The Bayonne Local Redevelopment Authority and the city of Bayonne may have to pay back the federal government as much s $40 million from the sale of a portion of the former Military Ocean Terminal (MOTBY), according to a letter used to the city on June 2.
The Army contends that the sale – although not finalized until this year – actually took place prior to the lifting of restrictions on land sales at the MOTBY in October 2008. The Army has given Bayonne until July 20 to show how the money was used to reconstruct the MOTBY for development or to give the proceeds to the federal government.
A city official who wished not to be named said the money was transferred to the city coffers to help pay the cost of union agreements and balance this year’s municipal budget.
“In the past, the city would bond for the same amount and give the borrowed money back to the BLRA,” this official said. “This year the city did not give any money back to the BLRA. The city simply spent it.”
If forced to give the money back to the federal government, Bayonne could be ruled in violation of its agreement with the state Department of Community Affairs by going to default on its budget.
Like Hoboken, the city of Bayonne defaulted on its budget in 2007, but avoided a direct take over of the city’s spending by forging an agreement with the DCA. This could change if the city is forced to repay the Army.