Friday, May 24, 2013

Think this through

Learning is a life long task. It is the way we acquire the information we need to function.

Decisions should be made after gathering as much information possible.

It follows then, that learning leads to better decision making. (Noting that not everyone will derive the exact same assumption from the same set of data).

This is the essence of what those in attendance should take away from Thursday night's city council meeting that mostly centered on the issues of the city's floundering hotel.

Things learned.

Some key facts came to light that many did not know and others may have known but forgotten over the intervening years since the hotel project was first proposed. Some of the information was revealed via simple research into public documents. Some of it was explained by the city's extremely capable bond attorney, Ed McManimon.

  • The Lafayette Yard Community Development Corporation was incorporated in June of 1998 by Shelly Zeiger. The other "trustees" besides the incorporator were Acquest Realty's David Ong, along with Bill Watson, Allan Mallach, and Gwendolyn Long. These five were, according to the incorporation document, "designated by the Mayor of the City" and two others were to be "designated by the City Council at a later date." Mr. Zeiger was the registered agent for the corporation.
  • The purpose of the LYCDC was to assist the city, parking authority and state in redeveloping the parcel of land into a hotel, conference center and parking garage.
  • The LYCDC, when adopting its bylaws, made the Mayor the appointing authority, with advice and consent of the City Council.
  • The LYCDC, NOT the City of Trenton, owns the hotel.
  • The LYCDC, NOT the City of Trenton, issued the tax-exempt bonds to raise some of the money for the project.
  • The City of Trenton is the guarantor of the bonds. That is, if there is not enough revenue generated by the hotel operations to cover the payments of principle and interest on the bonds, the City of Trenton must make the payments. Since the hotel has, generally, not made a profit that means the city has made the payments and likely will continue to do so.
  • There are other, subordinate loans from the state and the Trenton Parking Authority that helped finance the project.
  • While the City of Trenton is responsible for the debt incurred to finance the development, it is NOT obligated to cover any operating shortfalls.
  • In order for the hotel to be sold, the title has to first transfer to the City of Trenton from the LYCDC.

What this means, in short, is that the LYCDC holds title to the property and operates it via a contract with a management company. The LYCDC is technically the borrower of the money used to construct the facility. The city is the backup...if there are not profits from hotel operations to pay the lenders back, the city must (and has been) make the payments. The city is not obligated to honor the cash calls made by the LYCDC to cover operating deficits.

Take a minute and let that sink in.

Ok, so what do we do?

There is universal agreement that the hotel needs to be sold. There is not so much agreement on the where, when, how and to whom,

It is also pretty much agreed that the hotel is more attractive to a buyer as an open and operating concern rather than closed.

To continue operations after the current agreements with Waterford (the management company actually "running" the hotel) and Marriott (the brand or "flag"), a new computer management system must be purchased and up and running. (This is because the current system in use is Marriott's proprietary system and when they go, it goes. It is that simple.)

There will also be expenses incurred removing all "Marriott" branded items from the property.

This is the $200,000 in transition expenses approved at last night's council meeting. This will allow Marshall, the incoming management company, to operate the hotel after midnight, June 14 when the property becomes "the-hotel-formerly-known-as-the-Trenton-Marriott".

What is not settled is whether to proceed with the re-flagging of the hotel as a Wyndham or operate it independently. Here there are differences of opinion.

Many in the business community, along with the LYCDC board majority, place importance on having a branded hotel. Their arguments range from the improved market recognition a flag carries to implied "standards" of service and facilities. Some say the public seek out name brand hotels when traveling because they are known entities.

Of course, running with a flag can mean additional costs. There is reportedly a $10,000 application fee just to be considered for the Wyndham name. Then there will be some kind of license fee, franchise fee, etc. to actually put the name on the property, tie into its reservation system and utilize the chain's marketing muscle. In addition, we cannot overlook the $3 million in property improvements that Wyndham wants done. These have thus far been described in reports as essentially cosmetic makeovers of the bar area and freshening up the decor in the guest rooms.

In the other camp are those who feel the hotel could operate just fine without a brand for the very brief (but as yet undefined) period between losing the Marriott name and being sold. The thought is that if you are coming to Trenton and inclined to stay at a hotel here in town, you will really have no choice. A brand name is not going to make a difference. Surely, Marshall can operate a property to "chain" standards without the benefit or expense of the brand name. The money saved on application and franchise fees can be freed up for marketing and for those property improvements and maintenance that are actually necessary.

Would operating independently eliminate the need of further bonding?

Operating independently might eliminate the need to issue more bonds to cover this expensive bar makeover and such. However, there are undoubtedly some repair and maintenance issues that should be addressed as part of "polishing this gem" (as one speaker referred to it last night) and readying it for sale.

There is another option that bears consideration.

Bond counsel Ed McManimon noted that the city could issue taxable bonds in the amount equal to the LYCDC’s tax exempt bonds, essentially paying off the LYCDC’s bond debt and acquiring the hotel. At current rates, the city’s debt would be about the same as it is currently paying as guarantor of the LYCDC bonds.

A new body could be created, with members from the state, perhaps the county, the business community and such to oversee the operation AND sale of the hotel.

Robert Lowe sketched it out this way in a post on Facebook last night:
The Trenton Hotel 7 Step
  1. The City issues taxable bonds equal to the hotel equity it has guaranteed, approximately $13.5 mil, and retires the LYCDC bonds it has guaranteed in equal amount. With this action, the City officially owns the hotel, disbands the LYCDC and nullifies the Asset Manager contract.
  2. The City works with the Management firm to operate as an unbranded hotel.
  3. The City plans what is truly needed in a reservation system, and works with outlets such as Expedia, Flipkey, and the like to ensure continued internet marketing.
  4. The City begins negotiations with the unsecured creditors to arrange for forgiveness of such debt.
  5. The City studies the advisability of sale timing, and the possible returns potentially realized by initiating renovations - a true professional business assessment with realistic projections for each available scenario.
  6. The City prepares an RFP for sale, and determines the timing of sale, based upon a thorough assessment of the business analysis described above.
  7. The City sells the hotel, and encourages all stakeholders to step up to bat, requesting a demonstration of their support by steering business to the hotel. This includes the State, who by purchasing procedures and policy can drive volume.

We think Mr. Lowe is onto something.

We know we will likely never get back the money already invested in this project. We need to focus on getting the hotel into private hands.

As Mr. Lowe said, details need to be worked out. Still, this is more of a plan than we have seen or heard to date.  
It is worth a shot.

Wednesday, May 08, 2013

Something is happening here but you don't know what it is...

...Do you, Mr. Mack.

The saga of the Tony Mack administration gets sadder.

While he awaits his day in Federal court on charges of conspiring to accept bribes in a make believe development deal, the indicted and embattled mayor continues to lose whatever shreds of credibility he may have had left.

In April, the Civil Service Commission ruled that the administration had wrongfully laid off former lead park ranger Michael Morris in favor of Mack croney, Robert "Chico" Mendez. The CSC gave the city a month to rehire Morris and dismiss Mendez. The city has done neither.

In fact, the administration is claiming that it wants to appeal the decision in the case. Strange, since the record shows that they did not even bother to respond to the matter when it was crawling through the CSC process.

Asking the city council to approve funding for an appeal that would seem to have no real standing but instead is based purely on the mayor's personal vendetta against a former employee is not going to be an easy sell. The governing body is increasingly wary of these kinds of wasteful and ultimately fruitless expenditures.

And, lest anyone think the council does not have a say in the matter, let us refer you to this little item from the city code:
Whenever (s)he deems the interests of the City so require the City Attorney may, with the approval of the Mayor and Council and within the limits of available appropriations, appoint special counsel to assist him/her in the preparation, trial or argument of such legal matters or proceedings as (s)he may determine. If the City Attorney should be disqualified with respect to any matter, the Mayor shall appoint special counsel, with the approval of the City Council, to represent the City for and with respect to such matter.
 Clearly, the governing body has the approval. Period.
This might be a mere annoyance to a mayor who has repeatedly ignored the laws if they didn't agree with his personal agenda, but it is only the beginning.
“We received notification from DCA earlier today that they will not even consider any funding in support of the hotel until they receive a copy of a plan from the city with respect to available options for funding and profits — a more comprehensive plan,” business administrator Sam Hutchinson said.
After an hour long presentation meant to coax the city council into approving a $200,000 expenditure to help cover the costs of transitioning the hotel from Marriot to Wyndham and changing management companies, members of the governing body engaged in a little question and answer session about the hotel.
All of the responses from LYCDC president Joyce Kersey, the LYCDC attorney and representatiaves from the management companies circled around having more money appropriated to effect the changes and better position the property in the market place. Very little was said about efforts to sell the hotel beyond vague references to giving consideration to any "serious offer".

In response to a question from council president Phyllis Holly-Ward, city business administrator Sam Hutchinson announced that he had just that morning received communication from the New Jersey Department of Community Affairs informing him that they could not proceed without a concrete plan in place.

Seizing the moment to solidify the obvious (and reported) inclination of a majority of the body to cut off further spending on the hotel, Councilman Zac Chester immediately asked if the administration would pull the item from the docket.  Strangely, Hutchinson declined to defer to the mayor's higher authority and declined to withdraw the funding resolution from the docket.

It really didn't matter as the council has the authority to set its agenda and can add or remove items as it sees fit.

This didn't stop Councilwoman McBride from launching into an angy attack on the DCA, proclaiming that Director Neff was, in effect, the "mayor of Trenton" and that Mayor Mack had been reduced to nothing more than a mere figurehead.

The councilwoman was more correct than she knows.

The latest MOU signed with the state continued a three year trend of putting more control over city matters in the DCA's hands and creating less leeway for the mayor and his few remaining cronies to wreck their own particular brand of municipal mayhem.

The edict to not proceed with any further funding for the hotel without a concrete plan represents a very significant flexing of the state's muscles. It appears that the state "is not playing" anymore.

Something IS happening here.

Wednesday, May 01, 2013


Trenton City Council held a special meeting Tuesday night. The purpose of the meeting was to present publicly the legal process for filling any vacant elected offices (council or mayor).

The meeting was relatively brief, under an hour. The information was presented, council was provided an opportunity to raise any questions (they had none) and then members of the audience were invited to ask questions.

Despite reports last week of errors in the way the city legal department described the process to council in advance of the meeting, the information provided tonight was correct.

In short:
  • If a vacancy occurs in a council position, the remainder of the governing body appoints a replacement by a majority vote. 
  • If a vacancy occurs in the office of mayor, the council president becomes the acting mayor until the body appoints a replacement.
  • In either case, if the vacancy occurs prior to September 1 of the final year of the term, a special election is scheduled for the next general or municipal election, whichever comes first.
  • If a vacancy occurs after September 1, the appointee completes the term; no special election is required.

There were some good questions raised by members of the public tonight.


Q: Who can be appointed? A: Anyone who is legally qualified to hold the seat. Not just a member of council or the administration.

Q. What constitutes a majority vote on an appointment? A. Four votes out of the seven possible (in the case of a tie in voting for a replacement council member, the mayor may vote).

A little trickier question was about whether there would be an open process of soliciting names and resumes of those interested in filling any future vacancies and just how that process might be handled.

The council president promised as open and transparent a process as the law allows and an open call for submissions from interested parties. The law director rightfully pointed out that criteria for evaluating the submissions would need to be agreed upon by the governing body and made known to the public.

All well and good. Moreover, the proceedings went better, largely, than one might have expected after reading of the earlier confusion over the actual process.

What was unsettling, though, were questions raised about whether or not members of city council had been approached about securing their votes for one particular individual or another to be appointed mayor in case of a vacancy.

The reason for the line of questioning was a obvious belief that some sort of back room deal had already been made on just who council would appoint to fill a vacancy in the office of mayor.

The political climate in Trenton has long fostered an abundance of conspiracy theories. One could suppose it is a natural by-product of politics.

However, if this is the tone the upcoming campaign is going to take than we have a big problem.

Trenton is in crisis. We need competent, steady leadership. We do not need another thin-skinned, suspicious, administration. We need to build coalitions and to include all segments of the population. We can no longer afford to discount or disparage others simply because they are rivals or challengers.

It is a given that candidates cannot absolutely control what their supporters say and do, but they can make an effort or distance themselves from those who won’t behave civilly.

There is no room for the accusatory challenges launched from the podium tonight. Nor is there cause for the commentary passed between various members of the audience. That kind of behavior is not going to save Trenton. It is only going to send us further along the road to dysfunction and divisiveness.

If you are going to campaign through innuendo and rumor, you are not going to win a lot of votes. And you are not going to help Trenton.

It would benefit us all if candidates and their supporters would keep their conspiracy theories to themselves unless and until they have very credible evidence to back up their assertions. Failing to do so will not only hurt their chances of obtaining the goal they seek, it will severely inhibit the city’s ability to move out of these troubled times and onto recovery.

Isn't the whole idea for us to be better, do better than our recent history indicates we are?