EDITOR’S Note: We have written several commentaries on why local governments should not be involved in real estate dealings. The last one was in 2009. We have some new information to discuss so we decided to explore the topic once again.
By Bill Cleary
(CNBNEWS.NET) If anyone needed an example on why government should not be involved in real estate they need to look no further then the 2001 lease agreement between the City of Gloucester City and Holt/Cresmont/Gloucester Marine Terminal. That agreement signed by former Mayor Robert Gorman and Tom Holt Sr. gave the City’s biggest taxpayer a 99-year lease for the former Coast Guard building.
If the deal was handled by someone with any business sense the agreement would have included a condition that the yearly rent of $152,000 would rise annually based on the Consumer Price Index (CPI).
Although members of the present city administration have criticized Gorman privately for signing such an agreement they too are just as bad for spending millions of dollars of your money on two real estate deals they had no business getting involved in.
THE CITY SPENDS MILLIONS FOR DILAPIDATED APTS.-In December 2007 the James Administration entered into an agreement with owners of the Chatham Square Apartments, Klemn Avenue and Rt. 130 to buy the 100 apartments. Councilman Marchese had said the city planned to tear down the rentals and build single family homes. The City paid $4.1 million to buy the site. Giving the seller, who acquired the apartments in 2002 a $1.3 million profit. Keep in mind the apartments were in need of extensive repairs. In fact in October 2006 the owner was fined $96,000 for violations and faced a penalty of $17,000 a day for every day the violations were not repaired.
Deed in hand the City scraps the plan to build single family homes. Over the next two years the City incurs more expenses on the property. Someone forgot to look at the financial records before buying the apartments. Come to find out many of the those living there are not paying rent. The City is forced to go to court to remove the vagrants. Thousands and thousands of dollars are spent on the apartments to bring them up to code.
UPDATE-Three years have passed. On June 1, 2010, the City announces it has hired Orens Brothers to convert the 100 apartments into 50 Townhouses. Prices for the townhouses range from $167,000 to $195,000. The arrangement with Orens, who borrows $1.1 million from the city’s UDAG program to help pay for the work, calls for the town homes to be built as they are sold.
CNBNEWS Photo: City council along with officers from Orens Brothers attend ceremonial groundbreaking on June 1, 2010
Another year goes by. Construction work has been completed on the outside facade of 8 of the townhouses but not one property has been sold.
Most recently the City has been trying to rent some of the apartments that are still livable in an effort to raise money from the stalled venture. The rent ranges from $595 to $869, according to the notice on the City’s website. If only the City had stuck with the original plan to demolish the complex and build single family homes, the project would have been completed by now and tax revenue would have been generated.
CNBNEWS PHOTO- In the back of the unfinished townhouses a small deck has been built
THE CITY SPENDS MILLIONS FOR A CONTAMINATED FACTORY-
The former Amspec Chemical property on Water Street is purchased in 2009 for $5 million. The plan is to allow building contractors to dump clean fill at the site for a fee. Anticipated revenue $1.5 million from a contractor building a WalMart in Somerdale. The DEP is suppose to help pay for the cleanup of the 22 acres.
Along comes a new governor. Out goes the promise that the state would pay 75 percent of the cost to clean up the environmental problems. There is no money. Guess who is stuck paying to remove the contaminants? The taxpayer. No one has dropped any dirt on the property for sometime.
City Solicitor John Kearney was asked recently to comment.
“Our big problem right now is that the State has essentially shut down funding for the cleanup (as well as funding for cleanups all over the state) and the DEP wants us to fight with the prior owners to pay for the cleanup. The building is down and we have not had any dirt since Walmart but we would welcome the revenue.”
Suffice to say the French novelist Alphonse Karr (1808-90) was thinking of Gloucester City when he said, “The more things change, the more they stay the same.”
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- FIRST PART: The Tale of Holt, the UDAG, and the City of Gloucester City -cnbnews.net