Jersey City accepts bid in tax lien transaction

Real Estate Weekly, July 7, 1993

The winning bid for the first bulk sale of municipal tax liens was approved by the City Council of Jersey City. This landmark development was announced by Mayor Bret Schundler, who advanced the idea for this historic transaction in November 1992 as the centerpiece of his plan to reduce property taxes. Schundler reiterated today his goal of reducing property taxes by 33 percent over four years.

The 2,900 delinquent tax liens were sold to a Delaware Owner Trust established by The First Boston Corporation. The trust paid $45 million in cash and the remainder of the $25.5 million purchase price in a Note to the City. The tax liens are attached to commercial, industrial and residential properties. Under the new State Legislation authorizing the sale, no tenant may be evicted as a result of any action taken by the Trust to enforce the lien.

Approximately $10 million of the cash received will be applied to the City's 1993 fiscal year .budget and $15 million to the City's 1994 fiscal year budget. The proceeds of the Note are expected to be received from 1996 to 1998. In addition to receiving the Note's face value, the City expects to receive net interest payments of at least $6 million.

Representing the interest of the city in the transaction were W.R. Lazard & Co., New York, as financial advisor; and Sullivan, Donovan, Bond and Bonner, New York as Bond Counsel.

First Boston assembled a team to complete the transaction including Mudge Rose Guthrie Alexander & Ferdon of New York; Brown & Wood as Counsel to First Boston, Bankers Trust as master services of the lien portfolio and Breen Capital Partners as sub-services.

The legislation enabling the City to conduct this innovative transaction was passed overwhelmingly by the State Legislature in May.