Wednesday, May 14, 2008

Where we can agree 

Two quotes about the requested state subsidy of the Mall of America:
1. Mall of America executives, planning a $2 billion expansion of the mall, are continuing to press for nearly $400 million in state subsidies. Mall officials warn that the mall has "no chance of being built" if the subsidies are not given. If they have such a crummy business plan, maybe they just shouldn't bother.

2. What are the folks who own the Mall of America going to do if they don�t get their state subsidy � build Phase II in Iowa?

Source 1, 2. Interesting.

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Thursday, April 12, 2007

$22k a stall 

And the owners of Mall of America would like taxpayers to pay for parking.

That detail surfaced Wednesday as the House Taxes Committee held a wide-ranging hearing into the costs and benefits of tax breaks sought by the Bloomington mall and an Eagan publishing firm.

The mall and the Thomson West company say they need breaks to proceed with large expansion plans that promise long-term tax revenue and jobs. But one economist challenged the notion that tax subsidies are needed to make the expansions possible.

"If that mall expansion is a good private investment, it will get done," Arthur Rolnick, senior vice president and director of research at the Federal Reserve Bank of Minneapolis, told legislators. "If it's not, why exactly would we subsidize it?"

The argument for the Thomson West expansion that Art makes is quite sound: You get into a bidding war with other states when you start using tax breaks to attract or keep firms in your state. The Minneapolis Fed has written several papers on this collected here. And yet the Minnesota Senate has already passed these tax breaks and the House might follow. As I argued before, the idea that more out-of-state visitors would come to a larger MOA and generate enough additional sales tax revenue to offset this is ludicrous. And the Mall, unlike Thomson, can't move.

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Friday, March 02, 2007

MOA handouts 

I had completely missed Captain Ed's shout-out for help on the Mall of America subsidy being pitched by its owners to the state Legislature. The owners are asking the state to build a $180 million parking structure plus another $20 million in infrastructure investments. I became aware of it when Stephen Spruiell at National Review called for comments last night, which he published this morning. I said:
King Banaian, chairman of the St. Cloud State University economics department, is skeptical. �Let�s think about this: Mall of America is huge. So, we�re going to make it huger, and somehow more people are going to come to Mall of America?� Banaian tells NRO. �The marginal gain in [sales tax] revenues is likely to be pretty small.�

Banaian says the mall�s request is easy to understand when you look at the context: �There�s a small surplus in the budget right now,� he says. �Everyone wants to ask about their favorite project.�
(I can hear the screams from the Legislature now -- THERE'S NO SURPLUS!!!! WE HAVE TO FACTOR INFLATION!!!! STOP ASKING FOR MONEY!!!! -- but the fact remains that the inflation dodge is just a way to protect existing tax consumers from encroachments by outsiders to the trough.)

I don't believe there's a bill in the Legislature for this yet, though the AP reports that Senate Tax Committee chair Tom Bakk plans to introduce it. "Bakk said the project would mean 10 million to 15 million man hours of construction work..." I suggested to Spruiell that if Sen Bakk wants to help out the construction industry, the workers might prefer $200 million in cash handouts plus the 10-15 million hours to do something else rather than $260-$390 million in wages (before taxes) and none of those hours. The additional jobs generated in the retail sector pay on average $320/wk. for 30 hours of work -- if there are health benefits in there, I'd be pleasantly surprised. (Source for wage/workweek data.)

It's interesting -- and I think pretty good reporting -- that the MOA handout was contrasted to the handout being sought by Thomson West. Those are better paying jobs, the claim is made, and that is indeed true. But if the jobs are worth that much, why should taxpayers subsidize the building in which the employees earn it?

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