Thanks to what some see as a bad deal made in 2005, Bayonne taxpayers may have to pay back $29 million to the developer of part of the former Military Ocean Terminal property.
And if they avoid this fate by allowing the developer to build rental housing instead of condos, they will lose taxes and possibly get sued by a different waterfront developer that wants to build the only rental housing in the area.
Fidelco, the developer of the Harbor Station development district of the former Military Ocean Terminal, would like the Bayonne Local Redevelopment Authority to allow the company to build rental housing instead of condominiums.
If the BLRA votes to approve the change, Trammel Crow – who is developing a portion of the nearby Bayonne Bay District – has threatened to sue the BLRA for breach of its contract.
Trammell Crow had previously had exclusive rights to develop luxury rental units on MOTBY and, according to its communication with the BLRA, the company feels that a change to allow Fidelco to build rentals would infringe on Trammell Crow’s ability to market its own units.
Postponed decision last month
While Councilman Anthony Chiappone chastised Trammell Crow for threatening suit, saying the city had given the company a tax abatement, others said the agreement with Trammell Crow two years ago kept the city’s municipal budget from going into default when H.R. Horton pulled out of a development deal in June 2006.
BLRA Chairman Howard Fitch said at a meeting Sept. 18 that faced with last-minute information, the BLRA had to postpone deciding on whether or not to grant the change to Fidelco. Last month, the company had presented the BLRA with a study that showed the change would not have a dramatic impact on other development at MOTBY. But shortly before the meeting, Trammell Crow presented the BLRA with a study of its own showing a significant impact on future sales.
City Law Director Jay Coffey said the two studies will be released to the public if the BLRA decides to move ahead in November.
“We got this 28-page memo 25 minutes ago. We need time to study it,” said Commissioner Nick Mangelli.
Legal department reviews request
City Councilman and BLRA Commissioner Anthony Chiappone asked whether or not Fidelco could be cited for breach of contract for failing to construct for-sale homes, a question the legal department is currently reviewing.
Fitch hopes that the delay will allow the two developers to negotiate privately and come to an agreement that will resolve the matter. Currently, Fidelco has agreed to negotiate with Trammell Crow, but Trammell Crow apparently has resisted.
John Wisniewski, the attorney for Trammel Crow, said the change requested by Fidelco would violate the city’s agreement with Trammel Crow.
Fiscal ramifications
Jason Sternberg, the vice president of Roseland Property Company, said that the depressed economic situation makes it nearly impossible to sell the units.
Critics of the Fidelco deal from 2005 said the city has acted irresponsibly.
“Fidelco never gave the city any money to purchase the land,” Michael Masone said. “We borrowed the money to give it to them so they could put it in escrow. Then we borrowed against that so we could fill a budget gap in the municipal budget. Now the taxpayers are on the hook to pay the money back if this deal falls through.”
If Fidelco pulls out of the deal, the city will have to come up with about $29 million in 2010 to pay the original loan back.
“We need to get a divorce from this company so we can start again,” Masone said. BLRA Commissioner James Pelleccio, a staunch critic of the Fidelco plan when proposed in 2005, said his decision would be based on what is best for the city, although he did agree that he is torn between doing what he said is “morally right” and what is “fiscally responsible.”
“We have to look at everything,” he said. “I’m not against digging up old bones. But in the end, I am going to do what is best for the city and its taxpayers.”
Test run for ferry service
Joseph Nicolas, executive director of the BLRA, said a test run was scheduled to be conducted in December for a new ferry service to MOTBY.
A ferry service to and from Manhattan is seen as critical for future development in Bayonne.
The service would connect MOTBY (to be called the Peninsula at Bayonne Harbor) to Battery Park. The BLRA has signed an agreement for three years with Statue Cruises – which already operates ferries to the Statue of Liberty and Ellis Island from Battery Park.
If the test is successful, the service would begin in spring 2009.
The ferry could carry as many as 600 people per trip and take up to 25 minutes one way. Initially, the ferry would make one trip out of Bayonne in the morning and one trip back at night.