The city has found itself in several precarious situations regarding its municipal garage on Observer Highway. They are entering into a standoff with a developer, prolonging a faceoff with residents, and preparing to possibly pay off a debt for a building that – while causing so much chaos for Hoboken – isn’t even owned by the city anymore.

On several fronts, the city is being squeezed and deadlines are approaching.

The city sold the garage to a county agency in 2005 in order to get millions of dollars into its budget. The county agency leased the garage back to the city while the city tried to find a developer to buy the property. The idea was that the city could make extra money on the lucrative land – located near the PATH station – and build a new garage in a less desirable part of town. (The garage is where the city’s equipment is kept and vehicles are repaired.)
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“I insulted Michael Russo and no one else.” – Michael Lenz
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But over the years, the city has had trouble finding a suitable place to build a new garage, and meanwhile, they’ve moved their debt from the HCIA to a private finance firm, NW Financial.

At Wednesday’s council meeting, the council discussed various options, entertained an offer from a developer who is ready to buy the land, and continued to be hounded by residents who are vehemently opposed to the city moving the garage to their neighborhood.

The three facets of this problem include: whether the city and developer can (or will) finalize a $25.5 million sale of the garage space on Aug. 13; if the city will need to bond for $16 million to buy back the garage from a financial firm that allowed the city to borrow against the property; and where the city will put a new garage, if need be, both temporarily and permanently.

New economy, new offer

S. Hekemian is a development group that agreed in 2007 to purchase the garage for $25.5 million. But they could not take possession of the land until the city had a new place to build its own facility. A deadline was set for July 1 of this year, then pushed back to Aug. 13.

Recently, the garage property was assessed at only $14 million by the developer. Last week a representative of S. Hekemian Group asked the council to make several concessions in order for the project to remain profitable for the development group, which is run by a wealthy New York City family.

Mayor Dawn Zimmer had already rejected the proposed amendments in recent private meetings, but allowed the developer to present his amended offer to the council on Wednesday.

In the end, the council must approve any redevelopment project for the city.

Douglas Cohen, Hekemian’s general counsel, asked the city to reduce the project’s payment in lieu of taxes (PILOT) from $1.6 million to $600,000 annually until the economy recovers; to change plans from having 10,000 square feet of retail space to a 30,000 square-foot grocery store; and to bypass affordable housing requirements – which were already reduced for the project once – and instead let the developer make a $1 million payment to the city that can be used to create affordable housing elsewhere.

In return, the developer will maintain the purchase price of $25.5 million, and the agreement on the size of the buildings (12 to eight stories) and number of residential units (240).

Most importantly, Hekemian would allow the city an extra year to move their operations to a new site.

At Wednesday night’s council meeting, several council members asked questions, but no one committed one way or the other.

Cohen said at the meeting that he believes the environmental condition of the site will preclude the city from closing the sale of the garage by Aug. 13, the already-extended date of sale. However, City Business Administrator Arch Liston said the city has met all deadlines for the state Department of Environmental Protection (DEP) and he does not foresee any problems.

Of course, the state could find problems, he admits. If the city reaches the closing date without DEP approval, they can only hope to renegotiate with Hekemian or face a lawsuit for breach of contract.

Why decline?

Some council members at the meeting, as well as Zimmer in a press release, said the offer from Hekemian may not be in the best interest of the city.

For one, affordable housing is already at a minimum in Hoboken, and Cohen admitted at the meeting that the cost of building one unit of affordable housing in town is between $75,000 to $200,000, yet the developer is only offering $41,000 per unit.

Fourth Ward Councilman Michael Lenz said the city will also be “subsidizing” the building by allowing a $1 million reduction in PILOT payments to the city.

Cohen admitted that any reduction in the PILOT would not be passed along to the residents of the building, but rather to make the project profitable for the company.

During the part of the meeting when the public is allowed to comment, resident Perry Belfiore said the city should take the deal because it allows the city more time to find a replacement site for the garage.

“That’s the one commodity that we’re short on,” he said. “We’re short on time.”

Persistence of passion

Also at the meeting, members of the community spoke out again against garage moving to a former tow yard at Sixth and Jackson streets.

Nicole and Sean Sliger, a young husband and wife who live near the potential site, asked every councilperson to sign a letter promising not to relocate the garage near any residential areas of the city.

Councilman Michael Russo, who represents the 3rd Ward where the towing site is located, was the first to sign the letter and challenged the rest of the council to join him.

Only Russo-allied Councilwoman Theresa Castellano and Councilwoman Beth Mason, along with Councilman Nino Giacchi, signed.

The issue sparked a political boxing match between Russo and Lenz. Lenz said he and the Zimmer administration thought the Jackson site between Sixth and Seventh streets was a “terrible site” and that Russo had misled the residents into believing it was a top choice, for political gain.

Lenz accused Russo of playing the crowd for his advantage, but Russo said he was just doing what he was elected to do: Defend the residents of his ward.

Castellano shot back at Lenz, “You’ve insulted the intelligence of all these people.”

Lenz said, “I insulted Michael Russo and no one else.”

Meeting Sunday

While City Council President Peter Cunningham allowed the residents to speak at the beginning of the meeting this time regarding the garage, the council did wait until after 1 a.m. to decide whether a special meeting will be held regarding bonding for the garage.

Because of approaching deadlines, the council needs to schedule a special meeting in two weeks to address the possibility of bonding to buy back ownership of the current municipal garage site.

The city entered into a leaseback agreement with financial services firm NW Financial around 2007, after the leaseback agreement with the Hudson County Improvement Authority from 2005 ended.

Now the city is preparing to possibly bond for $16 million to buy the property back, after paying roughly $100,000 per month interest on the deal.

The timeline for the bonding is tight, but Cunningham decided to hold a special meeting on Sunday, June 13, even though three council people said they cannot attend. Those three are Mason, Russo, and Castellano.

The regularly scheduled council meeting on Wednesday, June 16 is still in time for the bonds to be passed, although Giacchi will be out of the country that week. Cunningham did not give an explanation for why he prefers the Sunday meeting when questioned later. Zimmer later defended Cunningham’s choice in an interview, saying, “It is important to have six votes [needed for bonding approvals].” She also said she believes Giacchi will give the matter careful consideration, insinuating that Russo, Mason, and Castellano would not.

Who is profiting?

While Hekemian may lose $10 million in value on the garage if the sale is finalized, others have been profiting off the process.

NW Financial Group, a financial services company based in Jersey City with offices in Trenton, New York City, and Pennsylvania, is collecting rent and interest on the building. NW Financial has been receiving over $100,000 monthly interest payments – more than $1.2 million per year – since it the city borrowed against the sale of the garage for a second time in 2007.

The city could not say on Friday exactly how much they have paid to NW Financial, but agreed to seek and provide that information.

NW Financial is reportedly being investigated by the state in regards to a multimillion dollar contract with the New Jersey Turnpike Authority.

The city’s bond counsel, Gluck and Walrath LLP of Trenton and Red Bank, are profiting from many of these transactions as well, thought the city could also not provide immediate information on how much when contacted on Friday.

Gluck and Walrath were accused by several news outlets last year of “wheeling” – circumventing state pay-to-play/campaign finance regulations – when they reportedly contributed to a Political Action Committee that financed Peter Cammarano’s campaign for mayor while they held a public contract as the city’s bond counsel.

Timothy J. Carroll may be reached at tcarroll@hudsonreporter.com.