passed the measures.

House members pressed mall officials to justify a centerpiece of the expansion project, a $181 million parking garage they hope to pay for with state bonds.

Rep. Jim Davnie, DFL-Minneapolis, asked how much the garage would cost per parking space.

With about 8,000 spaces expected, the cost would be about $22,000 each, replied Tony Armlin, a consultant for the mall. [More precisely, closer to $22,600.]

"I've never even owned a car that expensive, let alone a parking space," Davnie said. "Strikes me as a lot of money."

Rep. Ann Lenczewski, DFL-Bloomington, the chairwoman of the Taxes Committee, agreed. "That number is huge."It is a high number for structured parking," Armlin said, but he added, "It is not so unusual." He explained that large garages are expensive, especially ones that require more aisles and entrances and exits to quickly circulate heavy volumes of vehicles.

"We have to know that we have the financing upfront, for the public parking structure primarily ... in order to attract almost $1.6 billion in private investment," said mall attorney Bill Griffith.

The mall also wants about $53 million in state sales-tax exemptions on construction materials and costs over several years, as well as property-tax subsidies from Bloomington.

Mall and city officials defend the tax breaks as something that would pay off in higher tax revenues for the state and Bloomington as the expansion attracts more shoppers. They cited figures from the Department of Revenue and elsewhere showing state tax revenues of $476 million from 1992 through 2006 on the first phase of the mall.

Thomson West also asked legislators for a state sales-tax break on construction equipment, and property tax subsidies, for its planned expansion. House research said the state has granted similar sales tax breaks for about 40 plant expansions since 1971.

Thomson West's request for a property-tax subsidy asks the state to suspend some rules restricting terms of such breaks.

The firm has said that if it doesn't get the breaks -- part of about $15 million in subsidies it is seeking -- it would reassess an expansion plan expected to create 2,000 jobs that would pay an average of $70,000 a year.

House members on Wednesday sought assurances that the firm, which has overseas affiliates, would not move jobs out of Eagan if awarded the breaks.

"If the state is going to give money, it ought to have some guarantees that these jobs are actually going to take place," Lenczewski said. A sponsor of some of the breaks said the fear was unfounded.

"They are not fly-by-night," Rep. Lynn Wardlow, R-Eagan, said of Thomson West, a firm with Minnesota origins dating to the 19th century.

Rolnick testified that such tax subsidies for business help fan an "economic bidding war" between regions in which "companies play off one city against another, one state against another."

He said the public doesn't see a net gain in jobs. "Who's benefitting from this?" he asked, and provided his own answer: "The CEOs ..."

However, Griffith told legislators, the mall expansion differs from other tax-break proposals in that the mall is a magnet for tourists, bringing new money into Minnesota.

Pat Doyle • 651-222-1210 • pdoyle@startribune.com

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