Mall of America owner raps public subsidy plan

Mall of America
The largest mall in the U.S, with more than 40 million visitors a year, the Mall of America has become one of the biggest tourist attractions in the country. It has proposed a $2.1 billion expansion, but says it may delay the project if it can not secure state-authorized subsidies.
Photo by TIMO GANS/AFP/Getty Images

If the Triple Five corporation has its way, the Mall of America will get a $2.1 billion supersizing in coming months. The developers of the giant retail and entertainment complex want to more than double its size, with a 5 million square foot addition where the Met Center used to stand.

To do it, though, they say they'll have to add new parking and other amenities. And the mall's owners think the public should chip in.

"Because it simply cannot be financed with out it," said Kurt Hagen, a vice president with the company that owns the Mall.

"We're looking for the same public-private ratio that we had in phase I," he said. "Not a penny more. Not a penny less It's 17 percent of the total project cost. We're trying to take that package to the lending community, and it's a very, very tough lending community, as I'm sure you're all aware. And to do that, we need to bring that public piece with us."

The state has been willing to entertain the idea for years. The project could mean as many as 14,000 construction jobs in one of the leanest times in memory for laborers. The housing crunch is already helping push up Minnesota's unemployment rate, now nearing 5 percent.

The Canadian-based Ghermezian family, which owns Triple 5 and first built the mall, also says the whole state will benefit from the increased sales taxes and tourism the expansion will bring. Half of the existing mall's sales come from out of state.

But the idea has run into a stiff headwind at the Capitol.

It's not so much giving money to one of the most lucrative commercial projects in the country. It's where the money would come from.

A proposal approved this week would redirect money Bloomington gives to a regional property tax pool to help pay for the project. The developers say about 22 percent of the $370 million subsidy would come from what's called the "fiscal disparities pool".

Fiscal disparities is a state program started 35 years ago to help different parts of the Twin Cities from raiding each other's tax base. It takes a portion of the growth in business property taxes and redistributes it through the region.

That helps St. Paul, for instance, stay afloat without having to lure new business in from the suburbs. The suburbs, in turn, don't have a crumbling urban center in their back yard.

Taking money out of that pool to build a parking ramp at the Mall of America would set a dangerous precedent, according to Bob DeBoer, director of policy development for the Citizen's League, a St. Paul-based think tank.

He said businesses elsewhere, even other shopping malls, would have to make up for the money that went to the mall expansion.

"What you're doing from a policy perspective, is perverse," he said. "You're making competitors pay for their competition. It's always a danger, when you subsidize something, that you could be devaluing what you already have."

But the other option on the table at the Legislature faces opposition, as well.

The bill would allow the city of Bloomington to enact local levies, like food and drink taxes, to help pay off the mortgage on the Mall expansion. City officials say the plan approved by lawmakers this week puts the burden unfairly on Bloomington.

But key lawmakers, like Rep. Ann Lenczewski, DFL-Bloomington, aren't budging. DFL house speaker Margaret Anderson Kelliher said today that lawmakers don't want to set the precedent of diverting property tax money from the fiscal disparities pool into public subsidies.

"There are some small adjustments that can be made, but this is the package that can pass the Legislature," she said.

Negotiations on the state budget, which might include changes to the mall package, continued Wednesday evening in the governor's office.