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Re: Jersey City planning $20M City Hall annex on MLK Drive
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Jersey City delays ribbon cutting of City Hall annex

JERSEY CITY -- Mayor Steve Fulop was hoping to head into the final weekend of his re-election campaign with a big feather in his cap: the opening of the City Hall annex on Martin Luther King Drive.

The $20 million building, which has quotes from the civil rights leader carved onto its exterior, is one of Fulop's signature achievements for the south side of the city, along with Berry Lane Park and increased police patrols.

http://www.nj.com/hudson/index.ssf/20 ... ing_of_city_hall_ann.html


Posted on: 11/2 19:42
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Re: MLK City Hall Annex unfinished but taxpayers paying $80,250/month rent
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neverleft wrote:
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mia wrote:
No, the initial date was February 2017, never 2018. Why would we be paying rent if the date was not until 2018? Really... You are confused... A second ordinance was passed about 7 months later, which I cited in the show, to postpone the date to Septemeber 30, 2017.



Let me get this straight the ground breaking for the project was in July 2016 and you are saying it was to be ready in February 2017? Wow they must have planned to have Superman build it like when he put together his Fortress of Solitude in the Arctic Ice.

7/19/2016 JJ : “a City Hall annex that will house about 300 workers when it opens in February 2018.”

“…. will build the 45,000-square-foot annex and lease it to the city for 20 years at a cost of $36 million. After the lease expires, the city will own the building. The city has said if it built the annex on its own, the cost would be $43 million.”


When you interviewed The Healy Clone what did you mean by “he’s going to be telling a little bit about us”? Oh yeah and nice dig on how crowded the ballot is going to be because of “Mayor Fulop’s misinformation about the election move”. We are not dumb we can all read/study the ballots when they are mailed to our homes and on election day push the buttons. I am pushing all of mine for Mayor Fulop and his Team, we cannot go backwards to the Healy/ Matsikoudis days of NOTHINGNESS. I guess you and the other Clonettes can.

Steve Fulop for Mayor – 1A TEAM FULOP: MOVING JERSEY CITY FOWARD

Rolando Lavarro for At-Large Council – 1B TEAM FULOP
Joyce Waterman for At-Large Council – 2B TEAM FULOP
Daniel Rivera for At-Large Council – 3B TEAM FULOP

Denise Ridley FORWARD A Council – 7C TEAM FULOP
Mira Prinz-Arey FORWARD B Council – 3C TEAM FULOP
John Hanussak FORWARD C Council – 3C TEAM FULOP
Moriah "Mo" Kinberg FORWARD D Council – 5C TEAM FULOP
Jermaine Robinson FORWARD F Council – 5C TEAM FULOP


PS - I figured out what the name of your show is from it's initials "TP" because that is all it is good for when you have guesses like The Healy Clone on.

..


You're entitled to your opinion but don't misrepresent the facts. Read the ordinances, which are online. Even when they passed the 2nd ordinance to extend the date to September 30, 2017, it was still less than the minimum 18 months that the Asst Bus Administrator Corrado kept quoting.

Terrence tells me they're having a ribbon cutting tomorrow and the building isn't close to being done.... I think Steve is getting delusional....

As for all the name calling, doesn't add to your credibility.

TP is just short for Talking Politics, the Comcast TV show, which is in my signature....

As for moving the Mayor/ Council race from May to November and the resulting ballot, yes Mayor Fulop kept emailing everyone the City would save $400,000 / year! The Mayor & Council elections are every FOUR years and DO NOT COST $1.6 million but more like $500,000. He also admitted he wanted to do away with the run-off elections. So now we have a run-off in December and not June, when people would be more engaged. Yes, the ballot is huge & confusing....

Posted on: 11/1 21:49
Check out Talking Politics --- 90+ shows stream off talkingpolitics.net or see 23+ shows on YouTube. Search " Mia Scanga". The shows broadcast on Comcast's Channel 51, Mon @ 9:30pm, Wed @ 8:30pm, Thurs @ 7:30pm. On Verizon FIOS: Channel 38, Mon 6pm, We
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Re: MLK City Hall Annex unfinished but taxpayers paying $80,250/month rent
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mia wrote:
No, the initial date was February 2017, never 2018. Why would we be paying rent if the date was not until 2018? Really... You are confused... A second ordinance was passed about 7 months later, which I cited in the show, to postpone the date to Septemeber 30, 2017.



Let me get this straight the ground breaking for the project was in July 2016 and you are saying it was to be ready in February 2017? Wow they must have planned to have Superman build it like when he put together his Fortress of Solitude in the Arctic Ice.

7/19/2016 JJ : “a City Hall annex that will house about 300 workers when it opens in February 2018.”

“…. will build the 45,000-square-foot annex and lease it to the city for 20 years at a cost of $36 million. After the lease expires, the city will own the building. The city has said if it built the annex on its own, the cost would be $43 million.”


When you interviewed The Healy Clone what did you mean by “he’s going to be telling a little bit about us”? Oh yeah and nice dig on how crowded the ballot is going to be because of “Mayor Fulop’s misinformation about the election move”. We are not dumb we can all read/study the ballots when they are mailed to our homes and on election day push the buttons. I am pushing all of mine for Mayor Fulop and his Team, we cannot go backwards to the Healy/ Matsikoudis days of NOTHINGNESS. I guess you and the other Clonettes can.

Steve Fulop for Mayor – 1A TEAM FULOP: MOVING JERSEY CITY FOWARD

Rolando Lavarro for At-Large Council – 1B TEAM FULOP
Joyce Waterman for At-Large Council – 2B TEAM FULOP
Daniel Rivera for At-Large Council – 3B TEAM FULOP

Denise Ridley FORWARD A Council – 7C TEAM FULOP
Mira Prinz-Arey FORWARD B Council – 3C TEAM FULOP
John Hanussak FORWARD C Council – 3C TEAM FULOP
Moriah "Mo" Kinberg FORWARD D Council – 5C TEAM FULOP
Jermaine Robinson FORWARD F Council – 5C TEAM FULOP


PS - I figured out what the name of your show is from it's initials "TP" because that is all it is good for when you have guesses like The Healy Clone on.

.


.

Posted on: 11/1 8:38
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Re: MLK City Hall Annex unfinished but taxpayers paying $80,250/month rent
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Rent began September 30th. See the video of the March 2015 Council meeting where we opposed the project as there was no due diligence done by the City. We knew it wouldn't get done on time and it wasn't. There was no penalty for the developer, Brandywine, to complete the building on time. Taxpayers pay no matter what... Another gift from the taxpayers.


Wait I am confused wasn’t the opening planned for February 2018 but that date was pushed up to late October early November 2017 because construction was moving at a fast pace?

Isn’t it a lease to own deal and after the 20 year lease is up the city will own the building?

Are you the woman who I see night after night on Local Cable Access “interviewing” The Healy Clone making up all sorts of BS about Mayor Fulop? What’s up with the Clones hands?

.


No, the initial date was February 2017, never 2018. Why would we be paying rent if the date was not until 2018? Really... You are confused... A second ordinance was passed about 7 months later, which I cited in the show, to postpone the date to Septemeber 30, 2017. As the City had done NO due diligence, didn't know they had to transfer some of the HUD Section 108 loan, which took months to do so further backlogged the project. They didn't subdivide the parking lot until June 2015. It's a $36+ Million building with a 25-year lease. The City has already spent almost $4 million in interior work so looks like the $50/sq foot has also proven to be very inadequate. They're about 70% over budget and the building isn't done.

You should watch the show again....

As for that woman, I don't know what you're talking about but I don't think you do either.... I hope you're not planting all this nonsense while you're supposed to be working. I've heard complaints from City workers about all the campaigning that's expected of them...

Posted on: 11/1 5:40
Check out Talking Politics --- 90+ shows stream off talkingpolitics.net or see 23+ shows on YouTube. Search " Mia Scanga". The shows broadcast on Comcast's Channel 51, Mon @ 9:30pm, Wed @ 8:30pm, Thurs @ 7:30pm. On Verizon FIOS: Channel 38, Mon 6pm, We
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Re: MLK City Hall Annex unfinished but taxpayers paying $80,250/month rent
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Rent began September 30th. See the video of the March 2015 Council meeting where we opposed the project as there was no due diligence done by the City. We knew it wouldn't get done on time and it wasn't. There was no penalty for the developer, Brandywine, to complete the building on time. Taxpayers pay no matter what... Another gift from the taxpayers.


Wait I am confused wasn’t the opening planned for February 2018 but that date was pushed up to late October early November 2017 because construction was moving at a fast pace?

Isn’t it a lease to own deal and after the 20 year lease is up the city will own the building?

Are you the woman who I see night after night on Local Cable Access “interviewing” The Healy Clone making up all sorts of BS about Mayor Fulop? What’s up with the Clones hands?

.

Posted on: 10/31 22:43
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Re: MLK City Hall Annex unfinished but taxpayers paying $80,250/month rent
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mia wrote:
Rent began September 30th. See the video of the March 2015 Council meeting where we opposed the project as there was no due diligence done by the City. We knew it wouldn't get done on time and it wasn't. There was no penalty for the developer, Brandywine, to complete the building on time. Taxpayers pay no matter what... Another gift from the taxpayers.




As long as the envelopes get delivered by the first each month.. nothing to see here.

Posted on: 10/31 18:36
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MLK City Hall Annex unfinished but taxpayers paying $80,250/month rent
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Rent began September 30th. See the video of the March 2015 Council meeting where we opposed the project as there was no due diligence done by the City. We knew it wouldn't get done on time and it wasn't. There was no penalty for the developer, Brandywine, to complete the building on time. Taxpayers pay no matter what... Another gift from the taxpayers.



Posted on: 10/31 17:45
Check out Talking Politics --- 90+ shows stream off talkingpolitics.net or see 23+ shows on YouTube. Search " Mia Scanga". The shows broadcast on Comcast's Channel 51, Mon @ 9:30pm, Wed @ 8:30pm, Thurs @ 7:30pm. On Verizon FIOS: Channel 38, Mon 6pm, We
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Re: Jersey City planning $20M City Hall annex on MLK Drive
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Terrence T. McDonald | The Jersey Journal


JERSEY CITY — Edwin Davis moved to Orient Avenue from Manhattan about a year ago and felt some initial trepidation about the area.

Located near the Hub shopping center on Martin Luther King Drive, the neighborhood struggles with poverty, unemployment and crime. Residents nicknamed the local McDonald's "Smackdonald's" because of drug addicts they see congregating there in the early-morning hours.

But Davis, 57, who was steered to the area by a real-estate broker, said he's "happy to be here." He's even more excited now that the city plans to open a new municipal building in the Hub plaza.

"This gives me hope that this will be a really interesting area and I'm here at the beginning of it," he said.

Davis was one of about three dozen residents and public officials who attended this afternoon's groundbreaking ceremony for the $20 million new municipal building, a City Hall annex that will house about 300 workers when it opens in February 2018.

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Posted on: 2016/7/19 19:36
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Re: Jersey City planning $20M City Hall annex on MLK Drive
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My letter published in the Jersey Journal 3/17/15

With the approval of the City Hall annex construction at the Hub, taxpayers will have a new building or perhaps the biggest tax increase in the not too distance future.

This increase will be based on the soil test that must be done before construction. Before any agreement was negotiated, the city should have contacted the DEP to find out if the lot and block are considered a brownsfield. I find it perplexing that this step was ignored.

The site is now a parking lot and the state allows contaminated soil to be used as parking lots. This was evident in Newark when a parking lot later became housing and 19 homes are now sitting on contaminated soil causing health problems for buyers.

The council's job is to protect the financial health of the citizens. Perhaps, we will be lucky and there will be little or no contamination, if not we will be bonding tens of millions to clean up the site.

It is actions like this that makes Jersey City unaffordable, as the bonding debt grows more property owners are struggling to maintain their homes.

Since common sense did not prevail, we can only hope and even pray that little or no contamination will be in the soil.

YVONNE BALCER
JERSEY CITY
http://www.nj.com/opinion/index.ssf/2 ... l_annex.html#incart_river

Posted on: 2015/3/17 16:17
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Re: Jersey City planning $20M City Hall annex on MLK Drive
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Raiz Wahid spoke on the ordinance and asked why there was no "pay to play" attachment. He raised a good question, why was this missing?

Posted on: 2015/3/12 15:54
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Re: Jersey City planning $20M City Hall annex on MLK Drive
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deja vu all over again

Posted on: 2015/3/12 8:12
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Re: Jersey City planning $20M City Hall annex on MLK Drive
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I spoke on this ordinance and asked about the contamination. The city said they will test for contamination after the deal is signed. We, the taxpayers, are now on the hook for clean up.

Posted on: 2015/3/11 22:44
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Re: Jersey City planning $20M City Hall annex on MLK Drive
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Jersey City council approves $36M plan to build City Hall annex

By Terrence T. McDonald | The Jersey Journal The Jersey Journal
March 11, 2015 at 10:18 PM

JERSEY CITY - The City Council tonight approved a $35 million plan to build a City Hall annex on Martin Luther King Drive, one the Fulop administration touts as the largest investment in the city's black community in decades.

The 7-2 vote came after a roughly two-hour public hearing that saw supporters express hope that the annex will rejuvenate the economy of the commercial strip near the Hub shopping center, and opponents slam the deal as a giveaway to the developer, Brandywine.

Council President Rolando Lavarro, who voted in favor, said the annex will be a "catalyst" for more redevelopment in an area that has been "distressed for decades."

"Hell yeah," Lavarro said when the time came to vote.

Lavarro was joined in support by Mayor Steve Fulop's other allies on the council: Joyce Watterman, Daniel Rivera, Frank Gajewski, Khemraj "Chico" Ramchal, Candice Osborne and Diane Coleman. The two regular Fulop critics, Rich Boggiano and Michael Yun, voted against.

Read more:  http://www.nj.com/hudson/index.ssf/20 ... ity_hal.html#incart_river


Posted on: 2015/3/11 22:37
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Re: Jersey City planning $20M City Hall annex on MLK Drive
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I went to the Caucus meeting two weeks ago when this came up. Councilman Yun questioned the contamination of soil. Greg Corrado said, the property in question is now a parking lot, so there is no need to worry. There are homeowners in Newark who brought new homes that was a parking lot and they are sick from the contaminated soil.
http://www.nj.com/essex/index.ssf/201 ... apors_seeping_inside.html

Posted on: 2015/3/8 17:02
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Re: Jersey City planning $20M City Hall annex on MLK Drive
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Something is missing from the articles, or the explanations of this. On the face of it - the city builds it itself for $10M, saving many millions over the long term vs. leasing, seems like a no brainer. Are there other advantages in leasing? Writing off certain costs? Not needing to require union wages in construction/cleaning contracts?

Posted on: 2015/3/8 16:34
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Re: Jersey City planning $20M City Hall annex on MLK Drive
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Interesting that the Police Department has opted out of going to the Annex at MLK Drive saying they were reluctant to establishing a new central headquarters in a building with mixed uses, calling it a security nightmare. So where have they been for the past couple of years since 8 Erie Street closed? They are at 1 Journal Square though you'd never know it from passing by. By the way what about the "security nightmare" for the rest of the city agencies in the building. They're gonna be just fine right?

Posted on: 2015/3/8 8:57
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Re: Jersey City planning $20M City Hall annex on MLK Drive
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Smaller building, but the deal’s the same City to reduce size of City Hall Annex on MLK Drive but still lease it for 25 years

 by  Al Sullivan Reporter staff writer                                         
Mar 08, 2015
Residents who attend a hearing about the controversial City Hall Annex proposed for Martin Luther King Drive during the March 11 City Council meeting will discover the project has been reduced in size, but the lease purchase arrangement between the developer and city remains the same.

The annex will be built by Brandywine Jersey City LLC through a public-private partnership with the city and the Jersey City Redevelopment Agency (JCRA).

However, the size of the structure wasn’t the cause of the controversy; the cause is the lease purchase under which the city would acquire the facility.

The annex, in the neighborhood popularly known as The Hub, would be rented to the city by Brandywine with an option to buy it for a nominal price at the end of the 25 years.

Originally proposed to cost $14 million to build, the project has been scaled back from 60,000 square feet to 45,000, said Eric Moore of Brandywine. This reduces the city’s overall cost by about $10 million, from about $45 million to about $36 million, after the city’s lease purchase agreement expires.

Read more:  Hudson Reporter - Smaller building but the deal s the same br font size 2 i City to reduce size of City Hall Annex on MLK Drive but still lease it for 25 years font i br

Posted on: 2015/3/8 3:00
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Re: Jersey City planning $20M City Hall annex on MLK Drive
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City council postpones vote on controversial City Hall Annex project

By Michaelangelo Conte | The Jersey Journal
December 15, 2014 at 9:51 PM

As expected, the Jersey City City Council yanked a controversial ordinance from Wednesday’s council meeting agenda aimed at clearing the way for a 25-year lease/purchase agreement to building a $24 million City Hall Annex at a total cost to the city of about $45 million.

State officials were set to review the deal for possible approval today, but that has been tabled until at least next month. The council cannot take a final vote on the ordinance it until the state gives the plan it’s OK.

The city “has a need for office space for the Department of Health and Human Services, the Department of Public Safety, and the Department of Housing, Economic Development & Commerce,” reads the ordinance which was to have a public hearing and vote on final passage at the next council meeting. It was pulled from the agenda at tonight’s caucus meeting without comment.

Read more:
http://www.nj.com/hudson/index.ssf/20 ... y_hall_annex_project.html

Posted on: 2014/12/15 22:10
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Re: Jersey City planning $20M City Hall annex on MLK Drive
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I remember when City Hall condemned the property across the street on Montgomery St. (a small church was there ). The city, then plan on building an annex there. It became a parking lot.

Posted on: 2014/12/12 11:03
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Re: Jersey City planning $20M City Hall annex on MLK Drive
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a friend of my commented this evening that this lease is like a "blank check" to the developer", a 5 year arm with no limits.

Posted on: 2014/12/11 22:26
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This will be on the council agenda December 17, 2014.

Posted on: 2014/11/10 20:20
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hero69 wrote:
i agree that playing the floating rate game is VERY dangerous!


+1 There are a lot of provisions in that lease which look like the standard landlord-tenant commercial lease, where the landlord pushes various risks onto the tenant. In this case, the city should use its leverage to get a more favorable deal.

Posted on: 2014/10/6 15:54
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i agree that playing the floating rate game is VERY dangerous!

Posted on: 2014/10/6 14:23
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This is back as a first reading ordinance, there might be some changes but basically it is not a good deal for JC. For those who did not see, here is the video of Michael Yun explaining why this deal is wrong:
http://youtu.be/ZDV_rM0qPlw?list=UUPZCDR4rCUMJtCl7__MaEag

Posted on: 2014/10/6 10:47
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dtjcview -- All good questions. Please ask them at the Council meeting when the lease is back on the agenda....or send a letter to all our council members with a copy of to the Jersey Journal.

Posted on: 2014/9/9 9:27
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I'm surprised Fulop with his Finance background, backs this. The developer profit isn't quite $45m - $16m = $29m - that misses the cost of financing - the interest the developer could earn on their $16m investment over 25 years.

But it's still a very high profit - $5-10 million for near zero risk. A 4-5% fixed rate loan, on $16m over 25 years costs costs $35-$40m to repay - see total payments & total interest below.

Why doesn't the City bond $16m itself and repay over 25 years for much less? Or repay the developer by other means, like granting other building permits that generate revenue?

My bet is that there is some other financial shenanigans going on - that doesn't simply involve a developer payback. Like keeping the deal off the books when it comes to reporting level of City debt.

Quote:

http://www.bloomberg.com/personal-finance/calculators/mortgage/

Your payment is $84,453.89 for 25 years with a rate of 4%.
Mortgage Summary
Loan amount 16000000
Term 25
Interest Rate 4
Monthly Payments 84,453.89
Total Payments $25,336,168.33
Total Interests $9,336,168.33

Payment Schedule
Period Payments Interest Principal
12/2014 253,361.68 159,688.45 93,673.23
12/2015 1,013,446.73 629,260.44 384,186.30
12/2016 1,013,446.73 613,608.10 399,838.64
12/2017 1,013,446.73 597,318.05 416,128.68
12/2018 1,013,446.73 580,364.33 433,082.40
12/2019 1,013,446.73 562,719.88 450,726.85
12/2020 1,013,446.73 544,356.58 469,090.16
12/2021 1,013,446.73 525,245.12 488,201.61
12/2022 1,013,446.73 505,355.03 508,091.70
12/2023 1,013,446.73 484,654.59 528,792.14
12/2024 1,013,446.73 463,110.78 550,335.95
12/2025 1,013,446.73 440,689.25 572,757.48
12/2026 1,013,446.73 417,354.22 596,092.51
12/2027 1,013,446.73 393,068.50 620,378.24
12/2028 1,013,446.73 367,793.33 645,653.40
12/2029 1,013,446.73 341,488.41 671,958.32
12/2030 1,013,446.73 314,111.80 699,334.94
12/2031 1,013,446.73 285,619.81 727,826.92
12/2032 1,013,446.73 255,967.02 757,479.71
12/2033 1,013,446.73 225,106.13 788,340.61
12/2034 1,013,446.73 192,987.91 820,458.82
12/2035 1,013,446.73 159,561.16 853,885.58
12/2036 1,013,446.73 124,772.54 888,674.19
12/2037 1,013,446.73 88,566.58 924,880.15
12/2038 1,013,446.73 50,885.54 962,561.20
12/2039 760,085.05 12,514.79 747,570.26
Totals: 25,336,168.33 9,336,168.33 16,000,000.00
--------------------------------------------------------------
Mortgage Loan Results
Your payment is $93,534.41 for 25 years with a rate of 5%.
Mortgage Summary
Loan amount 16000000
Term 25
Interest Rate 5
Monthly Payments 93,534.41
Total Payments $28,060,321.99
Total Interests $12,060,321.99

Payment Schedule
Period Payments Interest Principal
12/2014 280,603.22 199,663.69 80,939.53
12/2015 1,122,412.88 788,366.76 334,046.12
12/2016 1,122,412.88 771,276.33 351,136.55
12/2017 1,122,412.88 753,311.52 369,101.36
12/2018 1,122,412.88 734,427.59 387,985.29
12/2019 1,122,412.88 714,577.53 407,835.35
12/2020 1,122,412.88 693,711.90 428,700.98
12/2021 1,122,412.88 671,778.74 450,634.14
12/2022 1,122,412.88 648,723.44 473,689.44
12/2023 1,122,412.88 624,488.59 497,924.29
12/2024 1,122,412.88 599,013.84 523,399.04
12/2025 1,122,412.88 572,235.75 550,177.13
12/2026 1,122,412.88 544,087.65 578,325.23
12/2027 1,122,412.88 514,499.43 607,913.45
12/2028 1,122,412.88 483,397.42 639,015.46
12/2029 1,122,412.88 450,704.18 671,708.70
12/2030 1,122,412.88 416,338.29 706,074.59
12/2031 1,122,412.88 380,214.17 742,198.71
12/2032 1,122,412.88 342,241.88 780,171.00
12/2033 1,122,412.88 302,326.85 820,086.03
12/2034 1,122,412.88 260,369.69 862,043.19
12/2035 1,122,412.88 216,265.93 906,146.95
12/2036 1,122,412.88 169,905.73 952,507.15
12/2037 1,122,412.88 121,173.65 1,001,239.22
12/2038 1,122,412.88 69,948.36 1,052,464.52
12/2039 841,809.66 17,273.08 824,536.58
Totals: 28,060,321.99 12,060,321.99 16,000,000.00
©2014 Bloomberg L.P. All rights reserved.


Posted on: 2014/9/8 20:54
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Re: Jersey City planning $20M City Hall annex on MLK Drive
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This is a terrible deal for JC. Fulop knows this. Floating Rates are what put Orange County, CA into bankruptcy back in 1994. It never hurts to look at history on these sort of "deals."

JC should not be in the interest rate hedging game. They will get fleeced on pricing by any bank and it is definitely not a core competence of anyone working at City Hall.

Fulop should be embarassed by this proposal and kudos to Brigid for mulling thru the documents and putting it in plain English...

This is why banks and Investment Firms love working with cities and municipalities, it is so easy to scalp them on deals. Guess who is the Patsy at the table?

Posted on: 2014/9/8 19:46
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Re: Jersey City planning $20M City Hall annex on MLK Drive
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if you have interest in city taxes and spending, please read thru the write up - there are some great diagrams and charts -
http://civicparent.org/2014/09/city-h ... rns-about-the-fine-print/

City Hall Annex: Concerns About the Fine Print
By Brigid D'Souza | September 8, 2014

Jersey City currently rents office space at several locations other than City Hall for a total of about $2.7 million per year. City Hall Annex MapTo cut costs and give residents a single location (other than City Hall) to access services, the City wants to create a City Hall Annex (“the Annex”). A key question has become: how much money should the City pay for the new space?

Under Mayor Fulop’s proposal – codified in Ordinance 14.099 – the City would enter into a 25-year lease with a developer for a cumulative cost of $45 million. In year 26, the City could purchase the building for $1.

Mr. Fulop’s proposal received initial approval from the City Council on August 18th. It now requires one more vote – scheduled for September 10th – to be finalized.

City Hall Annex Timeline v2At the August 18th Caucus meeting, City officials cited the merits of Mr. Fulop’s proposal, including:

The proposal lowers rent from the current rate of $2.7 million/year to between $1.28 and $2.4 million/year.
The proposal spreads the cost of a long-term asset (a new building) over a long-term timeline, thus freeing up funds for other expenses.

But a closer reading of the fine print reveals potential flaws with Mr. Fulop’s plan:

The lease agreement bonds the City to 25-years of rent with no escape clause.
The lease agreement requires the City to pay adjustable interest for a majority of the lease term.
The lease agreement provides an approximate 64% profit margin for the private developer.

Let’s take a closer look at the three fine print items.

Fine Print Item #1: This is a “Bond” Lease (aka “Hell or High Water” Lease)

With a bond lease, all risk is transferred from the landlord to the renter. There is no escape clause; “come hell or high water,” the renter must pay for the entire lease term, even if the building is partially or fully destroyed. This type of lease is similar to the interest paying obligation on bonded debt, thus its name, “bond lease.”

Bond lease info graphic v2As a concept, a bond lease is not “bad” or “good”; it is simply a financial instrument that serves a specific purpose for landlord and tenant in a specific context. However, a bond lease passes risk from owner to renter, regardless of unforeseen circumstances that may harm the renter. This risk is important for taxpayers to understand.

Fine Print Item #2: The City Must Pay Variable Interest Rates

The bond lease contains annual payments that increase over time. For instance, the City will pay $1.28 million rent in year 1, $1.67 million rent in year 10, and $2.42 million rent in year 25. This gradual increase presumably accounts for inflation. Yet despite these increasing payments over time, the lease binds the City to adjustable interest rates above 4.6%.

Rent schedule w callouts vfinal2

Variable interest rates are an inherent financial risk that companies deal with in the ordinary course of business. Companies generally hedge this risk. Yet Ordinance 14.099 provides no explanation about how the City will hedge the risk of rising interest rates.

Fine Print Item #3: Developer Profit Margin May be as High as 64%

Every developer must earn profit, otherwise he would have no incentive to do business. But as taxpayers, we should understand the profit we are funding.

Ordinance 14.099 is effectively a 78-page lease contract between Jersey City and a private corporation named Jersey City Municipal, LLC (“JCM LLC”). The contract was not put out to bid; the land is owned by the Jersey City Redevelopment Agency (JCRA) and there is no legal requirement to solicit multiple bids. JCM LLC was formed in April 2014 and is owned by Brandywine, a Pennsylvania-based developer that currently manages “the Hub,” a commercial property complex where the new Annex will be located. According to NJ.com, the Hub has been a “financial hole” for Jersey City and Brandywine; further, Jersey City owed Brandywine $262,000 in back commissions as of June 2014.

Cost Breakdown-CH AnnexFIXEDv2Under this lease plan, total revenues to JCM LLC are $45 million. The cost to build the new Annex can be estimated at approximately $16 million (based on a $215 per square foot cost estimate for new commercial construction from RSMeans, a research company that compiles construction cost estimates). Thus JCM LLC’s profit would be approximately $29 million, or 64% margin. This 64% profit margin does not directly account for inflation.

According to research firm IBIS World, average profit margin for U.S., nonresidential commercial construction ranged from 4.84% in 2006 to 0.78% in 2010.

Some Civic Questions

The Mayor’s lease proposal contains fine print that demands answers from taxpayers. When average taxpayers speak up, the City Council listens. Here are some questions you should ask the Mayor and your Council members:

Why was this project not put out to bid? While the JCRA is not required to solicit bids, wouldn’t a bid process be more transparent?
Should the City enter into a 25-year bondable lease? Is this type of lease typical for municipalities?
Is the City exploring other alternatives, such as Mr. Yun’s plan to build the annex, or using an existing City building that may be vacant (e.g. the old Golden Door Charter School, aka the PS 37 Annex, located at 9th and Marin)?
Does Jersey City have a plan to hedge its risk associated with rising interest rates from years 6 through 25 of the lease?
What is the maximum potential cost if interest rates do rise above 4.6%?
What is the typical profit margin for new commercial construction in northern NJ/tri-state?
If the City Council approves this lease, will 64% profit margin be expected from other developers who want to do business with the City?
The developer will pay zero property taxes on the Annex (since the Annex is a public building and thus exempt from property taxes). Has the City Council factored this cost reduction into its analysis?
If Jersey City currently owes the developer unpaid commissions, could this unusually high profit margin be interpreted as a quid pro quo attempt to make the developer whole on prior losses?

Posted on: 2014/9/8 19:04
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Re: Jersey City planning $20M City Hall annex on MLK Drive
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Posted on: 2014/9/8 17:22
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Re: Jersey City planning $20M City Hall annex on MLK Drive
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Posted on: 2014/9/8 15:54
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