Six years ago the $300 million NextGen Aviation Research and Technology Park was announced as a project that would bring 2,000 high-paying jobs and a technology-based economy to the region from its base adjacent to the FAA Technical Center in Egg Harbor Township.
Today, no construction has begun on any of its proposed seven buildings, not a single tenant for the park has been secured and a developer is still being sought.
And officials acknowledge that the 2,000-job figure came from a calculation of how many people can fit in the 400,000 square feet of the proposed seven buildings, not from the number of people needed to complete work on projects or from potential employer estimates.
Opportunity to move the project forward has been missed. On Dec. 31, 2011, 15 construction bids ranging from $9.5 million to $12.5 million for construction of the first building expired, as park officials were unable to secure a developer in time. This month, the low bidder, Hunter Roberts Construction Group with offices in Philadelphia and Newark, Essex County, agreed to extend its $9.5 million bid to June 30, 2012. While construction companies are willing to build the first structure, a developer is still needed to finance construction.
In December 2010, the South Jersey Economic Development District, which has led the project and leases the land for the park from the Federal Aviation Administration, missed a chance to use a $15 million stimulus bond awarded for building construction after it and the park’s board failed to secure tenants for the first building.
In fact, SJEDD missed deadlines twice to secure the tenants needed to access the funds. The Atlantic County Improvement Authority, which issued the bonds after the project applied for the financing, originally told the SJEDD it had until August 2010 to secure tenants. When that date was missed, the deadline was extended indefinitely, but the bonds themselves expired Dec. 31, 2010.
An additional $3 million from the Casino Reinvestment Development Authority — also needed to begin construction of the first building — remains inaccessible as a result. The CRDA, which has already approved another $8 million in startup fees to the park’s leadership, will not release the $3 million until an additional estimated $15 million needed to complete the first building has been secured.
The SJEDD has managed project planning and has completed a $7 million infrastructure installation — including roads, sewer and electricity capability — at the construction site on the FAA’s William J. Hughes Technical Center grounds.
Financing of that $7 million was secured from Atlantic County, the U.S. Economic Development Authority and the South Jersey Transportation Authority. Atlantic County contributed $2.5 million to the infrastructure costs.
The SJEDD, FAA, CRDA, SJTA, the state Economic Development Authority, The Richard Stockton College of New Jersey and Atlantic County are the seven entities with a stake in the project. Each has contributed either money, time, personnel or property to the project.
Officials from the agencies and organizations involved with the park have expressed concerns about the project’s management, its funding stream and its general viability under the control of SJEDD. Earlier this month, Atlantic County — one of the SJEDD’s four member counties — withdrew from the organization, citing its failure to provide accurate financial information on the costs and debts of the NextGen project.
Efforts have been made to wrest control of the project from the SJEDD and place it in the hands of the park’s board of directors, which is the nonprofit arm of the park and is composed of officials representing the seven agencies and other members of the private sector.
Among the private sector members is former state Assemblyman Ed Salmon, of Bridgeton, Cumberland County. He is president of the board of directors.
“The board now is made up of individuals with unique understanding and experience — relying on knowledge of aviation research and technology. Because of that experience, this board is the right vehicle to exert control and lead this effort,” Salmon said. “We have a huge responsibility ahead and a challenge. A lot of people think — and a lot of the articles that have been written — suggested that the park would be here tomorrow. That’s not the case.”
The project’s problems are compounded by the lack of consistent federal funding for NextGen — the multibillion-dollar program set to transform air transportation. While billions of dollars in contracts have been announced for NextGen research, just a fraction of that funding has been made available to the dozens of aviation companies thought to be potential tenants for the park.
Boeing, for one, said a move to the South Jersey region doesn’t make sense.
“There hasn’t been any significant funding yet for the (NextGen) contract — at least not enough to justify that kind of a move on our part,” Boeing spokesman Tim Neil said. “We haven’t totally closed the door on the notion that we could locate something up there some day, but there has to be business to support it.”
Booz Allen Hamilton, a firm that provides intelligence and defense consulting for the U.S. government, said it does not discuss real estate plans unless a signed lease is in place. General Dynamics, ITT and Northrup-Grumman did not return calls seeking comment; all are involved in aspects of NextGen research from offices in different areas of the country.
Metron Aviation, the first — and only — NextGen contractor to move to the region, announced in December it would put workers in an Egg Harbor Township office building near the English Creek ShopRite shopping plaza, rather than committing to the park because space was needed immediately. The company provides aviation engineering and software development. Documents obtained through an Open Public Records Act Request from the CRDA show that Metron officials considered committing to the park, but were concerned about the high costs per square foot.
Park officials have declined to provide current square-footage cost estimates. A December 2010 report by park Executive Director Ron Esposito, obtained by The Press through an OPRA request, shows that in August 2010 Metron was told rates could be as high as $28 to $30 per square foot. Later, those figures were adjusted to between $23 and $25 per square foot after the project obtained a financing commitment for part of the first building from the CRDA.
Metron officials, however, had found rates of about $20 per square foot “in the surrounding area,” according to project updates circulated within the park’s board of directors.
Office space is readily available in the surrounding area. Among the communities of Egg Harbor Township, Northfield and the Hamilton Business Park in Mays Landing, there is about 97,000 square feet of vacant space, said Samantha Roessler, vice president of Rose Commercial Real Estate in Northfield.
However, she said, very few of the buildings can accommodate a large user. The largest contiguous spaces available are about 10,000 to 12,000 square feet.
"Technology tenants obviously look at the location and look at the building. We also know they don't typically want to go above $23 a square foot," Roessler said. "That can certainly be found in the available space."
Gordon Dahl, the SJEDD’s executive director, blames the project’s problems on the federal funding issues and says his agency never intended to operate the park beyond administering subleases to tenants, despite language to the contrary in the 50-year lease agreement. The FAA leased the land to Dahl’s organization in 2008 after it became clear that the park’s board of directors — then in its infancy — was not ready to act in a lead capacity.
Efforts to register the board as an official nonprofit organization began in 2007, but the Internal Revenue Service rejected the application. Nonprofit status wasn’t achieved until September 2011 under the name Aviation Research and Technology Park of New Jersey Inc., according to a letter from the IRS to the board.
Nonprofits file annual Form 990 tax returns. That form is not yet available for the organization.
However, within a year of signing the lease, CRDA and the state Economic Development Authority were exchanging emails — obtained by The Press of Atlantic City through an OPRA request — about the need for the project to be overseen by an organization more experienced than SJEDD.
In April 2009, a chart also circulated among CRDA and state Economic Development Authority officials laying out the strengths, weaknesses, opportunities and threats associated with minimizing SJEDD’s role in the project. Among strengths listed in one version of the chart, a CRDA official noted that if SJEDD were to partner with another party it would bring “capital and development expertise to the project that is currently absent.”
Meanwhile, Dahl, speaking for the project in early 2010, again promised the park would bring 2,000 jobs, a first building completed in 2011 and all seven constructed by 2015. This came at a time when no financing for the buildings existed.
Joe Sheairs, the former interim executive director of the park, said at that time the project was suffering from a lack of consistent leadership.
“In the beginning, everyone was very optimistic. That optimism, to me … was not as slam-dunk as people made it out to be. There was no funding to get anything done,” Sheairs said.
“The other major problem was no one had full control of the project. I told the board when I left (in October 2010), ‘We do not have the organizational structure to be successful.’“
Not until June 2010 did SJEDD and the park’s board enter into a memorandum of understanding outlining each organization’s responsibilities and mandating that the two share information related to prospective tenants, lease agreements, FAA funding and “any problems and/or risks to the successful implementation and operations of the park.” Each party agrees to assume liability for risks associated with the project, according to the memorandum obtained through an OPRA request.
Under the agreement, SJEDD handles the park’s infrastructure, ensures that the project complies with the lease, and assists in recruiting tenants. The board, which now seeks full control of the project, is responsible for the park’s master plans, coordinating tenant recruitment and handling the park’s daily management.
Philadelphia-based planning firm Wallace, Roberts & Todd completed a feasibility study on the park in 2007. Sheairs followed up with a strategic plan completed in 2009.
The feasibility study concluded that there was strong local support for the project. The park’s proposed location was ideal for collaborative efforts with the tech center, and the park’s proximity to both Atlantic City International Airport and the Atlantic City Expressway would help in marketing. The study stressed a strong financing strategy should be developed with participation by the state EDA and CRDA. Development would take place over a 10-year period, according to the study.
“This isn’t a real estate project; this is expanding aviation in New Jersey. That is our goal,” said Anne Harlan, board vice president and former director of the William J. Hughes Technical Center. “(The expectations) for this project have been overestimated perhaps in terms of job creation and how soon development will progress. But they’re too low in terms of what NextGen is capable of. This is an expansion that could have an international impact.”
Documents obtained by The Press of Atlantic City through an Open Public Records Act request show the Casino Reinvestment Development Authority was reluctant to provide $3 million needed to begin construction of the park’s first building. On Sept. 28, 2010, then-Executive Director Tom Carver wrote in a confidential memo that the project had “fatal flaws” and said the SJEDD was not a qualified developer.
In various documents, CRDA officials questioned how the SJEDD would pay off a previously obtained $4.7 million bank loan for the project. Other concerns included the steep square-footage rates and capital improvement fees — $1.6 million for the first building — that SJEDD planned to use to pay off the loan and account for future infrastructure improvements.
Carver, however, wrote that there were also risks to not approving the money. “Local interests will not likely accept sidelining the SJEDD unless the care and effort is made to meet individually with key stakeholders to explain the financial barrier to moving forward. CRDA will suffer harsh criticism,” he wrote in a Sept. 28 memo.
Hundreds of documents obtained from the CRDA through OPRA requests show other officials within the agency shared Carver’s concerns. Less than a month later, however, the agency approved the funding. It can’t be released until the park secures the balance of the financing — estimated at $15 million — needed for the construction of the first building.
Carver, who resigned Feb. 8, declined to comment on the memo or identify to what local interests he was referring.
Carver is now vice president of governmental affairs for Hi-Tec Systems — the only company to have engaged in walkthroughs with project architects in planning a potential space in the first building. The company even requested an “impressive” front lobby in the building, according to notes from a July 2010 walkthrough.
To date, however, Hi-Tec, an Egg Harbor Township-based firm that deals in aviation engineering and research, has yet to submit a formal tenant application and has not received FAA approval to locate there.
U.S. Rep. Frank LoBiondo, R-2nd, has been among the staunch supporters of the project. When first asked about the project’s difficulties, including the lost stimulus bonds, he stated he was not aware of the issue because he was not involved with the project at a micro level.
However, after others — including Sheairs, the park’s interim executive director — stated they became involved with the project at the congressman’s request, LoBiondo later said he was aware of the issues but did not manage the project at an internal level.
“There’s a lot at stake with this project. My role, my goal, was to be a facilitator and not let the project fall apart. I was involved with trying to get people together who had an ability to try to keep people on balance and moving forward,” LoBiondo said.
“We hit some bumps in the road. I don’t know whether we want to attribute those bumps to personality conflicts, I just don’t know. There was a big federal commitment. There was a big commitment on the part of Atlantic County. Rather than step aside … and just let this thing fall apart, I attempted to help people and move the project forward.”
Atlantic County Executive Dennis Levinson, also a member of the park’s board of directors, says the county remains adamantly committed to the project. To date, the county has invested $2.5 million of taxpayer money in infrastructure upgrades.
“This is a project that is too big to fail. If it fails, we all lose,” Levinson said. “We believe there are investors out there that understand how important this is. We believe once we get this thing started, people will be sorry they didn’t get in on the ground floor.”
Some of the park’s problems — particularly the difficulty in attracting tenants — come from funding issues at the federal level. Last year, the FAA announced $7 billion of NextGen contracts over 10 years under the title Systems Engineering 2020, or SE2020, awarded to Boeing, General Dynamics, ITT, Booz Allen Hamilton and others. The contracts are the largest in the FAA’s history.
FAA officials and politicians at the time lauded the awards as a sign that NextGen development was an imminent reality. Yet as of Jan. 5 — the most recent figures available — only $429 million has been released, and there is no guarantee as to when the rest will come.
“Until the dollars started flowing for NextGen (development), the park was never going to attract the interest of the outside coming in. It was getting the cart before the horse,” said Dave Sparenberg, a former contractor who helped develop the park’s concept.
“There’s no funding for NextGen. It’s a lot of talk. Until they get funded, why would Boeing send 100 of its people to Atlantic City when there’s not the facilities to work out of and there’s no federal dollars to pay for the work?”
Yet tech center Director Wilson Felder, who must approve all park tenants, remains adamant that the park was never meant as a home for FAA contractors receiving NextGen work.
“I have cautioned all along that if the expectation is that this park is a place for the expenditure of large quantities of FAA money, that is not a viable expectation. It’s company research dollars and university research dollars I expect to be spent there,” Felder said.
Difficulties finding developer
The project has faced a number of obstacles even aside from the problem of attracting tenants. Among the most notable complications was a belief that the FAA objected to hiring a private developer to finance construction rather than looking for an aviation company to construct its own building.
Dahl and Sheairs said they were told by the FAA that a private developer would not be permissible because only aviation-related activity can occur on the premises, according to the land lease.
Responding to an April 2010 memo in which Dahl outlines a plan calling for a private developer to take part in the project, Diane Loughrin, an attorney for the tech center, said in an email obtained by The Press that a private developer would be viewed as a tenant on the FAA’s land, which would thus present a problem.
“We were put in this position because we believed and we were told that a private developer was out of the question,” Dahl said. “Our direction, our plan, all along had been to bring in a private developer and they said no, flat-out no. Their interpretation was a developer didn’t constitute an aviation company.”
Despite the email from Loughrin, the FAA disputes that interpretation.
“I have never thought it was an issue,” Felder said of the private developer scenario. “The government is open to any proposal that will get the construction of the park moving. If you’re going to look at a specific email, my comment on that would be that the email was in response to a hypothetical request. Any hypothetical request always has the potential of having a problem with it. My lawyers are just being diligent and careful in responding to that hypothetical request.”
All agree getting the park moving is a chief priority, but it wasn’t until December 2010 that the FAA imposed strict deadlines on the project. The changes were made in an addendum to the master lease, which was examined by The Press, extending the term of the lease between the SJEDD and the FAA from 25 years to 50 years.
In the addendum, the FAA states that the SJEDD defaults on the lease if it fails to begin construction of the first building by Dec. 21, 2014. Completion of the first building and a certificate of occupancy must be obtained by March 1, 2016, and SJEDD has until Dec. 1, 2030, for full build-out of the park.
Accompanying the original 2008 lease is a memorandum of agreement that states the infrastructure was to be complete by March 31, 2011, a deadline that was not met. However, a spokesperson for the FAA said that the deadlines in the agreement were never meant to be strictly enforceable and were eventually superseded by the addendum to the lease.
Nearly all parties involved still insist that the project is viable and will happen — although all are hesitant to provide any sort of timeline aside from the forgiving deadlines now included in the lease. What seems likely is that the once-projected 2,000 jobs at full build-out by 2015 will not happen. It’s estimated that once the first building is complete, it will bring 150 to 250 jobs, according to both the park’s feasibility study and application for CRDA financing.
“The expectations were way too high as far as the reality of what would be done, how many jobs would be created and how quickly that would be accomplished,” said Salmon, the park’s board president.
Definitive control of the project hangs in the balance as the park’s board still seeks to take over the lease agreement from SJEDD.
Park board members, Sheairs and others also have questioned a spin-off proposal for a NextGen International Aviation Center for Excellence at the Atlantic City Race Course in Hamilton Township that promises as much as 600,000 square feet of office space and a hotel.
No one involved with the NextGen park, including current park Executive Director Ron Esposito, said he or she was consulted about the spinoff proposal announced in December 2010, days before SJEDD lost the bonds for the park at the tech center.
Transfer of the park project from SJEDD to the park’s board would have no effect on the race course proposal. No financing has been secured for the construction at the race course.
Dahl argues that his plan was stable.
“If people were disputing our strategy, they were not speaking to me about it. I wasn’t acting independently. Everybody wanted to see this thing move forward, and that’s what I did,” Dahl said. “I followed this project with the hope that those NextGen contracts were coming out and there would be companies interested in moving in. I can’t control that it didn’t happen as people said it would.”
Salmon said the shift would provide more cohesive leadership for the project.
“There was a feeling — probably from the beginning — that eventually the (park’s board) would have to take over. You have to have an entity who has the experience and depth of knowledge of what the (park) is all about,” Salmon said. “The way it is now, if I was a member of the public I wouldn’t really know who was doing what and who is responsible for what.”
For the park’s board to take control of the project, it requires a full understanding of the project’s finances. Dahl said the information has been provided; the park’s board members said the information was not forthcoming and that it needed a $10,000 independent report of the project’s finances by Vineland-based accounting firm Martini and Martini in May. The cost of that report was shared by SJEDD and Atlantic County, which later decided an even more thorough review was needed.
Ocean City-based accounting firm Ford-Scott and Associates followed with an additional financial report in October, showing the district is carrying $858,410 in unfunded liabilities on the project. The district still owes more than $1.3 million to vendors, but should be able to recoup some of that through grants and other income.
SJEDD also expects to be compensated for its efforts with the project. In an April 13, 2011, letter to Salmon, SJEDD requests $1.74 million to relinquish control of the project. More than $1 million of the amount is calculated as administrative fees for administering contracts and obtaining and implementing grants, even though the district has already obtained fees for some of the grants from the issuing agencies.
The two organizations have confirmed that they are in negotiations based on the cost analysis, but declined to address specifics.
However, the negotiations pose a challenge to the park’s board, which has little of its own funding. Esposito’s $150,000 salary and nearly all of the organization’s operating expenses are being funded by CRDA appropriations, which have totaled nearly $8 million.
The park’s income is exclusively based on membership fees for the park, which to date have totaled about $80,000. Those fees are paid by aviation companies, colleges and other organizations interested in a “seat at the table” and increased visibility and business opportunities, according to the park’s website.
Esposito would not comment as to where the organization might find the funding to pay SJEDD. Meanwhile, FAA attorneys are looking into whether or not the lease for the park’s land can be transferred to the park’s board.
“Our main concern at the time the lease was executed was to get as much of the project done as we could and then we’d figure it out. We’re now in the stage of figuring it out,” Felder said. “Our preference is that an entity like the (park’s board) — operated by a consortium of government and private interests on the board — be the operator of the park, rather than a single institution like SJEDD.”
Contact Jennifer Bogdan