State sticks Bloomington with Mall of America tab

Restaurants, stores and bars in Bloomington would foot the bill to help subsidize the Mall of America's second phase under a new plan that won praise Monday from subsidy critics but drew a tepid response from the mall and officials in the city.

After a series of late-night weekend meetings, legislative opponents stripped away a proposal to subsidize the $2.1 billion project by diverting money from the state fiscal disparities pool to help create a $370 million subsidy package.

Opponents had argued that using fiscal disparities money would put many cities across Minnesota in the position of losing state money in order to help finance the mall's 5.6 million-square-foot expansion.

The new approach, part of a huge tax bill tentatively set to go to the House floor late Monday, still amounts to a hefty public subsidy for a project that would include hotels, offices, stores, a water park and an 8,000-space parking ramp.

As the Legislature began its final week and pressure to OK the project grew, mall officials said its one-of-a-kind economic bonanza and promise of 14,000 jobs outweighed concerns about any public subsidy.

But narrowing the public subsidy burden to Bloomington -- rather than spreading it across the region and state -- led to conflicting reactions as some officials predicted the project would now be approved and others struggled to grasp what it would mean to those eating and shopping in the Twin Cities' largest suburb.

"I don't think that's going to sell well in Bloomington," City Council Member Vern Wilcox said of the revised proposal. "I think it's going to be hard to come back to our people, our taxpayers, and say you guys are going to assume the risk, you're going to bear the expense but the benefits go to the state."

Concerns from mall, city

Under the new proposal, Bloomington would be allowed to impose an admissions and recreation tax and a food and beverage tax in a special taxing district that could include part or all of the city. The plan would allow state revenue bonds to be issued for the project, to be repaid from the city's new revenues.

In another noteworthy change, the state finance commissioner would sign a development agreement with the city and the mall, be able to inspect the mall's financial records, and also determine whether the project met a so-called "but-for" test, meaning the project could not proceed without a public subsidy.

"I've been saying for a long time, no one has required these guys to open the books. So this makes you open the books," said Rep. Ann Lenczewski, the House Taxes Committee chair who represents Bloomington but has opposed public subsidies for the project.

"It's a way tighter, harder, more accountable process," she said of the new proposal, but, "I still don't think it's government's role."

While the new approach may clear the way for House and Senate approval - and, many believe, may also gain Gov. Tim Pawlenty's key support - it was unclear Monday whether the mall and the city would back the revised public subsidy approach.

For much of the past month mall officials, backed by the local construction lobby, have held large rallies at the State Capitol and gained endorsements from key legislators as they touted the project's promise of creating thousands of jobs at a time when the Minnesota economy is stagnant.

"We are still in the process of evaluating the language, but we do have some initial concerns," Dan Jasper, a mall spokesman, said in a statement. The mall, he said, would work with legislators "to do everything possible to move the project forward."

Bloomington's city manager, Mark Bernhardson, said the revisions would put the financial burden on "selected Bloomington businesses" but said city officials were still analyzing the impact. While he said the city had given legislators "a list of possible public financing" options, Bernhardson said the changes "were not ones we had provided."

Brian McClung, a spokesman for the governor, said Monday that "this language is relatively new and we are still reviewing it."

The rejected plan

Though the mall had for more than a year pushed a plan to divert money from the state fiscal disparities pool, the proposal had drawn a wide range of criticism. Since the mid-1970s, fiscal disparities has been a financing tool through which 40 percent of the growth in commercial-industrial tax base in the Twin Cities metro area is shared among cities in an attempt balance "have" and "have-not" cities in terms of tax base.

But legislative analysts, in an attempt to show the impact of the mall's plan, released studies showing that the proposal would have a financial ripple effect that would cost many cities across Minnesota. For Minneapolis, according to state forecasts, the loss would have been $284,862 annually once the project is fully built. For St. Louis Park, the loss would have been $19,934 a year. Even for Oronoco, a city with just two full-time employees and less than a thousand residents in southern Minnesota, the loss from the mall's plan would be $261 annually.

Mall officials argued that the studies were flawed because they did not take into account the large amounts of state revenue the project would produce.

Mike Kaszuba • 612-673-4388