State of New Jersey vs. Tony Novak, et. al.

Baysave was named as a defendant along with its controller Tony Novak in a lawsuit filed May 4, 2018 by New Jersey Attorney General Gurbir Grewal. The lawsuit does not allege that Baysave or Novak or anyone associated with us did anything wrong, but rather that we are in possession of distressed properties where the stabilization, recovery,  transfer, sustainability planning and compliance phases are taking much longer and are proving more complex than anyone had hoped.

The underlying issue is that the entire Money Island marina, in fact most of the small rural port community of Money Island, was built almost a century ago without building permits, land surveys, tideland leases, etc. We assumed these properties would be acquired by the state like other local working waterfronts and that would transfer the issue to the state to deal with (as with other marinas like neighboring Fortescue). But in the years since Sandy, little has actually been accomplished. Apparently the state switched from being a cooperative partner in our restoration efforts to being an adversary. We don’t know why but we suspect the action is not in good faith.

The lawsuit comes down to this: the government has declined at least 15 permit or license applications or pre-application inquiries since Sandy (when Novak legally took over management) and is now suing us because those same permits are not issued.  It is, in our opinion, unconscionable for the state to be both the denier of permits and simultaneously bring charges for failure to have permits that should have been addressed decades ago.

Most significant in this matter is the observation that the NJDEP abandoned its normal problem-solving mechanisms (pre-permit planning meetings, application review and comment and alternate dispute resolution) to opt for decline of applications and direct to lawsuit with no attempt at resolution. One NJDEP program director told me that this was the first time in her career that she saw this pattern of action by her department and so she did not know what to advise me.

Here is:

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Learning to speak climate at the bayshore

My work involves speaking with a wide range of people about observations in nature. I am clear that this is the largest issue affecting our lives, our community’s future and our society but this ‘heavy stuff’ is of course not the message of day-to-day communications. More likely, I get questions like “Why are the fish coming in later?” or “Why can’t I get a building permit?” These are not simple topics to discuss. Like many others in a similar position, I struggle to find the right words to use to communicate the extent of what I observe on a day-to-day basis here at the bayshore. I’ve had more formal training is science in general, and climate science in particular, than most people. Some call it indoctrination. I call it command of facts. But that’s not necessarily an advantage when it comes to leadership. A leader must engage a wide community group base but how is this possible on the issue of climate?

When I think about local media coverage like last June’s front page article in the Philadelphia Inquirer where I was one of several intelligent, educated and well-informed business owners (I know them all pretty well since this is such a small community) who deal with climate issues on a day-to-day basis at the core of their businesses. The writer chose to give more print and apparently did not make any attempt to fact check the statements of the local mayor who said “There is no sea-level rise, and it’s a bunch of hogwash”. The mayor admits that he has no training in science or climate issues. Yet his statement as given more prominence that the considerable better-informed sources. Why would a major newspaper allow this? Would they have printed the story the same if the mayor said the earth is flat or that the planet was created 5,000 years ago? If not, then what possible basis are we using to justify the public expression of these unchallenged false climate statements? This is just one example. I am also aware of a local book writer whose work in progress seems to give credence to climate deniers.

I know that certain words trigger an angry response, can cause our businesses to lose customers and may even cause us to lose government infrastructure funding. I’ve been physically assaulted and verbally threatened for my talk about climate-related issues. Yet I’ve been clear that climate denial is not a logically or legally defensible position. In fact I would be willing to be a witness for the prosecution in future cases that challenge climate change deniers.

In our local market dominated by trumpist thinking, even mention of the term “climate change” in print sets off angry responses. Other words like “strategic retreat”, “inundation”, “sea level rise”, “fact”, and even “science” itself are controversial.

So how then do I talk about the things I see and the things I can’t explain without an understanding of climate issues? It his latest book Thomas Friedman1 offers some suggestions from his conversations with Greenlanders:

“Just a few years ago,… but then something changed…”

“Wow, I’ve never seen that before…”

“Well, usually, but now I don’t know anymore…”

“We haven’t seen something like that since…”

That’s all climate-speak—“surpassing,” “highest,” “record,” “broken,” “biggest,” “longest.”

The fact is that the impact of climate change, acidification, sea level rise and warming temperatures affect me and my industry more than anything else. It would be nice to be able to talk about it.


1Friedman, Thomas L.. Thank You for Being Late: An Optimist’s Guide to Thriving in the Age of Accelerations (p. 162). Farrar, Straus and Giroux.

Update on Money Island Blue Acres buyouts

NJ.com posted an update on the status of the local property buyouts at http://www.nj.com/cumberland/index.ssf/2016/08/state_program_hits_milestone_buying_500th_piece_of.html

Some locals here at the bayshore predicted that this buyout would come eventually after we were caught by surprise by the dramatic effects of the global sea level rise hotspot in the 1990s and early 2000s. It appeared unlikely then that we would have the political will to fund the massive investment in new technology and construction techniques that would be required to keep the island suitable for human habitation. Seperately, I wrote in a 2006 editorial that fiscal sustainability of the local township was in doubt as a result of the declining trend in taxable property values largely attributable, directly or indirectly, to the effects of water level rise. Since then, the township, county and state governments have made major investments to bolster Money Island’s infrastructure. More are planned. BaySave is involved in the process of raising additional infrastructure funding from non-governmental sources. Yet it seems more likely than before that bayside homeowners (those on Bayview Avenue past the bridge) will not be able to sustain the huge costs of private residential property maintenance. Nor is NJDEP likely to issue the waterfront development building permits that would be required to fight rising water levels. As a procedural issue, the DEP requires that past violations be addressed before new permits are issued. The cost of addressing violations exceeds the value of the real estate so it is difficult to see how anyone might be willing to make that investment.

While I am a committed volunteer and cheerleader for a sustainable future for our small bayshore community, we must also recognize that the water level rise forecast and its financial impact is disturbing. There is no clear strategy for funding the survival of our community at this point. Most specifically, there is reportedly no plan to rebuild the Bayview bridge that faces the forces on tidal action diverted by the new adjacent seawall. The basic law of shoreline management physics is that when  you stop tidal flows at one location it causes an increase in erosion on adjacent properties. The project engineers predict that the new bulkhead finished last year will do a great job of protecting the 400+ feet of shoreline on Bayview Road but that it will increase stress on the bridge and the marina jetty. Presumably Cumberland County will eventually be put in the difficult position of either closing the bridge, repairing it, or surrendering it to some other entity. The first seem the most likely of the three options, at least as a short term response to future damage.

In early 2012 before Sandy we proposed to the state a strategy that is used successfully in other NJ communities where the state owns the land and leases it back through its rental program to the residential or commercial operators. At least 17 property owners at Money Island NJ showed interest in the plan at that time. Ar first state officials showed interest in the plan. That discussion was scrambled after Sandy and never regained life.

Now I work as adviser to some of the Blue Acres target property owners here who have recently become aware of apparently inconsistencies within the design of the valuation process whereas it is possible for similar properties with similar values to receive vastly different offers from the Blue Acres program. Apparently this is because each property has a separate appraiser and case worker who is unaware of the comparative valuations and offers on neighboring properties. In one case an owner who wanted to sell withdrew her consent after learning of a higher offer on a smaller property next door.

Blue Acres reports that it closes on 80% of the purchase offers made but the state seems far from achieving this benchmark at this early stage of the buyout process.

Also, we learned only two weeks ago that the state is not interested in acquiring a number of properties that were offered as a conditional gift/sale. The government liabilities exceed the market value of these properties and so they were previously abandoned in federal bankruptcy court before being acquired by non-profit NJ charity BaySave Corporation for conveyance to the state. A written offer of gift/sale of 19 properties was made before Sandy and the state was considering the offer until last month is apparently off the table so it is back to the drawing board to come up with a new plan for sustainability.

Time to rethink the basis of environmental regulation

“You only have power over people as long as you don’t take everything away from them. But when you’ve robbed a man of everything, he’s no longer in your power — he’s free again”. – Alexander Solzhenitsyn

For all of our modern times, government has regulated environmental organizations with a combination of threats, intimidation, and fines. Overall, this system has been pretty effective in mooting the possibilities of most types of innovation and environmental improvement. Environmentalists with visions of improving their world are routinely knocked back into mundane roles through such government enforcement actions. We’ve seen several examples here in the New Jersey in recent years, even from the most powerful environmentalists in organizations like the Partnership for the Delaware Estuary, The Nature Conservancy and Rutgers University.

About a decades ago residential and business property owners in our own community began reporting that NJDEP officials were demanding payment of ‘offset credits’ simply because sea level rise had changed the nature of their structures from dry land to above water. This form of action is viewed by some local property owners as legalized government extortion. Government’s reaction to sea level rise has changed the fundamental possibility of future use of shorefront properties. Many of the properties here used to be 100% on dry ground in the 1950s are now 70% below the water line. Values have fallen dramatically and most owners are underwater financially as well as physically. This enforcement action effectively put a halt to our plans to open a nature observatory at Money Island. The costs of compliance extracted by government are simply too high to allow for shoreline development of non-profit ventures like a nature observatory.

Then in 2010 NJDEP Commissioner engaged in a battle against oyster reef restoration efforts including our own at Money Island. While some projects were relocated, ours were simply abandoned. We don’t have the manpower to relocate and we really need the living shoreline restoration efforts here. Likewise, we’ve faced resistance on dune restoration and it has been difficult or impossible to get permits for living shoreline restoration. In 2015 a group pf environmental organizations teamed up to push permitting through for some projects. But these are largely experimental projects; not the type of proven shoreline stabilization techniques that we badly need to implement sooner rather than later.

Lately I’ve been engaged in a battle to bring properties up to standards in modern wastewater handling. The local and county governments have a solid plan to bolster wastewater treatment facilities but that pan is not moving fast enough to satisfy the NJDEP. Instead of pushing and helping government implement their plans, the state has allowed the NJDEP to threaten property owners instead.

In 2014 the NJDEP issued a dubious water test report that was later admitted to be faulty in design and execution by its authors. The intent of the report was to prove that the septic systems of certain human residences were polluting the bay. The not-so-hilarious thing was that the report singled out specific abandoned homes with photographic evidence to support its conclusion. In fact, there is no such proof and dozens of other water test results before and after show bacteria level at normal expected and acceptable levels. Still homeowners are feeling the pressure because the cost of compliance often exceeds the value of their shore front homes. Some of these owners donated their properties to BaySave for the purpose of transmittal to the state or to find a resolution. I work with many levels of government and private enterprises and conclude that there is no immediate solution to bring government and residents into compromise. This is where the story gets more disturbing.

The NJDEP now sends letters threatening fines of up to $50,000 per day to these low-income and mostly unsophisticated local residents. I pointed out to the state officials that these residents are already financially ruined by sea level rise, have no other assets or income and that they have been praying for the state to take possession of their property or relocate them to offshore locations. The state offered to buy their houses for $20,000 to $30,000 but that’s not enough to pay off their existing mortgage debt let alone leave money to allow them to buy another home. These residents have no financial ability to comply and no reason to fear additional fines. Their properties are worthless (based on value less mortgage less taxes) and, for the most part, have not been occupied since superstorm Sandy. Some of the best minds in New Jersey’s think tanks – the NJ Bar Association, The NJ League of Municipalities, NJCPA, NJ Plansmart, for example –  have volunteered their help on this issue but have been unable to come up with a solution. It is unreasonable to expect NJ’s property owners to do this on their own,

In BaySave’s case, the NJDEP and various other government agencies have already issued fines, levies, liens and taxes that far exceed the property’s value. All of this happened long before we were involved. Volunteer efforts are focused on digging our way our of the hole to reestablish a sustainable shorefront resource for the community. That’s how BaySave came to own the properties; the previous owners simply couldn’t handle these government aggressions either from a financial or psychological perspective and they recognized that we stood a better shot at success. Some owners have chosen to make their donation public by filing the deed. Most have not, and prefer to keep their financial affairs private. If these owners do have other assets, they fear that these might be at risk if the New Jersey government chose to pursue prosecutions of alleged environmental violations. The smart decision was simply to donate their properties to an environmental organization. I expect these types of property donations will continue to come as long as government makes threats without offering viable solutions. We agree that the problem is financial but that’s as far as we get. I want to talk financial solutions while the NJDEP wants to continue to talk fines and enforcement.

My point is that in the past environmental regulation was based on a premise that property owners had something to lose. Now that a growing number of waterfront properties in New Jersey will have no net economic value, we need to rethink the strategy. The abandonment of property is a real and growing problem. Partnering with, rather than threatening environmental organizations is the path we need to follow.

Love Where You Live

Yesterday I heard an excellent presentation on behalf of the Cumberland County NJ economic development office for a project called “Love Where You Live”. I wrote to thank the presenter and followed with this comment:

For most all of my adult life I’ve been committed to improvement of our small rural community at Money Island. It started out with small projects like cleanup of road trash in the 1980s and then grew to other areas like shoreline stabilization in the 1990s. In the early 2000s I helped rally my neighbors to lobby various levels of government to construct a sea wall where I live (It was just completed 9 years after we initially organized a strategy for it). The project was cited as an example of public/private cooperation. During those years I developed an interest in community-based sea level rise response and have gained insights from other eastern seaboard communities in other states through my travel and involvement in these environmental conferences.

In 2010 I formed BaySave Corporation, a small but growing NJ charity focused on education and advocacy of bayshore issues. Both the NJDEP and EPA cited our exemplary work in living shoreline restoration but have put restraints our plans for oyster reef restoration and shell recycling from Pennsylvania. Simultaneously, I am working with several commercial watermen, aquaculturists and harvesters here to evolve our commercial businesses at Money Island for long term sustainability. Many people in government are supportive but there are still massive obstacles to overcome.

Then in March 2012 I was retained by a private investment group to prepare some financial projections about the economic future of our community. The results were shocking and much of the disastrous forecast in my 2012 report has in fact come true since then. Real estate values and local population have dropped sharply over the past decade. Some properties here were recently assessed at about 15% of their 2006 tax assessment level. Taxes and real estate related prosecutions against homeowners and businesses have increased sharply. Outside investors advised by the NJ League of Municipalities were not been able to make headway with local government that would have led to an economic redevelopment plan here. Last month I was surprised to learn that the State of New Jersey apparently has no programs or legal means to revitalize communities where the collective amount of government liabilities exceed the collective value of the community’s real assets (as is the case here at Money Island). I am currently working with Senator Van Drew’s office on this issue.

Local news organizations like WHYY Newsworks have portrayed my statements as “gloom and doom” and positioned them in direct contrast to Bob Campbell’s cheerleading positions for the future of the community. In reality, we are all working toward the same goals and need to work together on all these issues.

Now BaySave is preparing for a next round of financing for environmental projects that will likely involve some crowdfunding projects. Soon Nantuxent Corporation is expected to seek financing for aquaculture expansion here. As a CPA, I have a professional duty to explain the financial facts in as candid terms as possible. The financial picture here is not pretty. The 5-10 year future projections are even worse. The longer term forecast calls for our entire community to be inundated by water level rise and NJ and EPA regulations do not yet even provide any means that would allow for our continued existence. I am professionally bound to express doubt over the private or municipal prospects of our future as a going concern. Yet I’m frustrated by being labeled as the ‘naysayer’ simply because I conclude, based on the available data, that there is visible reason to express economic optimism.

In 2012, before Sandy, I proposed a possible plan for the sustainable future of our community that is endorsed by the majority landowner stakeholders at Money Island. The plan is based on state ownership of the land with leases to private stakeholders; a strategy that works well in other environmentally challenged communities. I shared that plan with Freeholder Director Derella and many others in government and business. Yet there has been no action taken in several years and so I have no reason to believe that we will move in that positive direction.

I would welcome any thoughts as to how I might be a more effective endorser for the community while upholding my professional duties for candid assessment of our financial future.

Certainly I love where I live. But that doesn’t change the fact that the scientific and economic forecasts suggest that we will face huge, unprecedented and difficult issues ahead.

New warning about the impact of climate change

This post is a summary of the June 28, 2016 strongly worded letter to Congress by 31 organizations in the scientific community to emphasize that the severity of climate change impacts is increasing and is expected to increase substantially in the coming decades.

For the United States, climate change impacts include greater threats of extreme weather events, sea level rise, and increased risk of regional water scarcity, heat waves, wildfires, and the disturbance of biological systems. The severity of climate change impacts is increasing and is expected to increase substantially in the coming decades.

Yet 180 members of Congress are believed to be climate deniers” so now these 31 major scientific organisations in the US – including the American Association for the Advancement of Science, the American Meteorological Society and the Society for Industrial and Applied Mathematics – have signed a joint letter to Congress urging them to accept that climate change is real and action needs to be taken.

 

Plansmart NJ stranded asset symposium

These are my unformatted notes from yesterday’s Plansmart NJ symposium on repurposing and revitalizing NJ’s financially stranded real estate assets.

NJ is the most exited state in the U.S.

The state’s population is growing rapidly while the number of owner-occupied housing units is dropping.

Influx from NYC to North Jersey offsets the loss of income and jobs in other areas.

Dramatic change in demographics in NJ communities from 2005 to 2015

There is 40% vacancy rate for commercial properties in Hunterdon County.

Commercial property values plummeted.

Tax base must be revenue driven.

Government must focus on economic redevelopment.

Jobs follow people.

Tourism is our sleeping giant.

Flemington is a model redevelopment community.

There is still a lack of public private partnership.

Tax exemptions under NJSA 40A:20-1 can be valuable.

  • Pilot program increases revenue to municipality.
  • Redevelopment bond

What happens to the prior property tax lien when an asset is repurposed?

What if local government does not respond to request for redevelopment of abandoned asset?

 

Planners need to educate local government on redevelopment issues.

Sometimes revenue potential seems “too good to be true” to government.

 

Perception that developers do not need financial assistance is false.

The world is changing and there is a new set of rules.

We are not saving properties; we are transforming them.

The driving factor for government is revenue, revenue and revenue.

Local zoning laws must change for redevelopment to work.

Laws and zoning are falling further behind new technology and millennials’ expectations.

It takes time for education, buy in and consensus building before change occurs in government.

Some don’t want change. Some don’t recognize that the economy  has fundamentally changed.

Some municipal leaders don’t want new students.

There is still much miscommunication between planners, developers and government.

 

Energy – micro grid implementation feasibility study is included in current state budget.