Will using blue dye kill or negatively affect Water Lilies? (I don't want it too)

I'm going to suggest that dye will have no effect on emergent plants like water lilies. The dye blocks light penetration into the water, and hence impedes the ability of submerged plants like FA to use it, which limits their growth. With leaves above water, there would be no effect. The dye is otherwise inert.

That was my thought but also assume not to use it until the pads have surfaced.

Not sure tubers with no foliage would grow, but that probably depends on the water depth they're planted at. Potted or planted lilies with foliage should do just fine. They live happily here in my dyed hatchery pond.