Hoping to jump start development on the west side of Jersey City, Mayor Steven Fulop has asked the City Council to consider adopting a $170 million bond for the purchase of property on the Hackensack River from Honeywell International Inc.
Seen as the largest development in Jersey City since the Newport development in the early 1980s, the purchase would allow the city to control the amount of affordable housing that is constructed there.
The city owns a portion of the nearly 100-acre site, but it would have to pay back about $30 million the city got from Honeywell as advance payment on potential development.
Honeywell, the conglomerate that had been accused of dumping chromium in the area, was one of several entities that were part of a cleanup and planning effort for the multi-site project up and down the river.
The Bayfront I Redevelopment Area is part of a larger vision from May 2003 called the Jersey City Bayside Development Plan, which set the stage for redevelopment of the Hackensack Waterfront.
Cleanup is completed
Early in the 1900s, Hudson County was known as a chromium ore processing capital with three large plants located there.
The Mutual Chemical Company, which was later taken over by Honeywell, ran a chromate chemical plant on Jersey City’s west side and produced toxic waste that was dumped onsite.
As part of a two lawsuits filed in 2005 – one by the Hackensack Riverkeeper and the Jersey City-based Interfaith Community Organization, and the other by the state of New Jersey – a federal judge ruled that Honeywell was responsible for removing contaminated land on the West Side that bordered the Society Hill development. The cleanup started in 2005.
Honeywell reached a 2008 settlement agreement with the city and community groups to remediate 100 acres of chromium-contaminated land along Route 440 and the Hackensack River that was once home to the Mutual Chemical Company.
Under the 2008 agreement, the city agreed to turn over 35 acres of municipal land to Honeywell and the company agreed to cover the cost of the environmental cleanup, which was conducted under the watch of a federal monitor.
In addition, Honeywell was given the right to develop the entire 100-acre site, but was required to split the profits from the future development with the city. Honeywell would get 60 percent of the profits from the Bayfront development, and the city would 40 percent.
Fulop said the site has been declared pollution free and now Honeywell (the majority property owner) is anxious to sell the property.
“They want to be out of this by the end of the year,” Fulop said. “By selling the whole property for about $105 million, there would only be a few potential buyers. And the city would have little control over the pace of development.”
Fulop told the City Council at its May 21 caucus that there are several options. The safest is to do nothing, and let the property get sold off to another master developer.
He said the city taking possession, however, offers the most promise for the future and a potential windfall for the city as well as residents seeking affordable housing.
“I know $170 million is a big number, but 1,400 affordable housing units is a big number, too.” – Steven Fulop.
Not repeating the mistakes of the past
Trying to learn from one of the major mistakes from development of the Hudson River waterfront, where the city could require only minimal affordable housing, Fulop is hoping the city can purchase the property and become its own master developer.
This would allow the city to divide the property into smaller parcels, sell those off to different developers, and require a much higher affordable housing ratio, possibly as much as 38 percent of all the units constructed.
This would amount to 1,400 affordable family-sized units if the project constructs 4,000 total units as currently projected. If the Hudson Bergen Light Rail Line is extended to Route 440, then the site would likely see as many as 8,100 total units constructed with as many as 3,000 of them considered affordable.
“I know $170 million is a big number, but 1,400 affordable housing units is a big number, too,” Fulop said.
Under the current agreement, the city could only require a developer to provide 5 percent on site affordable housing, the bare minimum. These would be workforce development units, smaller single bedroom units.
“But Jersey City has changed over the last decade and so have our housing needs,” he said, noting if the city takes over the property, this would allow for the number of units to increase as well as the type of unit built as affordable.
The change would allow for two-and-three bedroom units that could accommodate families.
The city would also determine when the affordable housing units would be constructed, planning them for earlier in the development rather than later as is typical when done by a private developer.
“We would control the pace of development,” Fulop said.
A big risk, but maybe worth it
If the city allows the sale of the whole parcel to be sold off by Honeywell to another developer, the city would largely break even, Fulop said. But if the city takes over, the potential for future sales could actually generate money to cover the $170 million cost – perhaps more.
Fulop said estimated cost to purchase the land at about $100 million to $110 million.
This is relatively low considering the location and potential sales for a future developer. But he said anyone buying the property will have to also construct infrastructure such as water lines, sewers, and roads. He estimated this cost at about $60 million, which would be paid for from the bond.
The biggest risk is a potential down cycle in the demand for housing or a spike in mortgage interest rates. But the mayor said the city could afford to wait out the cycle until the market improves. Without naming an interest rate, Fulop said the city could afford the debt service of a $170 million bond issue. Jersey City currently is carrying bond indebtedness of around $745 million, according to Business Administrator Brian Platt.
“This is a once-in-a-life time opportunity,” Fulop said.
The City Council is expected to mull over the proposal and collect additional data before possibly introducing a bond ordinance.
Al Sullivan may be reached at email@example.com.