Politics & Government

City Council Approves Bankruptcy Settlement

In a 5-3 vote during a special council meeting on Thursday night.

The City Council agreed to give up its rights to a $2 million claim in bankruptcy proceedings with Hudson Healthcare Inc, the management company of the Hoboken University Medical Center, in a 5-3 vote during a special meeting on Thursday night. Council members Theresa Castellano, Tim Occhipinti and Michael Russo voted against. Councilwoman Beth Mason was absent.

in parking fees and rental payments. It's unclear how much of that $2 million the city would have gotten after going through bankruptcy court.

In return for giving up rights to that claim, the city indemnifies itself from any liability from the roughly 5,000 creditors against the hospital.

Find out what's happening in Hobokenwith free, real-time updates from Patch.

The city is waiting for the State Health Commissioner to approve the sale of the Hoboken University Medical Center to HUMC Holdco LLC, the same company that bought the Bayonne Medical Center.

If the sale goes through, the city will be relieved of a $52 bond obligation. Mayor Dawn Zimmer and Hospital Authority Chairwoman Toni Tomarazzo have said that without this sale, the hospital will be forced to close.

Find out what's happening in Hobokenwith free, real-time updates from Patch.

After the roughly $90 million sale goes through, it's likely that Holdco will sell and lease back the hospital from an Alabama-based real estate firm, which has drawn criticism. Other concerns from critics—and an issue discussed during the state health planning board meeting—include the fact that HUMC will likely not accept all current health care contracts, which could mean that some Hobokenites won't be able to use the hospital anymore after the sale.

It also recently came to light right before the management company filed for bankruptcy.

The settlement between the city and the hospital management company is laid out in a 19-page document, which has not yet been made public. Council members received the document on Thursday afternoon. Some councilmembers said they had not read the document before the meeting. 

Paul Hollander—who is the special counsel retained for this matter by the city at $540 an hour that is part of an initial emergency contract that's not to exceed $17,500—briefed the council on the settlement in a closed session.

Hollander explained also that part of the proceeds of the sale will be returned to the HHI, with which it can pay off some of its creditors. The HHI's total debt is roughly $25 million. Hollander said that this amount will be calculated by a formula, which was not disclosed on Thursday.

Hollander was hired by the city in the week before , indicating that the city was aware the bankruptcy was imminent.

According to a recent Newark Star Ledger article, the hospital received $11 million from the state to pay interest on the $52 million bond.

"We were told time and time again that this company would defease the bonds in cash on their own," Councilman Michael Russo said Thursday night after the council discussed the settlement in a closed session. "We're now told a different story."

Hollander said that the bankruptcy was "accelerated" because the management company was not able to pay public service bills. One of the HHI's largest creditors is PSE&G, with $2,5 million in uncollected bills.

Hollander said that a large unpaid balance to public service could have caused an interference with the hospital's operations.

"It needs to be resolved," said Councilman David Mello about the hospital sale. "It needs to be resolved now." Mello, together with the rest of the mayor's allies on the council, voted in favor of the settlement.

"I am going to vote yes for this," said Sixth Ward Councilwoman Jennifer Giattino, "I don’t think we need to be discussing the hospital over and over and over again."


Get more local news delivered straight to your inbox. Sign up for free Patch newsletters and alerts.

We’ve removed the ability to reply as we work to make improvements. Learn more here