Chris Christie Donor's Property Venture Given $106 Million by the State
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Chris Christie’s New Jersey administration awarded a $105.6m public subsidy to a property venture involving a close friend and financial backer of the governor, after state law was amended to enable the project to qualify for the money.
The venture, in one of the state’s poorest cities, appears potentially lucrative for the friend, Jon Hanson, a wealthy real estate tycoon who headed the fundraising operations for Christie's election campaigns, chairs a policy commission for the governor, and is a longstanding Republican donor.
Under the plans, Hanson’s real estate company will develop a hotel and an office building near a hospital in the city of Paterson in a “joint venture” with a non-profit organisation. Hanson’s firm will end up owning the $53m office building, which could be worth millions of dollars a year in rental revenues.
The site is located outside a city zone in which businesses were originally eligible for the state funding program. It did not appear to meet the usual requirements for creating jobs and future tax revenues that were placed on other projects that were seeking the funding.
Yet a series of amendments were made to New Jersey law that made funding easier to obtain for a development that happened to be on or adjacent to a hospital. They allowed the venture to win a $105.6m tax break, which is expected to cover more than 75% of its total costs, from Christie’s economic development authority (EDA), which is led by another close friend of the governor.
Paterson’s mayor, Jeffery Jones, said he was concerned that Hanson’s firm, The Hampshire Companies, may have received a “special sweetheart deal”. He said: “Somebody wanted this thing done, and they got it done.”
After being informed by the Guardian of Hanson’s connection to the project, he said that the New Jersey state legislature should investigate. “I’m not clear that this is a clean process,” said Jones, a Democrat. “If this person, or anyone, is given a special advantage in the form of the tax credits to do this, I would have some real challenges.”
Christie, once seen as the early frontrunner for the Republican party’s 2016 presidential nomination, is already under investigation by the state legislature and federal prosecutors over the politically motivated closure of lanes to the George Washington bridge last September by some of his aides and state appointees.
His administration has also faced questions about its $15m investment of state pension funds in a firm where a Republican candidate for Massachusetts governor, who donated $10,000 to the New Jersey Republican Party, works. New Jersey is facing a budget deficit of almost $2.7bn over the next 13 months.
Hanson, 77, the founder and chairman of The Hampshire Companies, has given at least $310,000 to Republican candidates and committees for national and New Jersey election campaigns in recent decades, according to FEC and state filings. He oversaw the raising of millions of dollars for Christie as finance chairman on his 2009 and 2013 election campaigns, reprising a role that he played in the 1980s for governor Thomas Kean, Christie’s political mentor.
He personally donated the maximum $7,600 to Christie’s primary and general campaigns last year, having done the same for Christie’s 2009 campaigns. He also maxed out to the 2012 Republican presidential campaign of Mitt Romney, and donated thousands to both of George W Bush's White House campaigns. Christie worked as a senior fundraiser for both. Hanson also made contributions to the successful state senate campaign of Joe Kyrillos, Christie’s 2009 campaign chairman.
Soon after entering office, Christie issued an executive order making Hanson chairman of the New Jersey Gaming, Sports and Entertainment Advisory Commission, which is responsible for devising state policy on those industries. He has twice in recent years been named the most powerful person in New Jersey real estate by NJBIZ, a business journal. “He has complete access to the governor,” another property mogul told the publication. “He just gets whatever he wants.”
State officials said that subsidies such as the one given to the Paterson project are not covered by New Jersey's law against “pay to play”, which bans state authorities from awarding contracts to private companies if the firm or its major shareholders have made political contributions.
But Greg LeRoy, the executive director of Good Jobs First, a watchdog group that monitors corporate subsidies by states, said of the Paterson tax break deal: “This has the appearance of cronyism … where you have got a major campaign donor receiving what is probably going to be a lucrative subsidy from the state. This is not unique to New Jersey, but $105m is a very big number.”
Asked directly whether Christie or anyone from his office contacted anyone at the EDA about the Paterson project, or suggested that it receive state funding, Kevin Roberts, a spokesman, said that “program funding is awarded based on a strict, objective review process” and “the governor’s office has no role in that process whatsoever”.
Hanson’s company entered into a partnership with Medical Missions For Children (MMC), a Paterson non-profit that is based at the city’s St Joseph’s hospital. MMC had in previous years been seeking $42m in funding or bond guarantees from the city to build a hotel on the hospital campus. But Mayor Jones opposed the request, amid concerns about Paterson’s multi-million dollar budget deficit.
In December last year, however, a fresh plan from the new Hampshire Companies-MMC partnership was put to the state EDA. The agency awards hundreds of million dollars a year in corporate grants that Christie has declared are crucial to the economic recovery of the state. Federal authorities are currently auditing the EDA’s use of $23m in disaster recovery funds that it spent on a TV ad campaign starring Christie after hurricane Sandy.
The EDA’s chief executive is Michele Brown, a longtime friend of Christie's who was previously his appointments counsel and, before that, a senior official in his office as US attorney. It emerged during Christie’s 2009 campaign that he loaned Brown $46,000 without reporting this on his tax return or financial disclosure forms. He insisted that he was only helping out a friend. Brown resigned, saying that she did want to be a distraction.
One of the EDA’s board members, Harold Imperatore, is Hanson’s son-in-law and a senior executive at The Hampshire Companies, as is his wife, Deborah, who is Hanson’s daughter. According to the EDA, Harold Imperatore recused himself from the agency's consideration and approval of funding for the Hampshire Companies venture in Paterson.
Under the partnership’s new proposal, the hotel that MMC, the non-profit, had been trying to finance for years would be built on the existing St Joseph’s Hospital campus on Main Street, which is owned by the hospital. The plans said that the 132-room hotel and conference centre would eventually be donated to a foundation that would make money for the hospital and MMC.
But the proposal also included a second building: a 105,000-square foot office building with with 40 parking spaces, expected to cost about $53m, on a large vacant plot further along Main Street from the hospital’s existing campus. The proposal said that the offices were intended for use by hospital staff, self-employed medics and various other professionals. City property filings show that The Hampshire Companies bought this second plot in August 2012.
Details of the proposal, found in the 174-page full agenda of an EDA board meeting last December, did not make clear who would ultimately own the second building. But an internal slideshow presentation on the project, which was obtained by the Guardian, states: “Hampshire will own building.” Thomas Banker, a consultant retained by the firm for the project, said in a phone interview: “A Hampshire entity will own the office building.”
According to internal financial projections, the building is expected to bring in revenues of $2.6m in its first year. This figure is then expected to increase each year. The Hampshire Companies declined to discuss who would receive revenue from the office building or any of its financial arrangements. Banker, the consultant, said: “The landlord will probably be a Hampshire entity.”
The partnership asked Mayor Jones to sign a letter to the EDA that it had written, which enthusiastically endorsed the project. He said he declined because he was not given enough information about it and was concerned about potential future costs to the city. The partnership instead obtained a resolution of support from the city council. Though he had no say in whether the subsidy would be awarded, Jones – unaware of Hanson’s connection – eventually made a submission that the EDA summarised as “indifference with the project”.
The EDA board voted unanimously in favour of awarding the project the $105.6m tax break, under a program to encourage business investment around “urban transit hubs” across the state. Announcing the award, the authority referred to the partnership as MMC-DB Group LLC, its official corporate name. It highlighted the involvement of Medical Missions For Children but made no mention of The Hampshire Companies.
A change in New Jersey law
The original criteria for the program said that in Paterson, projects needed to be within half a mile of the city’s rail station to be eligible. The entire Hampshire Companies-MMC site is located outside this zone, which is marked on an official EDA map.
However, a spokesman for the EDA said that the project was deemed to be eligible because in June 2012 – two months before The Hampshire Companies bought the plot of land – the rules were changed by state law so that “the site of the campus of an acute care medical facility located within a one-mile radius of the midpoint of the platform area of such a rail station” was also eligible. St Joseph’s hospital falls within one mile of the station. As the crow flies, the Hampshire-owned plot of land – a block away from the existing hospital campus – begins at 1.03 miles from the midpoint of the platform.
Further exceptions were subsequently written into law that also helped the project to qualify. Typically, a project wanting such a tax break had to show that it would directly create at least 200 new full-time jobs, and that over 20 years it would benefit New Jersey overall by creating new tax revenues worth 110% of the amount that the venture originally received in the tax break.
Yet an overhaul of the New Jersey law on corporate tax breaks, signed by Christie three months before the EDA approved the Paterson project, eased the rules for sites “located on or adjacent to the campus of an acute care medical facility”. This meant that staff of the eventual tenants of the office block would also count towards the new-job total. Another provision said that if such a project cost more than $100m, it would be given 10 extra years to pay for itself.
Roberts, the Christie spokesman, stressed in an email that the new law, the Economic Opportunity Act, won bipartisan approval in the state legislature before being signed by the governor. “To suggest the bill did nothing more than ‘specifically made it easier’ for a project to obtain funds blatantly misses the sweeping nature of this legislation,” said Roberts.
A spokesman for The Hampshire Companies said in an email that after considering a series of detailed questions from the Guardian about the project, including whether Hanson’s connection to Christie had helped it secure funding, the firm “decided that they won’t be able to participate in this opportunity”.
During a brief phone interview, Frank Brady, the chairman and CEO of Medical Missions For Children, declined to speak about the project. “I’m not going to answer any questions at all,” he said. When informed about Mayor Jones’s concerns about the involvement of Hanson and The Hampshire Companies, Brady said: “That’s all bullshit, that’s all bullshit, that’s all bullshit.”