The Bayonne City Council on Sept. 23 unanimously voted to give $23 million to Cameron Group toward the construction of a $120 million big box mall on Route 440. Although labeled a loan, future taxes generated from the mall project will be diverted from city coffers – where it might have been used to pay police and fire department salaries, repave roads or purchase police car to repay the loan instead. Because the City Council also agreed to act as a co-signer to the loan, if the mall fails to generate enough in taxes to pay the debt, taxpayers would repay the loan anyway.
“The developer has demonstrated that it cannot afford to pay the debt service on this loan.” -- Joe Bauman
Critics of the mall project also say that the mall construction – especially the inclusion of a Wal-Mart store in the mall – would further deteriorate the existing business district, forcing the closing of businesses that cannot compete with Wal-Mart’s lower prices.
Joe Bauman, the bonding attorney for the $23 million redevelopment package, said the developer needed the additional revenue from the city or would not be able to build the mall at all.
The loan to the Cameron Bayonne Group is being provided by the New Jersey Environmental Infrastructure Trust.
The city will issue bonds to guarantee the loan.
The 355,000-square-foot project is within 90 days of coming up with all its finances, after which construction can begin. The NJEIT loan will be repaid out of the taxes the mall pays to the city each year over the next 30 years.
Bauman said the city will continue to collect taxes on the land – which it is currently collecting. Taxes generated by improvements on the land would be diverted to pay off the loan.
Allowed under redevelopment law, the loan, Bauman said, would allow the project to move ahead.
“The developer has demonstrated that it cannot afford to pay the debt service on this loan,” Bauman said.
So taxes that would other wise come to the city for other expenses must be diverted to pay for the loan.
“If we don’t do this, the project can’t move ahead,” Bauman said.
But he believes that the mall will generate enough taxes on improvements to the land, and that the city will be able to pay the annual payments for the loan and still have tax revenue from the project to apply to city needs.
Hudson County is also on the hook for repayment of the loan, but only in the extremely unlikely case that the city is unable to pay the obligation.
Eric Alderman, a spokesman for the developers, said investors in the mall will, however, continue to pay their taxes and thus allow the city to pay off the loan. But city officials acknowledge other tax payers will not receive the full tax benefit from the mall if the mall’s taxes went directly into the city coffers instead of paying back the loan.
UEZ loan also paid by diverting sales taxes
Business administrator Terrence Malloy, in promoting the project, said the mall would become the biggest single contributor to the UEZ, but that early on money generated from the mall would be used to pay the $2.5 million UEZ loan first.
If successful, the project would generate as many as 1,200 construction jobs, and almost 100 union workers appeared before the City Council to show their support for giving the mall the $23 million to allow the project to move ahead.
City officials claim the mall will generate as many as 800 full time equivalent jobs when it is complete, although a critic of the plan and a City Council candidate, Stan Marko, pointed out that this would be offset by a loss of jobs and revenue elsewhere in the city as the mall competition closes businesses in traditional shopping districts. He noted that Wal-Mart, in particular, is noted for paying low wages as well as hiring mostly part time workers – which means those employed at the megastore would not get health benefits.
He also noted that the income generated by the mall’s contribution to the UEZ would also be decreased as existing businesses go out of business and can no longer generate sales.
Marko said the city, through its various public bodies, appears to be responsible for more than one third of the developer’s investment in the project.
Most of those who spoke at the public hearing seemed unaware that tax dollars generated from the mall would be used to pay back the loan, and several residents seemed deeply concerned about the loan guarantee and the impact of the mall on local businesses.
While residents such as Debra Noble – who is also a candidate for City Council – said they wanted to see the land developed, they did not want to see tax payers on the hook for the loan.
Malloy and several council members said many Bayonne shoppers are already going out of town to other malls, including Wal-Mart stores. By developing the mall in Bayonne, the city recaptures these revenues through sales tax contributions to the UEZ as well as purchases made to mall. He said the side benefit of the mall would be felt by other businesses, including the ailing Broadway shopping district where shoppers might patronize local restaurants, even though the mall also has several prominent eateries.
John Kevin, who owns a business on Broadway, called the mall “a risky investment,” and said several malls have gone belly up.
One resident pointed out that a prominent hardware store on Broadway was on the list of properties that are delinquent in taxes, and that Wal-Mart and Loews could force this business as well as some of the local garden centers to close.
Councilman Gary La Pelusa said local businesses will have to focus on providing better services to make up for their inability to compete with lower prices charged by stores such as Wal-Mart.
The Wal-Mart is expected to be about half the size of a typical store in that chain, but will likely include a grocery component.
Along with union members, some residents, such as Larry Buck, said that the mall would provide a positive use to land that was formerly contaminated.
Freeholder Bill O’Dea, who voted in favor of the county acting as the second co-signer on the loan, said this agreement hinged on the fact that tax revenues would be paying off the loan, calling it a very solid revenue source.
Al Sullivan may be reached at email@example.com.