The great stadium hustle

Image via The Washington Post

By Joe Schackman

The Devils sold Newark, N.J., an arena filled with false promises of economic prosperity, and the city is now paying the price.

New Jersey Devils owner Jeff Vanderbeek promised Newark that at least 41 times a year, the city's bars, restaurants and stores would be packed with Devils fans on the way to games at his brand new arena.

That would be on top of the countless concerts, circuses and various other events that the Prudential Center would host. The $200 million arena would be the "the economic engine" that local politicians had been searching for, powering Newark into a new, lucrative era.

Now, nearly five years since the building opened its doors, Newark has yet to reap the rewards it was promised. But that hasn’t stopped Vanderbeek from continuing to hold the city hostage.

Then-Mayor Sharpe James signed the arena deal in 2004, bringing two professional sports teams to Newark for the first time in its long history. The Brick City, notorious for its violence and economic struggles, was for once brimming with hope and confidence.

However, the deal was not as sweet as it sounded. James, whose legacy is defined by backroom arm-twisting and shady arrangements, had signed an agreement with Vanderbeek that put Newark in a financial hole.

The city put up $210 million in bonds to pay for the stadium's construction. In contrast, the Devils — the main tenant — paid about $100 million. According to the original deal, the arena would be owned and operated by the city, with the Devils and other organizations paying rent. Newark would also own the parking lots surrounding the arena, which were expected to provide the revenue the city needed to recoup their original investment.

But this is where things get messy. A letter signed by James’ business administrator allowed the Devils to take $2.7 million annually of parking revenue. It's an arrangement made outside of the original agreement, but is nevertheless signed by the team and former city officials.

Since Mayor Cory Booker took office in 2006, he has fought that rigged deal. He brought the Devils back to the bargaining table a number of times, but for unknown reasons, the talks always fell through.

Predictably, Booker blamed the Devils and the Devils blamed the city, a disagreement that led Booker to withhold the parking funds from the team. In turn, the Devils withheld their $3 million rent check. Things got ugly after that, and the case eventually went to arbitration, where Booker and the city lost. Newark must now pay the Devils the $15.3 million in parking revenue and capital gains, while the Devils are responsible for paying back rent. Newark comes out the net loser in the decision by about $600,000.

Newark's arena issues are just the latest example why building stadiums are not as beneficial to their communities as they are normally billed. Arenas are insanely expensive, difficult to maintain and rarely provide the economic benefits that owners and local politicians claim. Studies on the economic impact of stadiums make it clear that there is little stimulus generated by erecting a sports arena.

The contrast between expectations and reality is even starker in a poor economy. Most states and cities already can't afford to throw hundreds of millions of dollars toward something that doesn’t grow the surrounding community. When the tradeoff is taking money away from funding for education, road and bridge maintenance, airports and so on, the decision should be easy.

But regardless of the mounting evidence, the same thing happens almost every time. A professional team puts together a proposal to a city asking for vast amounts of money to build a state-of-the-art stadium. Their report includes all types of fudged numbers and weak economic studies that claim X amount of dollars and jobs will be created by the public’s investment. Local politicians bat the idea around, while outspoken newspaper columnists and loudmouth fans make it clear that they want their team around at any cost. Fans represent a small but influential minority, and public officials don’t want to be the ones responsible for letting a team walk. So they strike a deal with the owners, citing the exact mythical economic benefits the team is claiming.

It's happened all across the country, in cities like Cincinnati, Miami and, of course, Newark. Minneapolis and Los Angeles could be next.

The Newark arena controversy came to a head when Booker attacked Vanderbeek and the Devils during a press conference, calling the former Lehman Brothers executive a “high-class huckster and hustler.” Strong words are Booker's only weapon at this point, and he can only hope that public pressure forces the team back to the negotiating table. Otherwise, cash-strapped Newark will have to find a way to live with $2.7 million less per year.

It's likely too late for places like Newark and Cincinnati and Miami. They can now only hope that their mistakes serve as a warning to other cities considering ill-fated deals of their own.

Joe Schackman is an editor and co-founder of Began in '96.