Divided Council to Vote On Bond Ordinance; Six Votes Needed

Hoboken City Council will hold a rare special meeting on Sunday night to try to solve a complicated dilemma over the municipal city garage that could leave Hoboken deeper in debt and with no maintenance facility for city vehicles. 

But interviews with the council members have indicated that several aren't sure they fully understand the issues involved and—despite lobbying by Mayor Dawn Zimmer—it's still unclear if the council will approve a $16 million bond ordinance, which can be used in the event that the city has to buy back the municipal garage.   

The special meeting—which will take place on Sunday at 7 p.m. in City Hall—was announced by Council President Cunningham around 1:30 a.m. at the last council meeting. Although the bond ordinance was first on the agenda for the regular meeting, scheduled for Wednesday June 16, the special meeting was called when it became clear that Sixth Ward Councilman Nino Giacchi would be absent on Wednesday. Council members Theresa Castellano, Beth Mason and Michael Russo (who expressed vehement opposition to this bond ordinance) all said they wouldn't be available on Sunday night.

In order to approve a bond ordinance, there needs to be a six-vote majority. Council members Michael Lenz, Ravi Bhalla, Carol Marsh, David Mello and Cunningham (who all support Mayor Dawn Zimmer) said they intend to vote in favor of the bond. 

"We need six votes," Zimmer said. "I trust Councilman Giacchi to make an informed decision." 

Giacchi, in a phone interview earlier this week, said that approving the bond would be a "last resort" and should only be done when the city is out of other options. 

"If I'd be pressed to vote today," Giacchi said on Wednesday, "It'd be 'no.'"

In a memorandum on Thursday afternoon, Zimmer urged the council to approve the bond. "Failure to pass the bond could mean that our City risks losing all ownership interests in the garage," she wrote.

There is a lot of confusion among the council members about all the financial intricacies the plan involves, and many of them were unable to answer some questions with certainty.

"I don't know any of the answers," said Giacchi, "and I don't see them coming on June 13." And although it may be more difficult to go out to bond in July, he said, it may be easier to get that sixth vote then, when bonding is the last possible option. 

But, does the city have time to wait? 

When the city sold the municipal garage to the Hudson County Improvement Authority in 2005 under the Dave Roberts Administration, it used the money to plug the deficit in the budget. In the meantime, the city has been leasing back the property and decided to award a contract to Paramus-based development firm S. Hekemian Group in 2007, to build a 12-story, 240-unit apartment complex on the site. The selling price that was decided on was $25.5 million. In the meantime, said Hekemian's Corporation Counsel Doug Cohen at the last council meeting, the property's value has dropped to $14 million. 

The city's debt currently lies with finance firm NW Financial Group, said Cunningham. 

In order to make the project successful and profitable, Cohen said, Hekemian now wants to make some amendments to the original proposal. Hekemian wants  to pay less taxes on the property—5 percent rather than 15 percent, which would cause the city to lose $1 million in revenue per year, until the "market picks up." Cohen did not present a specific timeline or deadline for when the PILOT payments would go back to the 15 percent level. 

"I don't want to accept those terrible terms Hekemian came up with," said Councilman-at-Large Mello. "I'd rather buy back the garage than agree to Hekemian's amendments."

Hekemian also proposed to reduce the amount of affordable housing units in the building, and instead offer the city $1 million to build its own. Zimmer has urged the Council to reject Hekemian's proposals. To appease the city, Hekemian has proposed to build a grocery store on the ground floor of the complex and give the city a year extension to vacate the property. 

"I believe the proposal is unfair," Zimmer said. In Thursday's memo she wrote, "our auditor and financial advisor agree that voting no on this bond ordinance could severely impact our bond rating for years to come."

The closing date is coming up on August 13. Before then, the city needs to vacate the premises, clean it up and adhere to any other environmental standards. Director of Environmental Services Jennifer Wenson Maier said at the last meeting that the city will be prepared to close on Aug. 13. 

Third Ward Councilman Russo said the city and Hekemian are playing "a game of chicken."

When asked if he had seen any proof—other than Maier's word—of the city's ability to close on that date, Fourth Ward councilman Lenz answered: "the administration and director Maier have a lot of irons in the fire." 

Another date also looms: June 30, which is when the city owes the bank its debt on the garage. At the last meeting City Council approved to extend the loan with Capitol One Bank, and push back the date by 90 days. 

According to Councilmen Bhalla and Lenz, the bank will only extend the loan, if the city approves the bond on Sunday as a way of showing it will pay off its debt. Cunningham said the bank wants to see a "good faith effort." The $16 million bond will have to serve as a back up plan, which can only be used to retire the city's debt (or in other words: buy back the garage), said Lenz. 

But at a meeting with constituents in the Third Ward on Sunday, Russo said the city had three more months to pay off its debt and did not mention that a bond would be necessary to do so. 

Russo, who said he is having a surgical procedure on Friday but will try to attend the meeting on Sunday, said he had spoken to Giacchi. Russo said that Giacchi told him that "if they force a vote, he's not going to be supportive of it."

Russo said there's no immediate need to bond for the money on Sunday. 

Second Ward Councilwoman Mason—who said she will attend the meeting on Sunday—said she does not have sufficient information and said she didn't know yet what she would vote on Sunday. Without knowing where the garage will be moved to, she said, she couldn't support the bond.  

If the bond can only be used to buy back the garage, Councilwoman-at-Large Marsh said, "three months from now is no different from now." She added that the bond authorizes the $16 million if the city needs to buy back the garage if the closing on Aug. 13 doesn't happen. "It doesn't actually write a check for $16 million."

If not passing the bond means that the city will have to pay its debt on June 30—and would therefore default on the loan—it may mean that the bank could foreclose on the garage. Mello and Lenz said if Capitol One, the current mortgage holder for the garage, takes posession of it—the city could be out of the equation. 

Even if the city can come to an agreement to work out the finances for the old garage property, the lack of suitable locations for a new garage complicates the issue. When it became evident that the Pino site on 6th and Jackson, in the residential Third Ward, was a potential location, the neighborhood came out to a council meeting to protest.  

Mello said he would never support the Pino site as a location for the garage. He suggested that a good place for the garage would be Northern Hoboken, north of the viaduct.

In a letter sent out by her spokesman, Mason, said that the Stevens Institute of Technology campus has been named as another potential location for the garage (Cunningham mentioned this in a previous council meeting).

If the council doesn't pass the ordinance on Sunday, the item may be moved to Wednesday's meeting's agenda. Giacchi won't be there then (he's traveling to Europe), but Russo, Mason and Castellano will be present. If the administration still wants to approve the bond before June 30, it will have to happen in a special meeting, because there are no more scheduled meetings for the month of June. 

"If the choice is that the city is going to lose its garage and have nothing," said Lenz, "I'm willing to go to special meetings every day until people stop playing politics." Lenz said he rejects the idea that Giacchi is the deciding vote. "I believe we'll get seven votes," Lenz said. 

When the garage was sold, Russo said, "we spent the money we thought we'd get for it." Now, he added, "we have to borrow the same money and buy it back. If you think about it, it's absolutely insane."