Public gets a refresher course on complex negotiations
By: Nick Norlen
Princeton Borough provided a public status report on its negotiations with Phase 1 downtown redeveloper Nassau HKT on Tuesday and some council members said the talks could conclude within weeks.
Borough Administrator Bob Bruschi said the presentation was intended to give a "generic" summary of the outstanding issues but some officials worried the presentation came close to negotiating in public.
Mr. Bruschi said the "intended goal" of the negotiations is to complete Phase 1 and address the issues linking it to Phase 2. He said he hopes to a recommendation for the council in a few weeks but cautioned, "It could be very easy for this thing to unravel."
Pending matters discussed on Tuesday included the legal issues surrounding the basement slab of the garage, a performance guaranty for the garage and the plaza, questions about the start date for rent commencement, and Phase 2 issues including Public Service Electric & Gas Co. costs and parking, ownership transfer and environmental concerns.
NHKT and subcontractor HNTB are in dispute over the design of the garage basement, which has recently undergone repairs for flooding.
"The borough is linked to that because currently we have … $119,000 that we owe toward architectural fees," Mr. Bruschi said.
Councilman David Goldfarb said that money the borough "owes" is simply being held to potentially pay NHKT.
"The borough does not owe HNTB anything because the borough does not have a contract with HNTB," he said.
Borough Attorney Karen Cayci said the borough has not been served with any lawsuit in the dispute but would need a release from HNTB to be sure that no litigation would be filed.
Also pending is a lien claim initiated by the subcontractor Troast Construction, which Ms. Kayci described as a remnant "of a consolidated lawsuit that began as an attempt by NHKT to gather all the claimants and to substitute cash and a bank account for the liens that they had filed."
However, there is no claim against the borough by NHKT "other than simply that we are holding funds," she said. "One of the goals of this negotiation is to get rid of that lawsuit. . . a place-keeper for any potential claims that NHKT might want to bring against the borough."
Mr. Bruschi said the initial $2 million performance guaranty posted by NHKT has been reduced to approximately $1 million because "a significant amount of that money has been paid out to settle claims."
Borough Engineer Carl Peters said that NHKT officials said Monday that the garage repairs are completed.
He said an inspection will soon be scheduled with borough parking garage consultant Timothy Haahs & Associates.
"We may or may not find that we’re in agreement with the developer," he said, noting that the inspection will determine if the borough will "start the clock" on the maintenance bond.
Mr. Bruschi said a split of approval process fees has been agreed upon with one-third being paid by NHKT and two-thirds by the borough.
Mr. Peters said he expects the borough to be paid approximately $100,000.
Rent commencement remains "a sticking point", Mr. Bruschi said, adding,"We feel it’s an integral part of any settlement that we have."
At some point, NHKT would "begin to have to pay more rent even though Building C was not done," he said, later noting that rent fees are approximately $15,000 per month. Building C will be built on the Tulane Street parking lot.
Councilman Roger Martindell said he sent a memo two years ago asking Mr. Bruschi to solicit a response from NHKT Principal Robert Powell about what those dates were.
He said the response was that rent commencement for the Phase 1 Ground Lease would start May 1, 2005, and that commencement for the Phase 2 Ground Lease would begin in April 2006.
Mr. Martindell questioned the descrepancy between those responses and the current position.
Mr. Bruschi said: "The only thing I would say is that within the agreement, you could draw different conclusions."
Mr. Goldfarb objected to the exchange, saying, "This is the kind of thing that is not helpful." Councilwoman Wendy Benchley agreed.
Councilman Andrew Koontz also intervened. "I think we are getting into negotiating in open session, which is inappropriate," he said.
Mr. Koontz said that the language of the redevelopment document not Mr. Powell’s response to a question would be legally binding.
Concerns about discussing such details in open session were also voiced by Mayor Mildred Trotman, Ms. Cayci and Mr. Goldfarb.
"Once we have a proposed settlement, that would be the time to ask those questions," Mr. Goldfarb said.
Other Phase 1 issues reimbursement of legal feed, Building A financial reports, and pergola completion were summarized by Mr. Bruschi as calling for assurances that there is no further financial obligation by the borough. Mr. Peters said Verizon Corp. is scheduled, within two to four weeks, to remove the utility pole that has prevented the pergola installation from moving forward.
"That is what Verizon is telling us will happen," Mr. Koontz said. "I remain skeptical about it."
Mr. Bruschi said the posting of a completion guaranty could come in the form of a bond, a letter of credit or a personal guaranty.
Phase 2 will also entail PSE&G costs for installing the underground electric service along Spring and Tulane streets a major issue for both parties, Mr. Bruschi said.
But soil contamination remediation will be solely the developer’s responsibility, he said.
Mr. Bruschi said the developer is also interested in obtaining overnight parking permits for the garage leading Mr. Martindell to express concern about overuse of the facility.
But Mr. Goldfarb and Ms. Trotman said the use of the permits would monitored very closely.
In terms of NHKT’s proposal to Mr. Bruschi said "the challenge is to make sure that the borough is covered with all their other obligations that are within the redevelopment agreement."
Ms. Cayci said NHKT seeks to transfer ownership to another entity in which the same principals would be involved because "their lender would like an entity created that holds title only to Building C, has no other assets, has no other obligations or debts."
Mr. Goldfarb said such a scenario has become common practice among lenders.
During the public comment session, residents Mark Freda and Mark Alexandridis called the potential for the developer to issue a personal guaranty rather than a bond "very unusual" and "unprecedented."
However, Mr. Freda said he was "very relieved to hear all the comments about ‘tentative agreement, no commitment to the developer until there’s public discussion.’"
Mr. Goldfarb said more information will be revealed at a later date.
"I think we should be able to present the proposed settlement with a description of how it’s beneficial to the borough, and people can draw their own conclusions," he said.
"We will keep you posted," Ms. Trotman said.