June 18, 2010

Newark celebrates new arena by laying off city workers, selling off water system

With the New Jersey Devils firmly ensconced in their new publicly funded arena, and the Nets set to join them for two years this fall, the city of Newark should be seeing the benefits of that new-sports-team economic pixie dust right about now, right?

To address what he calls the biggest budget crisis in a generation, Newark Mayor Cory Booker is proposing a radical restructuring of city government, which includes massive layoffs, cuts in employee benefits, departmental reorganizations and the creation of a municipal utilities authority.

Erm, okay, not so much, then. But at least the new arena must have helped spur some revitalization of downtown Newark?

The James administration always said the $200 million investment was not about an arena but about downtown development and tax revenue and jobs — not just arena jobs, but jobs from all the new retail stores, commercial spaces and residencies that were going up in the arena district.

On Thursday, all I saw was a lot of parking lots. The only arena district enterprise that the Devils brag about is the Brick City Coffee shop on the ground floor of the Rock's parking deck.

That's Newark Star-Ledger blogger Joan Whitlow, but it's the same thing I saw the last time I walked around the arena. (Though the New York Times' ever-rosy-eyed Ken Belson raved about all the development that is "planned.")

Now, it's certainly true that Newark's fiscal issues run deeper than a bad arena deal (whose total public cost is actually closer to $400 million than the $200 million figure Whitlow cites). But as Whitlow notes, it certainly isn't helping matters that Newark is stuck with hundreds of millions of dollars in added debt and a deadbeat tenant at a time when it's in desperate need of cash:

The previous administration, under Mayor Sharpe James, sank more than $200 million in city money into a lopsided partnership with the New Jersey Devils hockey team. The team put up $100 million to build the arena, known as the Rock. In return, the Devils got a lease so tilted, the team claimed the rent wasn't due because the city owed the Devils money. The lease even precluded the city from taking its recalcitrant tenant to court.

For months the city has been negotiating to collect the rent and get a few million more here and there out of a lease that provides too few financial sweeteners for Newark. But talks broke down this week. Most of the issues are headed for arbitration. The city is suing over the Devils claim for a couple million dollars a year in guaranteed parking revenues. Lawyers fees and legal risks: It's the mess that has grown from what I believe to have been a bad deal to begin with.

The lesson here isn't even so much "don't build a hockey arena"; it's "don't build a hockey arena that assigns almost all the costs to your city and then gets you nothing back in the lease." But then, since getting something for nothing is the modus operandi of most sports teams these days, in most cases no team is going to want your lousy hockey arena unless you agree to let them keep all the money from it.

I hate to say "I told you so," but I'll happily link to it.