Since the start of last season, the New Jersey Devils have been playing in the glittering Prudential Center in Newark, New Jersey. But now that the rent on that publicly-funded palace has come due, the Devils are looking for a way out. Here's Maura McDermott from the Star-Ledger:
The Devils do not plan to pay the first year's rent on the $375 million Prudential Center and instead say the Newark Housing Authority owes them nearly $800,000 due to delays in completing the arena.I think we should all personally thank Devils owner Jeff Vanderbeek for providing an object lesson in why governments should think twice, and maybe even a third time, before agreeing to publicly finance sports arenas.
The authority, which owns the arena, gave the team until last Monday to make what was expected to be a multimillion-dollar rent payment, granting the team's requests for two extensions on the Sept. 30 deadline.
On Tuesday, team owners delivered 12 pages of letters and calculations to the authority stating their lease allowed them to deduct nearly $2.9 million from the roughly $2.1 million rent owed and take a $210,000 credit for next year's rent, due to delays in building the year-old arena and completing construction on surrounding land.
As a result, the authority owes the team $791,530, according to a letter from Gordon Lavalette, an executive vice president with the team.
First off, folks should know that the Devils aren't the first team to pull this trick. Here in Washington, the Nationals held back rent from the city and used exactly the same reasoning to justify it.
But here's the real kicker: we're heading into a recession -- an economic contraction. When the economy contracts, salaries contract. When salaries contract, tax revenue contracts -- and urban governments like Newark are looking at a long stretch where they're going to have to make some hard financial choices. And in the midst of all this, the Devils are going to be withholding a couple of millions of dollars from the city that I'm betting their accountants expected to receive.
And when Newark doesn't get that money, it means somehow, somewhere, some vital city service is going to get cut.
The only other option that might be available would be for the state to bail out the city. In other words, all taxpayers statewide are going to have to pony up the dollars that the Devils ought to be paying.
One final question to ponder: we need to consider the real possibility that the Devils are going down this road not to simply enforce the contract to the last letter, but rather as a rational response to help conserve cash in anticipation of a wider economic downturn.
I watched the Devils-Maple Leafs game last night, and while the attendance was pegged at just above 14,000, I counted a lot of empty seats.