Faced With Ethical Questions and Litigation, Hoboken Goes Back to the Drawing Board on Waterfront Hilton Hotel Deal

***UPDATE: (11:33 a.m.) Having been asked for comment earlier, the City of Hoboken has responded to this article after its publication (see below). At their strenuous request, we’ve amended the title, which previously read “After Being Reminded That Extortion Is Illegal, Hoboken Kills Waterfront Hilton Hotel Deal.”

The City maintains that the developer has been happy to donate large sums of money to the community.***

The saga of Hoboken’s Hilton continues, as the City Council has opted to kill void and then restructure the existing deal for fear of legal actions being pursued against the much-touted “givebacks” scheme.

In October 2018, the City of Hoboken celebrated its groundbreaking deal with KMS Development Partners, in which KMS presented the City with “givebacks” in exchange for permission to move forward with their plans for the Hilton hotel on the Waterfront.

When asked by hMAG if this project would move forward without the “givebacks”, Hoboken Mayor Ravi Bhalla stated, “I would not be amenable. My administration is insisting on these givebacks.”

Meanwhile, the Hoboken City Council supported the plan, after a rather belligerent back-and-forth between the Administration and the City Council over who gets what.

Eventually, KMS agreed to fork over $4.85 million in community benefits—$2 million to renovate the Hoboken Community Center, $1 million to improve infrastructure along 1st Street, $165,000 for infrastructure in adjacent neighborhoods, $1 million to the Hoboken Public Education Foundation, $484,000 to the Hoboken Public Charter Schools, and $200,000 for Hoboken’s Affordable Housing Trust.

Mayor Bhalla and the Hoboken Public Education Foundation celebrate their “giveback” from KMS Development Partners.

When the deal was initially announced in October, hMAG spoke with a local attorney who was well versed in development transactions, regarding the legality of the givebacks. “This is plain and simple extortion,” he told us.

In November, owners of properties adjacent to the proposed Hilton site announced a lawsuit against the City of Hoboken, Mayor Ravi Bhalla, the Hoboken City Council, and KMS Development Partners in Hudson County Superior Court.

Hoboken Land Building LP and Hoboken Holdings LP claim the giveback scheme, “promotes favoritism, cronyism, lack of accountability, lack of diversity, and is otherwise unlawful.”

The City of Hoboken and KMS Development Partners moved to dismiss the lawsuit, but a judge denied that motion on March 26. Superior Court Judge Anthony D’Elia ruled that “permitting a municipality to require givebacks…would create unacceptable possibilities for abuse and fraud and cannot be permitted for reasons of public policy.”

Facing litigation, the City Council voted unanimously on Wednesday to completely void the redevelopment deal, reports Jersey Digs. The resolution claims contract was cancelled by “mutual agreement” and that KMS remains as the Conditional Redeveloper of the Hoboken Post Office Rehabilitation Area.

“However, both sides are not giving up on the project. The resolution says that the city and KMS will work to negotiate a new hotel deal within a 120-day period that commences on the date of adoption, giving them four months to hammer out an agreement,” reports Chris Fry, of Jersey Digs. “If at any time, following an additional 120 days, Hoboken determines that a new deal cannot be successfully negotiated, the city may terminate the conditional designation.”

Seven years ago, in 2012, the City of Hoboken designated the area—which sits on the southern end of the city’s waterfront, adjacent to the train terminal—as being “In Need of Rehabilitation,” based off a 1990 model of the ideal Waterfront development put forth by Fund for a Better Waterfront.

The KMS/Hilton deal has been treading water since 2016, with KMS having previously expressed its frustrations over bureaucratic dealings with the City of Hoboken, as reported by hMAG in February of 2018.

As for the significant funding to community programs that was put forth by KMS in the “giveback” demands, they obviously remain in limbo.

“We’re coming up with a new community development agreement, where the givebacks will have a nexus to the hotel,” says Council President Jen Giattino.

UPDATE: Here’s the statement from the City of Hoboken:

The City is firmly committed to a hotel redevelopment deal that provides givebacks to our community. While the administration strongly disagrees with the lower court judge’s ruling, the City is moving forwarded with an amended plan agreed to by the redeveloper that includes $3.75 million in community givebacks.

While the previous agreement is being modified, a deal to bring a hotel to Hoboken with community givebacks is anything but “dead” and to suggest otherwise would be highly inaccurate.

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