The City Council on Wednesday addressed the looming $15 million budget hole created by a Military Ocean Terminal (MOTBY) development deal breaking down last month. The council voted 3-1-1 in a decision to allow business administrator Joe DeMarco to gauge the market for the city’s future assets. The Port Authority bought a portion of MOTBY in 2010 for a $235 million non-interest-bearing payment over 24 years, or $5 million annually. DeMarco said the city plans to sell part of Port Authority’s debtto third parties if the agency declines to make advanced payment. He will be fielding offers to report to the council members who decide during the next city council meeting on June 22.
The plan
With the MOTBY land already sold, the future revenue can be monetized right now. Chief Financial Officer Terrence Malloy explained. “Part of that sale was four large payments made in the first four years, then scheduled out over 20 years.” He said the city is looking to cash in on the back end of the payment schedule – around 7 or 8 years.“The advantage of doing this is to allow a greater period of time in order to maximize the sales price as well as the value of the long term development.”
The real advantage comes with the plan’s immediacy. “The full $25 million would become available this year. I would think our use of that money would be between $13 and 14 million.” Inaddition to the recent plan to monetize future assets, Malloy said, “We refinanced some new debt, we just received money from another land sale, and we’re looking to turn back various expense accounts.” Malloy is referring to the recent finalization of an $800,000 sale of Standard Tank Cleaning Co. industrial site from six years ago. The city also leased the Cape Liberty sign on MOTBY for $150,000.
“I was upset about the plan. There are ways to save money in other areas that would be less risky, and we wouldn’t have to go out and monetize the debt.” – Gar La Pelusa
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A vote against
Third Ward Councilman Gary La Pelusa was the only member to vote against. He expressed concern that the city is rushing into a debt sale without looking hard enough at other solutions. He said, “I was upset about the plan. There are ways to save money in other areas that would be less risky, and we wouldn’t have to go out and monetize the debt.” La Pelusa recommended cuts in the city stipend as well as repealing tax cuts for some residents living around the Bayonne Bridge. “I can’t condone a tax break for anyone at this point,” the councilman said. He’s also concerned that the city is compromising its leverage in negotiations. “Now, [potential buyers] will be in the driver’s seat because they know we’re doing it out of desperation and because of our budget hole. Do I believe we’ll have to make concessions? Yes, I do. I just don’t think that we’ll see full value for it.”
Response to an executive order
In other efforts to tighten the city’s belt, Mayor James Davis last week issued an executive order implementing a one-year hiring freeze to address “concerns about financial oversight and fiscal stability.”The order includes exceptions, one of which is for the “the transfer of no more than five workers as the result of the dissolution of the Bayonne Municipal Utilities Authority.” Once the MUA is dissolved, its current $234,920 debt would be absorbed by the city. Local attorney and former business administrator Peter Cresciwas at the meeting. He criticized the MUA for what he said is its ineffectiveness and the high cost of keeping employees. “You’re acquitting up to five people that don’t do their jobs. There’s a million dollars between the pensions, salaries, the bonding and expenses.”
Rory Pasquariello may be reached at roryp@hudsonreporter.com.