Money Woes Keep Nation’s Largest Shopping Center Closed
This was to be the year that Xanadu, a two million-square-foot entertainment/shopping complex, was to open in the New Jersey Meadowlands. Although promising an indoor ski slope, tunnel diving, movie complex, and warehouse-sized shops, the project has few cheerleaders.
Area newspapers have quoted Bergen County residents calling it “structural graffiti” with its proposed Pepsi Globe Ferris wheel blocking the Manhattan skyline. State Senate President Richard Codey (D-Essex) told reporters it’s “yucky-looking,” and the Federal Aviation Administration wonders whether the Ferris wheel will interfere with air traffic control.
Then there’s the timing: A huge Disney-meets-Vegas-inspired retail center in the midst of a recession?
Misplaced Government Bets
What’s especially worrying, however, is that it won’t matter whether the site turns a profit.
“The largest retail and entertainment complex in the United States” partially owes its existence to subsidies, bonds, and taxpayer-financed site remediation. Can taxpayer life-support be far behind?
Xanadu is a hybrid: Last decade’s euphoric consumerism kept alive by misplaced government bets.
The vision belongs partly to the New Jersey Sports and Exposition Authority (NJSEA), a state agency that oversees New Jersey’s tracks and stadiums. The Meadowlands has been a government target for economic redevelopment for decades. Xanadu is the most recent attempt to fill unused parking lots next to the stadium.
The vision also belonged to a real estate developer, the Mills Corporation, which has since backed out.
While not directly subsidized, the $2 billion center is being built on state-owned land, and nearly $80 million is being spent on road construction. Site remediation has cost taxpayers $2 million. In return the NJSEA received a $160 million, 15-year lease from the private developer, Xanadu Meadowlands.
Today the main players are in financial difficulties. Real Capital Analytics put the project on its “Troubled Assets List.” The NJSEA is in the red. Years of using surplus track betting revenues to finance stadiums and convention centers and the authority’s penchant for issuing bonds have come to a screeching halt.
Xanadu is now scheduled to open some time next summer. Jeff Tittel, executive director of the New Jersey chapter of the Sierra Club, says these millions of dollars have been spent “on a project that was pushed through because of political connections, not because we needed it.”
‘What Are We Doing?’
Brian Donohue, reporting on The Star-Ledger newspaper’s Ledger Live Web site, said: “Like a lot of New Jerseyans, I look at this thing and say to myself, ‘What the heck are we doing? Of all the things this state needs, a giant mall with an indoor ski slope? What about stem cell research? What about green technologies? Shouldn’t we be building research centers and things like that?’”
Donohue also noted an irony pointed out to him by the Sierra Club’s Tittel: “They filled in a stream here to build a mall with a fake trout fishing stream inside it.”
Donohue said developers haven’t been able to rent enough of the retail space, largely because outdoors retailer Cabela’s is no longer opening new stores. Cabela’s was expected to be one of Xanadu’s anchors. In addition, a major lender has defaulted on its loan.
Codey told Donohue, “This was a bad idea from the beginning. Now we may have what I would call a white elephant on our hands.”
George Zoffinger, former chief executive of the NJSEA, questions such investments but thinks Xanadu is ultimately a good idea, saying, “The economy is in a shambles here.” He added, “At some point the economy will improve and the project will go forward.”
‘Where Are Priorities?’
Zoffinger points out the state recently spent $400 million on a new stadium for the National Football League’s Giants and Jets, “for billionaires who can afford it themselves. We spent $210 million, plus whatever else has been spent by the City of Newark, with all its needs, on an arena in Newark for a private developer. We’re going to put a $100 million expansion on Rutgers Stadium. Yet we had the opportunity to build the premier stem cell research facility in the entire country in New Jersey, and we backed off and didn’t do it. Where does that put our priorities?
“Xanadu in my opinion is slightly different in that it was private investment coming into our state, it was jobs for our state, it was workers that were going to work in our state, it was an attraction for our state. People might say, ‘Well, it hasn’t lived up to its potential.’ I agree we should have had it open sooner, but the economy is what the economy is. ... At the end of the day, we have our priorities dead wrong in New Jersey.”
Bergen Record reporter John Brennan said he believes the sheer size of Xanadu—and the hundreds of construction jobs still needed to finish the project—will apply enough pressure to see it through to completion.
“It’s such a big project. ... This thing is so substantially built, the exterior is probably 95 percent done,” Brennan told Donohue. “It’s so far along in construction, it’s not like you could put something else in there.”
Eileen Norcross (email@example.com) is a senior research fellow with the Mercatus Center at George Mason University.