12/5/18 Business Meeting

By: Joseph L. Kuchie

SOUTH AMBOY – South Amboy’s city council held a 2 ½ hour public hearing regarding the Manhattan Beach Project prior to last Wednesday’s business meeting.

Joseph Baumann Jr., an attorney for the South Amboy Redevelopment Agency, walked through a PowerPoint presentation highlighting the high-level notes of the project and what residents could expect if the project is approved. Representatives from Sherman Financial Group and BNE Real Estate, the developers looking to construct Manhattan Beach Project, were also on hand to field questions that Baumann was unable to answer.

The presentation highlighted several key facts, including:

• There will be 1,750 units built in phases on the property over the next 25 years, plus an additional 88 affordable housing units.

• The agreement does not allow for commercial or retail uses on the property to drive the new residents to local businesses on Broadway.

• The developers have pledged $500,000 to South Amboy’s public safety after 1,250 units are built.

• The city will receive $2,500 for each unit rented.

• BNE Real Estate will utilize union labor for the construction of the parking garages and will make a good faith effort to hire local South Amboy workers on the rest of the project.

Councilman Tom Reilly presented several questions to Baumann and the developers, many regarding the pilot that the city negotiated with Sherman and BNE Real Estate. Reilly believed that the pilot was low compared to other projects that have received pilots in South Amboy and surrounding towns. 

In the proposed pilot, the city will receive 10.5% of the annual gross receipts from the developers in years 1-10, 12% in years 11-16, and 13% from years 17-25. Reilly compared these numbers to the pilot negotiated on the Woodmont Cove properties, which starts at 13.5% in years 1-5 and grows to 15% in years 16-30.

“Every project stands on its own in terms of financial analysis,” Baumann said. “There’s plenty of examples where it’s 10% for thirty years. It’s really project by project, the benefit of what we did here is we employed Beacon Planning who has been the financial advisor to every single one of those projects.”

“With Woodmont they also donated the land to the city to build the Y, so there are other advantages to things to we did them,” Mayor Henry added.

“I think one of the dangers we’re running into when handing out pilots like this is that the city becomes so heavily weighed on pilots,” Reilly said. “These pilots are also on rental units, where we find that there’s a less of a need for rental units in town, could severely impact the money coming back to the city. I think it’s a dangerous road to go.”

Councilwoman Zusette Dato mentioned that Woodmont properties was sold out before the units were built and she didn’t believe Sherman Financial Group would invest in the project if they didn’t think the units would sell.

“Over the last 50 years the occupancy rate for rental apartments in New Jersey have been north of the 94-95%,” Jonathan Schwartz from BNE Real Estate said. “The amount of the cash equity on top of the financing we put on… it’s a tremendous amount of risk. We would never do these projects if there was even a large chance it would get below 90%. The chance of that happening is very slim so I don’t think that’s an issue.”

“I also want to clarify our pilot does have an annual minimum service charge, so there’s always a minimum payment that has to be made as part of the pilot, he added. “If the place was empty, we would still have to make a payment.”

Many residents like Barbara Pasternack were concerned that the city’s business center could not handle an additional 1750 units worth of residents.

“We hardly have retail to begin with and if you’re adding 1750 homes don’t you need more business?” she asked.

“When we increase the resident base there’s more of a demand,” Business Administrator Glenn Skarzynski said. “Developments like this act as an economic driver for downtowns that attract business owners who look and say ‘now I have a new pocket of humanity that’s going to desire my goods and services’.” 

Mayor Henry waited until all residents and the council spoke before he made his remarks regarding the project, which were all positive.  He began with history of the project dating back to the removal of McCormack Sand.

“Just a reminder of what was down there with McCormack Sand, Henry said. “We spent about 20 years in litigation with them to get rid of them, spent thousands and thousands of dollars to remove a nuisance.” 

“Part of the deal was bringing in O’Neil and Sherman and originally I believe there were 2,400 units requested, and we negotiated it down to 1,750 which it is now,” he continued. “We all know that O’Neil is out and BNE [Real Estate] is in as the builder.” 

Henry then dove into the financial benefits of bringing this project to South Amboy.

“[Sherman] has already spent a lot of money on this project including about $8 million on sewer capacity which helps them but it also benefits the city because any other developments that are needed in any parts of South Amboy we now have that sewer capacity.”

“We will be getting $2,500 for each unit which comes to a total of $1,252,000 to the city,” he continued. “Halfway through the project, $500,000 to the city for fire prevention. These are things if we don’t get this from them we’re going to have to raise taxes to take care of these things we know that we need.”

Many residents were concerned about the additional children that could potentially come into town, which may put a strain on the school system. Mayor Henry assured residents that the schools could handle additional students if the project is approved.

“The Superintendent has assured us that they have room for 200-300 more students, and even at an accelerated projection we’re not even close to that as far as this project is concerned,” he said. “You look at Lighthouse Bay, you look at Woodmont, over the years we have gotten very few students out of those projects.”

“Everything here points to a very stable financial future for South Amboy if this agreement is passed,” Henry said. “I hope the council can look at the benefits for all of South Amboy and be able to pass this at the next meeting.”

The city council will have a final vote on the project during the December 19th at 7:00 p.m. All council members were in attendance for the business meeting.