NJ Gov. Christie Could Back Hundreds of Millions in Bonds for Moribund Xanadu

Thursday, July 22, 2010

New Jersey Gov. Chris Christie came to the new Giants-Jets stadium's 50-yard line to lay out the most dramatic public policy shift for the state's gambling industry and Sports Authority since both were created more than 30 years ago. After the state lost the intitial rounds of roulette on the Xanadu mega-mall here, Christie says he may have no choice but to throw more chips on the table.

Christie offered support for Atlantic City and to have it yanked it from New Jersey's horse-racing operations.

But while he wants the state out of the race track business, Christie says he's not giving up on the Meadowlands area. On the contrary, he wants to help private developers finance the $875 million they need to finish the stalled Xanadu mega-mall project built on adjacent public land that still belongs to the Sports and Exhibition Authority. Among the sources of funding being examined is low-interest bonds funded by the American Recovery and Reinvestment Act (the "stimulus" bill.)

The two million square foot mall was supposed to open in 2007. Billed as a shopping mall like no other, its architectural profile and color scheme have become the focus of near uniform radio disc jockey and public derision.

But the project has already drained $2 billion in private capital and $200 million in public support for a train-spur. That funding was supposed to bring customers to the mall, but now only serves sports fans and concert-goers at the Meadowlands. "You essentially have two choices you are confronted with now, make it work or tear it down," Christie says.   

The idea of the state supporting public financing for the ill-fated mega shopping-and-entertainment complex in a time of public scarcity doesn't sit well with Democratic Bergen County Executive Dennis McNerney.

"This is a governor who said look we are taking $120 million out of state aide for Bergen County," says McNerney. "And now he is here on a hot July day saying you know I am going to put money back in Xanadu."

The Hanson report says that Colony Capital, the current developer of Xanadu, has teamed up with the Related Companies to try and re-launch Xanadu. But both companies have told the state the project is not viable without public financing through something like the New Jersey Economic Development Authority.

Christie's agenda was laid out by a special panel he appointed chaired by Jon Hanson, a  real estate executive and major GOP fundraiser who once chaired the NJ Sports and Exhibition Authority and had tried to bring major league baseball to the Meadowlands.

The Hanson report suggests the state turn to $376 million federally backed Recovery Zone Facility Bonds that were part of the Obama Administration's American Recovery and Reinvestment Act.  The reports says time is of the essence because the American Recovery abd Reinvestment Act bond program "sunsets at the end of 2010."

Christie says if he puts any public financing on the table he wants taxpayers "to benefit on any up side" from a profitable Xanadu.

Christie's support of Xanadu was announced as he put forward a plan to take over Atlantic City's gambling district--because, Christie says--local governemnt has been unable to provide basic services. He says, as a result, investors' perception of the gambling venue is that it is neither "safe nor clean."

While Christie is looking to deepen the state's investment in Atlantic City, he's also calling for the sale of the state's two race tracks -- Monmouth and the Meadowlands.  "The state can no longer sustain the subsidy that we are giving to the standard bred industry and the Meadowlands Race track," says Christie. "We simply can't."

Christie is also trying to dramatically downsize the NJ Sports and Exposition Authority. When the state's Sports and Exposition Authority was originally established by Gov. William Cahill in 1971, the Meadowlands race track's revenues were sufficient to carry the Sports Authority. Scroll forward to the 21st century. A proliferation of gambling "opportunities" throughout the region and a generational shift away from racing all took their toll.

In the 1970s the state's racing industry accounted for a 77 percent market share of the legal gambling in the state. Today its just 2 percent. Bottom line -- the Authority's race track operation now has to be subsidized by taxpayers. Overall, the Sport's Authority loses more than $30 million annually.

Some local northern New Jersey elected officials have advocated installing video lottery terminals like the ones at the Yonkers Racetrack. Christie says that would only further undermine Atlantic City

"It does not make sense to have gaming outside of Atlantic City when one of the major engines of our state's economy over the last 30 years is in such desperate straits," Christie says.

Christie says in addition to creating a special gambling district in Atlantic City, the state's Casino Control Commission needs to update the way it regulates gaming. He says the rulemaking for the industry currently on the books pre-dates the proliferation of computers.

Just after Christie's press conference the regulars strolled into the Meadowlands Racetrack and stood at attention as the Star Spangled banner played over the video screen from a live race thousands of miles away. 

Meadowlands patron Clifton retiree Raymond Lejuez says Christie should be careful about putting state chips on Xanadu. "It's a bad bet. The place was a waste. One guy said to me the only thing you can do is throw a bomb in the place," Christie says.

"You know what Christie should do with that money? Give us seniors our rebate back on our property taxes, "says Lejuez who says he pays more than $7,000 in property taxes a year.

Lejuez says the state is leaving big money on the table by not installing the video slots at the Meadowlands track. "This place would be a mob scene. You wouldn't be able to get in here if they put the video slots in here.  Believe me. That's what they should do," Lejuez says.

Assemblyman Ralph Caputo from nearby Essex County agrees. He sits on the legislative committee that oversees how the state regulates gaming. "Yonkers is doing $500 million in the VLTs and here we are in North Jersey, probably in a better location," says Caputo. "I think it is something worthy of consideration and should be placed on the ballot so voters can make their decision." 

To accomplish what Christie wants to do he's going to have to win the support of a Democratic controlled legislature -- by convincing lawmakers that he's betting on the best horses by focusing on Atlantic City and Xanadu and letting the horseracing industry fend for itself. But whatever becomes of the once mighty and powerful Sports Authority its current  $368 million in long term debt will still need to be serviced.

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