Mayor Cory Booker persuades investors, donors to bet on still-struggling Newark

October 27, 2012

Cory Booker strides to the lectern at a June reception honoring hedge-fund founder Bill Ackman. Pershing Square Foundation, Ackman’s philanthropic organization, had pledged more than $25 million since 2007 to help poverty-racked Newark improve schooling, enhance parks and find jobs for ex-convicts.

Now, in Manhattan’s Mandarin Oriental ballroom, Newark’s 43- year-old Democratic mayor salutes one of the titans of finance whom he has persuaded to help revive his city — though some have never set foot there.

“The room is packed,” recalls Joseph Shenker, chairman of the law firm Sullivan & Cromwell. “You had every major hedge-fund, private-equity person.”

Booker holds the guests spellbound, using the Hebrew phrase “tikkun olam” — “fixing the world” — to describe Ackman’s generosity. It’s a notion Booker has adapted to Newark, and the moneyed elite are buying in.

“One of the things Cory Booker has done is turned Newark into a national cause,” says Shenker, 55, who remembers watching TV footage of the 1967 riots there that left 26 dead. “He has made it a serious issue for the United States.”

Midway through his second four-year term, Booker has raised more than $250 million in donations and pledges for a city whose previous three mayors were convicted of or pleaded guilty to felonies after leaving office.

Benefactors view Booker as somebody they can work with after decades of corruption, says Larry Sabato, director of the Center for Politics at the University of Virginia. Mining a network stretching back to Stanford University and Yale Law School, the mayor is promoting Newark as a lower-cost alternative to New York and overseeing nonprofit groups as they fund everything from security cameras to midnight basketball tournaments.

Facebook chief executive Mark Zuckerberg pledged $100 million for education to aid a school system that’s been under state control since 1995 and where just 61 percent of students graduate high school. The Silicon Valley billionaire chose Booker’s cause of school reform in 2010 after meeting him at the Allen & Co. conference in Sun Valley, Idaho.

Billionaires Nicolas Berggruen, founder of investment firm Berggruen Holdings, and Leon Cooperman, chief executive of the New York- based investment partnership Omega Advisors, are among others funding what Booker pitches as “a city of emergent hope.”

Developers are responding by turning long-vacant land into corporate headquarters, factories and housing, with more than $700 million invested.

“The feeling is, if we can turn Newark around, we can turn anything around,” Sabato says.

Unresolved ills

Booker’s money and clout have not yet resolved the social ills that plague his city of 277,000, where 86 percent of residents are black or Hispanic.

Newark suffers from the 10th-highest poverty rate among major U.S. cities, and crime has remained stubbornly resistant. In 2012, through Sept. 2, murder was down 17 percent from a year earlier, but rape had soared 29 percent.

“Has the city turned around?” asks Brad Tuttle, author of “How Newark Became Newark: The Rise, Fall and Rebirth of an American City.” “Everybody would say no.”

On Oct. 2, Gov. Chris Christie (R) said he will order spending cuts in Newark because the city has yet to pass a budget for the year that began Jan. 1. Booker proposed a spending plan in February. The City Council has not approved it.

Booker, speaking on his mobile phone as his security team drives him to an appointment in April, ticks off accomplishments.

“The first two new hotels are downtown in 40 years,” he says. “The first office towers are going up in 20 years.”

Construction began in February on Teachers Village, a $150 million complex featuring charter schools, housing and shopping, the work of architect Richard Meier, the Newark native who designed Los Angeles’s Getty Center.

Berggruen and Goldman Sachs Group’s Urban Investment Group provided financial backing. Panasonic Corp. of North America, aided by $102 million in state tax relief, broke ground on headquarters in May. Prudential Financial scored a $210 million state tax break for the $444 million tower it plans to open by 2014.

The state, which has reduced budget grants to distressed cities since Christie took office in 2010, helped Newark last year with $32 million in aid. Booker says such gifts will not be needed as Newark’s tax base broadens.

“The legacy I want to leave is to be the first time in a generation that the city’s not dependent on big lump-sum government payments,” he has said.

Ackman likens the mayor’s job to the task his hedge fund, Pershing Square Capital Management, took on as majority shareholder of J.C. Penney.

“A lot of what I do for a living is finding really super-talented people to step into a turnaround situation and make it better,” he says. “Newark’s a turnaround.”

Return to Newark

A once-great hub for leather, plastic and chemicals, Newark fell into decay after World War II. Booker, born in 1969 to activist parents, grew up in nearby Harrington Park — a town so white that his father, Cary, described himself, his wife, Carolyn, and their two sons as “four raisins in a tub of vanilla ice cream.”

But the family worshiped at an AME Zion church in Newark. One Sunday, young Cory spotted a man painting a house and asked his father whether they could paint the whole ugly city.

Booker won an athletic scholarship to Stanford, where he was an all-American football tight end. He earned a bachelor’s degree in political science and a master’s in sociology.

“It occurred to everybody at Stanford: This guy is going to the top,” recalls Jody Maxmin, a professor of arts and classics. Stanford’s alumni association honored him for tutoring and peer counseling. “He just lifted everybody up, including me,” Maxmin says.

Booker was a Rhodes scholar at the University of Oxford before enrolling at Yale Law School. He accepted a fellowship to study community activism in Newark, trying his hand at fixing the town where he had worshiped as a child.

He was elected to the city council at 29, two years after Time magazine ranked Newark as America’s most dangerous city. He made headlines at 30 by living in a tent for 10 days to agitate for policing of violence-prone apartments.

In 2006, he was elected mayor. Four years later, he faced an $83 million deficit in a $605 million spending plan. He raised property taxes 16 percent, sold 16 city-owned buildings and eliminated about 800 jobs, including 167 police officers.

Moody’s Investors Service cut Newark’s credit rating one step, to A3, that December, the fourth-lowest investment-grade level. The gloom stretched into 2011, when violent crime rose 12 percent and the year’s 90 homicides totaled four more than in 2010.

Still, Booker enjoyed a knack for good press. Returning to his apartment one night in April, he saw flames next door and rushed in to rescue his 47-year-old neighbor. He described the feat on Twitter en route to the hospital for treatment of smoke inhalation and minor burns.

Such public relations antics rile state Sen. Ronald L. Rice, the Democrat whom Booker defeated in 2006. Booker’s interest lies in self-promotion, Rice says, not city hall.

“If we have a homicide, he’s out of town tweeting about it so people get the impression he’s still here,” Rice says. “Then he pops in for a ribbon cutting, and he’s gone.”

‘Personal touch’

Booker, a single man who lives on the top floor of a three-family rental, reaches across party lines.

“He has the personal touch, whether he’s communicating with 1 million Twitter followers or with the financial industry,” says Margie Omero, a Washington-based Democratic strategist.

Julian Robertson, 80, whose Tiger Management was among the most successful hedge funds in the 1990s, backs Republican presidential nominee Mitt Romney. That did not stop him from giving the maximum $26,000 to the campaign fund for Booker and his city council allies.

Media mogul Oprah Winfrey and director Steven Spielberg were among others who contributed that amount in 2010, helping Booker raise $7 million and win a second mayoral term.

“From the day I met him, I thought he would be our first black president, but I was wrong,” says Whitney Tilson, who co-founded both New York-based hedge fund T2 Partners and Democrats for Education Reform, which advocates for charter schools and higher standards in public classrooms. “He’ll be our second.”

Booker says he will decide early next year whether to challenge Christie in 2013.

“He’s certainly going to run for higher office,” Sabato says. “He is salesman of the year in politics.”

Booker’s wooing of Wall Street can land him in trouble. He infuriated Democrats in May when he said on “Meet the Press” that he wasn’t “about to sit here and indict private equity.” Weeks earlier, a steelworker in an campaign ad for President Obama had described Bain Capital, the foundation of Romney’s personal fortune, as a vampire.

Booker responded to his gaffe with a four-minute YouTube video lauding the president.

“He was out of line,” says Bob Shrum, the Democratic strategist who helped Edward M. Kennedy defeat Romney in Massachusetts’s 1994 U.S. Senate race. Booker will not repeat the misstep, Shrum says.

Booker stayed on script when he took the stage at the Democratic convention, espousing affordable health care, good-paying jobs and same-sex marriage. The Republican Party, he said, favors the fortunate few. “We choose inclusion,” he roared, as delegates erupted in applause.

Shrum imagines Booker aiming for the governor’s office, then a possible White House run.

“It could happen very fast,” he says. “It happened with Obama.”

The high-profile New Jersey mayor has already cultivated an enviable calling card: his ability to charm Wall Street.

The full version of this Bloomberg Markets article appears in the magazine’s November issue.

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