At the end of April, The New York Times reported that “Gov. Chris Christie and the developers of the Mall of America have struck a deal to pour in $1 billion more in hopes of reviving the oft-ridiculed Xanadu Meadowlands complex” in East Rutherford, New Jersey.
If all goes as the governor and the developers hope, the complex, now renamed “American Dream@Meadowlands,” will be the largest retail and entertainment complex in the United States and the third-largest in the world, with 4,500,000 square feet of entertainment, sports, and retail space, according to Wikipedia.
But why would a Republican governor who presents himself as tight-fisted with taxpayer dollars invest in a private project, especially one as retrograde as a mall? That’s what many New Jersey residents and people who study real estate development are asking.
The project, supported by an earlier Democratic governor, Jim McGreevey, was approved in late 2003 as a joint venture between the former Mills Corporation and Mack-Cali Realty Corporation, and was was hailed by Mills Chairman and CEO Laurence E. Siegel as “a new standard for bringing lifestyle, recreation, sports and family entertainment offerings together in one location.” Ground was broken September 29, 2004, and by 2008, Wikipedia reports, the complex’s exterior and the structure for an indoor ski slope were complete.
Then the enormous project went through a series of financial calamities, with new developers entering and exiting, followed by physical disasters as well. On February 1, 2011, after a record-breaking month of snow, a 50- to 60-foot long section of the eastern wall buckled and a crease showed up in the ski slope. Two days later, the eastern wall failed and the roof suffered a partial collapse. Even before then, Christie had called the complex “the ugliest damn building in New Jersey and maybe America.”
“The administration has argued that the project is too big and too far along to let it lie fallow,” The Times reported. The state would provide $180 million to $200 million in low-interest financing and forfeit a similar amount in future sales-tax revenue.
Triple Five, a Canadian conglomerate that owns the 5.3-million-square-foot West Edmonton Mall in Edmonton, Alberta, and the 4.2-million-square-foot Mall of America in Minnesota, would invest more than $1 billion.
Jeff Tittel, director of the New Jersey chapter of the Sierra Club, said the kind of state financing in the Xanadu agreement only helped enrich the developer at the expense of taxpayers. “At a time when the governor has taken money from renewable energy and schools, he’s bailing out an ugly mall,” Tittel told The Times.
Nicole Gelinas, a contributing editor to the Manhattan Institute’s City Journal, wrote May 8 in the Star-Ledger of Newark that Christie’s decision “shows a lapse in judgment, at best.” Gelinas said, “The Republican governor should understand that there’s no place for public money in a mall, even one with indoor ski slopes. If Xanadu’s new owners and lenders thought that American Dream’s prospects were stellar, they’d fund the thing themselves.”
If the project runs over budget again — the new price tag is $3.7 billion — taxpayer money beyond hundreds of millions of dollars of public support nearly a decade ago will be potentially at risk, Gelinas warned.
“Last year, Christie cancelled a $9.2 billion tunnel to New York, noting worry about costs,” she pointed out. “Now, Christie has chosen to spend his finite time and taxpayers’ finite money on a mall, which is not public infrastructure, over the rail project, which was.”
The project also fared poorly on the Times “Room for Debate” discussion page. Judith Martin, director of the urban studies program at the University of Minnesota, argued, “In a still-lingering recession, with huge health, education, and public infrastructure needs being ignored, deflecting scarce public dollars for Xanadu’s continued development seems callous indeed — unless you believe that it’s too big to fail.”
David Smiley, who teaches architecture and urban studies at Barnard College and is author of the forthcoming Pedestrian Modern and editor of Redressing the Mall: Sprawl and Public Space in Suburbia, argued that aiding a huge mall is the wrong thing to do.
“The small stores and the older main streets of New Jersey, like many states, need attention,” Smiley wrote. “If Governor Christie wants to subsidize Xanadu’s Triple Five, then he should also offer proportionate loan deals and subsidies to single and local store owners in places like Newark, or he should offer deals for mainstream retail chains to open in underserved neighborhoods in cities like Trenton or he should encourage community groups in places like Perth Amboy to form their own development corporations to figure out what kinds of stores they need and want.”
“But it is unlikely that any of this will happen on a scale that matters,” Smiley acknowledged. “Retailing’s financial structures – under stress long before the current residential finance breakdown – have nurtured only large-scale development, enabled massive tax write-downs (among other shameless balance sheet techniques) and tacitly encouraged poor investment decisions.”
“For decades malls were built where they could not be supported by the surrounding population,” he said. “Thus, in the past decade or so, we have seen growth in the numbers of dead malls, which, by some counts, is well over 10 percent of total mall properties.”
Another contributor to the Times debate, Brigid C. Harrison, a professor of political science and law at Montclair State University, maintained, “While the state should be in the business of promoting investment and creating a favorable climate for such investment — and one could argue that a project of Xanadu’s scope could warrant state-supported lending — it is hard to rationalize the state’s decision to forgo some of the revenue produced by such an investment, particularly when the development could have a deleterious effect on neighboring retail centers. She said: “It puts the state at risk for financing a historic boondoggle while in the midst of a slow economic recovery.”
“The project would create thousands of construction jobs and, when completed, more jobs to run the restaurants, theaters, indoor ski slope and other attractions,” wrote Bob Ingle, a political columnist for Gannett New Jersey Newspapers. “The developer estimates the mall will draw 55 million visitors a year. That potential appears to be motivating Governor Christie.”
But Ingle pointed out that even Christie supporters “are questioning the very idea of tossing more money into a pit that has produced little more than ‘only in Jersey’ jokes.”