How to Dismantle an Atomic Municipal Debt Bomb
Like the rumored disposition of Jimmy Hoffa's remains, and Bruce Springsteen's car from "Rosalita," in the new issue of City Journal, Steven Malanga writes that there's plenty of debt that's stuck in the mud somewhere in the swamps of Jersey:
In the early 1970s, New Jersey officials decided to build a sports facility in the Meadowlands, the state’s wetlands just outside New York City. To help pay for it, they formed the New Jersey Sports and Exposition Authority (NJSEA), a quasi-governmental agency with the power to issue debt. The authority floated $302 million in bonds, used the proceeds from the bond sale to construct Giants Stadium and a Meadowlands racetrack, and planned to pay off the debt in 25 years, largely with proceeds from the track but also with some help from the stadium. Horse racing proved a big hit, and the plan seemed bound for success.
But the pols couldn’t resist soaking the Meadowlands. They siphoned track proceeds into the state budget; repeatedly refinanced the NJSEA’s bonds, pushing repayment dates far into the future; and relied on the authority’s good credit rating to launch other building schemes, including a costly but unsuccessful aquarium in Camden. Today, 35 years after its first bonds, the NJSEA is $830 million in hock. Worse, it can’t repay that debt because business has cratered at the racetrack, still the Meadowlands’ principal revenue source. As for Giants Stadium, it was demolished this year, and its replacement won’t be contributing much to the debt repayments. The state, facing its own cavernous budget deficits, has had to assume the authority’s interest payments—about $100 million this year on bonds that now stretch out to nearly 2030. “The sports authority is paying the consequences for politicians using it for their pet projects,” observes Steve Lonegan, former mayor of Bogota, New Jersey.
Read elsewhere for similar horror stories from across the country, and what can be done about them.
Related: Some residents of the now-infamous small California town where the city manager makes a hefty $800k a year(!) and retired city employees will reportedly bring home seven digit (!!) pensions are sporting T-shirts saying "My city is more corrupt than your city."
Though, I can think of plenty of other cities that would beg to differ.
Meanwhile, in other related economic news, great moments in Friday night document dumps: "Obama WH gives its economic policies a good, solid F+."
Did they grade on a curve?