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Tuesday, April 22, 2008

Watch Your Wallets


Will megamall deal usher in one for Vikings?
By MIKE KASZUBA, Star Tribune

April 22, 2008

The Mall of America’s plan to help finance its second phase could face an important legislative hearing today — and among the interested observers will be the Minnesota Vikings, who see in the proposal a possible method to build a new football stadium.

After a previous version of the plan went down last year when Gov. Tim Pawlenty vetoed a sweeping tax bill that included it, the mall’s lobbyists are back in force at the Capitol. They’re hoping to tap money that otherwise would go into a met­rowide business property tax pool and use it to help finance a $204 million parking ramp accompanying the $2 billion mall expansion. Last year alone, the mall spent $740,000 on lobbying.

Critics are rallying opposition to the plan in part by arguing that the Vikings would likely want to use the same mechanism to help build a $954 million stadium.

The Vikings acknowledge that they are watching the mall’s efforts, and team Vice President Lester Bagley said it will be “hard to explain” to owner Zygi Wilf why the mall project is moving forward while the Vikings’ stadium is not.

“Our ownership is alarmed at the lack of urgency” to bring about a new stadium, Bagley said.

“What do you think they’re thinking if [the mall’s plan] goes through?” asked House Taxes Committee Chairwoman Ann Lenczewski, DFL-Bloomington, whose panel could take up the proposal today. The Vikings, she said, are thinking, “Yeah, we got a funding source” for the stadium.

John Marty was a guest on Minnesota Matters discussing this article tonight.

'Fiscal disparities’ pool

The mall’s plan to finance the parking ramp involves the state’s “fiscal disparities” pool, a complex financial tool that dates to the early 1970s.

Under fiscal disparities, 40 percent of the growth in the commercial-industrial tax base in the metro area is shared among communities in an attempt to strike a balance between “have” and “have not” cities in terms of tax base.

Bloomington, which has a large commercial tax base, is contributing $24 million in tax base to the pool this year and will receive $9 million in tax base in return. In contrast, St. Paul is contributing $23.4 million and is getting back $45.3 million.

By any measure, fiscal disparities offers a potentially rich source of money — and one that has largely been off-limits to fund private developments. This year, the total tax base contribution to the pool is $402 million.

The state Senate has already approved a plan that would take the additional fiscal disparities money generated once the mall’s second phase is built — estimated at $4.5 million annually — and give it to the city of Bloomington rather than putting it in the pool.

The city, according to the mall, would use the money to help finance the new parking ramp . In addition, the city would boost its lodging tax to help pay for the ramp.

Not 'new ground’

Mall officials said that the money being diverted amounts to only 1 percent of the total fiscal disparities pool, and that the mall’s exemption would be no different from those granted more than 20 years ago for other projects. Moreover, mall officials said last year’s proposal has been reconfigured to satisfy many critics.

“We’re not breaking new ground here,” said Kurt Hagen, vice president for Triple Five Corp., the owners of the mall, and the company’s manager of the second phase project. “Nobody is going to pay a penny for Phase II parking” other than those paying Bloomington lodging taxes and shoppers at the mall.

Hagen said the $200,000 in fiscal disparities contributions now generated annually by the second phase site — which is currently a parking lot — would continue to go to the pool.

Without public subsidies, he said, the mall’s second phase will not be built.

The 5.6 million-square-foot project, spread across 42 acres, will create 7,000 construction jobs and during the first 20 years generate $1.1 billion in new sales taxes, according to the mall. It would include stores, hotels, offices, a dinner theater and a water park, among other things.

As for the Vikings, Hagen said he endorsed any effort that brings large amounts of tax revenue to Minnesota. “If anyone can generate those kinds of returns [as well as the mall] for the state of Minnesota and the region, bring it on,” he said.

Slow go for Vikings

For the Vikings, whose lease at the Metrodome expires in 2011, getting a warm reception at the State Capitol has been difficult. A proposal last month for a $2 million study on a new stadium was rejected by the Senate.

The Vikings said they and the National Football League are committed to providing $250 million toward a stadium, but have no clear public funding source to pay for the bulk of the project.

The Minnesota Chamber of Commerce has tried to referee complaints that others would want the mall’s fiscal disparities deal. Tom Hesse, a chamber lobbyist, said the group spoke to the Vikings as early as last year to try to discourage them from seeking the same exemption.

“We had a brief conversation with them saying we suggest other sources if they’re going to look for money,” he said of the Vikings. With the mall being a high-profile corporation, Hesse said the chamber was “trying to walk a fine line here.”

Bob DeBoer, policy director for the Citizens League, a nonprofit public policy group, said the proposal’s complexity and its relative obscurity — it encompasses 10 lines in a 202-page tax bill — puts critics and ordinary citizens at a disadvantage. He also said that because the fiscal disparities pool was never meant as a tool to subsidize private development, there is no mechanism requiring the mall (or potentially the Vikings) to show why it needs such a subsidy.

The mall’s proposal is also opposed by many Twin Cities businesses, who said the fiscal disparities plan would essentially force them to subsidize a competitor. “This would subsidize free parking at the Mall of America,” said Brad Sherman, vice president of Hubert White, the longtime downtown Minneapolis clothier.

The mall’s proposal, however, is luring many legislators with a promise of jobs and an increase in tax base.

“The state badly could use the economic stimulus,” said Sen. Tom Bakk, DFL-Cook, chairman of the Senate Taxes Committee.
Bakk, like others, downplayed the likelihood of the Vikings getting a similar deal. But given the financial firepower of the Vikings, others are not so sure. Kaye Rakow, a lobbyist for the 1,000-member Minnesota chapter of the National Association of Industrial and Office Properties, which opposes the mall’s subsidy plan, is one of them.

“When you think about what’s the next big one, well — the Vikings,” she said.

It's time to write your legislator, telling them you oppose the Mall of America's boondoggle. It looks to me that the end result is increased property taxes on others besides the Mall.

This is another reason to strongly oppose Tom Baak if/when he runs for Governor. If he got elected governor, the taxpayer would be on the hook for endless boondoggles of this sort.