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Megamall seeks state help

ST. PAUL - Minnesota lawmakers gave the Mall of America a mixed reception Wednesday when its representatives sought state aid to expand.

"I would say my district needs more help than you do," Rep. Sandy Wollschlager, DFL-Cannon Falls, told them.

On the other hand, Rep. Dean Simpson, R-Perham, rebutted: "Any time you can bring that kind of money into the state, we should do it."

A similar Senate bill has advanced with relatively little opposition, but the House plan faces problems, especially since the Taxes Committee chairwoman is against it. "It is going to be a long stretch," Simpson said.

The mall and its host city, Bloomington, are seeking a property tax break to help fund street, sewer and other public infrastructure improvements. They also want the state to borrow $181 million to fund a new parking garage for 8,000 cars.

The megamall, the country's largest, wants to add up to 5.6 million square feet of space adjoining its existing Bloomington facility. The $1.8 billion expansion would include two hotels, a 6,000-seat performing arts center, ice skating rink, water park and mostly upscale retail stores. Bass Pro Shops is the only major retailer committed to the project.

Mall officials say the expansion is designed to attract customers who earn at least $100,000 a year.

The mall has served an average of 40 million visitors each year since it opened in 1992. It is by far the state's most popular attraction, with more than half of the money spent there coming from out of state - and, often, out of country - customers.

The House Taxes Committee heard testimony on the proposal Wednesday, but committee members probably won't make a decision about whether to support it until next week.

Mall officials said the state's general fund would receive $53.8 million annually if the expansion plan goes ahead. However, the Minnesota Revenue Department estimates the state would lose up to $13 million a year if the mall's request to exempt mall construction materials from the sales tax gains approval.

Mall attorney William Griffith said the state has received $476 million, mostly from the sales tax, since the mall opened. And the addition will not emphasize clothing sales - which are not taxed - as much as the existing facility, so state revenue should increase, he said.

"We now have a 15-year track record of returning money to the state," Griffith said.

With so many people from outside Minnesota making mall purchases, he added, much of money would not otherwise come to the state. Griffith said that is a reason the state should lend its support.

Griffith said the public investment, for infrastructure improvements, must be about 17 percent of the total project cost or the mall will not proceed with its current expansion plans. When pressed by legislators, Griffith would not say what the mall would do if the state does not help.

"Whether we build anything next is up to all of you," Griffith told committee members.

A Bloomington representative, and chairwoman of the Taxes Committee, opposes the state help mall officials request. Rep. Ann Lenczewski, a Democrat, said there is a lot of competition for the international travelers the mall wants to attract.

"There is a risk that not only Americans, but all the world, tires of the really big mall," she said.

Economist Art Rolnick of the Minneapolis Federal Reserve Bank said legislators should concentrate on lowering business taxes, not subsidizing businesses. In many cases, he said, businesses would expand without state aid.

"If that mall expansion is a good idea, why would we subsidize it?" he asked.

Rep. Morrie Lanning, R-Moorhead, said Rolnick's comment would be valid if no one else offered subsidies, but since other states and counties offer incentives, he likes the idea of helping the mall.

"We are in a competitive marketplace," Lanning said.

Taxpayers eventually will be better off if they help the mall because of the increased taxes expected for years to come, Lanning added.

Simpson said all Minnesotans would benefit from the $53.8 million the state would collect each year thanks to the addition.


However, Wollschlager said, the mall does not need state help.

"I'm just not for big tax breaks for companies that are successful," she said.

The land where the mall sits is valuable, Wollschlager added, and that should attract investment. "That's kind of it in a nutshell."

Some disagreed that the property tax breaks amount to a subsidy by other taxpayers, but Rep. Paul Marquart, DFL-Dilworth, said there is no doubt that is what happens. He is chairman of a House property taxes committee.

"When one segment of your city pays less dollars (in property taxes), another pays more," Marquart said.

Rep. Loren Solberg, DFL-Grand Rapids, could not understand why mall officials have no plans to charge for parking in a garage that would cost $22,000 to build each parking space.

"We ask kids at Itasca Community College to pay for their parking," he said, adding the mall should do the same.

Griffith said that charging for parking would hurt sales. If it were possible to charge and still be competitive, he added, the mall would not be asking for state help.

Don Davis
Don Davis has been the Forum Communications Minnesota Capitol Bureau chief since 2001, covering state government and politics for two dozen newspapers in the state. Don also blogs at Capital Chatter on Areavoices.