I sent this letter to the City Council members this morning. If you live in Jersey City and have similar concerns about funding variable interest rates, please feel free to copy/paste this letter and send from your own email account, or call your Council reps. Contact info is provided below the letter.
Background on Open Letter
On August 21, 2014 the City Council passed – on 1st reading – Ordinance #14.099, which was a lease contract between the City and a developer to construct the “City Hall Annex.” On September 8th, 2014 the ordinance was pulled from the City Council agenda prior to the 2nd reading (final) vote. The City cited the Council’s need to allay concerns brought by the state about the lease contract. I wrote an article about the contract on September 8th which you can read here.
The City has reintroduced the City Hall Annex lease, through a new ordinance, #14.136. It is scheduled for a 1st reading vote this Wednesday, October 8th and is effectively unchanged from the previous version that was pulled on September 8th.
The focus of my letter below is what I feel to be the most flawed aspect of the lease agreement, the variable interest rates.
Open Letter to Jersey City’s City Council Members re: Ordinance #14.136
Dear City Council Members,
I’m contacting you to share my concerns about Ordinance #14.136 which is up for 1st reading vote at this Wednesday’s (Oct 8th) City Council meeting. I do not believe the ordinance should be passed, even on first reading, in its current form. What I find most troubling about this ordinance is the variable interest rate clause on pages 8-9 of the contract.
Here are the facts, as I understand them, after reading the lease contract in Ordinance #14.136:
- Ordinance #14.136 is effectively a 25-year lease contract between Jersey City and a private developer to construct the “City Hall Annex,” a 60,000 square foot building which would be located at the “Hub” in Ward F.
- In return for constructing the Annex, the developer will receive $45 million in rent over 25 years from Jersey City taxpayers.
- The $45 million rent outlined in Schedule “B” (attached) is considered “base rent.”
- The “base rent” is subject to increase, however, if interest rates rise above 4.6% in years 6 through 25 of the lease term. There appears to be no explicit cap on the interest rates. (see pp 8-9 of the lease contract in Ordinance #14.136).
Here’s my main concern: I don’t understand why the City would even consider exposing taxpayers to variable interest rate risk, particularly over such a long time period. Is there some implied benefit to the City in exchange for taking on variable interest rates? If so, can you please explain that benefit?
I’m struggling to understand the City’s rationale here, particularly in light of the fact that:
- This ordinance was already passed on first reading on August 20th, yet subsequently pulled from the Council agenda on September 8th due to concerns about this variable interest rate clause. What has changed between September 8th and now to allay the concerns about variable interest rates?
- This project was not put out to bid. I understand this is a JCRA development, thus a public bid is not technically required. But shouldn’t $45 million of taxpayer funds over 25 years warrant a public bid process? Wouldn’t this be the more transparent approach?
- There have been no public meetings outside of Ward F about this project, despite this being a high-cost project that all City taxpayers will be funding over the next 2+ decades.
- This is a bond lease contract, i.e. there is no escape clause for the City should the facility at some point become unusable. Is a bond lease typical for municipalities? Is the City recognizing some benefit to account for the increased risk associated with a bond lease?
As I understand it, passing an ordinance on 1st reading is intended to give the public an opportunity to discuss the proposal; but my assumption is that anything worth passing on 1st reading should at least meet some standard of reasonableness. From my vantage point as a resident, variable interest rates are not a reasonable “ask” of taxpayers, thus this does not warrant passing even on 1st reading.
Thank you for your time and I look forward to a response.
By copy to Mr. Byrne I’m requesting that this letter be included in official correspondence to the City.
Jersey City Mayor:
- Mayor Fulop: [email protected], (201) 547-5200
Jersey City At-Large Council Members (they represent you regardless of where you live)
- At-Large Councilman Rolando Lavarro: [email protected], (201) 547-5268
- At-Large Councilman Daniel Rivera: [email protected], (201) 547-5319
- At-Large Councilwoman Joyce Watterman: [email protected], (201) 547-5134
Jersey City Ward-specific Council Members (click here to see what ward you live in…it’s the 2nd image in the article provided)
- Ward “A” Councilman Frank Gajewski: [email protected], (201) 547-5098
- Ward “B” Councilman Khemraj “Chico” Ramchal: [email protected], (201) 547-5315
- Ward “C” Councilman Rich Boggiano: [email protected], (201) 547-5159
- Ward “D” Councilman Michael Yun: [email protected], (201) 547-5485
- Ward “E” Councilwoman Candice Osborne: [email protected], (201) 547-5315
- Ward “F” Councilwoman Diane Coleman: [email protected], (201) 547-5338