the staff of the Ridgewood blog
East Rutherford NJ, visit the American Dream in East Rutherford on a Saturday, and you’ll find a bustling scene. Shoppers are enjoying indoor roller coasters, waterslides, skiing, and indulging in the myriad shopping and dining options available. Despite this apparent success, mall officials assert that the $5 billion entertainment and retail destination, heavily subsidized by state and local funds, isn’t fully operational. As a result, they claim they’re not yet obligated to make significant payments to local municipalities.
The Dispute Over Payments
American Dream, financed by about $1 billion in state and local subsidies, is at the heart of a contentious debate. The mall’s owners, Triple Five, argue that since the mall is not 100% occupied, they are not required to pay the millions of dollars owed to local towns. As of July 1, the mall was 87% leased, according to a public filing.
Secaucus Mayor Michael Gonnelli remains skeptical. “That’s a good place to be,” he said. “I know the mall is packed, especially on the weekends. They’re not paying the towns.”
Despite the high leasing rate, mall officials have not disclosed plans to achieve full occupancy, instead highlighting recent retail and entertainment additions. Experts like Charles Cristella from JLL emphasize that maintaining 100% occupancy is exceptionally challenging, with most high-performing malls averaging high-90% occupancy due to frequent tenant changes.
Financial Obligations and Disputes
The payments, intended to substitute for property taxes, were to be funneled from American Dream to the New Jersey Sports and Exposition Authority (NJSEA) and then distributed to local towns. These funds are crucial for covering public services that benefit the mall and its patrons.
The developer is obligated to pay $1.15 million annually to 13 Meadowlands towns in the first two years post-opening, escalating to $1.65 million by year five. However, the NJSEA has yet to receive any of these payments, though it has received rent payments totaling $1.2 million.
Local officials assert that the mall effectively opened in 2019 with the launch of Nickelodeon Universe Theme Park. Despite this, towns claim they have not received the funds they are due. East Rutherford, home to the mall, argues that it is owed $7.5 million in payments in lieu of taxes (PILOTs) and $400,000 for sewer payments, prompting a lawsuit against American Dream and Triple Five.
Carlstadt Mayor Robert Zimmermann stated that the mall owes his town $4.2 million over five years since its opening in 2019.
The Legal Battle
East Rutherford’s lawsuit contends that American Dream has been operational for three years, drawing millions of visitors and generating substantial revenue, yet the mall’s owners argue they are not yet liable for payments as the mall is not fully open. Triple Five has denied these allegations, seeking dismissal of the case.
Zimmermann remains cautiously optimistic due to recent leadership changes at the NJSEA and preliminary discussions with American Dream executives.
Evolving Expectations and Future Steps
The original agreement from 2011 didn’t foresee the impact of events like the COVID-19 pandemic. Marc Pfeiffer from Rutgers University suggests that economic shifts necessitate adjusted expectations and recommends mediation or arbitration to resolve the dispute. This could involve retired judges facilitating a solution potentially involving staggered or reduced payments.
“They are far better off attempting to mediate a solution,” Pfeiffer advised. “If that doesn’t work, to agree to a final arbitration. It could be a lower amount. It could be a staggered amount based on a verifiable metric.”
As the situation unfolds, the parties involved must navigate these complex negotiations to reach an equitable resolution, balancing the mall’s operational realities with the financial needs of the surrounding communities.
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