New Jersey has endured a record eight credit downgrades since Governor Chris Christie... Read More
American Dream, the vacant East Rutherford megamall that Christie once called “the ugliest damn building in New Jersey, and maybe America,” hasn’t signed investors almost a year after his administration agreed to public financing and a $390 million tax break, the biggest of its kind in state history.
The Republican governor had planned for the $3.8 billion mall to open in 2013. Instead, it will be at least two years before the first of an expected 35,000 employees clock in. The jobs will come too late to offset this year’s loss of as many as 10,000 positions in
a wave of Atlantic City casino closings, including Revel, which closed this month. Without those projects, the state’s recovery continues to trail the nation’s.
“They need job growth, they need economic growth, revenue growth and anything that can help in that direction,” said Dan Solender, who manages about $15.5 billion of municipal bonds at Lord Abbett & Co. in Jersey City. “The state is well in the investment-grade range -- there’s no fear of any kind of default or anything like that. But the downgrades continue. Right now there seems to be no plan in place to change that.”
Record Downgrades
New Jersey has endured a record eight credit downgrades since Christie took office in January 2010 as rating companies raise concerns about the state’s lagging recovery. While New Jersey has regained about half the jobs it lost in the last recession, neighboring New York’s employment had fully recovered by 2012.Revel, the casino project restarted with Christie’s pledge of $261 million in tax breaks, was a key piece of his plan to turn around the seaside resort and lure tourists to New Jersey amid growing gambling competition in nearby states. The casino, projected to generate $3.2 billion in taxes over 20 years, closed on Sept. 2 after twice filing for bankruptcy.
Like Revel, Christie was counting on American Dream, first called Xanadu when it was proposed more than a decade ago, to help pull New Jersey from the 18-month national recession that ended in 2009. The project included shops, restaurants, an indoor ski slope, Ferris wheel and other amusements about 10 miles (16 kilometers) west of Manhattan.
No Money
After the state approved construction in 2003, the initial developer, Mills Corp., ran out of money; another, Colony Capital LLC, pulled out after Lehman Brothers Holdings Inc., which had financed construction, filed for bankruptcy protection in September 2008.Behind chain-link fence, the mall and its multicolored facade became a decaying landmark off the New Jersey Turnpike.
In a report after Christie won the November 2009 governor’s race, his transition team called Xanadu “a failed business model.” Christie, though, announced in May 2011 that Triple Five Group, the Edmonton, Alberta-based owner of the Mall of America in Minnesota, would take over the site.
The new owners, Christie said, would change the name to American Dream and add amenities to create “a premier tourism, entertainment and retail destination for New Jersey residents and tourists from around the world.” The project, he said, would create more than 8,900 construction jobs and as many as 35,000 permanent jobs, attract 60 million annual visits and generate millions of dollars in tax revenue.
Jersey Traffic
The targeted opening in late 2013, though, passed with no construction activity as Triple Five fought a lawsuit brought by the National Football League’s Jets and Giants related to game-day traffic near their adjacent sports complex. Christie’s expectation of having parts of the mall open before the February 2014 Super Bowl at MetLife Stadium was never realized.In March, Christie announced that the teams and the mall developers had reached a confidential agreement. Triple Five signed a labor contract the following month for as many as 9,000 construction workers.
In recent weeks, tradesmen have begun replacing the facade. The developer now intends to open the mall in late 2016, according to Alan Marcus, a Triple Five spokesman employed by the Marcus Group, based in Little Falls, New Jersey.
Yet the bulk of financing is still pending for the $1.9 billion that Triple Five plans to spend. Marcus, in a Sept. 18 telephone interview, said he “couldn’t say right now” when investors might be in place.
“There are no problems or issues that would negatively impact us going forward with the financing,” Marcus said.
Financing Delays
Kevin Roberts and Michael Drewniak, spokesmen for Christie, didn’t respond to e-mailed requests for comment on the project.Though the state signed off on the bonding structure on Nov. 1 and gave a May 1 deadline for commitments, East Rutherford -- a borough of 9,000 residents operating on a $24 million annual budget -- has yet to approve issuing $524 million in redevelopment bonds tied to American Dream revenue. Though the borrowing would be designated non-recourse, meaning bondholders cannot force the locality to pay them back, borough officials are seeking insurance as extra insulation in the event of default, according to public meeting minutes.
Mayor James Cassella didn’t return phone calls to his Borough Hall office and home. Richard Allen Jr., the borough attorney, didn’t respond to a telephone message left at his law office in Rutherford.
Taxpayer Involvement
Ed Ravettine, a 57-year-old East Rutherford resident who at public meetings has criticized the borough’s financing role, said earlier incarnations of the project, before Christie’s tenure, didn’t involve local taxpayers.“I’m a supporter of something happening down there,” Ravettine, a former borough councilman, said by telephone on Sept. 19. “We don’t have to step up and finance it.”
As the U.S. in May regained all the jobs it had lost in the Great Recession, according to the Bureau of Labor Statistics, New Jersey is a laggard. The state won’t reach 4.09 million employed, its January 2008 level, until late 2018, according to the Economic Advisory Service of Rutgers University in New Brunswick.
With American Dream delayed and Revel out of business, Christie has reaped no return on the tax incentives designed to kick in after the projects opened. At $390 million for the mall and $261 million for the casino, they were the two largest of their kind ever approved by the state Economic Development Authority, agency records show.
The Christie administration doesn’t appear to have more plans for economy-boosting projects of similar size, according to James Hughes, dean of the Edward J. Bloustein School of Planning and Public Policy at Rutgers University.
“If it was Intel wanting to build a chip-making plant, then yeah, I think the state would salivate over that possibility and provide the financing,” Hughes said by telephone on Sept. 23. “But outside of something like that, I think American Dream may be the really last big one.”
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