A Louisiana nonprofit that specializes in “lessening the burdens of government” will help Bloomington build one of the nation’s largest water parks beside the Mall of America.
City leaders voted this week to hire Provident Resources Group to play a crucial role in the unusual borrowing arrangement they are pursuing for the proposed $250 million park, which would occupy nearly six acres north of the mall. Under the plan, Provident would borrow money to build the park and then own it — reducing the financial risk for the city.
The mall proposed the water park, but its representatives have said the facility would not generate enough money to cover private interest rates. City leaders came up with an alternative plan that aims to lower borrowing costs without risking the city’s credit rating.
The public will have some financial risk, however. In the event the park doesn’t earn enough to pay its debt, the city will take advantage of a special state law allowing it to increase sales taxes at the Mall of America to cover the shortfall. Tax dollars will also pay about $50 million for a parking ramp and skyway, as well as up to $8 million to prepare the site.
Provident was one of five nonprofit organizations that sought to be a part of the deal. The organization has helped build student housing at universities across the country and has also been involved in senior and affordable housing projects. One of its tax-exempt services is to “lessen the burden of government.” This year it partnered with local authorities to build two convention center hotels in Texas.
It has financed about $4 billion altogether for its other projects, according to a letter to the city. Provident CEO Steve Hicks said the water park will be the nonprofit’s first entertainment property.
“It was an exciting project based upon what we saw that had been developed by the Mall of America team,” Hicks said.
For its services, Provident said it would charge a $250,000 one-time fee and $175,000 per year, with a 3% increase each year.
Next month Provident and the city will select an underwriter that will sell the tax-exempt bonds. Authorities in public financing have said the plan stretches the intended purpose of tax-exempt bonds and reflects the growing use of such bonds for projects closely associated with for-profit entities.
Hicks said many state and local governments across the country are strained, lacking the bonding capacity to finance new projects they would like to build.
“So whenever they can have a project that is going to benefit their community by maintaining or actually increasing sales-tax collections, additional property taxes … that is serving local government,” Hicks said. “Which is what tax-exempt financing was meant to be.”
The water park will be managed by an affiliate of Triple Five Group, which owns the mall. Park revenue will pay the mall market-rate rent for the use of its land, possibly more than $2 million a year. The city says the arrangement is necessary, rather than the mall donating the land, because of rules restricting private involvement in tax-exempt bonding projects.
Hicks said the project’s ties to a for-profit company pose no risk to his organization’s charitable status because of the support from the city. He highlighted that Provident is closely aligned with another for-profit entity, Marriot, in the construction of a new convention center hotel in Irving, Texas.
“But the true beneficiary is the city of Irving and the Irving Convention and Visitors Bureau,” Hicks said.
Bloomington’s City Council and port authority passed resolutions Monday night entering into negotiations with Provident for the project “in order to lessen the burdens of the City and the Port Authority.” Port Authority Commissioner Robert Lunz cast the lone no vote but declined to comment in an e-mail Wednesday.
Provident intends to form a separate nonprofit entity in Minnesota to handle the project. In a letter to the city, Hicks proposed that its five-member board would include one member from both the City Council and Port Authority.
The city, meanwhile, is doing other work to shore up the water park deal. In April it committed $7.5 million to partner with the mall to fully develop the park’s design, which would be repaid if the project moves forward. And it has hired Imagine Resorts and Hotels to review the projected expenses for the facility.
Three rating agencies have examined how the proposed financing arrangement might affect the city’s AAA credit rating. Two said it would not affect the rating, while Fitch Ratings said it would be lowered slightly because of the commitment of the sales taxes.