The Worst Laid Plans of Mice & Men

9 Jun

As anyone who’s rode New Jersey Transit’s Montclair-Boonton/Morris-Essex or the Port Authority’s PATH train to Newark can tell you, a not-insignificant part of Harrison, NJ is, to put it bluntly, a shit hole.  Sure, there’s some decent parts, but the areas viewable from the train tracks is chock-full of abandoned factory/warehouse buildings and  post-industrial detritus.  It was in this area that MLS soccer team New York Redbull (nee, Metrostars) ownership decided to build its new stadium, Red Bull Arena.   While of questionable design aesthetic, the stadium is no-doubt a vast improvement over the rest of the landscape.  Unfortunately, in a nod to the long and storied history of big-eyed municipal managers believing the improbable dreams pitched by developers, Harrison went “all-in” on the project, and now, finds itself up the creek without a paddle:

The town has no “long-term solution” for its debt load, Moody’s Investors Service said in a May 20 ratings report. The company downgraded Harrison five levels to Ba3, a junk-bond rating, from Baa1, the eighth-highest investment grade.

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. Mayor Raymond McDonough is also considering selling seven parking lots.

I played soccer for about a decade and consider myself a fan (albeit a non-rabid one), so when the project was announced, I was excited, although tentatively-so; Giants Stadium is easier to get to and surrounded by the Meadowlands (and highways).  Harrison, well…yea.  I could have sworn I wrote something about the Redbull stadium project a few years ago but I can’t find it, but I remember thinking the plans, as announced, were a pipe dream.  I remember thinking those who thought restaurants, bars, and other businesses would flock to the area because of a seldom-used stadium were delusional.  Lo and behold, I was right, at least so-far.

Restaurateurs and shopowners are wary of opening businesses around arenas because they don’t draw visitors every day, said Andrew Zimbalist, an economics professor at Smith College in Northampton, Massachusetts.

“If you’re talking about an area that is economically stagnant, and you simply plunk the facility there, it’s unlikely in the extreme that something will happen,” he said in a phone interview.

Harrison is the latest town to invest in sports only to find fiscal forecasts didn’t bear out. Hamilton County, Ohio, paid for stadiums for Major League Baseball’s Cincinnati Reds and the Bengals of the National Football League with a sales-tax increase. Declining collections since 2008 have taken a toll: A $33 million deficit is projected in 2013 for capital repairs, said Terry Evans, county director of operations.

Let me share with you a few images of the area around the Stadium, and it will become immediately clear to you why I was initially skeptical, and remain wholly unsurprised the glorious redevelopment plans envisioned by developers and the town/country/state have yet to come to fruition.

Here’s the stadium undergoing later stages of construction, facing west-ish (looking away from Manhattan towards Newark):

Notice the very cool but unfortunately abandoned industrial building to the right of the image?  There’s plenty of them around there.  Notice all the empty lots?  I haven’t been over there since the Fall of last year, but unless there’s been some unexpected and magical development, they’re still mostly empty.

Here’s the satellite image of Harrison from Google Earth.  You can get a much better idea of what the area around the Stadium looks like here:

The roadway in the middle/top of the image is rt 280, which is a fancy name for a parking lot (between morning and evening commute hours), while the train tracks are, well, train tracks.  The blue icon just south of them is around the Harrison, which is about a third of a mile walk to the stadium, or so says Google Earth’s path tool (Having walked around there briefly, I think it may be a bit more than that, at least it seems that way).  Planners figured that was fine as far as public transportation goes.  Its one stop from Newark Penn Station, and a 20 minute ride on the PATH from World Trade Center in Manhattan.  This image was taken 6/18/2010, and given the tone of the Moody’s report and the Bloomberg article from which the above quotes are from, I doubt it looks much – if any – different today.  To get a slightly better idea how depressing the area is, check out this semi-horizontal view with 3d buildings enabled:

While none of the shorter buildings in Harrison (e.g. ~< 50′) show up as flat-land, you can get the general idea of the area from this view.  The buildings in the background across the river are downtown Newark, a short hop on the PATH train away from the stadium, but definitely not walkable, unless you’re a masochist/like gallivanting across train bridges.  Here’s a closer look of the area around the stadium.

Nice place, eh?  Wouldn’t you want to live in as-yet-built condo’s there?

All sarcasm aside, I think this area will eventually get developed and eventually it will be relatively nice.  Did you pick up on the key word there (emphasis mine)?

To jump-start development, officials of the town, Hudson County and the state had tried since the early 2000s to craft a stadium deal for the team, then called the MetroStars. In 2006, Harrison agreed to pay $39 million for the land, the county put in $45 million for a parking garage and the team paid $200 million for stadium construction.

Revenue from development would fund debt service, said the official statement of Harrison’s bonds, which were sold through the Hudson County Improvement Authority and backed by the town and county. The issue also carried bond insurance from MBIA, now known as National Public Finance Guarantee Corp.

How could that possibly go wrong?  Real estate values were only going up and after all, it worked in Hoboken and to a slightly lesser extent, Jersey City…(again, emphasis mine)

The bond offering described two ventures in particular. One, a 331-townhouse development, is about half built, said James Bruno, a lawyer who represents the Harrison Redevelopment Agency. The other hasn’t begun construction.

No feasibility study was done when the debt was sold, said Edward McManimon III, partner at bond counsel McManimon & Scotland, based in Newark.

The town forecast that developers’ payments would total $2.3 million in 2008 and increase to $11.5 million in 2011, according to Moody’s. Instead, Harrison received only $980,000 in 2009 and $1.1 million in both 2010 and 2011.


The best (er, worst) part is when people play the blame game for their naivete, ignorance, and lack of acceptance of their unbridled optimism.  Let me repeat this part in case you missed it the first time:

Those involved in Harrison’s plight said thousands of condos, shops and offices would have sprung up in its 1.3 square miles were it not for the 18-month recession that ended in June 2009, the longest since the Depression.

Maybe we were a little aggressive,” [Mayor] McDonough said in a telephone interview. He said he wouldn’t do anything differently. “It’ll work out in the end.

McDonough, a 62-year-old retired plumber, has been mayor 16 years. An “old woman crying” in his office that she couldn’t pay what she owed the town prompted him to look for ways to boost the tax base, he said. In 1997, Harrison designated a third of the town, including the stadium area, for redevelopment.

As usual, emphasis is mine.  I love the spirit, but I have a hard time believing Mayor McDonough could support that optimism if questioned by a 5th grader, let alone a professional investor.  Another thing: I’m not about to run for town council let alone Mayor, but this is the best guy they could find for a decade and a half?  Really?  I’m sure he’s a great guy of high morals and similar character, but when a plumber and friends decided to bet the farm like this – without a freaking feasibility study nonetheless!!! – perhaps we should spend more time talking about how some municipalities get themselves into trouble because the people running them are given WAY more than enough rope with which to hang themselves and their constituents/taxpayers.  I’m sure some municipal employees in bigger/more populous areas have degrees/experience in high finance, but I’m going to go out on a limb and guess they are the severe exception, not the rule.

I’m not sure more regulation to protect people (municipalities) from themselves is the right answer, nor am I familiar enough with the process to know if any shortcuts were taken here (besides the lack of feasibility study).  I am fairly certain, though, that there has to be a way of protecting tax-payers from municipal managers getting them into shitty, ill-considered deals like this.  How, though, is another story…


One Response to “The Worst Laid Plans of Mice & Men”

  1. Dusti Maciasz June 13, 2011 at 2:25 am #

    This is a awesome article. Thanks for making the effort to detail this all out for us. It’s a great help!

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