At nearly half a billion dollars, water park is just the beginning of Mall of America’s transformation

The Mall of America could break ground as soon as next year on a massive indoor water park, a long-awaited amenity that executives hope will inject new life into the Bloomington attraction amid the decline of brick-and-mortar retail.

But the “Mystery Cove” water park is only the beginning of the multimillion-dollar effort to transform Minnesota’s most famous mall into an entertainment hub. Part of the financing plan allows the first $100 million in water park profits to pay for additional projects, and leaders already have ideas — from tournament space for youth athletes to an exhibit hall.

Mall executives have sought for years to build out the retail behemoth. They finally got their wish, thanks in part to a complicated financing arrangement that lets Bloomington pump mall property taxes toward construction of the $432 million water park.

Some experts say that approach reflects the special treatment the mall has received from legislators and local governments over the years. But Bloomington officials and mall executives contend that a redeveloped South Loop, replete with a water park and other attractions, will be a boon for the entire region, generating visitors and tax revenue.

“Mystery Cove” is set to open in 2029, and it could be at least 10 years before that project turns a nine-figure profit that could fund additional development. But the mall’s success so far — Bloomington recently approved the tax subsidy key to financing the water park — reveals how deeply city and mall leaders are betting on the amenity’s next era.

“It’s exactly what we’re trying to do in the next phase of the mall: uses other than retail,” said Kurt Hagen, the vice president of development for mall owner Triple Five Group. “Everything that you will see in phase two will be entertainment, sports focused.”

The Mall of America has relied on subsidies from the start.

Nearly 40 years later, officials are looking to a $160 million subsidy to partly fund Mystery Cove, which renderings show will feature a winding lazy river and tangle of waterslides.

While the water park has received the bulk of attention as the Mall of America seeks to expand, a less immediate aspect of the project is no less significant: the plan to funnel some water park profits toward future development. At a September meeting, Hagen ticked off a list of possible projects, including an amateur sports complex, exhibit hall and conference space.

“We’ve been talking about those about as long as we’ve been talking about the water park, but we’ve never had a funding source to move them forward,” he said.

In an interview, Hagen made it clear that a conference center akin to the large convention spaces in Minneapolis and St. Paul isn’t on the table. (The mall’s original plans included a massive convention center; it was scrapped after Minneapolis officials protested, fearful the project would compete with a soon-to-be-constructed convention center downtown.)

Hagen said officials are more keen on building a structure that could host youth sports competitions, with out-of-state athletes and families ideally spending time at the Mall of America.

Hagen emphasized that these ideas are far from final. And he added that youth sports facilities typically are publicly funded, meaning Bloomington would have to identify a source, such as lodging taxes, to help pay for the project the city would likely run. (Asked if that possible source would be in addition to water park profits, a Mall of America spokeswoman said officials can’t specify funding sources for projects that haven’t been identified.)

“To date, there is no identified public funding source,” Hagen said. “So it’s not going anywhere other than, ‘wouldn’t that be a great idea?’”

Officials are touting the benefits of Mystery Cove — one estimate states the water park could draw 700,000 annual visitors — after working for years to find a way to pay for it.

The current approach calls for funding the water park through a combination of money generated from mall property taxes, private loans and a personal guarantee from the Canadian family who built the retail giant over three decades ago.

A notable part of the plan is the $160 million slice of mall property taxes that Bloomington intends to funnel toward the mall’s construction. The city has been able to make use of that approach thanks to the Minnesota Legislature’s controversial 2013 decision to exempt the mall from paying into a regional tax-sharing pool until 2034. That allowed mall taxes that would have been spread to other cities to subsidize the water park instead.

But Bob DeBoer, a research director at the Minnesota Center for Fiscal Excellence who has studied the tax-sharing pool, called the mall’s use of that program “perverse.”