The Borough Purchase of 9 East Park Avenue

 

On 14 December 2009, the Merchantville Borough Council (Mr. Alloway was absent that evening) approved the purchase of 9 E Park Avenue. This write-up tells how the proposed purchase was presented to Council, and provides some details and analysis of the deal. It also includes a short discussion of my vote supporting the purchase. Much in the way of explanation has been left out for brevity. Contact me if you wish to discuss this in more detail.

 

THE PRIVATE COUNCIL SESSION

 

The last item on the 14 December Council agenda was a private session.

Mayor North and Borough Attorney Higgins presented the purchase deal they worked out with the owner of 9 East Park Avenue.

 

Key elements of the deal, as presented in that session:

  1. Purchase price to be $325,000

  2. A two-year-old appraisal value of $295,000 was used as the Borough's basis for negotiations.

  3. Seller would build, at no cost to the borough, a new foundation for the EMS building, including running sewer and water to the foundation.

  4. Seller would be allowed to remain in the property for up to six months rent free, paying only utilities.

The purchase price being well over the appraised value was explained as acceptable in order to avoid both the cost and resident unrest associated with eminent domain (Which I would NEVER have supported).

Also, since the seller would be doing the EMS building work for free, we would see a big savings there (the mayor said twice about the EMS work, "That's part of the deal").

 

Key element number 3, the EMS Building work, apparently wasn't supposed to become public knowledge.

 

Prior to the vote, I specifically asked if the resolution would include the EMS building part of the deal, and the answer was "yes." The motion passed 5-0.

 

When the resolution, R09-159, was written at least two weeks later, no mention of the EMS foundation work part of the deal was present.

That incomplete resolution is now part of official Council minutes for 14 December 2009.

 

There are a number of problems I find with this deal.

  1. The item was not on the agenda.

  2. The resolution was not provided in writing for consideration.

  3. The Private Session was inappropriate. Council was presented with a deal for approval, NOT "matters of negotiation," as was stated prior to entering private session.

  4. The appraisal used was nearly four years old, not two years, as Mr. Higgins claimed.

  5. The part of the deal about the seller building the foundation for the squad building was never put in "official" writing.

  6. The use and occupancy agreement with the seller for $1.00 a month.  Since the seller will no longer pay taxes, we lose over $500 a month worth of property taxes.

  7. There is currently no contract in place with the selected TCE developer, Fieldstone. It was explained that Fieldstone is requiring that all property be in possession of the borough before they will sign a contract.

  8. THE PUBLIC RECORD DOES NOT REFLECT WHAT THE COUNCIL ACTUALLY DID.

The appraisal and actual property value.

 

Why wasn't the actual date of the appraisal (March 2006) made known?

According to the Federal Housing Finance Agency (FHFA) House Price Index (HPI - you can find the calculator here), the value of the property, as of the 3rd quarter of 2009 (latest data available), was only $276,064! That's a lot more than $30,000 between purchase price and property value. Note that, if the seller did any upgrades to the property (if they have, I'm unaware of it), these numbers would be different.

 

In any case, who in their right mind buys property based on a four-year-old (or a two-year-old for that matter) appraisal? No mortgage company would accept such a thing, but Merchantville's taxpayers have been forced to.

 

SO WITH ALL THAT, WHY DID i VOTE FOR this deal?

 

The short answer is that, now that I know the true situation, I wouldn't.

But as it was presented and as I heard it, it sounded like a good deal.

I don't recall the use and occupancy agreement being mentioned in the Private Session presentation. There were side comments and discussions going on during the presentation, so I must have either been listening to one of those or focused on another part of the deal that had been presented.

 

Had the details been written down and provided to Council on a resolution (as should have been done), missed elements would not have been missed.

 

THEREFORE -

 

I will never vote for a resolution that is not on the agenda and is not presented in writing for council to consider in advance of a meeting, except in cases where it is clearly a normal course of business to do so (approving members of the fire department is one example).

And I will speak up each and every time I believe a Private Session has been called inappropriately.

 

FINAL DETAILS AND THOUGHTS

 

Tom Evaul asked the Mayor about the 9 East Park deal at the December 28, 2009 Council meeting. The Mayor reiterated that the EMS foundation and utilities work was a part of the overall deal.

At a January 11, 2010 Council meeting discussion of the deal, the story changed(!). We were told that once the final deal had been reached, the seller then offered to do the EMS foundation and utilities work for free. That seems to conflict with earlier "it's part of the deal" comments.

The purchase of the property by the borough was completed in January.

No contract has yet been signed with Fieldstone - there's another deal that has to be completed for the property known as "The house built in a day."

So stay tuned - there will be more to come! 

 

A final thought - We seem to have a problem with real estate deals. Remember the PNC Bank purchase? The mayor told residents at Council meetings that the deal to lease it as a brewpub was "almost guaranteed." The brewpub company, Yards Brewing, subsequently backed out. The Bank building now sits empty. We're losing over $6,000 a month in taxes, loan interest payments and utilities on the PNC Bank purchase. I hope something like that doesn't happen in TCE!

 

Mark B.