Tag Archives: New Jersey Meadowlands

The Odyssey to Xanadu

In previous posts I have covered the trials of the Xanadu shopping center/entertainment complex in the New Jersey Meadowlands. Beset by bad timing, financing troubles, negative public reaction the facility is an example of the perils of government-induced investment.

A new developer will invest $1 billion, and the state of New Jersey has agreed to throw in $200 million in tax breaks to complete the project. To date the development has received $900 million in subsidies and tax breaks. The new owner has changed Xanadu’s name to “The American Dream” and plans to install a water park. The new opening date is scheduled for the fall of 2013.

The Real “Anti-Stimulus” – The Nation’s Growing Debts

The Washington Post reports how municipal governments in the U.S. are under great strain: state and local governments have doubled their debt loads in the past decade to $2.4 trillion. Factor in state (excluding local) unfunded pension liabilities for another $1 trillion (a figure that is likely closer to $3 trillion).

The future is debt-laden and the question is how will state and local governments respond. Trade-offs will have to be made between money for current services, bond payments, and pension benefits. Taxes will be raised and it’s likely that states will seek more bailouts from a debt-saturated federal government.

It’s hard to see how more federal spending (i.e. debt)  is the way to stimulate cash-strapped states. Yet, that’s the argument made by Ezra Klein in this Sunday’s Post.

Before issuing debt to cover debt it might be worth asking what have state and local governments been doing with all the economic development/infrastructure debt they’ve issued these past years?

Harrisburg issued debt for an incinerator that was supposed to make money. Now called a financial ”fiasco,” the incinerator threatens to sink the city’s budget. Steven Malanga discusses the debts incurred by what should be a profit-making enterprise — the 40 year old New Jersey Meadowlands, as well as the long-running “redevelopment debt” odyssey of California.

There is no magic in debt-financed infrastructure and economic-development, only a deferred tax bill to pay for the government’s gambles.

Xanadu Doomed, or just Delayed?

XanaduThis year was to mark the year that Xanadu, a 2 million square foot entertainment/shopping complex, was to open in the New Jersey Meadowlands. Promising an indoor ski slope, tunnel-diving, movie complex, and warehouse-sized shops, the project has few cheerleaders.

Bergen county residents call it “structural graffitti” with its proposed Pepsi Globe Ferris wheel blocking the Manhattan skyline.  Senate President Richard Codey says it’s “yucky-looking,” and the FAA wonders if the Ferris wheel will interfere with air traffic control.

Then there’s the timing: a Disney-meets-Vegas inspired retail center in the midst of a recession?

What’s worrying however is that it won’t matter. “The largest retail and entertainment complex in the United States” partially owes its existence to subsidies, bonds, and taxpayer-financed site remediation.  Can taxpayer life-support be far behind?

Xanadu is a hybrid: last decade’s euphoric consumerism kept alive by misplaced government bets.

The vision belongs to partially to the New Jersey Sports and Exposition Authority, a state agency that oversees New Jersey’s tracks and stadiums. The Meadowlands has been a government target for economic redevelopment for decades. Xanadu is the most recent attempt to fill unused parking lots next to the stadium. The vision also belonged to a real estate developer, the Mills Corporation, which has since backed out.

While not directly subsidized,the $2 billion center is being built on state-owned land, and nearly $80 million is being spent on transportation. Site remediation has cost $2 million. The NJSEA received a $160 million 15-year lease from the private developer Xanadu Meadowlands.

Today, the main players are in financial difficulties. Real Capital Analytics put the project on its “Troubled Assets List.” The NJSEA is in the red. Years of using surplus track betting revenues to finance stadiums, convention centers, and the authority’s penchant for issuing bonds have come to a screeching halt.

Now scheduled to open some time next summer, as Jeff Tittel, executive director of the New Jersey chapter of the Sierra Club notes, “We’ve given millions in incentives, tax breaks and transportation on a project that was pushed through because of political connections — not because we needed it.”

Consumer preferences will reveal how much it is loved or loathed next summer, in theory. Unless the state decides it is “too big to fail.”

Here’s a report from the Star-Ledger on Xanadu:

Ledger Live: Meadowlands Xanadu – A boon or boondoggle?