City votes for Municipal Garage redevelopment. Budget depends on $5M from sale, debate over what to build begins

City votes for Municipal Garage redevelopment
Budget depends on $5M from sale; debate over what to build begins

04/02/2006 Hoboken Reporter 

The Hoboken City Council unanimously voted Monday night to place the city's Municipal Garage on Observer Highway into a new redevelopment zone.

This will allow the council, which also serves as the city's redevelopment authority, to sell the property to a redeveloper for a sizable profit.

But some worry that the city shouldn't be basing development and zoning decisions largely on the need to fill a budget hole.

Budget crunch
Last year the city-owned garage on Observer Highway was sold to the Hudson County Improvement Authority for about $7.9 million, which was used to fill a budgetary shortfall. However, the HCIA is currently leasing the garage back to the city. Once the HCIA sells the garage property for more money, the city will receive the amount paid above the $7.9 million.

The city is currently anticipating $5 million in this year's budget, but the property could be worth much more than $12.9 million, depending on how it will be zoned.

City Council makes its case

Redevelopment, according to state law, is a zoning term that means there is an area that is not being used to its full potential. Designating a redevelopment site can mean special zoning. It can also mean allowing the developer to get tax abatements or make special in-lieu-of-tax payments (PILOTs).

Redevelopment also means the governing body can pool a large area of property together, even if it has multiple owners, and then zone the property as they wish. It can even mean that a city can obtain property via eminent domain.

Monday night, the City Council argued the positives of using a redevelopment zones.

Ruben Ramos Jr. said the money from the sale of the garage property can go to more than just filling the city's budget gap. He said that he wants some of the money used to buy open space north of the 14th street Viaduct, which is currently owned by Academy Bus Company.

Last year, when Mayor David Roberts unveiled his open space initiative, part of that plan included building several baseball fields on the Academy property. A new municipal garage could be built in that area, Ramos said. Councilman A. Nino Giacchi added that it is better for the City Council to zone this property, instead of the city selling it and a private developer then letting the developer seek zoning variances at the city's Zoning Board of Adjustment.

"We need to set an example [with how we zone this property]," Giacchi said. "It's better in our hands."

In lieu of regular taxes

Councilman Michael Russo said that using a redeveloper plan and approving Payment in Lieu of Taxes (PILOT) agreements with the designated redevelopers will enable the city to close its problematic structural deficit.

PILOT payments are one of the most controversial issues right now in Hoboken. When a project is included in a redevelopment area, the city can enter into a PILOT agreement in which the chosen redeveloper pays a set amount of taxes each year. The developer is still paying taxes, but it may be according to a more steady formula than regular fluctuating tax rates.

City officials like such agreements because the taxes go directly to the city rather than being split among the city, county and schools.

Russo said the city can use PILOT payments to increase the city's reoccurring revenue stream in order to help close the city's historically large structural deficit.

"By 2008 we hope not have a structural deficit," Russo said. "In my opinion, we are improving the health of the city [with redevelopment," Russo said.

Not all agree

Many that argue the PILOTs are a terrible deal. Community activist Daniel Tumpson said that residents will end up paying the county and school taxes that the developers don't.

Several members of the public who spoke at the meeting also said they do not believe planning decisions should be driven by the need to fill a short-term budget gap.

"Many people [think] that you are using redevelopment improperly," Hoboken resident Jim Doyle told the Council. "This is all being driven by your need to fill a budget gap."

Doyle said if the city weren't having fiscal problems, there wouldn't be a need "to rush into the redeveloper project du jour."

Ines Garcia Keim added that in Gov. Jon Corzine's recent budget address, he warned against an over-reliance on creative one-shot revenues.

During that speech, Corzine said "Every time [the state uses] a gimmick or a trick to pay for this year's expenses, all we're doing is making next year's problem bigger."

Garcia-Keim said that the same principle should be applied to municipal budgeting. "These one-shot deals are only going to make our problem that much worse," she said.

Another concern Monday night was that using redevelopment could entice the city to use eminent domain too liberally.

A portion of the new redevelopment area is a 40-car parking lot owned by the Jefferson Trust Condo Association. Jennifer Alexander, an attorney for Jefferson Trust, said that her client opposes the council decision to include their piece of private property in the redevelopment plan.

She added that the property is being used for its intended purpose and all of the 42 spaces are deeded for parking. If the redeveloper is not able to negotiate with Jefferson Trust for the sale of the property, at some future date the city would have the legal ability to seize the property through eminent domain.

Who's the developer?

Some residents and activists are worried that the mayor and City Council could already have made a deal with a politically connected developer behind closed doors.

Park activist Leah Healey, a lawyer who is an expert in redevelopment law, said that the city has already set a precedent for selecting a developer before a redevelopment plan has been completed. Last year the city entered into a "Memorandum of Understanding" with URSA developer to negotiate exclusively to be the developer of 11 acres of property on the city's western border. In 2005, persons associated with URSA and the Terragon Development Corp. contributed over $125,000 to Roberts and his allies' campaigns.

The "Memorandum of Understanding" was recently overturned by a Superior Court judge. URSA is currently appealing that ruling.

"I hope we don't find out at a later date that some deal has already been made [with a developer of the garage property]," Healey said.

According the city's lawyer Joseph Sherman, the Municipal Garage project will be offered via a public bidding process.

The process from here

To realize $5 million from the sale of the garage in this year's budget, the city must write a redevelopment plan, hold public hearings before the Planning Board and City Council, designate a developer, and then sell and close on the property, all before June 30, which is the end of the 2005-2006 fiscal year.

City officials say that while this is a tight timeline, it can be done.

Others fear that because this is such a rushed process, mistakes could be made and the city could be forced to accept an imperfect developer-driven deal.

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