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When Newark Mayor Sharpe James unveiled the city”s latest plan for a downtown sports arena last week, he presented it as a hub of economic development. But the $300 million plan had barely been launched before it ran into political and economic resistance. In Trenton, Governor James E. McGreevey says he favors keeping open Continental Airlines Arena in the nearby Meadowlands. The site, located some 12 miles from Newark, now houses the New Jersey Devils hockey and Nets basketball teams. Meanwhile, critics questioned whether the Newark project would be viable. Consider the advantages of the arena proposal. The city has a willing patron in the Devils, who have agreed to play in a Newark arena in 2007. (The Nets were sold last month to Brooklyn developer Bruce Rattner. He plans to move the team to Brooklyn.) Financing doesn’t seem to be a problem: Newark will put up $200 million from lease payments on Newark Liberty International Airport and the Devils would kick in another $100 million. The city already owns the land for the 18,000-seat arena, which would be on Lafayette Street between Mulberry and Broad streets. It would be the centerpiece of a Downtown Core Redevelopment district that envisions more than $1 billion of commercial projects. Included would be 4 million sq. ft. of office space; 500,000 sq. ft. of stores and family entertainment attractions; and a 300-room hotel. Plans also call for a new building for the city’s board of education and municipal offices and parking garages for 3,500 cars. Backers say all this would generate $28 million a year in taxes and create more than 13,500 permanent new jobs plus thousands of construction jobs. Over 30 years, the district would generate more than $670 million in revenue for Newark. Supporters of the project include Arthur Stern, CEO of Cogswell Realty Group in New York City, which has invested $70 million in two Newark office buildings with a total of 850,000 sq. ft. Cogswell is now building 550 luxury apartments for some $200 million. “When we meet with tenants,” says Stern, one of the first questions they ask is, ‘When is the arena coming?’” But trouble may lie ahead. McGreevey seems tacitly opposed, for starters. He resists any use of taxpayer dollars for a Newark arena and has thrown his weight behind the New Jersey Sports & Exposition Authority (NJSEA), which operates Continental Arena. Under CEO George Zoffinger, the NJSEA turned an $11 million loss for 2002 into a $9 million operating profit last year. James wants the Newark project to be seen as a downtown revitalization move, but its impact remains uncertain. While the Devils have won the Stanley Cup three times since 1995, they have continued to lose money. The success of an arena would hinge on its ability to bring in additional attractions. “It’s possible for a single-team arena to make a go of it,” says James Hughes, dean of the Edward J. Bloustein School of Planning and Public Policy at Rutgers University in New Brunswick. Hughes cites the Nationwide Arena in Columbus, Ohio, the home of the Columbus Blue Jackets of the National Hockey League (NHL). But Nationwide faces no local competition for concerts, shows and other activities that help make it economically viable. “The dilemma for the Newark arena is that the Continental Arena is probably the most profitable in the country for non-Devils and nonbasketball events,” Hughes says. Continental Arena would remain a draw as part of the $1.4 billion Xanadu sports and entertainment complex planned for the Meadowlands. Construction of Xanadu is scheduled to start this year. Hughes also questions the impact a Newark arena would have on the downtown area. “Most studies show that sports complexes don’t have a multiplier effect on development,” he says. “Newer arenas tend to internalize a lot of the traffic in restaurants and the like. And you don’t see a lot of spillover from Madison Square Gardens in New York City.” On the other hand, Hughes says a Newark arena could generate lots of foot traffic. He says that has been the case with the New Jersey Performing Arts Center, which is located a few blocks from Newark’s Penn Station. But real estate experts aren’t eager to see 4 million sq. ft. of new office space come on the market. “All that space is being planned when the Newark market has a 20% vacancy rate,” says Benjamin Lambert, a partner and real estate attorney at the law firm of Ohrenstein & Brown. Lambert’s firm last month relocated from the Gateway Center in Newark to Rutherford to accommodate an expansion. He says Newark must address concerns over “crime and the perception of crime” if it hopes to fill the planned office space. Critics also question the wisdom of using the $200 million from the Newark airport lease for the arena project. “It’s not something I get excited about because there’s other uses for the money,” says Hughes. Some 28% of Newark’s 273,500 residents live below the poverty line. Anticipating opposition, James last week rolled out a string of endorsements for the arena project. Supporters included Lou Lamoriello, CEO of the New Jersey Devils; Gary Bettman, commissioner of the NHL; and Al Koeppe, CEO of the Newark Alliance, a nonprofit group of senior executives of companies with offices in Newark. Support also came from state Commerce Commissioner William Watley, the pastor of Saint James African Methodist Episcopal Church in Newark. Watley said a downtown arena would be “a great benefit to the city, region and state.” With those endorsements in hand, James last week led a pep rally at the Ironbound Recreation Center to welcome the Devils to Newark. As part of the festivities, the mayor skated briefly with the East Side High School hockey team while the school’s marching band played a musical accompaniment. Zoffinger of the NJSEA claims to be unruffled by the Devils’ planned departure. His agency loses about $5.2 million a year on the Devils’ lease because of the way it was originally structured. “When that lease comes up for renewal [in 2007], we are not prepared to continue losing money,” says Zoffinger. “We therefore believe that their making arrangements in Newark is better for us.” Zoffinger also remains unfazed by the loss of the Nets, another team awash in red ink. Zoffinger says the NJSEA has been losing $2 million to $2.5 million a year on its lease with the National Basketball Association franchise. Zoffinger is focusing his attention on Xanadu, which is being built by Mack-Cali Realty and Mills Corp. of Arlington, Virginia. Its attractions will include an Alpine-style ski resort and a baseball stadium for the minor league Bergen Cliffhawks. Zoffinger says he is also in preliminary talks aimed at bringing a major league baseball franchise to the Meadowlands. A City’s great ExpectationsWhat an arena might mean for Newark:revenue over 30 yearsPayroll tax: $137 millionReal estate tax: $359 millionParking tax: $93 millionSales tax: $90 millionTotal: $679 millionJobsArena: 500Hotel: 225Offices: 10,500Retail: 2,000Total: 13,225Source: City of Newark| email [email protected]