The American Way of Graft
By George Amich

The Port Jersey Corporation committed its full resources to the job. By early 1969 Sensibar was getting complaints from the site that the city was doing nothing to fulfill its contractual commitment to furnish access roads, sewerage and water connections and other essentials. No direct route existed to get potential tenants onto the property to look it over. There was garbage dumping going on there, and a squatter running a sawmill. City help was needed to solve these problems. Various permits and approvals were being held up at City Hall.

Then Sensibar's partners got the bad news. Their architect, Bernard Kenny (recommended to them by John V., although the two were not related) advised them that "the organization wants five per cent of the total construction cost." Such a payoff would have totaled between $2.5 million and $5 million. Later Thomas Flaherty, the city council president, in direct negotiations lowered the figure to three per cent.

The indignant Sensibar met again with John V. Kenny. "He remembered our initial discussion," Sensibar said, "(and said) that he would stand by it." That sounded good, but it wasn't. "He said nevertheless that they did have an expensive campaign; that Mr. Flaherty was the man who was delegated to raise funds for the campaign, and that it would be appreciated if we would make a campaign contribution."

By now Port Jersey had more than $3 million sunk in the project and was "spending money every day on a grand scale." Under pressure from his partners, Sensibar gave in. He met again with Flaherty and agreed to contribute $20,000 to the mayoral campaign. After that Port Jersey's problems were eased.

A different problem, however, was tax abatement. Sensibar hadn't informed himself about Jersey City's sky-high property tax rate before wading into Port Jersey - a curious lapse for a prudent businessman. Once in deep water, he found that the port portion of his project would be competing with the Newark and Elizabeth operations of the Port Authority of New York and New Jersey. The Port Authority pays no taxes and finances itself with tax-exempt securities, which gives it two long legs up on a private developer.

To attract shipping clients, Port Jersey had to have favorable tax treatment of the kind which cities are authorized to grant on improvements in officially "blighted" areas. This assures the developer a stable tax base for fifteen to twenty years. During that time he pays taxes on land but not on improvements. In lieu of the latter, he pays a percentage of the project cost or of the rents received. The percentage is negotiable.

Eventually, the Jersey City Council did grant a tax abatement on one building to Port Jersey. The question that was never answered was: Did it require a payoff? Two witnesses told the SCI they had heard M. Gerard Kelly, a real estate man whose job it was to find tenants for the project, say "it had cost $50,000 for the securing of the abatement, but... it was well worth the investment." Kelly told the SCI he didn't think he had ever made the statement. No further details came to light.

Port Jersey would not have had the problems it did if jurisdiction over development of this valuable regional and state resource, the Hudson River waterfront, had been located where it belonged - in some regional or state agency. But that is not the point. The victim could have been somebody else, working a tract whose significance was purely local. The point is that a government agency that does not want to cooperate with a developer can find a lot of ways to frustrate him, and the developer needs some kind of equalizer.

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