Newark, N.J., and Essex County have successfully pitched a plan to retire their outstanding debt for a former minor league baseball stadium.
New York-based developer Lotus Equity announced last month plans to purchase Bears and Eagles Riverfront Stadium for $23.5 million and transform the 7.5-acre property into a mixed-use neighborhood. A spokesman for Essex County Executive Joseph DiVincenzo said the sale proceeds will be used to pay down $18.3 million in bonded debt the county and city of Newark owe for construction costs of the stadium. The city and county collaborated on borrowing for the $34 million 6,200-seat stadium that was home of the Newark Bears from 1999 to 2013.
"Essex County and the City of Newark have a tremendous economic growth opportunity with the sale of Bears and Eagles Riverfront Stadium to Lotus," said DiVincenzo in a statement. "Essex and Newark also benefit financially because the sale of the stadium removes significant, long-term debt obligations from both of our capital budgets and provides one-time proceeds that will benefit our general funds."
The Newark Bears are among three independent minor league baseball franchises in New Jersey to fold in recent years, joining the Atlantic City Surf and the Camden Riversharks. Other minor league franchises in the region not affiliated with Major League Baseball have thrived, however, including the Somerset Patriots in in Bridgewater Township, N.J., and the Long Island Ducks in Central Islip, N.Y.
The Essex County Improvement Authority issued construction bonds in 1997 under a deal where Essex County and Newark would each pay back 50% of the stadium costs. While both municipalities shared the costs of developing the stadium, DiVincenzo said Essex received about 53% of $5.2 million in net closing proceeds from the Lotus Equity sale, because the county had previously paid off a larger share of the bonds. The surplus money not earmarked for debt service will be marked as revenue under Essex and Newark's general funds.
The Essex authority issued $12.5 million in general obligation guaranteed lease revenue bonds in 2005 to retire a portion of the costs for acquiring land and building the stadium. Moody's assigned a Baa2 rating with a stable outlook for the refunding bonds.
Lotus is planning 2.3 million square-feet of residential, office, retail and cultural space development on the ballpark property. The land is located 500 feet from the New Jersey Transit Broad Street station, which is an 18-minute train ride away from midtown Manhattan.
"The Lotus development project will bring jobs, housing and new opportunities to Newarkers," Newark Mayor Ras Baraka said in a statement. "This project anchors our downtown development activities and brings new living and working options to current residents, students and those looking to make Newark their home."
Newark officials don't have an estimate yet on how much revenue or economic impact the new development may deliver. The city will receive all of the new tax revenues that derive from the property.
Moody's Investors Service downgraded Newark two notches to a near-junk level Baa3 with a negative outlook in May 2015 citing a negative fund balance, reliance on market access for cash flow and a history of late budget adoptions. The city had $561 million of total general obligation debt as of a Nov. 22 filing posted on the Municipal Rulemaking Board's EMMA website.
Essex County encompasses 22 municipalities in northeastern New Jersey. The county is rated Aa2 by Moody's and had $359.8 million in total net outstanding debt, according to a September EMMA filing.
The Newark Bears, because they were unaffiliated with MLB during its short existence, were unable to attract enough fans to make stadium a success, according to Robert Boland, a sports business and law professor at Ohio University. The Bears, who first played in Atlantic League and then the Cam-Am League, highlighted the obstacles independent baseball poses for urban settings like Newark, according to Boland.
"There is a challenge in the urban market for unaffiliated baseball," said Boland. "It was a tremendous competitive restriction for that ballpark."
The Bears only drew an average of 453 fans for the team's final season in Newark in 2013, according to attendance figures from the Cam-Am League website. Boland said a Mets or Yankees farm team in Newark could have succeeded, but the New York MLB teams held territorial rights that allowed them to block each other from making such a move. Boland added that the Bears' momentum suffered a blow when two years after the Newark ballpark opened Brooklyn and Staten Island opened minor league stadiums affiliated with the Mets and Yankees, respectively.
"They were doomed somewhat by the huge presence of other minor league teams in the region," said Boland. "It took all the momentum from right under them from a baseball perspective."
The development of Bears and Eagles Riverfront Stadium arrives on the heels of a $30 million mixed-use development on 22 acres of vacant downtown land next to the Prudential Center that Mayor Baraka announced in March was moving forward 11 years after the project was first conceived. Lotus has previously participated in Newark's revival efforts with an investment in a large downtown office building called 2 Gateway Center.
"We are extremely excited to continue our decade-long history of investing in Newark by delivering a dynamic and sustainable development in the City's downtown that will create a pedestrian-friendly and vibrant atmosphere for existing and new residents to live, work and play," Lotus CEO Ben Korman said in a statement. "This truly is a premier site offering unparalleled connectivity in the heart of a culturally rich and diverse community and we look forward to collaborating with the City to realize its transformation into a 24/7 neighborhood destination."
Though minor league baseball wasn't a hit in Newark, Boland stressed that building the stadium was still a worthwhile investment. He said that the stadium was a symbol of urban renewal and the new development planned on the ballpark property could be a home run for the city.
"It's bad for baseball, but will probably be good for Newark over the long-term," said Boland of the new planned development. "The ballpark did some good over its lifespan to attract people to Newark."