The BLRA voted despite the fact that they had already made a $50 million contract for the same property with the Port Authority of New York and New Jersey on Sept. 20. The BLRA faced criticism for that deal, as the decision was made without public notice or competitive bids.
The BLRA later voted to void the sale, but the Port Authority is asking the courts to force the BLRA to live up to its original agreement.
Ports America presented its proposal after the City Council held a special meeting to look at alternatives to what the Port Authority offered in September. Companies called Ports America, Fortis Group, and World Wide Group all presented possible projects that would generate more revenue for the city.
Pressed to reconsider its agreement with the Port Authority, the BLRA voted on Nov. 1 to void that deal on the pretext that it did not meet the legal requirements for meeting notification. The BLRA then agreed to hear presentations from other groups, and extended the offer to the Port Authority. World Wide Group and Ports America made presentations before the Nov. 26 vote.
The Port Authority was given a chance to make a presentation as well, but did not. Instead, representatives from Port Authority put the city on notice that a suit had been filed.
The BLRA is the agency designated to oversee the development of MOTBY and other large former industrial sites throughout the city of Bayonne.
'Most solid offer'
While World Wide Group offered $105 million to purchase the site for the development of a car import/export operation, the BLRA voted for the Ports America deal at $90 million, saying that the financing was already in place.
"World Wide Group wanted us to wait two more weeks," said Councilman Anthony Chiappone, who was recently named to the BLRA as a commissioner. "But we felt Ports America gave us the most solid offer. We didn't want to wait and find out the financing fell through the way it recently happened with an offer to purchase the Bayonne Medical Center."
Chiappone also said that he is beginning a petition drive to encourage Gov. Jon Corzine - who helps oversee the Port Authority - to call off the lawsuit.
Ports America CEO Stephen Edwards said that his firm was prepared to pay a $35 million deposit upon signing of the contract and the balance of $55 million at closing, which is expected before the end of January 2008.
Leader in port operations
Ports America, Inc. is the leading independent stevedore on the U.S. east and Gulf coasts, with operations in 24 ports and terminals from Maine to Texas.
In selecting Ports America, BLRA commissioners cited the financial backing of the $3.5 billion fund of its affiliate, AIG Highstar, as a major factor in their decision.
Under the terms of the deal, Ports America will pay approximately $1.8 million in annual taxes. The property will continue in perpetuity to be taxed at the same rate as other properties in Bayonne.
The deal also calls for Ports America to make $15.2 million in capital improvements to the site.
Ports America will build a roll-on/roll-off marine terminal operation that will complement the visionary redevelopment plan adopted by the City Council.
Access road construction to begin
In a related matter, the BLRA also agreed to enter into a deal with Dynamic Delivery Corporation that will enable the construction of an access road from the Maritime District to Pulaski Street. The vote followed more than a year of discussions and negotiations with Dynamic.
The vote will allow the BLRA to purchase a portion of 150 Pulaski St. from Dynamic (approximately 0.90 acres) and sell a portion of the Maritime District to Dynamic (approximately 9.6 acres). In addition to receiving a key portion of 150 Pulaski St., which is needed to create a new truck access road, the BLRA will receive $2.8 million from Dynamic Delivery Corporation.
"This is really a win-win for both parties," said Howard Fitch, chair of the BLRA Board of Commissioners. "The BLRA will get the property it needs to build a new access road to Pulaski Street and thus keep truck traffic off the rest of the mixed-use development. And Dynamic will get land it needs to improve operations."
The new road for truck traffic represents a major infrastructure improvement for the Peninsula at Bayonne Harbor.
Money needed for city budget
The sale of land to Ports America will help heal some of the city's critical budget woes, if other legal hurdles can be cleared with the U.S. Army.
The city received possession of the 437-acre MOTBY in 2001 after the federal government ceased operations there as a military base. For this distinction, the federal government placed restrictions on the land, saying the city had to use funds generated out of the place to prepare the site for redevelopment.
The city, however, found a loophole in the law that allowed it to use the funds to balance the municipal budget, a kind of money swap that used future deposits as annual revenue. Problems with the arrangement surfaced last June when a development deal the city relied upon to balance the 2006-2007 budget fell through, leaving the city $23 million short.
While the city generated funds through the use of tax anticipation notes and the issuing of the new year's tax bills to property owners, it faced a possible takeover by the state, and came into the new tax year anticipating an additional shortfall. Austerity efforts were instituted, such as cuts in expenses for every department and the laying off of more than 70 employees.
Council President Vincent Lo Re, however, said the impact of those layoffs would be relatively small compared to the gap the city needs to fill.
The Port Authority deal for $50 million was touted as the answer to the city's budget deficit, while in fact, the $90 million deal puts the city in better fiscal shape than it has been in several years.
If the city can actually access the funds
Last summer, union representatives and container port operators filed a complaint with the U.S. Army about the BLRA's ability to transfer developer money to the city. The union reps wanted the new development to provide more jobs on the waterfront.
The Army has told the city to cease - at least temporarily - the money transfer practice, which now means the BLRA may have $90 million that it cannot transfer to the city to halt a significant tax increase.
"We're hoping that we can get the Army to allow us to transfer the money," Chiappone said. "I think the sale of the land to Ports America shows that the city is living up to its promise to use the land to develop jobs."
One requirement was that redevelopment should help to replace jobs lost when the base closed. The Ports America deal for a car import/export operation would generate new jobs along the Bayonne waterfront.
Chiappone, however, said he is hoping that the original deals with developers will still come through in time to bail the city out of last year's budget hole.