A long-stalled development of vacant land in Newark, N.J., could provide a financial jolt to New Jersey's largest city.
Mayor Ras J. Baraka expects the Triangle Park project, which was first proposed in 2005 and is slated to break ground this spring, to trigger a boom in tax revenue. A mixed-use development with residential housing and commercial businesses is planned for the 22-acre site to go along with new green space and a half-mile footbridge. The $30 million project, estimated to be completed in 2018, will be financed largely through bonding and state funding.
"This development plan is more than bricks and mortar," Baraka said March 9, as he announced that the project was moving forward. "It is the creation of construction jobs now and commercial spaces and their jobs later, along with residential units, which enhance our tax base, economic strength, and desirability as a place in which to live, work and play."
The project next to the Prudential Center arrives when Newark is struggling economically. Moody's Investors Service downgraded Newark two notches to a near-junk level Baa3 with a negative outlook last May citing a negative fund balance, reliance on market access for cash flow and a history of late budget adoptions. Newark was among seven distressed New Jersey municipalities Moody's placed on review for a possible downgrade last year due to a heightened risk of state aid cuts. Newark's has $670 million of total debt outstanding.
New Jersey's Local Finance Board began providing oversight of Newark in October 2014 as financial stress worsened. Newark's fund balance had plunged to zero at the end of 2013 from 7.8% of revenues in late 2008.
Newark had a $766.2 million budget plan approved last September that raised taxes 9%. In order to plug a $60 million shortfall, the spending plan relies on short-term revenue streams such as $10 million in state transitional aid, sale of foreclosed properties and car rental taxes.
"They have a structural budget deficit that comes up every year," said Moody's analyst Josellyn Yousef. "It's something we want to see come down and considerably narrow."
Yousef said the Prudential Center and other recent downtown development projects will aid the Newark's payroll and parking tax revenues, but the ghosts of the Great Recession of 2008 still haunt the city.
Non-recurring revenues and state aid that Newark relied on suddenly sank around 2010, she said. "It was a shock to their budget and it's taken them a few years to adjust."
Mayor Baraka reported in his March 15 state of the city speech that he'd achieved a $29.5 million surplus balance after inheriting a $90 million deficit. He credited "significant gains" from property tax collections, employer payroll taxes and parking taxes.
"When we came into office the city coffers were completely empty," Baraka said. "We had an accumulated operating deficit of $50 million and unpaid bills totaling some $20 million. I'm happy to report that in our first full year in office all of the city's major bills have been paid, and we have finished the year $30 million in the black."
Moody's said in its ratings action last year that Mayor Baraka's' administration was making efforts to raise recurring revenues and that the city has numerous redevelopment projects underway. The ratings agency also said, however, that the city's high poverty rate could hamper recovery efforts.
Baye Adofo-Wilson, Newark's deputy mayor for economic and housing development, said Triangle Park will create attractions surrounding the Prudential Center, which is home of the National Hockey League's New Jersey Devils and the Seton Hall University men's basketball team. The project, particularly the footbridge, will help connect the city's downtown and Ironbound neighborhoods currently divided by a highway and commuter train tracks, Adofo-Wilson said.
"The Triangle Park development project delivers on a decade old promise to spur development near the arena and bring people back to Newark's streets," he said. "We believe that the footbridge will encourage residents and visitors alike to travel between the downtown arena area and our Ironbound community."
Though it has the lowest ratings in New Jersey, Newark was able to access the credit markets in 2015 thanks to the state's Municipal Qualified Bond Act. The credit enhancement program enabled Newark to issue $51.5 million in general improvement bonds last June that were rated A3 and priced with a top yield of 5.25% in 2029. City officials are using proceeds to permanently finance outstanding bond anticipation notes and tax appeal refunding notes.
While Newark is facing some serious immediate challenges, the city has plenty of long-term potential, according to Dr. Roland V. Anglin, director of the Cornwall Center at Rutgers-Newark. Anglin, who has studied Newark for two decades, said the city can benefit from its close proximity to New York City and booming real estate in nearby Jersey City. He said the city's access to mass transit will also help real estate property values.
"Newark is on the upswing," Anglin said. "The infrastructure is there."
Prudential Financial, which has been based in Newark since the 19th century, has helped spearhead the city's renewal efforts including $150 million in downtown revitalization initiatives. The financial services giant opened a new 20-story office tower last September for 3,000 employees two blocks from its global headquarters.
"You couldn't ask for a better location to do business," said State Sen. Ronald Rice, D-Newark, who has pushed to help the city's growth plans in the legislature. "I think the vision there is good."