Chris Christie’s “too big to fails”
Chris Christie, the Republican governor of New Jersey who has consistently been championed as a “fiscal conservative,” has a real soft spot for several of his state’s “too big to fail” private projects. These projects include the massive retail/entertainment/sports/dining complex at the Meadowlands and the Revel casino project in Atlantic City. Governor Christie has made his state, which is in perilous financial condition, equity partners in the two projects.
Meanwhile a court order is forcing Governor Christie to increase the state’s contribution to public schools:
The New Jersey Supreme Court ordered the Christie administration on Tuesday to increase state education aid by $500 million in the coming school year, saying it had failed to meet its constitutional obligation to provide adequate educational resources for poor and minority children…
… Stephen M. Sweeney, the Senate president, said that Mr. Christie â€śwas well aware that his draconian cuts to education were illegal,â€ť and noted that during his 2009 campaign, the governor vowed not to cut school aid.
Yes to gambling and shopping and no to education — there is something horribly wrong with this picture.
The Revel casino project is a failed investment of Morgan Stanley that was recently refinanced with Governor Christie’s support. The state is committing $261 million to the project and will own a 20% equity stake. NJ.com covered the opposition to the investment:
New Jersey Policy Perspective Executive Director Deborah Howlett questioned how Christie could claim the state is broke while promising hundreds of millions in subsidies.
“When we have to take such deep cuts in our investment in educating our children, in police, in sanitation workers, for Peteâ€™s sake, but weâ€™re still finding hundreds of millions to give to corporations, thereâ€™s an imbalance there,” said Howlett, a former spokeswoman for Gov. Jon Corzine, who lost to Christie in 2009.
Whether public entities should subsidize private, for-profit entities with the “hope” of future tax revenues is an important question. Is the public entity getting full participation in the profit of the enterprise, or is it merely “dumb money” that tides over the private entity until it can be pushed out?
Jeff Tittel, director of the New Jersey chapter of the Sierra Club, said the kind of state financing in the Xanadu agreement only helped enrich the developer at the expense of taxpayers.
â€śAt a time when the governor has taken money from renewable energy and schools, heâ€™s bailing out an ugly mall,â€ť Mr. Tittel said.
Brigid Harrison, a professor of political science at Montclair State University, said, â€śThe idea that Xanadu, which has such a reputation for being a boondoggle, is worthy of state investment â€” itâ€™s antithetical to what Christie says the role of government is.â€ť But Dr. Harrison said that the governor had no good options, and that voters would approve of his actions if construction resumed, the exterior became more attractive, jobs were created and the mall opened.
Critics have long predicted that Xanadu would harm every other retail center in North Jersey, or that it would never generate enough business to succeed.
States and municipalities will be strong and successful when they act prudently and focus on their core responsibilities. For New Jersey, it’s very hard to argue that betting on future returns from their “too big to fails” is fiscally conservative.