Last update: May 02, 2006 – 10:23 PM
Megamall asking for megamillions
The Mall of America says it may have to scale back its expansion plans if it doesn't get $200 million in new, publicly financed subsidies.
Chris Serres, Star Tribune
Shoppers have been expecting an expansion of the Mall of America for years. Now, they finally got the bill for it.
Never known for thinking small, developers of the Bloomington megamall are asking state legislators for about $200 million in public financing to help fund the facility's $1.4 billion expansion. This is on top of $108 million the mall's developers have received in tax breaks since the shopping center opened in 1992.
The mall's developers argue that, without the subsidies, they will have to dramatically scale back expansion plans that would more than double the size of the existing mall, already the nation's largest. Preliminary plans call for an additional 5.6 million square feet, which would include a 6,000-seat performing arts center, four hotels, an ice rink and a museum.
However, without the tax breaks, the expansion might include only two hotels and a "small retail concourse," said Bill Griffith, a lawyer representing the Mall of America. "If we don't get this, then we may be forced to go back to the drawing board."
The mall's developers, Simon Property Group Inc. and Triple Five Group Ltd., are lobbying state legislators to approve a bill that would keep Phase I and Phase II of the mall off the city's property tax rolls until 2035 -- about 20 years longer than planned. That could cost Bloomington $200 million in property tax revenue, or about $2,200 per resident.
Griffith said the extension is needed because "unforeseen events," such as the expansion of Minneapolis-St. Paul International Airport, delayed the mall's expansion and prevented developers from taking full advantage of the original tax break it negotiated in 1988. "We're asking state legislators to give us back the lost years," he said.
But some state legislators say the mall has already received enough public money, and they question the assertion that the second phase can't proceed as planned without the 20-year extension.
"There isn't a developer in this state that wouldn't love to get their hands on that property," said John Marty, the DFL state senator from Roseville. "They didn't need a subsidy in 1988, and they don't need one now." The original tax break negotiated between Bloomington and the mall in 1988 centered on tax-increment financing, a commonly used but sometimes controversial financing tool, which is a loan on a project that is paid back through increased property taxes on the newly improved property.
The original intention of tax-increment financing was to encourage new development in blighted areas by having taxpayers pick up part of the cost. But in recent years, it has been used to stimulate retail development in valuable pieces of real estate. Minneapolis devoted millions in subsidies to build a Target store downtown.
Proponents of extending the original tax breaks for the Mall of America argue that the tax benefits of Phase II will far outweigh the subsidies. Bloomington officials estimate that the project will generate at least $17 million a year in new property-tax revenue, or $340 million over 20 years. The estimate doesn't include sales tax revenue or spillover benefits from additional development in the area.
Since it opened, the mall has generated more than $600 million in state and local tax revenue, according to Bloomington city officials. That's nearly six times the subsidies developers received under the original agreement.
Even so, Rep. Ann Lenczewski, a DFL member from Bloomington, questioned why the mall was seeking a 20-year extension for both phases. She said a single extension of 10 to 15 years might be appropriate, but only for the expansion.
She said city and state officials should be willing to consider a smaller Phase II, if it means less public money will be put at risk. "It wouldn't be the end of the world if this turned out to be 2.2 million square feet instead of 5.6 million," she said. "Every developer thinks his project is urgent, and it has to happen now, or it's a crisis. I'm not compelled by that argument."