JERSEY CITY — The City Council at its council caucus discussed a $8 million federal loan to the city that would go to the developer of a new Hilton Hotel located in downtown Jersey City.
The Section 108 loan, which is issued by the U.S. Department of Housing and Urban Development (HUD), would finance the construction of the 300-room hotel by Warren, N.J.-based Tramz Hotel. Along with the hotel construction, the $118 million project also includes 470 residential units, an automated garage with 738 spaces and 12,294 square feet of retail.
A Section 108 loan is a financing tool for economic development projects that benefit low-and-middle income people. The hotel project is to employ low-and-middle income residents on both construction and in the operation of the hotel.
But the loan is not without risk to the city, as it would have to guarantee the loan if the developer fails to do so. That guarantee would happen by the city dipping into its CDBG (Community Development Block Grant) funds that it receives from the federal government and then allots to various social service programs across the city. Tramz Hotel is putting $1 million in an reserve account when the loan is ready to be paid off.
The council’s concern is that the risk is a reality, especially in tough economic times.
City Councilman Steven Fulop, who represents the area where the hotel will be built, said based on conversations with hotel operators in downtown Jersey City, hotel occupancy rates have gone down and creates a tough market for construction of any new hotels.
But Tarrunumn Murad, CEO of Tramz Hotels, said while this is a time that hotels have reached their “lowest point,” they are beginning to show signs of picking up occupancy and that Jersey City has an upside as a “hub of all new hotels” as opposed to New York City.
The ordinance authorizing the loan will have its first reading at Wednesday’s City Council meeting. – RK