Contractors began to demolish the old New Jersey Bell Telephone Company building next to the Bayonne Medical Center to make way for a new 120-unit Bayonne Nursing and Rehabilitation Center.

The owners, Omni/Bayonne, received city Zoning Board approval in January to demolish the building, along with a smaller structure at Broadway and 29th Street, and replace it with a 10-story nursing home with medical and professional offices and four stories of parking.

"The operation of a nursing and rehabilitation center will mean that people who have spent their lives in our community will be able to live with dignity in the city that they love," Mayor Mark A. Smith said.

An old underground fuel tank has to be removed at the site, said Omni attorney Thomas O'Connor. The general contractor, CCI Construction, has received the required permits from the state Department of Environmental Protection to remove, remediate and test the soil around the tank - a process that will take roughly three months, O'Connor said.

Once this work is completed, construction of the nursing home should take 18 months, officials said.

Elected officials said the new home would be a boon for the local economy and boost jobs.

"In the short term, construction will mean jobs for our building trades local," Mayor Smith said. "When construction is complete, the Omni building will be a major tax ratable that will provide careers for our residents."

"I think the location (of the planned nursing home) is perfect in the center of town and near to the hospital and to so many medical offices," Council President Vincent Lo Re Jr. said. "It is also perfect for transportation with buses running in front of the building. It will be a beautiful new addition to Broadway."

Both properties were sold in 2006 by the former owners of the BMC for $2 million, although former BMC officials said in a lawsuit against Omni that the land was worth $5 million at the time. The suit claims Omni, in 2005, pledged $5 million in annual $1 million installments for five years. Omni denies the pledge.