A bigger mall may have to rely on local tax increases

Mall of America visitors could end up paying extra taxes on food, drinks and merchandise to help finance an expansion of the shopping center under a deal brokered Sunday by Gov. Tim Pawlenty and legislative leaders.

It authorizes Bloomington to raise sales taxes by up to 1 percent at the mall and increase taxes on food and beverages there by as much as 3 percent. Citywide hotel taxes also could go up.

The mall reacted cautiously late Sunday to the deal. Executive vice president Maureen Bausch said it was unclear whether the arrangement would ultimately raise the money needed for the mall to finance the $2 billion expansion.

The mall issued a statement saying it was "not certain yet what the bill means for the project as proposed or the project's timing." It expressed concerns about a ban on a proposed 6,000-seat music theater.

Both the House and Senate approved the deal Sunday night as part of a massive tax bill.

The deal represents a retreat from earlier proposals that would have affected many cities across Minnesota by effectively diverting state aid from them to help build the project. But the heavy burden on Bloomington irked some of its elected officials.

Sen. Dan Larson, DFL-Bloomington, said the expansion would create thousands of jobs throughout the metropolitan region, "yet all the taxes with this bill are local."

Bloomington officials also have argued that the mall benefits the broader region and that the city should not have to shoulder the entire burden.

"My gut reaction is that the rest of the cities ... will reap the benefit of an expansion of the Mall of America but they won't have to pay the freight," said Vern Wilcox, a Bloomington City Council member. While Wilcox said he didn't know how he would vote on any of the allowed tax increases, "I'm not very enthusiastic about it."

He said the state's system of sharing the tax benefits of commercial and industrial development among cities essentially means the mall expansion helps other communities.

Wilcox also said a possible 1 percent lodging tax increase would hurt Bloomington but not adjacent communities that get business from mall visitors.

While the state would not contribute money to the expansion, the deal would extend a property-tax subsidy from Hennepin County for another three years. The tax break amounts to $21 million, part provided by Bloomington and part by the rest of Hennepin County. Larson objected to the property-tax subsidy by Bloomington residents.