Mall of America looks to Legislature for help subsidizing water park

The fate of Mystery Cove, a long-planned Mall of America water park featuring twisting slides and lush palm trees, rests on an unlikely source: the Minnesota Legislature.

As politicians continue to finalize a tax bill, the owners of the nation’s largest mall are counting on them to pass a version that lets Bloomington put public dollars toward a $160 million subsidy for the project.

The provision the mall hopes will make it into the bill would give the city more time to pay for the water park through tax increment financing (TIF), a method that would use property taxes the Mall of America generates to subsidize Mystery Cove.

More specifically, the provision would extend pandemic-era rules that loosened restrictions on the types of projects that cities can fund with TIF. Minnesota cities regularly use the financing method to pay for affordable housing, road improvements and pollution clean-up efforts.

A tax bill agreement posted online last week excludes the TIF extension, though a DFL spokesman said the bill isn’t final.

Some politicians contend enthusiasm has waned for pouring public money into an indoor water park. The subsidy has nearly tripled since 2019 while the planned water park has shrunk.

“We’re getting to the point where the potential public support for this is not really, I think, the best direction and the best use of these public dollars,” said Rep. Nathan Coulter, DFL-Bloomington.

A Bloomington spokeswoman declined to make Mayor Tim Busse available for an interview. Kurt Hagen, the senior vice president of development for mall owner Triple Five Group, addressed criticism of the project’s financing method in an email to the Minnesota Star Tribune.

Hagen said private money isn’t enough to cover the water park, plus its roads and utilities. The public financing approach, he added, would make possible a long-awaited project expected to generate millions in annual tax revenue and hundreds of construction jobs.

“The development of Mystery Cove will drive significant economic impact to Bloomington and the entire state of Minnesota through taxes, jobs, and tourism,” Hagen wrote, adding that “the project simply could not move forward at this time without this legislation.”

Bonnie Carlson, president of the Bloomington Convention and Visitors Bureau, said mall executives have for decades discussed building a water park inside the 5.6 million-square-foot establishment. A nearby Great Wolf Lodge is the only indoor water park in Bloomington.

Carlson called Mystery Cove unique.

“Just simply having it attached to the nation’s largest shopping and entertainment complex [makes] it easy for people to put it on their ‘things to do’ when they come on vacation,” she said.

Bloomington previously devised a complex financing plan for the amenity, with a nonprofit owning the water park and Triple Five Group owning the land. The city would devote about $50 million raised through TIF to a parking ramp and skyway, the Star Tribune reported at the time.

The pandemic disrupted those plans. Amid the health crisis, the Legislature loosened rules surrounding cities’ use of TIF to encourage development, enabling the mall to directly pump property taxes into the water park.

But those pandemic-era guidelines are set to expire at the end of 2025, and the mall has yet to break ground on Mystery Cove as construction costs tick up.

That’s why legislators are considering lengthening the window in which cities can use TIF to finance projects under the relaxed COVID-era guidelines.

A proposal in the House tax bill would allow all cities to use the approach on projects that break ground before December 2026. A similar provision in the Senate tax proposal would permit Bloomington to use TIF to subsidize projects that commence before December 2027.

Under Bloomington’s plan, profits from the water park would return to a local account reserved for improvements to the mall and nearby properties. City economic officials and construction industry representatives backed the TIF extension at an April hearing.

“We are particularly excited about this bill because of the significant impact on construction jobs that it will have in Bloomington,” Kyle Makarios, a lobbyist for the Minnesota Building & Construction Trades Council, told a room of legislators this spring.

Bloomington wasn’t the only city to endorse the TIF extension at the hearing. Leaders from St. Louis Park and Marshall, a city of 13,000 in southwestern Minnesota, said lengthening the timeline would give their cities more time to subsidize affordable housing projects.

Cities across the state most often use TIF to redevelop blighted areas, build housing for low- and moderate-income residents and support business districts, according to a recent state auditor’s report.

Hagen of Triple Five Group said $164 million in TIF has previously flowed to the mall, with the attraction generating over $150 million in taxes last year.

Coulter, the House member, acknowledged that the mall bolsters Bloomington’s property tax base and tourism industry. The water park, he added, could augment the attraction’s appeal.

But the representative, who previously served on the Bloomington City Council, said there’s a long-standing perception that the state affords the mall too much assistance, though Coulter noted that impression is at times overblown.

In 2013, the Legislature and then-Gov. Mark Dayton exempted the mall from the regional tax-sharing pool, allowing Bloomington to subsidize mall infrastructure with money that would have helped reduce property taxes elsewhere in the metro.

“I do think there is both a perception and sometimes an expectation that when the mall says ‘jump,’ folks will say, ‘how high?’” Coulter said.

Hagen disputed that characterization, contending the Mystery Cove water park will seriously bolster the local and regional economy — attracting an expected 750,000 annual guests, plus generating $9 million in yearly state and regional taxes and $3 million in annual city taxes.

And he noted that TIF rules stipulate property taxes can only fund projects within the mall’s “district,” ruling out using that revenue to support schools, social programs or other endeavors outside certain boundaries.

“If critics took the time to look at the actual impact, they’d see this isn’t a handout — it’s one of the smartest public finance decisions the state had made,” he said.

If the Legislature doesn’t pass the TIF extension, money allocated toward the Mystery Cove project will fund other infrastructure improvements in the mall’s TIF district.