Mike Lenz is seen to the left at the 5/5/2010 City Council meeting trying to explain to Mike Russo how municipal finance works and hence the anguished expression.
From Mike Lenz, Hoboken 4th Ward Councilman:
Passage of the Sunday’s bond ordinance is absolutely critical to the City’s fiscal health. Here’s why:1. The current debt on the Observer Highway Garage, which is a form called COPS, matures on July 1. The sale of the garage to Hekemian is not scheduled to close until August 13 – 42 days later! The lender, Capital One, has been very clear that the City must have a bond Ordinance in place in order for them to agree to extend the COPS. This means if we don’t approve the bond ordinance we have to repay the COPS more than a month before the sale is scheduled to go through. This risks the City defaulting on its existing debt, seriously jeopardizing both our rights to the garage and our credit rating.
2. A default on the COPs will also constitute a default on the sale agreement with Hekemian, allowing Hekimian to terminate the agreement and receive back their $2.5 million deposit. This means that a failure to pass the bond greatly increases the likelihood that the Hekimian sale will not go through, since the $2.5 million deposit will no longer be at risk.
3. The bond authorization will not result in any borrowing whatsoever at this time. If the sale of the garage to Hekemian closes on schedule, then the COPS will be repaid with the sale proceeds and there will be no borrowing on the bond ever. If the garage sale does not close on schedule, the City will have to repay the COPs without the sale proceeds. In that case we will be very glad to have approved the bond.
4. The demand by Hekimian that the City give up 24 units of affordable housing, and forego $1,000,000 in PILOT revenue each year until the market improves puts the City on notice that there is a very real possibility that the sale may not close as scheduled. Failing to plan for that contingency, once we are aware of it, would be completely irresponsible.
5. Note that authorization of the bond does not result in any risk or cost to the City. In fact, failing to do so would expose the City to enormous risk with respect to contingencies that the City is well aware could occur. This is not a situation where the City can just as easily decide what to do on August 13th if the garage sale fails to close. If we don’t act to pass the bond, the lender has told us they won’t extend the July 1 drop dead date. Because of the way the existing debt was structured, the garage is technically currently owned by a third party. This means if we default there likely won’t be a long period of foreclosure – we just lose the garage and get nothing. This is a reckless risk.
6. On the other hand, passing the bond is no risk at all. The bond can be used for one purpose and one purpose only – the refinancing of the existing debt already borrowed against the garage. No new debt will be created under any circumstances. Contrary to the false claims in a public statement that has been released, the bond cannot under any circumstances be used to finance the relocation of the garage. In fact, the only circumstance under which the bond can be used is if the sale of the garage to Hekemian does not close on August 13 as scheduled, in which case there will be no immediate need to relocate the garage at all.
Editor's Note: Mike Lenz now has a basic "Mike Lenz for 4th Ward City Council" page at http://www.lenzforcouncil.com. I would take it to mean he is planning on running for 4th Ward in November's special election. Not much of a surprise here. Actually, he has a fundraiser coming soon.
His Facebook page is at: Mike Lenz for City Council Facebook Page ◦
