The developer of the long-delayed American Dream mall and entertainment project at the former Xanadu site in the Meadowlands picked up financing approvals from two key public agencies this week. That should allow for construction to resume later this year at a complex Gov. Chris Christie once called “the ugliest damn building in America.”
If all goes right, according to the Triple Five development company’s latest plans, all work will be completed by the summer of 2018, with a grand opening occurring sometime thereafter.
At the heart of the rejuvenation of the massive project is more than $1 billion in tax-free bonds that are now slated to be sold as early as next month through the New Jersey Sports and Exposition Authority and a public-finance agency based in Wisconsin.
The state Local Finance Board voted in Trenton yesterday to allow up to an $800 million component of that financing plan that involves payment in lieu of taxes to go forward. That followed action by the NJSEA on Tuesday to authorize the full $1.15 billion financing for the project, which also includes a $350 million component backed by tax breaks on anticipated sales tax revenue from the site that’s being provided by the New Jersey Economic Development Authority to help complete construction. Triple Five is also seeking another $1.5 billion in private financing to pair with $600 million that it has already invested in the nearly three million square-foot project located on NJSEA-owned property in East Rutherford.
Added together, the combined financing that’s now set to go to market next month will total a whopping $2.7 billion.
Tony Armlin, Triple Five’s vice president of development, told the Local Finance Board that the project will generate thousands of jobs, both during construction and after it opens, and millions of dollars in tax revenue for the state. He also stressed that the financing arrangement relies on non-recourse bonds that shift the risk to investors instead of New Jersey taxpayers. But others argued that the state’s involvement in the deal provides an unnecessary boost to a private company seeking to develop one of New Jersey’s most environmentally sensitive areas at a time when the state can least afford to forgo tax revenue.
The American Dream project has a long and tortured history that goes back more than a decade, spanning the administrations of several governors and numerous developers. It was originally intended to be a high-fashion retail center with an indoor ski slope that was to complement the existing stadiums and racetrack already located in the Meadowlands sports complex. It was dubbed Xanadu by its first developers, Mills Corp. and Mack-Cali Realty Corp, and was supposed to open in 2007.
But after Mills Corp. experienced a number of problems, including having to fend off a lawsuit filed by the National Football League’s Giants and Jets, a new developer, Colony Capital, was brought in to take over the project and ramp up construction. Colony, however, suffered its own setbacks as a national recession took hold in 2007, and the project was again delayed for several years.
Triple Five came on after Christie took office in early 2010, with the Republican governor promising the vacant building’s much-maligned multicolored façade would be overhauled before it opened. He also said the grand opening would occur by the time the state hosted the Super Bowl at the sports complex in early 2014.
Instead, Triple Five has faced its own struggles generating the financing needed to resume and complete construction of the complex, leading up to this week’s new developments. The bond issue before the Local Finance Board yesterday was initially supposed to be worth $550 million, and it was to be facilitated by East Rutherford.
But East Rutherford Mayor James Cassella said yesterday that he prefers the new arrangement, which now doesn’t directly involve the borough in the bond sale but does still provide it with a portion of the payment in lieu of taxes from the developer. And he joked that yesterday was his third trip down to Trenton to appear before the Local Finance Board, an agency within the state Department of Community Affairs.
“We’re hoping this one actually works,” Cassella said.
During the meeting, Armlin cited economic projections that estimate the project will create 23,000 construction jobs and generate $50 million in tax revenue while it is being built and another 23,000 permanent jobs and $133 million in annual tax revenue once it opens.
“It’s a very important return for the overall economy of New Jersey,” Armlin said. But after the meeting ended he refused to share hard copies of those projections with reporters.
Armlin also said the $1.1 billion in tax-exempt bonds will actually be issued by the Wisconsin Public Finance Authority, an agency that Triple Five has worked with previously. The $1.5 billion in private-construction funding will be arranged by JP Morgan and Deutsche Bank, he said.
“Those two components are critical and essential for us to move forward with construction on the site,” he said.
But not everyone is sharing the same optimistic view of the project at this point, and many questions still remain unanswered. They include whether a destination anchored with retail like Triple Five’s Mall of America in Minnesota will fare well in a newer era as online shopping with next-day or even same-day deliveries has become routine. Also uncertain is whether the destination-center concept will entice the type of traffic in the competitive New York market that will be needed to make a success out of what right now remains a major eyesore.
A statement released yesterday by the conservative Americans for Prosperity organization took issue with state’s assistance, calling it a “corporate welfare giveaway.”
“If the American Dream project is a worthy investment, Triple Five should have no problem securing the financing from the private sector,” said Erica Jedynak, AFP’s state director. “They shouldn’t need a sweetheart deal from the state where they receive tax breaks and gain an unfair competitive advantage in the marketplace.”
Toni Granato, representing the New Jersey Sierra Club, spoke out against the project before the financing was approved by the Local Finance Board yesterday. She said the tax breaks being offered by the state are devoting resources that could be put to a much better use, especially with the ongoing political impasse over renewing the state Transportation Trust Fund.
“The problem with this deal is that the public will always be on the hook for this mall. We are actually losing hundreds of millions of dollars in revenue because the American Dream mall will be paying off bonds instead of taxes,” Granato said. “That means New Jersey will be losing this revenue because the mall will (use) essential government services, but they won’t be paying taxes.”