FAQs regarding proposed water park project in South Loop
- Property taxpayers in Bloomington are not put at risk with this project.
- The City will not own, operate or finance the project at the time of construction. Ownership would transfer to the City after 30 years, or sooner if the debt is paid off earlier.
- Estimates of benefit to the community include an additional $1M in admissions taxes, as well as an incremental increase in lodging tax revenue.
- Mall of America is not enriched in this project structure. The waterpark will be owned by a non-profit entity not related to Triple 5. Excess revenues flow to pay off the project debt, not to the nonprofit ownership nor the waterpark manager.
- Poor performance by the waterpark (lower attendance than projected) would not create financial exposure for the City. The financial performance is back-stopped by ARBLs (alternative revenues by legislation; admissions, food/beverage, lodging and sales taxes that get turned on) that are limited to Mall of America property and would be paid by MOA visitors.
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What is the water park project? (Background)
The water park project in South Loop would be one of the largest indoor water parks in North America with a building footprint of 250,000 sf and would cost $230-250 million. The West Edmonton Mall (WEM) in Canada (which the MOA is somewhat modeled after and is also owned by Triple 5) has a 215,000 sf integrated/attached water park that brings in over 500,000 users annually. The WEM water park adds to the vibrancy and resiliency of that large mall. Not only does the WEM water park have slides and other rides, its large wave pool hosts evening beach themed gatherings and surfing leagues, allowing for greater utilization of the venue.
The proposed South Loop water park would be open to the public, and would not be developed specifically along with a hotel. The water park would create room night demand for hotels. Any relationship between the water park and hotels would treat all hotels the same - meaning that if the water park provides discounted tickets to hotels, all hotels would be offered the same discounted ticket price.
Why does MOA want a water park in South Loop near the mall?
Triple 5 (owner of MOA) was a pioneer in building large retail malls which were also diversified with entertainment and restaurants. Retail continues to change in the age of Amazon, and new projects that Triple 5 is building have about a 50% non-retail component. MOA has performed much better than most bricks and mortar retail developments due in part to its entertainment and tourism focus, but continuing to diversify the MOA project with new traffic generators (e.g., attached hotels and office as well as more entertainment opportunities) is a top priority for Triple 5. MOA is about 70% retail today. Triple 5 has been interested in having a water park as part of the MOA project for years. It’s proven to be an asset to the West Edmonton Mall, helping that mall stay competitive. Triple 5 is building a water park as part of the American Dream New Jersey project (a large retail and entertainment project), which may include the largest indoor water park in North America, unless the water park at MOA is built to exceed it. (The largest indoor water park in the world is in Germany in a former zeppelin hangar which is 710,000 sf.)
What would be the City’s and Port’s involvement, and why?
The City, Port and Triple 5 have analyzed numerous financing models, ranging from traditional private financing, to a fully publicly financed model. Private financing interest rates are high enough to make the project unfeasible. The model being studied now is one where a non-profit owns the water park, and the non-profit borrows for the construction. The non-profit can borrow using lower interest rates, which make the project feasible. The City and Port would not be the owner of the water park initially, nor would the City or Port be borrowing for the construction or pledging property taxes to the proposed debt. The City would be pledging to impose certain taxes that it has the authority to levy and collect, but it would only levy and collect those taxes if the water park does not perform as projected. These taxes are comprised of admissions, food/beverage, lodging, and sales taxes – all of which would only be ‘turned on’ at Mall of America if the project does not perform as projected. The City would become owner of the water park after the debt used to finance the construction of the water park is paid off. The Port would finance and build the shared public infrastructure for the project.
What money would be used to finance the water park?
Based on the proposed nonprofit financing model, the water park is projected to support itself with revenues from tickets and admissions. If those revenues do not support operations, maintenance and debt payments - sales and use taxes would be enacted at MOA to pay for any shortfalls. No Bloomington residents’ property taxes would be at risk for the project.
Why would the City be interested in helping develop this water park?
Mall of America is about 10% of the City’s tax base. About 30-40% of the City’s hotel room nights are attributed to MOA, and the hotels in Bloomington make up about 7.5% percent of the City’s property tax base. The $58.4 million general fund levy in 2018 would be $9 million higher without existing lodging and admissions taxes that go to the General Fund (holding City services constant). Continued health of MOA is important to the reputation of the City as well as directly impacting the amount the City needs to levy in property taxes to operate. The City could offer a discount to Bloomington residents to the water park; the impact of which would have to be weighed against the actual revenues. The water park will also add a new attraction to the Minneapolis-St Paul region.
When would construction start?
The City continues to analyze the feasibility of the water park project. If the project continues on the current schedule, construction could start as early as late 2019, and be complete in 2021. It is important to note that like any large development project, the water park project is still in a phase where construction is not guaranteed and there are many factors which could cause the project to not move forward.
Who owns the land where the project would be built?
Triple 5 owns the land where the project would be built. In the model currently being analyzed, the City would lease the land from Triple 5 at market rates for 50 years.
What formal action have the City Council and Port Authority taken related to the water park project?
On March 6, 2018, the City Council and Port Authority directed staff to continue analyzing the project.
Is this nonprofit ownership structure a way for Triple 5 (owners of the MOA) to profit from the water park and avoid paying taxes?
The nonprofit itself cannot be a T5 entity - it must be a true third party. The nonprofit entity has not been selected yet. The nonprofit does get an annual fee, but that is projected to be below $200,000 per year for their work managing the board structure needed for the project and expenses. In this project structure, Triple 5 is prohibited from receiving revenues from the water park through a number of nonprofit, IRS, SEC, and tax exempt bonding rules, except for receiving a management fee and a lease payment for the land – both which need to be no more and no less than normal industry/market rates.
Are city property taxes going to go up or be at risk for the water park?
No city property taxes are being risked for the water park. If revenues from the water park are not sufficient to cover debt and operations, additional taxes would be imposed only at MOA (not citywide) to cover any shortfalls. These taxes imposed at MOA include admissions, food/beverage, lodging and sales taxes. The city would become the owner of the water park only after the debt (aka mortgage) is paid off; without the debt service payment (i.e., mortgage payment) the city stands to benefit from those surplus revenues.
What are the next steps for the City related to the waterpark?
On November 1, 2018, the City Council and Port Authority directed staff to continue performing due diligence on the waterpark. During the November 1 meeting, there was a discussion of having another joint meeting of the Council and Port in late November; the late November meeting has been postponed to allow staff to continue to perform due diligence. A date for the next joint meeting has not been set.