The Prudential Center in Newark is now in use. The Devils played their first game there the other night, and Bon Jovi will clear his band out after another couple of nights. I would like to take the opportunity to briefly explain why the arena never should have been built.
Newark claims two primary economic benefits of the arena: it will create both jobs and tax revenue. This is true, but the benefits can only be judged in the context of the cost of the project to Newark. As the arena prepares to open, its cost to the city has been $311.5 million, including road and ground improvements around the site.
Newark estimates the arena – independent of the other parts of its downtown redevelopment plan – will generate each year $9 million in sales taxes, $750,000 in payroll taxes, and about $3 million in parking taxes, for a total of $12.75 million.
These estimates are based on the assumption that enough people will be willing to part with large amounts of money – for example, the cheapest tickets to the series of Bon Jovi concerts are about $100 and go up to several hundred dollars for the best seats – to fill up all the Devils’s games and concerts. But assuming the estimates are true, it will take Newark a little more than 24 years to make back the money it initially invested in the project. After 30 years, the Devils’ lease will expire and the city will own the arena. Whatever the value of the property will be at that point can be added to Newark’s arena-based revenues.
If all of this works out the way it is supposed to, Newark will at least make back its investment in the arena, and likely come out ahead. In the long run, that would at least justify the initial expense. But the problem is not the possibility that Newark might lose money on the deal. The problem is in analyzing costs and benefits: By building the arena with the Devils, will Newark get the most benefit it could have from spending over $300 million? The city of Newark is not a real estate concern; its primary responsibility is not to turn a profit on construction projects. Its responsibility is to spend its public money in such a way that will bring the greatest long-term economic and social stability to its citizens. In this way, the Prudential Center is a failure.
This is the context in which one ought to consider the second supposed economic benefit of the arena, job creation. Most of the about 1,500 jobs the arena created are low-wage, menial jobs with no benefits, little job security, and slight chances of promotion: these jobs include ushers, janitors, security guards, and concession clerks. Although some of the jobs will be better – someone will have to direct the menial labor – most of them will be of the first variety.
Worse, the workers will be employed by the Anschutz Entertainment Group, which is based in Los Angeles and can be presumed to have little interest in the long-term well-being of Newark. If times get tight, you can bet AEG will not hesitate to lay off however many workers it might take to protect the corporation’s bottom line. Jobs provided by locally-owned and administered companies are less likely to be turned over in such a way. Although they are not absolutely secure, local companies naturally have a closer connection to their workers and the municipal government.
If the purpose of the project was to develop the local economy by creating jobs, Newark could have done a lot better. Three-hundred million dollars is a high price for 1,500 low-level corporate jobs. Alternative programs for job creation are too numerous to recite, but imagine if Newark had used a fraction of the money it spent to build the arena on a loan program for small and medium local businesses. The program could be tied to job creation. For example, if a local clothing retailer applies for a $500,000 loan to expand his store, the terms could depend on job creation: if the business promises to hire 3 additional employees, it can repay the loan with no interest. This is not a specific recommendation, but such a program would bring all the economic benefits of the arena without the disadvantages of a major construction project and jobs administered by a company 3,000 miles away.
Of course, this would deprive public officials of a single building they can repeatedly point to when they want to take credit for “development,” which I suspect is always a strong ulterior motive for funding projects such as the Prudential Center.
The arena also carries on the tradition of wretched urban planning that has plagued our cities for the last half century. The arena’s success will be judged by the number of suburbanites it will bring to the city. The only attention paid to the people who actually live in Newark will be from extra police assigned to the arena to keep the riff-raff away from the wealthy suburbanites, so they’re not afraid to open their wallets. Instead of investing in the infrastructure its people use or the businesses and schools they patronize, Newark’s previous government chose to spend hundreds of millions on a facility made almost specifically for out-of-towners. The ostensible benefit to Newark is low-level jobs with AEG and whatever incidental benefits they might enjoy from the road improvements meant to help suburbanites more easily drive their cars into the city center. It is fair to say most Newarkers have little interest in hockey, and few can afford the high cost of tickets to other events at the arena.
Look at the arena from the perspective of a bona fide resident of Newark, one who lives there and is raising a family there. The city took your tax money to build an arena to attract suburbanites to the city. The point of bringing them there is so they will spend their money in the city; when they spend their money, the city collects taxes. But the city will have to collect taxes for at least two decades before its initial capital investment in the arena is recovered. At that point, the city might use the money for Newarkers: maybe it will build some schools, or a new clinic. More likely, it will just use the money to fund the next fanciful “development” project.
I have a suggestion for the suburbanites still convinced the arena is a positive move for the city. Don’t take the officially recommended routes to the Prudential Center. Don’t take the Parkway to 78, then drive a few blocks through downtown Newark to get there. Take the Parkway to Exit 143A. If you are exiting from Parkway South, make a right on Union Avenue; Parkway North, make a left on Ball Street. Drive a few blocks until you get to Springfield Avenue, then make a right. It is only a few miles to downtown Newark. As you drive and stop at the stop lights, look around. You are in Newark’s Central Ward, one of the most depressed urban neighborhoods in the country. Take a good look, notice a few things. There are plenty of fortune-tellers, but very few clinics. There are a lot of young people, but hardly anywhere but the streets for them to hang out. There are a lot of churches and schools, but last year 104 men and women were killed on these streets. You will notice very quickly that something is deeply wrong. I dare you to say an arena will fix it.
-- Douglas Carlucci