Hoboken City Council was unable to reach the six vote majority it needs to pass a $16 million bond ordinance to potentially buy back the municipal garage during a special meeting Sunday night.
While one half of the council argues that the bond ordinance is needed to extend the city's loan on its current debt (which is due to Capitol One Bank on July 1 if the bank does not agree to extend the loan), the other half believes more options should be explored before approving a bond ordinance.
When after three hours of discussions and a public portion, it became evident that Sixth Ward Councilman Nino Giacchi—on whose behalf this special meeting was originally scheduled—would not be supporting the ordinance, Council President Peter Cunningham proposed to table the issue until Wednesday's regular meeting.
"We still have the time here," Giacchi said. "Why are we going down this road before it's necessary?"
Representatives from Capitol One Bank (who lent Hoboken the money) and NW Financial Group LLC (who hold the title to the municipal garage) answered the council's questions, but left many of them unanswered. Giacchi grilled George Ziminski, vice president at Capitol One, on the precise details and timeline of the negotiations. At one point Ziminski said he did not know the closing date on the property was August 13.
There also seems to be a misunderstanding about Capitol One's requirements to extend the city's loan by 90 days.
Ziminski said the council needs to approve the bond ordinance for the bank to grant Hoboken an extension on its payment. "We're asking you for this cost free good faith effort," Ziminski said.
Currently, the city owes Capitol One Bank $15.6 million by July 1. At that time, however, it will still be unclear if the S. Hekemian Group—the developer who has agreed to buy the garage site for $25.5 million—will be able to come up with the money.
Without passing the bond, said former Finance Director Nick Trasente, the city will be in default of the $15.6 million loan, which could cause Hoboken's bond rating to go down, making it very hard for the city to get a loan in the future. Trasente referred to not passing the bond as a "fiasco."
Raising his voice to make his point, Trasente added, "In the finance community it would look horrendous if we default on this loan."
The bond can only be used to re-finance the current garage, and not to acquire a new one. The money will only be needed if Hekemian is unable to close on Aug. 13.
"By not adopting the bond ordinance," said Michael Hanley from NW Financial Group, "the city is not being cooperative."
The original closing date, as it was written in the contract with Hekemian, used to be March 15, but was moved to accommodate the city. Mayor Dawn Zimmer and Environmental Director Jennifer Maier said the City is ready to close and fulfill the environmental remediation of the site by Aug. 13.
Hekemian has asked the council to consider amendments to the contract, such as lower PILOT payments and a large decline in affordable housing units. Since Hekemian agreed to buy the site in 2007 for $25.5 million, its value has dropped to $14 million because of the economic crisis. Zimmer has rejected Hekemian's proposal, which also included the idea to build a large supermarket on the ground floor of the 12-story building and a year extention for the city to vacate.
The new location for the garage is still unclear.
Requests for Proposal for a new (temporary) location for the new municipal garage are being accepted by the city until 2 p.m. on Tuesday.
"Why can't we at least wait till then?" asked Second Ward Councilwoman Beth Mason, who said she doesn't want to approve the bond ordinance before she knows the garage's new location.
The city's development attorney, Gordon Litman, was not present at Sunday's meeting, to the dismay of some of the council members.
Whether or not Zimmer and her council majority will be able to get that sixth vote on Wednesday remains to be seen. Giacchi will not be at that meeting (he'll be on vacation in Europe), but Russo, Mason and First Ward Councilwoman Theresa Castellano (who all three have indicated they do not want to approve this ordinance just yet) will be there.
"You don't have to be a rocket scientist to understand the basics of what we're being told," said Councilman-at-Large Ravinder Bhalla. "A default is a real possibility, yet we're all playing games."