American Dream, Source of Argument for and Against Reform of NJ Tax Incentives
Megamall probably could not have come to life without major state tax breaks and probably would not receive such incentives under governor’s reform pla
Credit: NJTV News
The long-awaited debut of the American Dream megamall in the Meadowlands is being viewed as both a success story for the state’s controversial tax incentives but at the same time as a huge billboard for the need to reform those incentives, as promoted by Gov. Phil Murphy.
On one hand, the mall’s partial opening last week comes nearly a decade after it was brought back from the dead, thanks in large part to the state’s largest ever economic-development tax break.
As a result, thousands of jobs are now being created where a vacant and much-derided complex once loomed over the New Jersey Turnpike.
But even after American Dream has taken a big step forward, a number of big concerns still remain for it. Among them are fears the mall will create more traffic than area roads can handle. Another is whether it can generate enough well-paying jobs to justify the state’s long-standing commitment to the project — and enough revenue to stay economically viable.
And while Murphy has been among the loudest critics of the state tax-incentive programs that were in place when he took office early last year, the Democratic governor was also among the first in line to celebrate last week’s partial opening.
“This feels like a success,” Murphy said as he attended opening festivities at the mall on Friday.
‘Goal now is to help it succeed’
Asked to comment on American Dream in the context of Murphy’s bid to reform the state’s tax-incentive programs, the governor’s office pointed yesterday to the project’s long history under previous governors going back to Democrat Jim McGreevey.
“Our goal now is to help it succeed,” said Murphy spokesman Darryl Isherwood. “As the governor said at the opening, American Dream will provide much needed jobs and economic growth to the state.”
But Isherwood also said the state’s new tax incentives “will be targeted at high-growth sectors and will focus on helping businesses grow and prosper in New Jersey.”
“We’ve said from the beginning our new incentive program must work for everyone, not just the politically connected,” he said.
Launched under the name Xanadu in 2003, the megamall project initially was aimed at generating much-needed economic development in the Meadowlands in the wake of the decline of its horse track. But the project stalled during the Great Recession as developers went bust, threatening to leave vacant a massive building whose multicolored exterior was heavily criticized by area residents.
Current developer Triple Five, the owner and operator of Mall of America in Minnesota, entered the scene in 2011 when former Republican Gov. Chris Christie was in office. Triple Five planned a massive expansion of American Dream — necessary for its success, it said — and sought a $390 million state tax break to help pay for construction, which was approved in November 2013.
Under the design of that tax break — which is a rebate on a portion of the project’s sales-tax revenue — American Dream is projected to generate an overall net benefit for the state. It is projected to create more than 10,000 permanent jobs, as well as thousands of other construction jobs, according to the Economic Development Authority, the agency that approved the tax break.
Are taxpayers getting good value?
But Murphy has loudly questioned whether the tax-incentive programs he inherited from Christie can offer taxpayers good enough value for the dollar.
In fact, earlier this year Murphy allowed the state’s main tax-incentive offerings to expire rather than renew them, absent major reform. He has instead proposed a new set of incentives that would target the tax breaks more toward specific goals, such as fostering startups and growth in high-tech industries. And he’s pushing for tight, annual caps on tax incentives to ease their impact on the state budget.
Former state Sen. Ray Lesniak — who authored the expired tax-incentive programs — noted yesterday that it was those prior offerings that ended up getting American Dream the gap-financing needed to complete the project.
“It would still be a white elephant casting an ugly look across the Turnpike, producing no jobs and no tax revenue to the State Treasury,” Lesniak said, when asked what would have happened if Murphy’s proposed reforms were in place in 2013, when the project was floundering.
That wouldn’t necessarily have been a bad thing, according to Jeff Tittel of the Sierra Club, a longtime critic of the project going back to its Xanadu days .
Among Tittel’s concerns about American Dream are the drain on energy resources posed by amusements like its indoor ski slope and wave pool. Traffic around the 3-million square-foot complex will also add to greenhouse gas emissions in the sensitive Meadowlands if it lives up to attendance projections, he said. Tittel is also concerned that most of the jobs at American Dream are low-paying, non-unionized positions that will make it tough for workers to afford to live in the Meadowlands region.
“I think that’s a big piece,” Tittel said.
The history of the American Dream project has also raised concerns about political cronyism, which have been mentioned more recently in media reports and by the special task force Murphy impaneled earlier this year to investigate the state’s tax-incentive programs.
A five-part series that was published in 2016 by NJ Spotlight, WNYC and Bloomberg Businessweek tracked $350,000 in contributions that were made by those with ties to American Dream to political funds controlled by Christie, including as he ran for re-election and later for U.S. president. They included contributions that members of the Ghermezian family, Triple Five’s owners, made to the state Republican Party’s federal account, which avoided triggering state “pay to play” regulations. To curb the influence of such contributions on government actions, “pay to play” regulations restrict how much those doing business with the state are allowed donate to state-registered political funds.
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