Only in New Jersey, an inaugural ball at the American Dream Mall

New Jersey — the crossroads of the American Revolution — is marking the 250th anniversary of American independence and the Battle of Trenton. Yet instead of celebrating at a historic landmark like the Trenton Barracks or Nassau Hall, the governor’s inaugural ball is being held at a mall: the American Dream Mall.

Only in New Jersey do we inaugurate a governor at a financially troubled, at-times bankrupt mall, built on a toxic site on filled-in wetlands that is located in a flood zone. A mall that has received more than $2.2 billion in public subsidies and loans, reneged on paying PILOTs to local towns, pays no property taxes, has a history of union busting, violates Bergen County blue laws, and stands as the ultimate symbol of pay-to-play politics in North Jersey.

This isn’t the American Dream. It’s the American Scheme.

There is a long, shameful history behind this site — financial, environmental, and political — stretching back decades. Both political parties share responsibility. I’ve long called it the “American Scheme Mall” because it’s been about fleecing taxpayers, not economic development. Every time the project was delayed or encountered trouble, it grew larger, expanding from 2 million square feet to 3 million, and received even more public funding. I also called it the “Vietnam of malls.” What began as a $1 billion to $2 billion project ballooned to $5.5 billion, while taxpayer subsidies and loans kept climbing.

The original deal

The project began in the mid-1990s as the Mills Empire Mall on the Empire Tract. Developers wanted to fill in 200 acres of a 500-acre site, triggering massive public opposition. Local Sierra Club members started the opposition movement, and the Audubon, Baykeeper, Hackensack Riverkeeper, U.S. Fish and Wildlife Service, and the Environmental Protection Agency all opposed the project.

The site was deeply constrained due to: limited access, no major highways, high costs to elevate it above the floodplain, and conservation zoning. Permits would have been difficult — if not impossible — to obtain, and legal challenges were inevitable.

So a deal was struck under acting Gov. Donald DiFrancesco. The state leased part of the Sports Authority land for the mega-mall — a sweetheart deal. Mills got one of the most valuable pieces of land in the New York metro area for $10 million a year for 15 years, after which rent would be based on profits, which never materialized. The mall sits at the crossroads of three major highways, on state land, with no zoning restrictions, and much of the site already filled in — saving developers hundreds of millions of dollars.

The Sports Authority law did not allow malls or large commercial projects, so they rebranded it as “entertainment” and coined the term “shoppertainment.” In exchange, the state took the original Mills site as open space.

The Sierra Club was shut out of negotiations. We opposed the deal because it was a classic bait-and-switch. The Empire Tract mall was never going to happen; Mills wanted the Sports Authority site all along. The development meant massive traffic in an already gridlocked area, increased air pollution, flooding, and water contamination — while developers got a $1 billion-plus property for pennies.

Environmental and financial collapse

Under Gov. McGreevey, the Xanadu Mall moved forward. Mills’ proposal was selected through what insiders knew was a preordained process. A sham environmental review — the so-called “5X process” — exempted the project from stormwater rules, flood standards, Clean Air Act mobile-source requirements, energy efficiency standards, and even parts of the Clean Water Act. Permits were issued to fill EPA-priority wetlands in an estuary.

The project was so egregious that even the Bush administration’s Environmental Protection Agency and U.S. Fish and Wildlife Service opposed it. The Sierra Club sued and won on wetlands violations, but the state filled them in anyway, forcing taxpayers to pay for mitigation. The state also spent $113 million on road improvements, $180 million on a rail spur, and $31 million on expanding a Turnpike interchange to serve the mall.

By 2006, Mills was under SEC investigation and facing financial collapse. Goldman Sachs extended a $1 billion loan. Gov. Corzine helped bring in Colony Capital, which took over the project, and Goldman Sachs got their money back. Colony owned three casinos in New Jersey — regulated by the same state — and there was even a push to add casino gaming at the mall.

By 2007, more than $2 billion had been spent. Then, Lehman Brothers collapsed in 2008, the project stalled, lenders foreclosed, and work stopped by 2010.

During his campaign for governor, Chris Christie called Xanadu one of the worst deals in state history. Once in office — after Republican lobbyists and consultants were hired — he reversed course and bailed it out with more taxpayer money.

“Xanadu is proving, once again, to be a taxpayer money pit,” I said at the time.

Under the approved deal, owners keep 75% of tax revenues, amounting to at least $200 million in subsidies. There was $390 million in direct subsidies, $800 million in subsidized loans, plus other subsidies, infrastructure improvements, and tax breaks — in total, somewhere around $2.2 billion. Instead of helping seniors or funding schools and protecting the environment, we’re subsidizing billionaire developers.

The only thing uglier than the building is the financial deal.

A continuing disaster

American Dream relies on surrounding towns for police, fire, ambulance, sewer, and emergency services — but refuses to pay what it owes. Carlstadt alone is owed $13 million in PILOTs and sewer fees. East Rutherford is owed $7.5 million in PILOTs and $400,000 for sewers. Homeowners are left holding the bag.

Environmentally, the American Dream Mall is a catastrophe. It produces more greenhouse gases than any building in New Jersey, yet was exempted from green building and energy efficiency standards. Millions of tons of polluted runoff — oil, heavy metals, asbestos, antifreeze, and more — flow into the Hackensack River. The site lacks adequate stormwater and sewage infrastructure, leading to partially treated sewage discharges during rain events and increased flooding in an area that has chronic flooding.

They built a water park at the mall in a priority wetland. The mall filled seven acres of EPA-priority wetlands. Despite claims of “clean historic fill,” 39 barrels of toxic waste were discovered, followed by more — again paid for by taxpayers. Workers were exposed to contaminated soils, triggering federal Occupational Safety and Health Administration (OSHA) violations.

American Dream traffic nightmare

The impacts are staggering — 100,000 to 150,000 cars per day, creating gridlock, or “carmageddon.” The Environmental Protection Agency opposed the project for violating New Jersey’s Clean Air Act State Implementation Plan.

Broken promises and pay-to-play

The mall was supposed to be unionized — it sits on public land — but instead has a long history of union busting, firings, and federal National Labor Relations Board (NLRB) complaints. The state looked the other way.

The mall also committed to complying with Bergen County blue laws. They did so because the Giants could have vetoed the deal, as Sunday traffic would interfere with their games. Now the mall violates the blue laws — gaining an unfair advantage over local businesses. Paramus is suing, while the state defends the mall in court, breaking its own commitments.

On affordable housing, the Sierra Club sued after American Dream failed to meet its obligations. This raised the affordable housing obligation for surrounding towns under regional obligations, causing more sprawl and overdevelopment. The New Jersey Legislature responded by passing S2957, a law that exempted the developer entirely and allowed the affordable housing funds to be reinvested back into the mall.

Now there’s talk of spending $2 billion more on a “people mover” to connect the mall to Secaucus Junction — while NJ Transit is broke, trains are unreliable, and critical projects like the Gateway Tunnel and Bergen-Hudson Light Rail need funding.

“We don’t need a train to nowhere,” I said. “We should be helping people get to work, not subsidizing a failing mall.”

Even with all these subsidies, American Dream is losing money and is plagued by vacancies. New Jersey needs another mall like it needs another Superfund site.

From the beginning, this project has been about inside deals, political machines, and pay-to-play. Politicians ran against it, then flipped once the money started flowing. Everyone got a piece, depending on who was in power. Xanadu/American Dream was like the cake on the roof in “The Godfather Part II,” with everyone cutting themselves a slice depending on who was in control.

Thirty years later, it’s still a mess. And maybe that’s why it’s fitting to hold the governor’s inaugural ball there. It reflects how far we’ve drifted from the revolutionary promise. In New Jersey, American Dream is a mall, not a revolutionary ideal.

But maybe it should also remind us that we need a new grassroots revolution in the state to make government accountable to the people and for the people again.

Gov. Sherrill should lead that revolution if she truly wants to make our government more accountable and transparent.

Writer’s note: I have followed this project for nearly 30 years. This story is even worse — and more complex — than I can fully lay out here. It touches almost every major political figure, law firm, lobbyist, and engineering firm in New Jersey. It is precisely why New Jersey needs strong, independent watchdogs, including a fully empowered state comptroller.