EAST RUTHERFORD - The New Jersey Sports and Exposition Authority has voted to issue another $800 million in bonds in an effort to jump-start the long-dormant construction project for the American Dream mall and entertainment complex at the Meadowlands, bringing the total bonds approved this year to $1.15 billion.
The NJSEA says the borrowing is worthwhile because bondholders, not taxpayers, are assuming all the risk. But a Kane In Your Corner analysis finds taxpayers could still wind up on the hook for this project in the future, and American Dream could ultimately result in a costly wake-up call.
For supporters of American Dream, the proposed shopping mall and indoor entertainment center is a no-brainer. "This place is so much more than a retail complex, this is a family destination where people from around the world are going to come year around,” Alex Torres of Hackensack told the NJSEA board prior to the bond vote.
To others, that vision of American Dream is high-priced fantasy.
“You're pouring more money down a rat hole,” says taxpayer advocate Jerry Cantrell, president of the Common Sense Institute of New Jersey. “Utilize that money for something the taxpayers can benefit from. Put that money into the transportation fund and fix some of these potholes.”
The bonds won’t cost taxpayers anything now, but Kane In Your Corner finds New Jersey residents could wind up paying later. Under the bond agreement approved by the state, half of the sales tax revenues collected at the mall would be earmarked to repay bondholders who invest in the project. Those Payments in Lieu of Taxes, or PILOTs, mean the money won’t be available for the things sales taxes normally fund, like roads or schools.
Gordon MacInnes, president of the think tank New Jersey Policy Perspective, says PILOTs have already taken their toll on New Jersey taxpayers. “We already can't afford to meet our current, past or future obligations as a state government,” MacInnes says. “We've dug ourselves a deep hole, by taking actions that are very similar to this one.”
The key to success for American Dream may ultimately be how well it attracts new revenue to the state. If the majority of its income is from shoppers who would not otherwise have spent money in New Jersey, then it won’t matter that a portion of the sales taxes are earmarked to pay bonds. However, if more than half of its income comes from customers who are lured from existing New Jersey malls or, worse, if the troubled project never reaches completion, there will be another shortfall for New Jersey taxpayers to cover.
MacInnes is not optimistic about American Dream’s prospects, calling it “ill-considered from the start.” He questions why the NJSEA “decided to go into business competing against the Bergen and Essex and Hudson county malls.”
That’s not all it would be competing against. In a 30-mile driving radius of American Dream’s location, Kane In Your Corner found 24 large shopping malls. That makes some wonder why the government keeps investing public resources into helping a stalled plan – now on its third developer – to build one more.
“This thing’s been resurrected so many times, it has more lives than your typical alley cat,” says Cantrell. “It doesn't make much sense.”