After the city and Waitex Global International could not agree on purchasing terms of the Military Ocean Terminal (MOTBY) the city finds itself in a budget hole.
The Bayonne City Council held a public hearing on April 20 during which the council addressed concerns about city spending and the adoption of the looming $135.5 million budget. The biggest concern was a $15 million revenue hole from a broken deal between the city and Waitex for the development of the southwest portion of MOTBY, known as Harbor Station South. The deal fell through a couple of weeks ago, according to city officials, and would have paid the city of Bayonne $15 million this year.
The meeting began with a public budget hearing. First in line to question city spending was local attorney and former City Business Administrator Peter Cresci. His opening remarks reflected the public mood. “Might as well get the party started as far as the budget hearing goes,” he said. “Can anyone explain how we’re going to plug this $15 million budget hole that we have?”
Cresci’s “party” was lively but no one was dancing.
Council President Sharon Ashe-Nadrowski addressed the $15 million question: “We are pursuing other avenues to get other developers in here to fill what was lost,” she said, “and get other people to commit sooner and start breaking ground on their projects, so we can get money on the books quicker.”
Bayonne Chief Financial Officer Terrence Malloy added, “We have to find 15 million dollars to balance out this budget whether it’s through reduction of expenses or whether it’s through replacement revenues.”
“There’s only so much money in the sofa,” Bayonne resident Peter Franco said while pressing the council on how the city would make up the budget shortfall without a developer deal. He said one problem is “this agenda is filled with more and more spending.”
Malloy responded, “There is no way we can come up with $15 million worth of expense reductions.”
Franco suggested cutting city employee salaries, which increased by $1.7 million from last year in the introduced budget. The council noted cuts made elsewhere that will help the city’s bottom line, such as reductions in pensions, employee healthcare plans, and severing its contract with McCabe ambulance service, which still serves Bayonne but is not paid by the city.
It is important for the city to fill the budget hole as quickly as possible because the alternative could be a larger tax hike than the one already proposed.
Malloy said that it is important to balance taxes with municipal services, but cutting services can dissuade new investors from coming to Bayonne.
“Land that hasn’t been sold on the base, we receive zero on.” – Joe DeMarco
Ticking tax hike time bomb? Not exactly, but there is some risk involved
Malloy and the council members hope the deal goes through in a timely fashion. City taxes are already going up by 2.64 percent under this year’s introduced budget (an average increase of $121 per household). If the city fails to strike a development deal, taxpayers will have to make up the difference. Malloy estimates the tax increase to go up to $855 per household without a development deal.
According to Bayonne City Clerk Robert Sloan, a state statute says municipal budgets need to be in to the state by April 28. However, municipalities rarely follow that guideline. Malloy said, “I don’t remember the last time we’ve had a budget adopted prior to then.” How long does the city have to adopt a budget? The answer is not concrete, but it’s roughly two months. Malloy said, “June 30th is not some sort of official deadline, but is it a good working date? I think so.”
Harbor Station South is a valuable 55-acre tract of land which undoubtedly has developers knocking on Bayonne’s door. Cresci asked, “Will this happen by June 30?”
Malloy replied, “In terms of identifying replacement revenues, that may very well happen prior to June 30th. Hopefully it happens even before then.” According to Malloy, Waitex pulled out at the “last minute,” leaving the city to scramble to find a new buyer. He acknowledged that the deal falling through “is not good news … by any means.” But, “It’s not the first time it happened,” he said. “As in the past, we are going to start exploring every avenue to make up those revenues.”
Cresci said, “If we can’t plan based on that answer, how fair is that? We got to stop doing this. We have to stop spending the money and then figuring out how we’re going to pay for it. We got to stop doing these one-shot deals.”
Malloy agreed that he would “much rather not do one-shot deals,” and noted that the city has made large strides in reducing the structural deficit in recent years.
“I was speaking with one entity today, who has interest in the property,” Malloy said.
Business Administrator Joe DeMarco has been speaking with several entities. “We’re certainly going to try to put that together as soon as possible,” he said. “We absolutely want to get the land sold, get it developed, and get it on the tax rolls. Land that hasn’t been sold on the base, we receive zero on. The fact that it wasn’t sold last year, that’s a zero. The fact that it wasn’t sold 15 years ago, it was a zero.”
“There’s only so much money in the sofa.”—Peter Franco
Crossing our Ts and our fingers
Can the city strike a better deal to replace Waitex? Malloy said, “Whether those options turn out to be a better deal than the one that was on the table, or equal to that deal? We don’t know that yet until we close.”
Broken deals are common in “closing on transactions” with developers, according to Malloy. “This is not something new to us,” he said. “Unfortunately this is the kind of track record that we’ve been dealing with down at the base with developers.”
Second Ward Councilman Sal Gullace expressed optimism. “I don’t think they’re going to have trouble,” he said. Malloy offered reassurance. “This isn’t just hope,” he said. “These are real people we’re talking with.” He cited a number of Requests for Proposal the city recently solicited as further evidence that they are making moves to prevent budget problems and further tax increases.
To address budgetary concerns about city employee salaries, Third Ward Councilman Gary La Pelusa proposed a temporary 30-day hiring freeze, which the council accepted. They will discuss the proposed freeze at next week’s meeting. The council also voted unanimously in favor of authorizing an application to the local finance board to approve the dissolution of the Municipal Utilities Authority, which would save the city a reported $300,000. While that will ultimately help the budget shortfall, only another MOTBY developer can fill the budget gap.
Rory Pasquariello may be reached at firstname.lastname@example.org.