Board members--who were reported (see WNYC) to have been under pressure from the mayor and governor who appointed them--agreed that this was the best deal they could get at a time when development is difficult. (Here's the official resolution.)
They went though some convoluted defenses of their failure to challenge FCR further. “The market is what the market is,” declared board member Jeff Kay, disregarding the failure to actually test that market.
Also, confirming the “done deal” aspect of the vote, they disregarded without discussion a last-minute--and, understandably, hardly fleshed-out--proposal from Develop Don’t Destroy Brooklyn (DDDB) to pay $120 million for the Vanderbilt Yard, $20 million more than FCR’s offer.
“It is highly probable that we will sue the MTA as a result of their actions,” DDDB spokesman Daniel Goldstein said afterward.
(The Times covered the vote online, missing several important details--see the comments. The news story for print skates over the vote and the value of Ratner's savings, and focuses on the not-so-certain chances for arena financing. DDDB contends that, despite the revisions of the deal that suggest the opportunity to accelerate, the developer has taken steps backwards, with a looming December 31 deadline to issue arena bonds. )
Discussion after comment
The board discussion, which lasted less than half an hour, came after some two hours of public comment, much of which was redundant and off-topic. As with the comments Tuesday before the Empire State Development Corporation (ESDC), project supporters touted the benefits of Atlantic Yards.
No one from Forest City Ratner spoke. No elected officials other than (a rep for) Borough President Marty Markowitz testified for the project.
Those testifying in favor of the project were essentially the same group—unions, Community Benefits Agreement (CBA) signatories, Downtown Brooklyn Partnership, real estate industry, and BAM—who testified before the ESDC on Tuesday.
“I’m here to discuss your duty not to squander your assets and your duty to be a good neighbor,” said Assemblyman Jim Brennan, speaking first. “The Public Authorities Accountability Act of 2005, which applies to the MTA, requires an independent appraisal,” he said, noting no such appraisal was part of the agreement.
(The video above includes comments from Brennan, City Council Member Letitia James, and Danny Serrano, representing state Senator Bill Perkins. Thanks to the volunteer who converted webcast video to these clips.)
Brennan said there was time to do what is required by law within the 60-day time frame for the Empire State Development Corporation to review the project.
Brennan heads the Assembly Committee on Cities, and is a senior member of the Committee on Corporations, Authorities, and Commissions, which oversees the MTA. (Biggest absence yesterday: Committee Chairman Richard Brodsky, who at a conference earlier this month warned, “I believe that the decision to accept that offer would be a violation of the fiduciary duty of the board members.”)
Brennan pointed out that rival bidder Extell in 2005 offered funds in excess of FCR’s offer. “Instead of 100 million dollars, you’re taking 28 million dollars over the first seven years,” Brennan said, speaking with brisk assurance, “and then the agreement involves a quid pro quo per development parcel... for 15 years, from 2016 through 2031. Let me suggest to you that that element of the proposal is utterly speculative.”
He added that the Independent Budget Office, in a preliminary analysis, had concluded that “the arena is a boondoggle.” (The IBO was more circumspect, saying that the projected benefits were eclipsed by increased city subsidies.)
James echoes the Post
City Council Member Letitia James pointed to an unfair cycle: “The taxpayers bailed out the MTA. Now the MTA bails out a wealthy private developer.”
“How can you sell off a valuable public asset without considering market value?” she asked.
The project, she said, is “about a public arena,” not affordable housing. (Actually, it’s a nominally publicly owned arena operated by a private company, which controls the naming rights.)
“This is the only time I agree with the New York Post,” she said. “It’s an outrageous giveaway.” (She brandished the column written Tuesday by contributor Nicole Gelinas, headlined An Outrageous Giveaway.)
(Also, to the surprise of many, the Post editorialized Wednesday that the board should reject the proposed compromise and accept only the original deal.)
Perkins’s questions ignored
Danny Serrano, director of public policy for state Senator Bill Perkins, who heads the committee overseeing the MTA, declared, “It is clear that the project no longer resembles the project that was originally approved. It will not and cannot provide anywhere near the level of public benefits that were originally planned.”
“Much of the controversy surrounding Atlantic Yards has been aggravated by a chronic lack of honesty, transparency, and accountability,” Serrano declared. “This proceeding today is an example.”
Last week Perkins submitted a letter with several “very basic, fair, logical” questions for the MTA. He received a letter, but, as Serrano reported, “it was in fact unresponsive.” Williams refused to answer or acknowledge the questions.
He began by asking why there was a renegotiation rather than demanding performance or reissuing the RFP. Asked to speed up, Serrano said, veering on sarcasm, “I’m going to run through the questions so you have the benefit of thinking about them.”
The other questions: whether MTA considered that most of the alleged public benefits it considered in 2005 have since substantially diminished or vanished altogether? Whether MTA contracted an independent appraiser? What is the current Fair Market Value? Isn’t an appraisal required? What are FCR’s obligations to the MTA if the deal closes but the developer does not proceed with the project?
Then came the pro-project testimony. Among them, Carlo Scissura, chief of staff of borough president Marty Markowitz, essentially reprised his testimony from the ESDC board meeting Tuesday, with a minor acknowledgment of the issue at hand. “Even though it’s a little less,” he said of the payments to the MTA, “in the long run, the tax revenues will be incredible.”
Similarly, the Rev. Herbert Daughtry sounded like a broken record, repeating his criticism of project opponents for not focusing on other developers, and praising the "state of the art” health facility and “intergenerational facility” that have been promised (but are hardly guaranteed).
“Why delay the project? It’s a load of cruelty,” he said, ignoring the specific issues before the MTA.
A few people acknowledged the issue. Darnell Canada of ReBUILD said, “Your duty is to stimulate this economy and help America continue to grow.” (Community groups like ReBUILD were responsible for some of the orange-vested “construction workers” at this and other hearings.)
Donald Elliott of the Downtown Brooklyn Partnership said, “No project is perfect but this one will do significantly more benefit to the city than turning it down.”
Need for informed decision
Bill Henderson, executive director of the Permanent Citizens Advisory Committee (PCAC) to the MTA, which represents MTA riders, said “we’re troubled that such a major proposal has come before the board without a committee recommendation.”
“For the good of the system and its riders, you must make informed and reasoned decisions on the proposals that come before you,” testified Henderson, urging caution but not a specific “no” vote. “There will be no second chances to derive full value from the MTA’s assets. We call upon each of you to move this process forward only when you have the information and understanding necessary for you to conclude that this proposal is in the best interests of the MTA and for those it was established to serve.”
DDDB Legal Chair Candace Carponter said, “I come here today to give the board members some free legal advice: The Public Authorities Accountability Act of 2005 includes a provision that requires the board members of the MTA to act in respect to their fiduciary duty to the MTA.”
“Whether or not this is a good project is really irrelevant to you,” she said. The question is whether it’s good for the MTA.
“If rumor is true, you have been receiving a lot of pressure from the mayor and the governor to do this deal, and Forest City Ratner knows that,” she said. “So negotiations have not been at arm’s length and therefore you’ve been forced to accept terms that I suspect most of you think are not really in the best interest of the MTA.”
She asked them “to not do what the bully in the schoolyard tells you but to do what is right.”
The DDDB proposal
After more than an hour, DDDB's Goldstein got to speak. “WNYC radio reported that some board members are in despair about the terms of the new deal,” he said. (WNYC didn’t use the term “despair.”) “That you’re getting pressure from the mayor, with his tentacles everywhere, and a governor with a 20 percent approval rating, to vote for this deal. And that there is no market for eight valuable acres in the heart of Brooklyn.”
“That’s nonsense. But you do not need to despair. You can issue an RFP, or you must consider our offer after tabling today’s vote. I’m here to announce that Develop Don’t Destroy Brooklyn is making an offer of $120 million to purchase the development rights to the Vanderbilt Yard.” The mixed use development would be based on the UNITY Plan framework.
The room got quiet. Was this a stunt, or was it serious?
“We are certain that our offer would receive stiff competition if the yards were put out for bid,” he said. “But we do feel fortunate that we can make such a discounted offer for such a great piece of real estate due to the absence of a competitive bidding process.”
(The term “great piece of real estate” comes from Chuck Ratner, CEO of parent Forest City Enterprises.)
MTA Chairman Dale Hemmerdinger had a sour look on his face. No one on the board seemed to looking directly at Goldstein.
As DDDB explained it, the UNITY Trust would bid the yards out in smaller, manageable parcels (6-8), for development and payment over a far shorter timeline than developer Forest City Ratner’s proposed 22-year Atlantic Yards timeline. It would pay the MTA construction costs for a new yard. It came, however, without financing, though DDDB said in a press release it could raise $5 million. Whether the plan was as likely to get financing as FCR’s plan--as Goldstein suggested to The Local--is a question that won’t even be tested.
“Whether what we offered was credible or not, they have no way of knowing,” Goldstein told me later. “They treated us basically the way they treated Extell. Like Extell, we would've liked to have the opportunity to sit and discuss our offer, just like they afforded Forest City Ratner years and years of discussing their offer.”
(The Daily News also reported on the proposal in the I-Team blog.)
Concerns from Straphangers
Gene Russianoff of the Straphangers Campaign said the group had no overall position on Atlantic Yards but was very concerned that the MTA was getting the best deal for its assets.
He raised some questions: “In the ordinary language of a regular rider, is this a dog of a deal or the best you can do? Should you ask for a new appraisal?... Should you take action to terminate the deal... or has the economy made this property less valuable?”
“I think a rush to judgment here will further undermine the public’s faith in your credibility... so take a breath,” he suggested. “If you cannot get complete answers to reasonable questions this morning, please don’t vote. The stakes are high and you have a very serious responsibility.”
One of the last speakers--before Council Member David Yassky--who also urged the MTA not to accept the deal--was Neysa Pranger, public affairs director for the Regional Plan Association, which has backed Atlantic Yards, though with reservations.
“While there has been little time to digest the proposal, several considerations are clear,” she testified, suggesting that project is now far different from the one approved in 2006, with “greatly diminished” public benefits. She also said that “it is likely to be years before the market recovers enough to attract new developers”--a statement certainly worthy of debate. And, she said, it “is almost inevitable that it will need to be redesigned and renegotiated over several business cycles before it’s complete."
“Does this new agreement retain enough benefits for the MTA and the city to proceed with a scaled-back plan?” she asked. “Based on the information available, the answer is no".
Rather than open up the site to new bids, she made four recommendations for any revised deal with Forest City Ratner, including granting the MTA more future project revenues, conducting a new cost-benefit analysis and creating a new ESDC subsidiary to oversee the project and review design elements.
The discussion of the issue lasted less than half an hour; no one acknowledged the RPA’s suggestions.
The first board member to speak was Mitchell Pally, who represents Suffolk County, the only member to vote against the original deal in 2005. (Note in the beginning of the YouTube video, which also includes comments by Louis Capelli, how the mustachioed Gary Dellaverson, the MTA’s Chief Financial Officer, looks tense.)
Pally said it’s not inconsistent to support the project but oppose the deal before them, “because I believe the only issue facing me as a board member is whether or not I believe... whether MTA was getting fair market value for its property. I did not believe that four years ago... And I believe the same to be true today.”
Allen Cappelli, a gubernatorial appointee, speaking next, said he’d given the project a lot of thought and wasn’t sure how he’d vote until he’d listened to some of the speakers. He said he supported jobs, the arena, and affordable housing, as well as the concept of the plan.
However, he said, “Our jobs as fiduciary is to ensure that the MTA gets maximum value... and, at least as of this moment, I have not convinced... I’m very troubled by the idea that the state of the art railyard... which was a nine-track facility several weeks ago, is now sufficient with seven. Once we build that out, we’re locked into that forever.... I know that the economy has changed a lot in the four years [since] this plan was initially approved, and there may be some risk to pushing the developer back to the table, but unfortunately that’s the risk that I recommend we should take.”
Another board member, Donald Cecil, said it would be helpful to have an updated appraisal and wondered, if the situation were tabled, how long it would take to get an updated appraisal.
Defense of the deal
Then came the defense of the deal, led by two mayoral appointees. While agreeing with Pally that the MTA’s responsibility was to the riders, one requirement for the transaction was that “it have absolutely no impact on the riders,” said board member Jeffrey Kay, who directs the Mayor’s Office of Operations. “I think this transaction this protects the Long Island Rail Road yards. There’s a guarantee that the money will be there in order to maintain and upgrade the railyards, and it does that.”
“The second issue of fiduciary responsibility is did we get enough for our assets,” he said. “Y’know, these railyards have been there for a very long time. It wasn’t until recently--probably either the market not being there or the MTA... not thinking about maximizing its assets--to start thinking about decking over railyards and start taking advantage of the property that we have.”
“Are we getting what it’s worth?” Kay asked rhetorically. “The reality is, it’s only worth what someone’s willing to provide... You could re-do the appraisal three times during three different business cycles, but there was an RFP process. There were things brought forward. The market is what the market is. I think this is actually a good win. I think, there’s obviously not the full upfront 100 million dollars would be provided initially, but... this deal provides us with an upfront 20 or 28 million dollars over a short period of time, and then, as the development goes forward, the full value of the 100 million dollars. And that comes, in my opinion, at no risk, because if, in fact, this other part doesn't exist, the MTA owns the air rights... it’s really a no-lose proposition. If in fact the developer flips the property or decides not to build, it’s ours.”
“But there is no other market,” he said. “No one else has come forward with a credible proposal at this time, and we should take advantage of that.”
(The New York Times once editorialized on a parallel issue: The most sensible course now is for the city to find out anew the market value of this property, and that cannot be accomplished through negotiations with one bidder.)
He said the MTA legal department had advised them it’s a legal transaction.
“I would follow and agree with much of which Mr. Kay has just said,” continued Mark Page, director of the city Office of Management and Budget, another mayoral appointee.
“I think that realizing value from railyard property that we own is something that we have learned over the last number of years, much of which has been in a boom real estate cycle, is extraordinarily difficult,” Page said. “Because we require the railyard function... we’re selling the space above it. To have an opportunity to actually realize value for the space above our land requires a tremendous upfront investment by the buyer to actually build the platform, an upfront, major investment before the buyer can then move on.”
There is, however, no obligation that Forest City Ratner build the platform on the majority of the Vanderbilt Yard site.
“The other aspect of these yards is that they’re large, and you need a buyer who’s going to somehow incorporate what you’re offering into a large and elaborate development project. Large and elaborate development projects in New York City are extraordinarily difficult to pull off, in terms of the levels of government and public particpation, legal issues to be dealt with,” Page said.
“To get all the elements lined up so that you can get a transaction of this kind to move forward is extraordinarily difficult and time-consuming. We have arrived at a point where there’s not perfect assurance that this project will in fact take place,” he concluded. “But I think, as outlined before us, with the benefits that are available here to the MTA, assuming it goes forward as currently described.... I think that this is as good a deal as is going to be available to us for this property in the foreseeable future.”
(Project opponent Patti Hagan submitted testimony: "You're raising the fare on us come Sunday. How about we get a Ratnerian 1/5 off the $2.25 fare, too? We pay the MTA 45 cents up front this year and you give us another 22 years to work up to paying the full $2.25.")
Frasca signs on
Then Doreen Frasca, who on Monday said having two days to decide was “outrageous”--the timeline was driven by Forest City Ratner's need to get tax-exempt bonds by the end of the year--indicated that she was on board.
Frasca said she spent five hours on Tuesday “just getting my arms around this transaction.” She and fellow board member James Blair were both briefed by MTA leaders, and “it was an interrogation.”
“I believe I received satisfactory answers,” she said. (Blair also said that the presentation was quite persuasive.)
“I have never yet seen a perfect deal,” she said. “The question that we ask as fiduciaries is are we getting the transportation elements... that we need and the financial safeguards that we require, and I believe that we have.”
Norman Brown, a nonvoting member, took aim at Carponter, saying, “I believe that fiduciary is a door that swings both ways,” suggesting it would be wrong to oppose it.
Andrew Albert, a nonvoting member who represents the NYC Transit Riders Council, expressed his own concern, saying, “I am torn.”
Albert asked a question about the naming rights agreement in which the Atlantic Avenue/Pacific Street station would also get the name Barclays Center. No, the name would not be added to the Long Island Rail Road station.
Page had the last word, trying to justify the intensely short time frame.
(The video above includes comments from Page and Hemmerdinger.)
“As a board, we have heard the latest iteration of the offer that we’re asked to vote on quite recently, but that’s because, as an entity, the MTA has been doing its best to negotiate the best terms for us at a staff level for a very long time on this transaction and very actively, on our behalf, really, right through last weekend. So it’s not as though it’s something that’s been dropped in our laps suddenly to consider,” he said.
“It’s actually the product of the best effort we’ve been able to do as an agency for this property and our situation in Brooklyn over an extended period of time,” he said, disregarding the fact that the board still had only two days.
“So, when questions of value and terms that might be available to us are not just abstract questions. The proposal in front of us is the product of very active hard-fought negotiations over an extended period of time, and this is the best that, as an institution, we’ve been able to bring before ourselves as a board to decide on,” he said, insisting “It’s not a quick, easy, sudden circumstance that we’re facing. It’s a major work product.”
Comments from the Chairman
Chairman Hemmerdinger praised the work of the MTA: “I just want to point out two things. First, you all may recall, we’ve been trying to make money off naming rights for quite a while. This is the first time we’ve been successful... It’s a very important point. That was never part of the original discussion [with FCR] on this deal and it speaks to what Mark was talking about, how hard the staff has worked to make this a better deal for the MTA and our customers.... I don’t think anybody should not remember that the real estate market is a whole lot weaker than it was in 2005.”
“It really was value engineering, not us giving up anything,” Hemmerdinger claimed of the deal, even though a nonbinding letter of agreement between the MTA and the developer stated that FCR would produce a yard with nine tracks or an alternative configuration "that does not reduce yard/station capacity or functionality."
“I’ve been in the real estate business a whole long time and I agree with Doreen no deal is ever perfect,” Hemmerdinger said. “You get what you can when you can. And I think, in this economy, jobs and an arena in Brooklyn is a public good.”
In essence, his argument had gone off the rails, the MTA was supposed to vote only in its own interests.
The vote was swift--Cecil, who had raised questions, voted with the majority--with only Pally and Cappelli voting no. There was one abstention.