This week could prove to be a make-or-break one for the long-stalled American Dream megamall in the Meadowlands, thanks to a court ruling on the developer’s controversial $1.15 billion state-assisted finance plan that could be released at any time.
Setting the stage for the high-stakes legal drama: the complicated nature of the financing plan for developer Triple Five and an appeal filed last week with the state Superior Court’s Appellate Division by a group that alleges the proposed financing would violate New Jersey public-finance law and other regulations.
If the court throws out the group’s appeal, the developer says it will be able to raise the cash it needs to resume construction later this year at the site in East Rutherford, according to the latest legal filings. That would mean thousands of new jobs for the region and millions in tax revenue as work on the planned 3-million-square-foot retail and entertainment complex would progress toward an expected 2018 opening date.
But if the court doesn’t sign off on the proposed financing, and do so by the end of this week, it could be “irretrievably lost,” wrote Martin Walrath, Triple Five’s executive vice president and chief financial officer.
“The project will not proceed and (the) economic benefits to the region will be permanently lost,” he went on to say in the court filings.
The appellate court’s pending decision on Triple Five’s financing issue is just the latest wrinkle in an ongoing saga involving a project once known as Xanadu that goes back more than a decade. The planned megamall and entertainment center adjacent to MetLife Stadium in the Meadowlands sports complex has already confounded two prior developers, and it was only revived in recent years after Gov. Chris Christie’s administration brought in Triple Five, which operates the sprawling Mall of America in Minnesota and West Edmonton Mall in Canada, and promised to deliver state assistance.
The financing deal announced earlier this summer for Triple Five involves the sale of $350 million in bonds that would be backed by future sales-tax collections through a tax incentive approved by the state Economic Development Authority. Another $800 million of the state-assisted financing plan involves bonds that would be backed by a regular payment in lieu of taxes from the developer under state redevelopment law.
The $1.15 billion in tax-exempt bonds would be sold through both the New Jersey Sports & Exposition Authority, which owns the site where the complex is located, and the Wisconsin Public Finance Authority. The bond sale would also set the stage for another $1.5 billion in private financing to help generate the cash needed both to resume construction and allow Triple Five to pay off a prior construction loan that comes due in early November, Walrath said in the legal filings.
Triple Five’s latest plans for the site call for shops, restaurants, movie theater, indoor amusement park, ski slope, ice rink, Ferris wheel, aquarium, and 18-hole miniature golf course, with a planned opening date of mid-2018.
But the appeal filed by a group called the New Jersey Alliance for Fiscal Integrity said the structure of the planned financing violates state law, including use of the Wisconsin-based agency to help facilitate the sale of bonds backed by New Jersey tax incentives. It also questions whether a 2008 constitutional amendment restricting borrowing by state agencies like the NJSEA prohibits the sale of bonds that would be backed by the EDA tax incentive, which will be subject to appropriation each year in the annual state budget.
The group — which has refused to say who is supporting it — is also pointing to an executive order signed by Gov. Christie Whitman in 1994 that restricts private bond sales such as those called for in Triple Five’s financing plan.
“It is this unprecedented financing structure — and the efforts taken by the NJSEA to effectuate it — that the alliance now challenges in this appeal,” the group’s legal brief said.
The NJSEA first approved the financing plan in late August, and then did so again during a meeting held earlier this month after the alliance publicly raised several of the issues that have since become a central part of its legal effort.
A joint legal brief filed late last week by the NJSEA and lawyers for Triple Five and a subsidiary questioned whether the group that’s challenging the financing plan is being backed by competitors in the retail market instead of those worried about preserving the state’s fiscal purity. The Alliance for Fiscal Integrity, which was registered using federal IRS rules, does not legally have to disclose information about its backers.
The NJSEA and Triple Five brief also said the lawyers for the group have a “fundamental misunderstanding” of state finance and redevelopment law.
“This Hail Mary appeal, correspondingly, is a desperate attempt to grind to a halt a critically important project that is ready to deliver a much-needed economic boost,” the brief said. “The action taken by the NJSEA in authorizing the NJSEA bonds is valid, consistent with its statutory authority, and should be upheld.”
The brief also stresses that the bonds that will be sold through the NJSEA and the Wisconsin Public Finance Authority will be non-recourse bonds, meaning all of the risk will ultimately be carried by the investors and not the state agencies or the taxpayers in either New Jersey or Wisconsin.
In a certification filed along with the legal brief, Walrath emphasized the complicated structure and tight timeline for the financing deal. The $1.5 billion in private financing to be arranged by Deutsche Bank and JP Morgan Chase won’t close without the $1.15 billion in state-assisted financing involving the NJSEA and the Wisconsin Public Finance Authority, he said. And the developer needs the private financing to settle its prior construction loan by a Nov. 4 deadline, Walrath explained in the certification.
Missing those deadlines risks “default and/or foreclosure and the likely failure altogether of American Dream,” Walrath wrote.