MOA water park one step closer, but the economy is a splash of cold water

The Mall of America is set to become the home of an oversized water park decades after its owners found a way to borrow the money they need to build it.

But economic conditions are creating new challenges for the project, recently estimated at $430 million, and time is running out. A state provision temporarily giving cities more flexibility in how they spend tax increase funding (TIF) dollars — a key part of water park funding plans — is set to expire at the end of the year. year.

“Our hope is to place financing this summer and begin construction this fall, but current challenges in the financing and construction market may delay this project until conditions improve,” the Mall said. of America in a statement.

The St. Paul Port Authority could issue up to $445 million in taxable revenue bonds, which will only be sold to qualified buyers who could earn interest of up to 12%.

Investors — not the city of St. Paul or Bloomington ratepayers — will bear the risk associated with the bonds, which will be supported by the water park’s future revenues and assets. If the water park fails to generate profits, the bondholders will lose.

Acting Port Authority Chairman Todd Hurley said the project is likely the authority’s largest bond issue to date. The agency has agreed to serve as a conduit because the project aligns with its economic development goals for the region, he said.

The 360,000-square-foot attraction, dubbed Mystery Cove Water Park, would feature waterslides, a 1,400-foot lazy river and a wave pool with an indoor beach. A 1,600-space parking ramp would be built at the site, which is owned by Triple Five, the company that owns the Mall of America. There would also be space for a hotel and future commercial expansion.

Although Bloomington and its own Port Authority have the power to issue bonds, the city and the agency wanted to maintain a more traditional role with a focus on tax increment funding for the project, said Schane Rudlang, administrator of Bloomington Port Authority. The TIF is a tool that cities and other public authorities use to pay for development in the public interest by capturing the additional increases in property tax that these developments create.

Triple Five has been interested in building the Mall of America water park since the 1980s. An economic impact study commissioned in 2018 estimated that the project would attract more than 900,000 visitors and generate $15 million in tax revenue each year. .

Around this time, Triple Five worked with the Bloomington Port Authority and the City Council to design a unique and complex not-for-profit model to fund, build and own the water park. But the COVID-19 pandemic put the project on hold.

A new funding avenue opened up last year, when the state legislature granted cities special permission to use TIF to spur private development and create jobs, a provision aimed at spurring recovery economy as a result of the pandemic. By law, the tax increases must be mandatory by the end of this year and used for projects that begin construction before 2025.

Bloomington and its Port Authority voted in March to create a TIF district that will generate $105 million for water park development, most of which will go to roads, infrastructure and parking.

Uncertainty remains as development costs continue to rise. Between inflation, labor and supply shortages, and rising interest rates, the estimated costs the Mall of America expects to incur have risen to $325 million from about $260 million. million dollars before the pandemic.

Lisa Washburn, managing director of Municipal Market Analytics who runs the Massachusetts-based company’s consulting division, pointed out that the water park’s pre-pandemic financing plans secured debt by pledging to raise sales taxes at the Mall of America if park revenue declines. short. That plan was scuttled “as the costs and risks of the project increase,” she said.

“In the previous iteration of the transaction, the nominal amount of the bonds was lower, the issue was going to be tax-free, the rate environment was more favorable, COVID had not emerged, inflation did not was not a significant factor and the risk of recession was not getting worse,” she said. “I wonder — and I’m skeptical — how all of this comes out of the feasibility report.

A Mall of America statement said the new financing strategy allows developers to avoid the restrictions associated with tax-exempt ownership and financing. Triple Five and underwriting firm Barclays believe that “the municipal bond market is deeper than the corporate bond market, which would lead to lower borrowing costs,” the statement said.

He added that the project leaders did not intend to pressure the legislature to change its deadline and believed “there is enough time to meet the challenges.”

Rudlang of the Port Authority of Bloomington was equally optimistic.

“We are working hard on it,” he said.

Melissa C. Keyes