Harrison, N.J. officials say they are past a rough financial patch that coincided with the construction of a Major League Soccer stadium, and are now seeing the investment pay off.
The rough ride for the town of 13,000 following Red Bull Arena's opening in 2010 included a 2011 downgrade to junk-level Ba3 of its general obligation bonds, with Moody's Investors Service citing "outsized enterprise-related risk" amid the slow emergence of arena-related development Harrison had counted on.
A fight between Harrison and the New York Red Bulls over stadium property taxes remains unresolved.
But a series of upgrades returned Harrison to investment grade in September 2014, followed most recently by an October 14 upgrade to Baa2 from Baa3.
The Red Bulls are also doing well on the field, finishing the 2015 regular season with the top regular season record in Major League Soccer, helping drive their average attendance in the 25,000-seat stadium to 19,657.
The $200 million arena was financed with the help of $39.4 million revenue bond deal from the Hudson County Improvement Authority to finance acquisition of the arena site across the Passaic River from Newark.
The land is owned by the Harrison Redevelopment Agency and leased to the Hudson County Redevelopment Agency, but a New Jersey tax-court judge ruled in 2012 that the Red Bulls needed to pay property taxes to Harrison since revenue generated in the stadium goes to the soccer club.
The HCRA bonds are ultimately backed by Hudson County's unconditional guarantee, but the intended repayment source is lease payments from Harrison, according to Moody's.
The Red Bulls have appealed the property tax ruling to the New Jersey Supreme Court trying to recoup nearly $3 million paid in 2010 and 2011. Moody's, in its October upgrade, said it believes the town has enough reserves to withstand a potential loss in property taxes from the facility.
Harrison Mayor James Fife said despite the Red Bulls' challenge to the stadium's tax status, their entry into the town has been a positive for businesses and a boost to its image. Fife said on game days, restaurants near the stadium are full and the town is also receiving parking revenue in shared agreements from developers who own lots.
"They are a good corporate addition to the town," said Fife of the Red Bulls. The team previously played at Giants Stadium in East Rutherford, and was known as the New York/New Jersey MetroStars from 1996 to 2005, when it was purchased by the Austrian makers of the Red Bull energy drink.
"It has been a positive for us," Fife said.
Red Bull Arena is the largest taxpayer in Harrison and accounts for roughly 6% of the town's taxable assessed value, according to Moody's. Receiving clarity on the tax issue will be important for Harrison to reap benefits of the tax revenue, said Moody's lead Harrison analyst David Strungis. The professional soccer club initially agreed to pay Harrison $125,000 in payments in lieu of taxes for the town's stadium investment.
"I don't know if they have been able to see the true benefit of the taxability as long as this Supreme Court issue looms over their head," said Strungis. "To maintain that property on the tax rolls is something that benefits the town."
Moody's analyst Josellyn Yousef said that sales taxes from surrounding businesses near the stadium go to the state, but that the success could translate to increases in property taxes for Harrison if real estate values climb. A new Westin-brand Element Harrison-Newark hotel near the stadium that opened last year also adds additional hotel tax revenue, she said.
The Red Bulls' arrival has spurred improvements to the Harrison PATH rail transit station about three quarters of a mile from the stadium.
The Port Authority of New York and New Jersey in the midst of a $256 million project replacing the 80-year old station, which Mayor Fife attributes in part to increased ridership for Red Bulls games. The initiative includes expanded platforms to accommodate 10-car trains, widening stairs and increased escalator access.
"Harrison is experiencing a renaissance of new development and investment that is having a very positive effect on the community and on Hudson County," said New Jersey State Sen. Nicholas Sacco, D-North Bergen. "Many projects have played a role, from the soccer stadium to the renovated PATH station to the new parking facility built by the Hudson County Improvement Authority, and all of it is helping to support new residential construction that is bringing in new residents and businesses. All in all it's a win for these investors and a win for the residents of Harrison."
Port Authority spokeswoman Cheryl Ann Albiez said ridership has increased to Harrison thanks to Red Bulls games as well as real estate development surrounding the station. Through September the station was averaging 6,261 riders day, up 5.6% from last year's daily average of 5,927 "The Port Authority does see greater PATH ridership to Harrison on Red Bull game days, but the total fiscal effect on the authority is difficult to determine as the five-year lifespan of the stadium coincides with closures for security work, World Trade Center construction and Sandy and post-Sandy closures," said Moody's analyst Earl Heffintrayer.
Fife said the Red Bulls' success this season has helped Harrison get more attention on a national level. He said the Red Bulls' 17 regular-season home games a year also provide an opportunity to showcase the area to people who could potentially consider living in one of Harrison's new developments.
"We have gotten good recognition from the Red Bulls," said Fife, a Democrat who was elected mayor last year following the death of Raymond McDonough. "Harrison is getting known."
Randy Gerardes, a senior analyst at Wells Fargo Securities, said stadiums can add a boost to certain areas from television exposure and fans attending the games depending on the community. Gerardes added that location of the sports venue can also play a role in whether real estate development accompanies the project, pointing to the Brooklyn Nets Barclays Center home arena as an example where this is being accomplished.
"If the stadium is developed correctly then there can be real estate development around it,' said Gerardes, who specializes in project financings for stadiums in his role with Wells Fargo's infrastructure finance group. "As an everyday economic driver it depends on the size of the community."
Robert Boland, a sports business and law professor at Ohio University, said timing of Red Bull Arena's debut was challenged by the recovery from the 2008 recession and opening in midst of four other new professional stadiums in the New York City metropolitan region from 2007 to 2010.
He said overall the stadium has been a success and is being aided by the rising popularity of soccer and MLS, but that for the venue to succeed long-term it needs to be conducive to holding additional events like concerts, which right now is limited due to a grass field surface that can easily be damaged. The stadium does host some international soccer games and next year will host a regular season English premier league rugby match.
"My biggest concern with the feasibility of the stadium is the lack of versatility," Boland said. "There is still some unrealized potential."