Hoboken's finance tricks backfire

Hoboken's finance tricks backfire
June 07, 2006

If the past decade of real estate sales is any indication, what hotter place is there than Hoboken to acquire property and then develop it for a small fortune?

This must have been on the minds of city officials when they decided to buy the garage back from the Hudson County Improvement Authority and then sell it to a developer at a substantial profit to fill a $5 million budget shortfall in the 2006 municipal budget.

Last year, Hoboken used the garage in a sell-and-lease-back deal with the county piggy bank for municipalities - the HCIA - which made it possible to float $8.5 million in bonds to fill a $7.9 million budget gap for the 2005 fiscal year.

City officials said they expected bids of about $30 million for the new redevelopment zone approved in March. Those hopes were seriously dashed when the property attracted only two underwhelming bids. Of interest to some political watchers were the identities of the bidders.

The lower bid of $18 million came from Hoboken-headquartered-Applied Development Company and Cali Futures LLC.

A group calling themselves Metro-Ran Garage Stop LLC offered $22.1 million as a bid. This is a partnership consisting of former city Councilman Robert Ranieri Jr., New York-based developer Dean Geibel, who is familiar to Sixth Street Embankment advocates in Jersey City, who see Geibel as thwarting their open-space hopes, and Louis Picardo, who is Hoboken's tax collector.

Unfortunately, or fortunately if you are the high bidder, Hoboken needs to come up with $5 million by June 30, the last day of the fiscal year, or the city will have to refinance the debt with the county at a much higher rate.

Some officials say the city is in this dilemma because of environmental concerns and an inability to maximize the density of the building. Others say the city should just take the best deal it can and blame the low bids on a late request for offers, dropping real estate values, and that the engineering firm Schoor De Palma had yet to submit a soil testing report.

For two decades, no matter what the state of real estate or the economy, the one constant has been housing development. There is no excuse for rushing this bidding practice, resulting in offers from local insiders instead of attracting possible deep-pocket developers from anywhere outside a mile square.

City officials created this mess with the use of one-shot gimmicks to put the city's 2005 financial house in order. Now the house is getting more expensive. This is not good government.

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