City Council Votes Down Bond; Hospital Deal Likely to Fall Through, Mayor Says

After Mayor Dawn Zimmer wasn't able to win over the council minority to approve a $5 million bond ordinance to settle a bankruptcy agreement, the Hoboken University Medical Center will close next month, she said.

The council voted 5-4 on a $5 million bond ordinance. Six votes were needed for it to pass.

Hoboken Municipal Hospital Authority Chairwoman Toni Tomarazzo called the vote "the most irresponsible thing a council could do." In the case of a closure, roughly 1,200 jobs will be lost.

Before the Hoboken University Medical Center can be sold to HUMC Holdco LLC, there needs to be a bankruptcy settlement between the hospital's not-for-profit management company and the creditors. The total debt is roughly $34 million.

The Hospital Authority will be able to offer between $5 and $8 million, Zimmer said, but the creditors had already indicated they will not accept that settlement. The $5 million from the city was supposed to help the creditors and the hospital come to an agreemenr. A hearing in U.S. Bankruptcy court was scheduled for Thursday.

On Thursday, Tomarazzo said, she and Zimmer will go down to Trenton to ask for an emergency closing of the hospital after they attend a bankruptcy hearing in Newark.

Zimmer, after the vote on Wednesday night, said that it's "very unlikely" that the creditors will agree with a settlement between $5 and $8 million.

If the hospital closes, the city is on the hook for $52 million in bond obligations. This will mean a significant increase in taxes, Zimmer said, as well as potential lay offs. The city will also face costs related to litigation, according to bankruptcy attorney Paul Hollander.

The minority council members—Tim Occhipinti, Theresa Castellano, Michael Russo and Beth Mason—voted against the ordinance, they said, because they need more information as well as a guarantee that the hospital will stay open for at least seven years, by way of a seven year deed restriction on the property.

Among other reasons, Russo said he voted against the bond ordinance because it would not guarantee that the creditors would accept that deal.

After a three hour closed session during which the council was briefed on the matter by its bankruptcy attorney as well as the mayor, members of the council minority berated the mayor about the deal, with Russo calling it "shady."

"You want this bond?" Russo asked, as he looked Zimmer straight in the eye, "I want all the information."

Earlier this week, a public hearing was held in Trenton, after State Senator Loretta Weinberg asked for an investigation into the deal.

The five-member council majority expressed their support for the bond, although some said that they thought that $5 million was too much.

"I think it's too much," Councilman Peter Cunningham said about the settlement, indicating that in most cases creditors would receive less money. Council President Ravi Bhalla called the amount "unfair," but added that the alternative of closing the hospital was worse.

Zimmer, shaking her head as she walked out of the council chambers on Wednesday night around 11:30 p.m., said that the vote will cause the city financial distress.

M on the ordinance earlier this week, said that without a guarantee she wouldn't vote in favor of the bond.

"We’re continually throwing money at this entity," Mason said.

As the meeting went on in Hoboken City Hall on Wednesday, in Newark the unions and Holdco were also locked in negotiations, according to one source with knowledge of the matter. 

Earlier in the evening, Zimmer said the deal was because the unions were not accepting a deal.