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June 10, 2011

Red Bulls’ Stadium Bonds Sap New Jersey Town as Condominium Visions Vanish

Bloomberg
by Romy Varghese

A cautionary tale from across the Hudson. When will politicians ever learn that arenas and stadiums ≠ economic development?

On a May evening, soccer fans streamed down a Harrison, New Jersey, sidewalk lined with posters depicting cafes and parks that don’t exist. They were headed to the $200 million Red Bull Arena, which rises above warehouses and industrial wreckage that were to become condos for New York City commuters and transform the town.

Harrison predicted that redevelopment revenue would cover its $39 million debt to buy and clean up land under the stadium for the Major League Soccer team owned by Dietrich Mateschitz, billionaire founder of the namesake energy-drink company. Instead, most construction projects haven’t begun. The community, across the Passaic River from Newark with a per- capita income 69 percent of the state average, had its credit rating slashed and is firing police and firefighters.

“The numbers didn’t make any sense; the economics didn’t make any sense,” said George Zoffinger, who criticized the deal in 2006 as president of the New Jersey Sports & Exposition Authority, a state agency that runs sporting and entertainment complexes. “Now the taxpayers are going to pay.”

Larger communities have been stung, too: The recession undermined the finances of stadium deals in Houston and Cincinnati. Harrison, a town of 14,000, spent years wooing a soccer team, only to see its prize become a burden.
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Town officials in December had to borrow $3.1 million -- 21 percent of its municipal tax collections -- to make the debt payment on the 2006 issue, and they anticipate doing so again this December, Moody’s said.

Meanwhile, the New York Red Bulls, whose owner is No. 208 on Forbes magazine’s list of the world’s billionaires, are challenging their taxable status. The team refuses to pay a $1.4 million property levy, according to Moody’s.

To close its $6 million budget gap, Harrison plans to dismiss 17 percent of its police and 29 percent of its firefighters on July 1, according to an e-mail from Town Clerk Paul Zarbetski.

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Posted by eric at June 10, 2011 10:22 AM