Too Big to Fail: New Jersey Mall Edition

Chris Christie can't let Xanadu go under; $400 million in corporate welfare

What corporate interest won’t Chris Christie subsidize with taxpayer dollars?

The New Jersey governor, press favorite, and conservative hero is unloading more taxpayer money to private interests. He’s doled out a 100 million bucks to a Japanese company, handed real estate tycoon Mort Zuckerman $42 million, and is subsidizing a casino in Atlantic City with $261 million in cheap financing. The latest giveaway is astonishing: subsidizing a Canadian company with some $400 million in tax subsidies and cheap loans to finish the disastrous Xanadu mall in the Meadowlands, The New York Times reports. Half the $400 million is from future tax revenue the state will forgo.

I’ve written about the Christie corporate welfare angle before, but I also used to cover the original developer of Xanadu: the Mills Corporation, which flamed out in an accounting scandal and was bought on the cheap a year before the financial crisis took hold. So I know a little bit about the backstory of this development.

It’s amazing to think that five years later this disaster is still unfolding. Two developers have given up after blowing $1.9 billion between them. Christie’s new deal is to entice a third to inject at least another billion into it. An unfettered free market just won’t work in the New Jersey swamp, apparently.

Then there’s the rebranding of the mall. Xanadu will now become—I’m not kidding—American Dream@Meadowlands. That’s “downright blasphemy”, as the Star Ledger’s Brian Donohue put it. Or it would have been eighty years ago. I think it’s uncomfortably close to the truth these days.

The Times points out that blowing hundreds of millions doesn’t fit with the governor’s image:

Though the Christie administration has criticized Xanadu, once calling it a “failed business model,” and the governor said he was uncomfortable getting the state involved in private development, the state would provide $180 million to $200 million in low-interest financing and forfeit a similar amount in future sales-tax revenue.

The administration has argued that the project is too big and too far along to let it lie fallow.

Xanadu is too big to fail, and the Christie administration, supposedly our model of fiscal rectitude, doesn’t understand the concept of sunk costs.

Which leads to quotes like this from the Sierra Club’s Jeff Tittel:

“At a time when the governor has taken money from renewable energy and schools, he’s bailing out an ugly mall,” Mr. Tittel said.

It is indeed a revealing picture of true priorities. This mess is not one Christie created—that was the McGreevey administration that’s now under investigation for the deal— and he isn’t spending cash on hand, he is blowing a huge wad of future cash on a giant mall in a place that already has an excess of them. Those foregone revenues will make it that much harder for a future administration, and possibly his own, to balance the budget.

It’s past time for a reevaluation of the press’s narrative on the Christie administration. How much corporate welfare can one governor hand out and still claim the mantle of a fiscal conservative?

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Ryan Chittum is a former Wall Street Journal reporter, and deputy editor of The Audit, CJR's business section. If you see notable business journalism, give him a heads-up at Follow him on Twitter at @ryanchittum. Tags: , , , ,