Numlock Sunday: Pat Garofalo on New Jersey's WrestleMania Boondoggle
|Oct 20, 2019|| 1|
By Walt Hickey
Welcome to the Numlock Sunday edition. Each week, I'll sit down with an author or a writer, behind one of the stories covered in a previous weekday edition for a casual conversation about what they wrote.
This week, I spoke to Pat Garofalo, he’s the author of The Billionaire Boondoggle who also writes the newsletter Boondoggle, which is a personal favorite of mine covering the maddening, crazy politics of local tax incentives. Here’s a recent story he covered that appeared in Numlock:
Minnesota is rolling out a new reform to its film and television incentive plan after The Tonight Show with Jimmy Fallon made a mockery of the rebate. The New York-based television program received $267,000 in subsidies from the state in 2018 after filming one episode in Minneapolis, the town that was hosting the Super Bowl. This illustrated how badly thought out the incentive plan really was, namely that it allocated funds on a first-come, first-serve basis rather than on whether the productions, in fact, created any local jobs or growth. The state has since fixed that loophole and also said it will no longer offer state funds to one-off television episodes tied to national events.
I wanted to talk to Pat about WrestleMania, which just this past week scored a $3 million tax kickback from New Jersey as he detailed in his post How Wrestlemania Body Slammed New Jersey. What followed was a broad conversation about the end of the absurd Kansas City Border War, why New Jersey is the epicenter of the future of tax incentives, and why WrestleMania got $3 million.
This interview has been condensed and edited.
Walt Hickey: You wrote a great story about WrestleMania and how New Jersey decided that it was a good idea to give $3 million to them. What happened?
Pat Garofalo: That was an outgrowth of New Jersey's TV and motion picture film tax credit program. For a bunch of reasons, those programs in general don't really work. They tend to create just a lot of short-term jobs and economic impact. It's kind of a sugar high, in that there's a spike that disappears, not anything longterm or sustainable. You're just renting jobs.
This event, in particular, failed on a couple of extra levels. The first one being, it was literally a one-night event! For $3 million, no way you're going to get the economic impacts from literally one night to make that cost worthwhile.
But the second level is that the thing was in MetLife stadium. I'm from New Jersey, I grew up in New Jersey, I spent a lot of time at what was then Giants Stadium which is where MetLife stadium now stands in the Meadowlands in East Rutherford, New Jersey. Anyone who's been there knows that there is absolutely nothing there. It is three sports facilities and a mall that hasn't opened yet in the middle of a swamp. There's just no possible chance that there's going to be any of the kind of trickle down, bankshot economic benefits from hosting this event. Normally when people talk about having an event at a stadium, it's that people are going to go to the bar, and then the restaurant, and they're going to go downtown and it'll be great. There is literally no way for that to work in this location. So it's not just from a program that has a flawed premise, it then fails at a bunch of extra levels.
I do want to talk a little bit more about the Meadowlands because you've written about it quite a bit, as it's basically the worst case scenario for this kind of economic development. You mentioned that there's a mall that's opening up.
Oh my goodness. Yeah, The American Dream.
My brother and I were driving past it the other day and I basically told him that it was the Iraq War of New Jersey governors, because nobody’s ever successfully extricated themselves from it and they each just throw more money at it.
This is the third iteration of it. It used to be called “Xanadu” before it was the American Dream. The name New Jersey residents gave it was Xanadon't, which is my favorite little tidbit about it.
It's basically supposed to be a counterpart to Mall of America, it's by the same developers. The idea is to have this mega-mall in the Meadowlands that's going to be a tourist attraction. We're talking billions of dollars in state subsidies and in local county and town subsidies that have gone into this thing. It's been delayed and delayed and delayed years and years. It was supposed to open, it never has.
But again, talking about things failing at a fundamental level, you're building this thing in the mall capital of the world! New Jersey has more malls per capita than anywhere else in the country. You're also just not that far from New York City, so I can't for the life of me understand why people are going to go out to the Meadowlands to go to this thing rather than going to either New York City or their local mall. It just doesn't make sense on any level.
This is a literal promotional image they have on their website in a section called “A Vibrant Location”
But as you said, many New Jersey governors have thrown money into this thing. It was Chris Christie who called it "the ugliest damn building in New Jersey, maybe in America." And that really does sum it up.
There are two points to make on this. I think this is a good example of how when development projects go wrong, no one ever wants to pull the plug. Everyone just tries to double down and then triple down because if you pull the plug, that money is just gone, and this is all a waste and you have to admit that it was a failure and no one wants to have that on their watch. They think it's better to just stick fingers in the dam and hope that the next governor can make something of it and then you'll be gone before the project collapses.
But the other thing is in this world I don't see mega malls as a viable retail option. There's been a mall apocalypse, there has been a retail apocalypse, the industry is shedding stores and jobs and locations. It sort of seems like 1996 called and wants its development plans back. I really don't get it. And maybe I'll be proven wrong, and maybe lots of people will want to drive out to the Meadowlands and walk across acres of parking to go to a giant mall. I'm just super skeptical.
The goal is getting the tourist to New York City to get on an NJ Transit train and schlep out to Jersey and going shopping.
You can't convince me that someone's going to be like, "Times Square? I'm over that. I'm going to ride to New Jersey on notoriously faulty transit to the middle of nowhere to go to this mall." Sure, it has all sorts of stuff like ski slopes and tons of restaurants and all sorts of fancy things. I really just don't think that's going to work. Mall of America is unique in that it is "the thing" in that part of the country. But in New Jersey, it's just going to be competing with tons of stuff. It's going to be hard to get to. I just really don't see it working as other development projects.
We've talked enough about New Jersey, I think for the time being. I did want to talk a little bit about it--
When it comes to this topic we can't talk enough about New Jersey! I'm not sure if you've been following, but they've been actually doing a ton of work on their corporate tax incentive programs. The current governor launched this big audit. They've been uncovering all sorts of horrible nonsense.
Really, on this topic, New Jersey is the epicenter of the universe right now.
Like how they called states "laboratories of democracy" but New Jersey is instead like the laboratory of terrible, terrible government incentive programs.
Absolutely. But I don't think they're unique in the badness of the programs. I think they're unique in the fact that somebody bothered to look deeply into them. On one level it's laudatory: Hey, good job guys, you're investigating all things that are going wrong. If lots of other states did this, they'd find the same thing.
When I saw the Joker movie, which filmed in New Jersey and got money to film in New Jersey, it’s not like that made a case about moving to New Jersey.
Not a lot of Joker tourism in New Jersey. The thing about WrestleMania, and this is true not just in New Jersey but in lots of other things, is that their film programs are just first come, first serve.
There was an episode a few months ago in Minnesota where Jimmy Fallon's Tonight Show did a special Super Bowl episode in Minneapolis on the Super Bowl. They got subsidies for that, and lots of local lawmakers freaked out and asked, "why are we subsidizing a one-off episode of The Tonight Show that was linked to the Super Bowl that was already here in the stadium that we paid for? Why are we paying for these things three times over?" And the reason was because Minnesota's film and television tax credit programs doesn't discriminate between programs.
If you got your application in the door and you hit the qualifying criteria — which is just spending a certain amount of money in the state — you've got the tax breaks, no questions asked. It's the same situation in New Jersey. As long as WrestleMania hit those criteria, they were going to get the tax break. So what Minnesota did was to go back and say one-off, one-night national events no longer qualify. And New Jersey could do that today, and fix this problem.
Can you talk a little bit about Kansas City and what went down there?
That was, for a long time, the most absurd of the corporate tax cuts incentives. They actually called it the "Border War" because Kansas City straddles the Kansas and Missouri state line. The two states had these economic development offices that were literally paying companies to just move across the state line to the other side.
You had companies — staying in the Metro area, keeping all the same employees — just moving across town and getting subsidized to do so. Some companies would go back and forth and back and forth, and each time get paid to do it. Just patently, clearly absurd. Hundreds of millions of dollars were spent by the two states collectively on this. A few months ago they finally decided to call a truce.
It's the first time that there's been a — by law — legislative truce in one of these border battles. For one, that's really encouraging. That's good. The law is on the books. It's not just a handshake, it's really solidified and concrete, and the states have to follow it. At the same time, it took them years and years and years and multiple administrations on each side to finally get to that point, in a situation that was so obviously ridiculous that it shouldn't have really taken them that long to figure out something and to realize that they were getting played by these corporate interests.
That's the problem with these programs writ large, is that everyone thinks they have to do them. There have been multiple efforts at interstate compacts, multiple state compacts, to try and prevent this stuff from happening. And all it takes, is one person being like "Nope, I'm back in the game and giving out a new tax credit" for the cycle to start all over again. All governors and legislators and mayors and lawmakers feel pressure to participate. This was one ridiculous example, where they felt pressured to do it even though it was obviously not going to be very good. It's emblematic of the programs writ large. Even though if you pull most lawmakers aside, I think they would admit that yeah, we probably really shouldn't be doing this, but they feel pressured to do it.
The race to the bottom stuff is really concerning. There's been talk of Jersey, Connecticut and New York maybe cutting down the arms race a little bit.
That's certainly the most likely location for the next one, just because New Jersey had been doing so much and then clearly getting played. There was a story about that in the Philadelphia Inquirer a few weeks ago where the companies were just making up addresses to move to in New York. As in, find me an address in New York that we could pretend to move to in order to qualify for these economic development programs. That's just happened over and over and over again. New Jersey got played. I think if it's going to happen anywhere, it's gonna happen there, because we know what the problem is. But unless you do it by law, like Kansas City, then I'm actually kind of skeptical because as I said, all it takes is a new governor to come in and say, "nope, we're not abiding by that anymore." If memory serves that did actually happen in the tri-state area once before, and it was New Jersey that broached the pact and started using these programs again.
Anything you're looking forward to over the next couple months? Where can folks find you?
I wrote a book this year called The Billionaire Boondoggle. It gets way in-depth on not just movies but sport stadiums, and the Olympics, and you can read all about the American Dream mall. You can really find out the how's and why's of why so much of your money goes into these tax programs and why so much of it is wasted. I also have the newsletter.
I'm looking at 2020 a little bit. Bernie Sanders dropped a big corporate tax plan yesterday, that was actually really exciting. That debate is going in kind of a cool direction. With Kansas City and with the Amazon HQ2 causing all sorts of consternation up in New York, it's one of the few moments when I'm cautiously optimistic about the direction this debate is going. Usually it's all awfulness and stupidity, which Hollywood production or which sports owner is getting a tax break. But right now there does seem to be at least a little bit of momentum, I think it's pretty exciting time to be talking about this topic.
If you have anything you’d like to see in this Sunday special, shoot me an email. Comment below! Thanks for reading, and thanks so much for supporting Numlock.