Bloomington leaders voted Wednesday night to commit $7.5 million to push ahead with a controversial — and complex — financial plan to build one of the country’s largest water parks beside the Mall of America.
The proposed $250 million facility would be built on a surface parking lot north of the mall. Renderings show people sunbathing beneath a glass roof, alongside wading ponds, slides, a lazy river and a waterfall.
The mall proposed the water park, but its owners say the facility would not generate enough money to cover private interest rates. As a result, the city developed an alternative plan with little precedent in the state — in hopes of lowering borrowing costs while shielding the city’s credit rating.
Representatives for Triple Five, which owns the mall, told the City Council and Bloomington Port Authority Wednesday night that the water park would help the Mall of America remain successful amid retail closures sweeping the country.
“The risk of not proceeding is what’s unknown. Where do you see mall sales going, mall revenues going if we don’t transform the Mall of America?” asked Kurt Hagen, senior vice president of development for Triple Five.
City leaders voted unanimously to partner with the mall on a development contract to fully design the facility, which would precede final decisions about the proposal. Bloomington will pay 75% of that $10 million cost using liquor and hotel sales taxes generated in the city, which would be repaid if the water park is ultimately built. Triple Five is to pay the remainder.
Tax dollars could pay another $50 million in the future for a parking ramp and a skyway, as well as up to $8 million to help prepare the site, according to city estimates. And the plan hinges on raising sales taxes at the Mall of America if the park fails to generate enough money — an option authorized by the Legislature in 2008.
“There really haven’t been any red lights that have popped up as this thing has been looked at and studied,” said Bloomington Mayor Gene Winstead.
Authorities in public financing say the plan stretches the intended purpose of tax-exempt bonds, and reflects their growing use for developments closely associated with for-profit companies.
Under the arrangement, the city would draft a nonprofit organization whose charitable mission is “lessening the burdens of government” to borrow money for the project — possibly from an out-of-state issuer of tax-exempt bonds — and then own the water park.
“We haven’t seen it in Minnesota, but it is something that … has been used in a number of places,” said Port Authority President Bob Erickson.
The water park would be built on land owned by the Mall of America, which would then be owed market-rate rent paid by water park revenue. The city says this is necessary because of rules restricting private involvement in projects financed by this type of bond.
Three rating agencies reviewed how the plan might affect the city’s AAA credit rating. Moody’s and Standard & Poor’s said it would not affect the rating. Fitch Ratings said the city’s rating would be reduced slightly because its commitment of sales taxes ties the debt closely to the city’s finances.
Several city leaders noted that the $7.5 million comes from a fund that must be used for South Loop development projects.
“It is a calculated risk,” said City Council Member Tim Busse. “But it’s a wise investment of the funds that are there for that very reason.”