Bayonne, N.J., Refunding $67.6M, Prepares TIF Strategy for Harbor

Bayonne, N.J., this week will refund $67.6 million of short-term notes, converting them into long-term debt as the municipality prepares to file tax-increment financing plans for a mixed-use development overlooking the New York Harbor.

In December, the state's Local Finance Board authorized three sections of the 430-acre site, called the Peninsula at Bayonne Harbor, as revenue allocation districts. That decision allowed Bayonne to craft financing strategies that include TIFs, called RAD bonds in New Jersey.

City and Bayonne Local Redevelopment Authority officials will submit those RAD financing proposals in the next 30 days while at the same time working towards district approval for the remaining three parcels on the Peninsula, according to Joe Baumann, bond attorney at McManimon & Scotland LLC, bond counsel for Bayonne and the BLRA.

"There's two things that they're thinking about. One is to expand the [number of RAD districts], which would include some additional areas," Baumann said. "But what they'll be doing before that is going in with a RAD plan, which should be ready in the next 30 days, for the existing approved districts."

The LFB, a division of the state's Department of Community Affairs, reviews RAD financing plans for authorization. If approved, Baumann said the first issuance of RAD bonds would occur in the first quarter of 2010. By next summer, the Peninsula is expected to generate $3.5 million of yearly property taxes and payments in lieu of taxes combined, Baumann said.

Issuing RADs could help address numerous infrastructure needs of roughly $100 million at the Peninsula as Bayonne transforms the former Military Ocean Terminal into a mixed-used development of residential housing, office space, and retail development. In addition, the site includes industrial port business and a cruise-ship terminal.

In the meantime, the city Wednesday will roll over $67.6 million of notes that will expire in July into long-term debt via competitive bid. The bonds are qualified municipal bonds, which allows the state treasurer to redirect Bayonne's state aid to the repayment of debt service rather than to the city's coffers.

The transaction offers serial maturities from 2010 to 2039, according to the preliminary official statement.

Moody's Investors Service rates the city Baa3. Bayonne has $136.4 million of general obligation bonds outstanding, according to Moody's. Standard & Poor's and Fitch Ratings do not rate the credit.

In April 2008, the LFB placed Bayonne under state supervision for a one-year period after the city ended two consecutive fiscal years with budget deficits. LFB will re-examine the city's fiscal situation at the end of this month and decide whether to continue the state supervision, according to DCA spokesman Chris Donnelly.

The city will end fiscal 2009 with a balanced budget with the help of revenue payments from the BLRA. The authority on April 13 paid Bayonne $5.3 million for certain municipal services at the Peninsula and another $27.7 million from a land sale involving Ports America Inc., according to the POS.

The BLRA in April sold 90 acres within the Peninsula's Maritime District for $90 million to Ports America for a roll-on, roll-off vehicle port. The U.S. Army is questioning that land sale. Bayonne purchased the former military base for $1 in 2001 with the stipulation that the city could not receive land-sale proceeds until July 2008. The U.S. Army on March 9 extended that time frame to July 20, 2010 and also informed Bayonne that it believed the Port America sale occurred during the original seven-year development period and therefore the proceeds need to be reinvested in the Peninsula.

"In the event that the Army's assertion is correct, the proceeds from the sale of the Maritime District to Ports America used by the agency to provide the city with the fiscal 2009 agency payment may be subject to recoupment by the Army," according to the POS.

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