Roper: We have bigger regional priorities than a Mall of America water park

Bloomington politicians have a special love for the Mall of America. It is their baby, after all.

The city (with state help) marshaled a heap of subsidies to get the mall off the ground three decades ago, followed by more taxpayer dollars for expansions. Now, Bloomington leaders are preparing to pour public money into a massive Mall of America water park called “Mystery Cove.”

The mystery I’ve been trying to untangle is how the city’s primary subsidy for this chlorinated oasis has nearly tripled since 2019 to $160 million. That’s especially surprising given that the water park actually got smaller. The catch is that the city and the mall want more time to close the deal, which hinges on a provision tucked into tax bills now being debated at the Legislature.

I am not anti-water park, per se. I have actually occasionally found myself lost in the tropical renderings of this glass-roofed facility, imagining the sun warming my skin on a frigid winter day as I sip a cocktail beside a palm tree and drift off to the sound of waves lapping the faux shoreline …

I snap out of it when I consider the shrieking of children, who would be a primary audience for this water park.

But imagine if any other city in the metro area was about to shell out $160 million for a water park. It would be a scandal. Yes, the Mall of America is a significant regional attraction that brings a lot of people (and tax dollars) to Minnesota.

City spokesperson Ashley Klemer wrote in an email that the mall generates an enormous amount of tax revenue, is a destination for many Minneapolis and St. Paul hotel guests, and “needs additional experiences to attract new visitors and remain viable.”

At the same time, we also have a lot of regional priorities right now that seem more deserving of public dollars on this scale. Off the top of my head: Several stadiums are simultaneously seeking handouts from the state Legislature. And a lack of money for housing and social services is contributing to homelessness and encampments.

I welcome your views on this at eric.roper@startribune.com.

None of this water park subsidy would be possible without help from the Legislature. (Put down your margarita and put on your green accounting visor as we enter the Mystery Cove … of public financing.)

First, some background:

Cities like having businesses because commercial property generally pays more in taxes than it consumes in municipal services. Because our region has so many cities vying for those businesses, the state in the 1970s devised an innovative program for metro area cities to share a portion of their commercial and industrial tax base. This helps level out property tax burdens on the region’s homeowners.

This works well, as long as everyone plays by the same rules. But in 2013, the Legislature exempted the Mall of America from paying into this tax sharing pool until 2034. This rightly caused some controversy at the time.

Instead, those mall taxes would be funneled into a subsidy tool (tax increment financing) that cities use to aid development. That type of subsidy typically comes with very specific guardrails on how cities can use the money, to ensure it serves a public good.

That’s why, back in 2019, Bloomington’s primary $55 million subsidy of the facility was targeted to a parking ramp and a skyway.

Then, the pandemic hit. The Legislature relaxed the rules on tax increment financing until the end of 2025, to help spur development. This allowed Bloomington to pour money directly into the water park as well, which is how its subsidy ballooned to $160 million (just over a third of the project cost). The park is now smaller, but the overall price tag has grown in part due to higher construction costs.

But they still can’t seal the deal. The mall’s owners are busy trying to secure private financing. So the Legislature is now mulling proposals in the House and Senate tax bills to give cities — or Bloomington, specifically — more time to subsidize development under the relaxed rules. (Other cities are also supporting that broader change.)

I asked to interview Bloomington Mayor Tim Busse but was told by city staff that there would be no updates until the end of the legislative session.

Kurt Hagen, the vice president of development for mall owner Triple Five Group, says it is appropriate for the regional tax sharing pool to be contributing toward the Mall of America since, unlike locally subsidized projects, the mall is a statewide regional asset.

“The region gets more benefit [from the mall] than Bloomington does,” Hagen said.

If this is such an amazing project, I asked, why aren’t bankers lining up to pony up the private dollars?

He responded by clarifying that it is a good deal for the public. “There are more taxes generated than there will be profits generated,” Hagen said.

Interest rates are a major factor in the financing. The old plan involved using tax-exempt bonds backed by potential sales taxes at the mall if there was a problem paying the debt. That’s no longer the case, which contributes to a higher interest rate. Hagen said investors are also skittish given the uncertainty about tariffs (a lot of the water park structures would come from Canada).

Hagen characterizes the city’s direct investment in the water park as a loan, not a grant, since after paying lenders the park profits would spill back into local subsidy accounts. Bloomington taxpayers may like the sound of recycled subsidies benefiting the mall and adjacent properties, but it would be nice for the project to actually repay the tax sharing pool instead.

So what do we do? I’d advocate that the Legislature not extend the relaxed subsidy rules past 2025. We’re far past the pandemic, and it’s time to put the public investment guardrails back on. (They can revisit this if there is another major economic downturn.) And with half a year left on the calendar, the water park project could still happen.

If it does, I hope I can restrain my tax-policy-energy-vampire vibes as I float down the lazy river, searching for tropical zen on the tundra.