The place is broke. It’s losing money on a continuing basis every month. Budget projections fall short and frequent infusions of cash from the parent entity are needed just to keep the doors open. Management has resorted to laying off employees, and starving the place of needed capital improvements. Compared to similar establishments in the surrounding area, it doesn’t seem to have much going for it. Its business model is so weak, there are serious, serious concerns that it doesn’t have much of a future as a going concern.
Oh, yeah, and the hotel inside its borders isn’t doing well, either.
I’m talking about the City of Trenton, actually. The Lafayette Yard Hotel and Conference Center, the loss-making inn owned by the citizens of the City, is in as desperate a shape as the city it calls home, and is a pretty good analogue, in miniature, of New Jersey’s Capital City. Both are in pretty sad shape.
“Going Concern” is a concept in financial accounting, defined here as “The value inherent in an active, established company as opposed to a firm that is not yet established. The value of the assets of a business considered as an operating whole.”
But this can be expressed otherwise, and more usefully for other contexts, by asking a few questions: “Does this establishment have: adequate resources to allow it to operate; ongoing and future clients that will keep it going; products or services that people want and need; a viable business model? In short, looking at its prospects, does the place have a future? Will it survive?”
Looking at the Lafayette Yard first, I have major doubts that the place can be considered a going concern. In its transition from its previous incarnation as a Marriott Hotel (an identity and brand that did not mean financial success during more than a decade of business) to another brand (perhaps Wyndham, perhaps not), the hotel figured it had a rough road ahead. A 5-year financial projection prepared last winter by the hotel’s previous management, and adopted by the new management, modeled a hopeful climb to profitability starting in 2013. These projections were intended to reassure Trenton’s citizens, and its City Council, that the hotel’s future was a good bet, and justified the investment of millions of more public dollars to upgrade its property and stabilize its cash flow.
That hope of reassurance is going down in flames. Over the last few weeks we have read that unpaid bills left by the previous Waterford management were turning out to be much higher than publicized. One of these unpaid claims includes one made by the previous asset manager, for over $1 Million in unpaid management fees. Published reports stated the hotel’s board signed a pricy 20-year (!) contract extension for water to service its cooling system, a pretty dubious decision for a financially-shaky business like Lafayette Yard.
And then there was the news last week that the place is projected to lose $800,000 by the end of the year. The 5-year plan from only 6 months ago projected that operations in 2013 were to have earned a profit of $293, 209, not a $800,000 loss.
This swing in projections of nearly $1.3 Million since February – absolutely huge for a place that was projected to earn only $5.7 Million in revenue for all of 2013 – may be a mortal blow to the future of the place, along with the other stories of misfortune. This week, the hotel’s governing body is meeting to address the rapid financial deterioration of Lafayette Yard, and to discuss any actions it can take to reduce its many woes.
Such action may reportedly include a discussion of a property sale or filing for bankruptcy.
Whatever action the Board takes this week, the news of the last several weeks provides a very, very strong sense that the Hotel, under present municipal ownership can just no longer be considered a going concern.
I have to wonder the same for the City of Trenton.
Last month, the Mercer County Prosecutor’s Office and the Trenton Police Department announced that the city’s police vice unit would be merged with the County’s Special Investigations Unit, to be managed by the Prosecutor’s Office.
Last week, Governor Christie raised the question as to whether the rest of the city’s Police Department should be absorbed into a new Mercer County service, in the manner of the new Camden County department that replaced Camden City’s this year.
There are a whole bunch of issues that come up in the context of that suggestion, that I won’t get into today. I mention it only to provide an example of actions and proposals that I believe should beg the question of whether there is a future for a viable, autonomous future for the City of Trenton as it exists today? Can Trenton, today, be considered a going concern? Or should we start to consider alternatives?
It’s clear the City of Trenton does not control its own fate. Years before the current Administration took office, forces were at work that were dooming this town’s future. The collapse of the town’s industrial base saw a huge share of its tax ratables disappear, leaving obsolete and crumbling industrial properties around town, with no replacements other than an increased non-profit, non-taxable presence by state, county and federal governments, schools, hospitals and churches. By 2013, well over one-half of Trenton’s total property by value is exempt from property tax. For decades, Trenton has been unable to pay for itself.
For most of those same years, most of the financial gap created by the loss of industry was covered by subsidies by the State of New Jersey. The current Administration of Governor Christie reversed that practice, and directly created the budget shortfalls that have been the immediate cause of the city’s financial crisis that led to the austerity in the City’s budget that forced the massive layoffs, including those among police officers.
Might this austerity be reversed in the future by a new, more generous governor? Perhaps. But even were that to happen, the City has now been shown to be extremely vulnerable to the swings of capricious State fiscal fashion. If the (relatively) good times of state aid return, so may the (absolutely definite) bad times.
Will the current disaster of a City Administration be replaced next year by a new, talented and competent one? Perhaps. But even an extremely dedicated and effective mayor and cabinet will, as explained above, be fatally limited in its ability to control its own future.
In short, given Trenton’s current situation and its prospects, is there a future for Trenton?
I don’t know. I really don’t. What, then, is the solution?
Perhaps a merger with a neighboring town such as, for instance, Hamilton, into a greater Trenton?
Or, a split of the town’s 4 Wards among Hamilton, Ewing and Lawrence? Three years ago, local publican John McManimon suggested this as a solution, complete with a “Vatican City-style” district that would include the State Capital building and nearby areas., to be administered by the State of New Jersey directly.
Or maybe current trends will continue, and piece by piece the traditional functions of Trenton’s municipal government get divvied up one by one. This year, the Police Department is in play for pickup by Mercer County. Next year, who knows, it’s the Fire Department’s turn. The year after that, Public Works and the Water Works becomes a regional authority. Maybe Trenton’s School District is parceled out, or becomes an agency of New Jersey.
I don’t know which way things will play out, or more important, how they should play out.
And, frankly, neither do you.
But, as we are seeing with the Police Department, these questions are being asked, and Trenton’s civic assets are in play. Right now, the players are in the State and County governments, working along with what passes for the pitifully weak and perpetually confused and witless Trenton Administration.
Trenton’s citizens have not been part of this conversation yet.
Trenton’s City Council has really not yet been part of this conversation, yet.
Those who would present themselves as the city’s next elected leaders have not been part of this conversation, yet.
I think it is high time to change that. If the Hotel Board is reportedly facing up to the prospects of the hotel by considering options up to and including bankruptcy, it’s time for the broader issues of the City as a whole to be addressed.
If I may be so bold, I’ll start.
So, I don’t think that Trenton as it currently exists has a future. For many years, it has not been a going concern, and probably will never be, in its current form.
I think the City of Trenton should be dissolved, and its wards assigned to merge with the surrounding townships. I’d like to look into the pros and cons of such a plan; how the numbers stack up; and whether and how the re-constitution of the newly-defined townships would better serve all the citizens within their borders better than they are being served now. Mine is a vote for John McManimon’s plan./
What do you think? Do you have a better idea?
Let’s work on it.