Destinations

The Mall of America has ambitious plans, but it can’t pay its own way

May 06, 2013 3:43 am

Skift Take

The midwest’s biggest tourist attraction wants to get bigger, but it will do so at the cost of other businesses in the region, and that’s not making many happy.

— Jason Clampet

Free Report: The Changing Business of Extended-Stay Hotels

Aine D  / Flickr

Exterior of the Mall of America. Aine D / Flickr


A long-dormant plan to double the size of Mall of America — adding hotels, a waterpark, a performing arts center, office towers and hundreds of stores — seems to be coming back to life.

But it hinges on the Minnesota Legislature, which is being asked for up to $250 million in tax breaks to pay for the project’s parking ramps, roads and other infrastructure. The plan has drawn scant public attention so far, but it is starting to stir controversy as lawmakers move close to granting the request.

Both the House and Senate have given initial approval to tax breaks the mega-mall says it needs to jump-start a $1.5 billion expansion that has stalled since it first was unveiled in 2006. Gov. Mark Dayton supports the idea.

Mall of America already ranks as the nation’s largest mall and the Midwest’s most-visited attraction, drawing 42 million visitors a year. The expansion would add 5.6 million square feet of space and is projected to draw another 20 million visitors a year.

“If we’re successful, it will be a good thing for the city and the state and the region, so we’re hoping it gets done this year,” said Schane Rudlang, administrator of the Bloomington Port Authority, the city’s economic development agency that is working with Mall of America.

But subsidizing a thriving private business like MOA is drawing scorn, too — just as it did when the Minnesota Vikings sought taxpayer money for a new stadium. There’s also alarm about the way the MOA’s tax break would be financed.

Both the House and Senate bills would tap money from Fiscal Disparities, a formula that requires growing and affluent communities to share some of the property tax windfall from new development with slower-growing metro communities.

It’s an appealing funding source at the Legislature because the money doesn’t go through the state budget. Even Rep. Ann Lenczewski, DFL-Bloomington, who previously lashed MOA for seeking another tax break, sounded OK with this approach.

“That’s a zero on the spreadsheets around here because Fiscal Disparities is just cities’ tax base sharing between one another — it’s not coming from the state,” Lenczewski told the Pioneer Press last month.

But it worries others. In its 42-year history, opponents say Fiscal Disparities never has been used to subsidize this sort of private development, but if Mall of America opens the door, others will surely follow.

“From our perspective, it’s pretty alarming,” said Bob DeBoer, project director at the Citizens League. “Mall of America is pretty high profile, but who draws the line on who’s worthy of a subsidy?”

Commercial property owners are concerned, too. If part of the immense Mall of America is shielded from paying into the Fiscal Disparities pool, as the Senate bill proposes, building owners fear their properties will be forced to pay more.

“We are being asked to directly finance our competitors,” said Kaye Rakow, director of public policy for the National Association of Industrial and Office Properties-Minnesota. “Look at what the mall is proposing in Phase II; some of it is retail, but it’s also office buildings and hotels.”

Nevertheless, Rakow can read the political tea leaves. She knows the leadership of both parties hunger for jobs, tourism and economic development, so “it’s real likely that this is going to go through.”

Yet why does a successful billion-dollar business like Mall of America need a subsidy at all? Rudlang of the Bloomington Port Authority says it’s less about whether the area north of the current mall is redeveloped and more about the type of development.

Based on a review of the project’s financials, Rudlang believes a big-box-type of development would be feasible without a subsidy. But Bloomington doesn’t want big boxes in that prime site.

“If we want expansion in a dense urban fashion, after looking at their financial information for the proposed project, we determined the project wouldn’t proceed without subsidy,” Rudlang said. “It’s much better to build a dense development in the 494 loop that’s right next to transit … rather than have it look like the outskirts of the city.”

While MOA’s Phase II grand plan has been sitting dormant since 2006, the mega-mall has been expanding in more modest steps.

Last month, a 500-room Radisson Blu hotel opened on the mall’s south side. And preliminary work has begun on an expansion on MOA’s near north side, which will feature more stores, a medical office building and a second hotel.

But the sprawling Phase II would go far beyond those projects, pushing the mall’s footprint deep into the old Met Center space — now an extended parking lot. The new development is slated to have a second vast mall, an NHL-sized skating rink, a third and fourth hotel, a link to the existing Ikea store, offices and more.

“Phase II is designed like a lifestyle center under glass with upscale retail, hotel and entertainment options while incorporating natural elements that reflect the region, such as greenery, waterfalls and natural rock formations,” the mall’s owners, Triple Five Group, says on its website.

Triple Five is privately owned by the Ghermezian family, based in Edmonton, Alberta. Mall of America officials say that Phase II would create an even bigger draw for Minnesota.

Already, MOA boasts that half of its sales come from tourists, and those “out-of-state tourists visiting MOA spend more than $1 billion annually outside the mall — on hotel rooms, rental cars, dining out and visiting attractions.”

Bill Salisbury and Christopher Snowbeck contributed to this article.

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