Bayonne Mayor Mark Smith has asked the Bayonne Local Redevelopment Authority and the Bayonne City Council to support a $23 million state loan for the Bayonne Crossing Mall, which may begin construction by the end of this year.
Smith also pleaded his case before the Hudson County Freeholders at a special meeting on Aug. 25.
Under the proposal, the city and Hudson County would guarantee repayment of the $23 million loan from the state of New Jersey, although the developer would be required to repay it or face the repossession of property valued at $60 million by the city and the county.
The total cost of the development – including improvements made by potential tenants – has been estimated at $120 million. Because of the sagging loan market, city officials say the project cannot move ahead without the low-interest loan.
“The developer, Bayonne Crossing LLC, is looking for a loan from the New Jersey Environmental Infrastructure Trust,” said Steve Gallo, chief of staff for Mayor Smith. “This is a financing vehicle that is used by many local governments for water, wastewater, and stormwater improvements. Private developers also can access these funds, but they need a public conduit borrower to assist with the application,” Gallo said.
“The HCIA [Hudson County Improvement Authority] is serving as the conduit in their role as improving Hudson County. The HCIA, the county, and the city are all supposed to be guaranteeing the loan, which is ultimately secured by the $180 million project and the real estate involved.”
The project has been staggering ahead for several years, delayed by the downturn in the economy, property settlements, a lawsuit brought by neighbors over traffic concerns, and environmental cleanup issues.
As envisioned, the mall would consist of 10 buildings on a 30-acre tract of land east of Route 440 between New Hook Road and East 22nd Street.
The acreage was cobbled together through a number of land deals over the last three years, but faced some serious environmental cleanup hurdles that involved the removal of underground petroleum contaminants from the site, which once served as a storage area for Standard Oil Company.
In making his argument to the freeholders, Smith said the project is expected to generate approximately 800 full-time permanent jobs, $1.2 million in tax revenue, and between $3 million and $4 million in Urban Enterprise Zone sales tax proceeds, a total that would double the amount of UEZ funding the city currently takes in. The project is also expected to generate thousands of temporary construction jobs.
Delays have doubled costs
Called “a power center,” the mall is expected to include stores such as Best Buy or Walmart, Lowe’s Home Improvement, New York Sports Club, Starbucks Coffee, Chili’s and Sleepys.
Originally, Cameron Group LLC of Syracuse, the mall’s developer, anticipated the mall would break ground by fall 2007. But over the last four years, estimated development costs, according to city officials, doubled to $90 million.
In reports to the city, Cameron partner Eric Alderman said building costs have escalated; legal, engineering, and consulting fees have shot up; and site preparation costs, including remediation expenses, were left out of the original estimate.
Cleveland-based Keybank has maintained its agreement to fund the project, but other funders have dropped out.
Last year, New Jersey Economic Development Authority approved a $1 million pre-construction Smart Growth loan to subsidize engineering, architectural and environmental consulting work needed to prep the site. But other state money could double that. The developers have also sought supplemental construction financing through the New Jersey Environmental Infrastructure Trust under the U.S. New Markets Tax Credit Program.
“The bond is relatively straightforward.” – Freeholder Bill O’Dea
“The bond is relatively straightforward,” Freeholder Bill O’Dea said. “It is being done through the Environmental Infrastructure Trust Fund through the state. It provides a 20-year, 1 percent loan for infrastructure work related to a large retail development on 440, a proposed Lowe’s, and a Wal-Mart and some smaller retail stores. There is no risk to the county in providing a guarantee since it will be secured by the payment in lieu of taxes (PILOT) payments to the city.”
O’Dea said the retail uses will also generate a lot of UEZ sales tax revenue for the town, as much as $2 million per year.
“The downside is that as presently proposed, most of the PILOT payments to the city [especially in the early years] go to pay for the bond so there is not much property tax relief from the project until later,” he said. “However, I strongly suggested that they look into the state’s new Economic Stimulus Bill signed last month, which can utilize 75 percent of the new state revenue the project will generate [corporate business taxes, employee taxes] as well as UEZ revenues as the first source to repay the EIT Loan with the PILOT payments as the pledged backup.”
City officials hope to see the project break ground by November.
“After years of work, the Bayonne Crossing project is within 90 days of closing on all of its financings so that building permits can be issued and construction can begin,” Gallo said. “The final piece of the financing puzzle is a loan from the New Jersey Environmental Infrastructure Trust Fund. Without this NJEIT Loan, the project cannot go forward.”
In order to obtain the NJEIT Loan, the state is requiring a municipal guarantee, Gallo said.
“In any economic time, this would be a home run,” said Mayor Smith. “In these economic times, it is an extra inning, seventh game, World Series, walk-off grand slam.”
Al Sullivan may be reached at firstname.lastname@example.org.