Paterson drops start-up business project after spending $7M in public funds

PATERSON — After spending more than $7 million in public funds on the project, city officials have dropped their long-delayed plans to convert a 6th Ward industrial building into a hub for start-up catering businesses.

Among the factors that contributed to the project’s demise were cost increases that eventually surpassed the money that was available for the initiative as well as difficulties finding bigger businesses as tenants, officials said.

The collapse of the plan has forced officials in Paterson to begin looking for someone to buy $700,000 worth of commercial kitchen equipment they bought to install in the building and is currently in storage.

Mayor Andre Sayegh — who enthusiastically pushed for the food start-up business proposal when he was a councilman six years ago — said on Thursday that he is trying to salvage the massive investment by finding another use for the building. The mayor said he would announce his backup plan soon.

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The city now wants to turn the building on Pennsylvania Avenue into a command center for the Paterson fire department and emergency management services, according to multiple sources familiar with the initiative. But local officials first must get approval from the United States Department of Housing and Urban Development (HUD), which provided a significant portion of the money that has been spent on the project, officials said.

Local officials halted renovations at the building more than a year ago and the work remains far from completed.

The project started in 2014 when Jeffery Jones was Paterson’s mayor. The plans then underwent a series of changes during the subsequent mayoral administrations headed by Jose “Joey” Torres and Sayegh, officials said.

“Unfortunately, to some degree, this project was a victim of changing administrations,” said Jamie Dykes, the chairman of the Paterson Restoration Corporation (PRC), a quasi-public nonprofit corporation that has spearheaded the city’s efforts to create the “business incubator” for start-up catering entrepreneurs.

Under the PRC’s formal organizational structure, the city’s economic development director also serves as the nonprofit corporation’s executive director. That arrangement ultimately gives whoever holds the office of mayor a great deal of influence over the PRC. Different mayors have had different ideas about what the catering business incubator should be, officials said.

The initial estimates for the project put the cost at about $3 million – including $700,000 for the kitchen equipment, $1.3 million to buy the site and another $1 million for renovations, officials said.

The PRC and the city have used money from HUD’s Community Development Block Grant program and municipal Urban Enterprise Zone for the project, officials said. The original plan was to create 30 commercial kitchens in the building, which would be leased to various start-up catering businesses that could not afford buying the expensive cooking equipment on their own.

Dykes said part of the draw of the program was that the commercial kitchens would be certified by the United State Food and Drug Administration. Also, he said, people starting catering businesses are prohibited by law from preparing the food they sell at their home kitchens.

After Torres took office as mayor in the summer of 2014, he wanted to make changes in the commercial kitchen plan by setting aside a portion of the building for several larger food businesses, officials said. That meant making changes in the renovations that had already been done, along with additional fees for designing the revised work, officials said.

One of the big businesses the Torres administration was looking to bring to the site was an ice cream company, officials said. Another was a cheese company that was going to make a dish that combined mozzarella cheese and prosciutto, officials said. But problems arose in getting the bigger businesses to come to the site.

“A project like this needs public, nonprofit and private support,” said Ruben Gomez, who was Paterson’s economic development director and the PRC’s executive director during the first four years of the project. “The problem was we couldn’t get the private investor.”

As time progressed, officials said, the renovations started and stopped, started and stopped and underwent costly changes. The construction bills gradually climbed from the original $1 million estimate to about $5 million, officials said.

Throughout that time, a portion of the building was occupied by a company that makes the bandages, or wrappings, which horses wear around their ankles, officials said.

After becoming mayor in 2018 Sayegh tried to revive an initiative that had been one of his pet projects. He endorsed the plans of a Hasbrouck Heights-based company, North American Regional Center, to create a complex of restaurants and shops at the site that would be called Palestinian Eats.

The company hoped to get as much as $11 million from a federal program, known as EB-5, designed to assist immigrant investors. But the company attempt to get federal government support fell short, officials said.

“Our administration immediately tried to foster a public-private partnership to save the food incubator,” Sayegh said, “but after several federal funding vehicles dried up, and other complications with construction stopping and starting previously, the hard decision to end the incubator became our only option.”

“Because of several stops and starts and previous decisions to change designs and structure, complete with cost overruns, the viability of a food incubator is not possible,” Sayegh added. “For the last several months my team has been working to develop an alternative plan that would benefit the public and be a more responsible use of resources, facilities, and time. We will share these plans shortly.”

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