The municipal council held the public hearing on the bond at a special meeting on Feb. 14, the last step in a complicated process that would allow the city to use money paid on deposit for the purchase of portions of the former Military Ocean Terminal to balance the budget. Instead of voting the bond up or down, the council agreed to put off the vote until details could be negotiated.
The federal mandates on the MOTBY require the city to use revenues from the land for redevelopment of the former base until at least July 1, 2008 - at which point the matter would be reviewed and the revenues from the base could be freed for general municipal use.
Developers seeking to purchase property for development give the funds to the Bayonne Local Development Authority (BLRA) which then transfers the money to the city. In order to meet the stipulations of the law, however, the city passes a bond the same amount to cover the needed infrastructure improvements at the MOTBY.
The bond stalled because Councilmen Anthony Chiappone and Gary La Pelusa indicated that they would vote against the proposal if the city did not do more to cut spending. To pass, the bond needs four out of five city council votes.
Technically, passing the bond does not affect the budget since the money from the developer was used to balance the budget and the bond simply meets the legal requirements imposed by the federal government. But if the bond does not pass, the city would not be able to use the deposit money, and the budget would come up $25 million short.
Since the city has already operated for nine months spending from this budget, tax payers would get hit with a massive tax increase and city workers could be laid off. City government could even close down, according to Chief Finance Officer Terrance Malloy.
To cover the debt without layoffs, the city would have to hike taxes on each home assessed at $133,000 by $1,500 - all of which would have to be paid in the final quarter tax bill due to be sent out in early May. Malloy, however, said the city would likely use a combination of tax increase and lay offs to make up the difference if the bond does not pass. This would mean an increase of about $1,000 and the laying off of as many as 30 city employees.
Whose budget is it anyway?
Politics is playing a huge part in the conflict as it has in the past.
Chiappone earlier this year announced his candidacy for state Assembly on a ticket that is opposed to Doria. A massive tax increase weeks before the primary election in June could benefit Chiappone if the blame can be shifted onto Doria.
This explained the early confrontation between Doria and Chiappone when Doria said that it was his job to present the budget and once presented became the responsibility of the city council - in other words, if there's a tax increase, Chiappone should be blamed.
Chiappone disputed this, calling the budget "the mayor's budget," and the bonding a financial "shell game" that puts taxpayers at risk by increasing the municipal debt without clear proof that the city will be better off in the end.
Doria, however, said the bond was part of a five year financial plan that would allow "the taxpayers of today" to benefit from future development.
Malloy said the plan involved a combination of bonding and modest tax increases for the five years until the funds from the base could be released for general use. At that point, the city would use the revenue from the sale to pay off these bonds as well as all of the city's debt.
Malloy said eliminating the city debt would provide fundamental relief to the taxpayers.
Doria and other council members who supported the bond said Chiappone had voted for the five year plan, implying that Chiappone might be using this as a political platform this year.
Chiappone defended his position, saying that he always had questions about the wisdom of the plan, but had changed his vote to support it.
"But since then Mayor Doria has changed the plan," he said. "The plan originally called for bonding and a modest tax increase. Last year, when running for reelection as mayor, Doria did away with the tax increase - the only part of the plan I thought made any sense."
Chiappone also said that last year he raised concerns about passing a bond before the developer actually gave the BLRA money to cover it in the budget. HR Horton backed out of the deal last May, sending the city budget into default. While the city has since made up the $25 million from last year thanks to a new developers agreement with another company, Chiappone said no deal has yet been inked to cover this year's bond, putting the city at risk again.
La Pelusa and Chiappone said they were open to negotiating the bond down, but that the mayor was not. La Pelusa said that while the MOTBY has been touted as the salvation of the city for several years, nothing has yet been constructed. He said the downturn in the housing market could spell disaster for Bayonne. He said the city is $25 million short in its budget and should be making cuts in every department. Early in the budget process, he had recommended a five percent cut in each department.
Is there room for compromise?
Councilman John Halecky, in support of the bond, said a change of state law in the late 1991 had laid more of the tax burden on residents. Since then, he vowed to fight any tax increase.
"I backed any one shot deal there was," he said. "I did it because I wanted to see taxes stable."
He said he supports the five year plan and believes it will work if the city sticks to it, even if the amount increases from $20 million to $25 million.
"At the end of the day, we're going to pay them off with the proceeds from the sale of the Peninsula at Bayonne Harbor (MOTBY)," he said. "Our assessor says the land there is worth conservatively $500 million."
Councilman Ted Connolly the city needed to use the base as its collateral to keep up services here.
"Fortunately or unfortunately, the city is experiencing major growing pains. Industry has left and it is not going to return," he said.
Council President Vincent Lo Re said that while development at the base has not proceeded as fast as first anticipated, work is being done and development is occurring.
"Over the years we thought we would have the base on line sooner," he said. "That's our pot of gold at the end. But it boils down to one thing, we're either going to cut services or - or in the total scheme of things - raise taxes, or do some bonding," he said. "But listening to what everybody here has said tonight, it is obvious that we have to do a mix of all those things. Not one thing is going to work."