Tuesday, June 02, 2009

MTA board member "concerned" about amended Vanderbilt Yard plans, says board has yet to be fully briefed

The one Metropolitan Transportation Authority (MTA) board member who voted against the deal to award the Vanderbilt Yard to Forest City Ratner said he remains “concerned” about reports of amended plans, but can’t formulate his position on the issue until board members are provided with briefing materials in about two weeks.

Mitchell Pally, who represents Suffolk County, told me that, at the MTA board meeting last Wednesday, members were briefed verbally about negotiations regarding Forest City Ratner’s request for extending payments rather than paying the pledged $100 million at the time of closing. (Press reports have indicated FCR wants to pay just $20 million up front.)

He said board members were not briefed regarding a reconfigured Vanderbilt Yard replacement, though Williams testified Friday at a state Senate oversight hearing that the MTA and FCR reached an agreement—to go from the planned nine tracks to seven—before Memorial Day. Pally told me that, while the agreement had been reached by MTA management and staff, the board had not yet weighed in.

Losing bidder penalized?

His concerns about fairness, he explained, apply to any project, not merely the one under consideration: “When you have a variety of bids, and then changes are made, you end up with an amended situation which is significantly different, and penalizes the non-winner of the original bid. I don't know what is happening in this situation, but obviously that is a concern.”

(Noticing New York's Michael D.D. White offers several arguments about why compromising with Forest City Ratner might not be such a good deal for the public.)

Later this month

Pally said that, according to typical protocol, the deal would first be discussed at the MTA Finance Commitee meeting June 22, two days before the full board meeting June 24. Typically board members get summary materials during the previous week.

Pally said he recognized that the economic situation had changed, but suggested that the financial return to MTA should be compared against three things: the original bid, zero (meaning the deal fails), or a potential alternative.

Will the MTA provide board members with a cost-benefit analysis regarding the revised bid? “Obvious if the project changes, the benefits have to change,” Pally said, expressing hope that such details would be provided.

Vote in 2005

In 2005, Pally supported development at the Vanderbilt Yard, but voted against Forest City Ratner’s bid, because of the contrast between the $100 million cash offered by FCR, with an MTA appraisal at $214.5 million: “My concern was, were we getting fair market value for our asset?”

He said he had not supported the rival bid by Extell, which offered $150 million cash. “We never got to that point,” he said, noting that there was never a full analysis of the value--in cash and other benefits--for the Extell bid. But the appraisal, he said, was “very clear regarding what the property was worth, and I did not believe at that the current developer met that criteria.”

Pally’s prescience about delay

As the Brooklyn Paper reported, during a September 2005 board meeting, Pally questioned why the board didn’t insist on getting more money, or ensure that Forest City Ratner paid the full price up front. 

“Why is the MTA making closing contingent on these other bodies?” asked Pally at the time. “We don’t know when this sale will close. It could be two years, it could be five years, it could be 10 years.”

Indeed, it has been nearly four years.

As for a new railyard, one of the reasons MTA Chair Peter Kalikow touted the FCR bid, Pally pointed out that the MTA’s needs assessment had not mentioned upgrading the railyard.

Fast track

Pally indicated yesterday that the revised deal is on a fast track. “We were told that, at MTA, decisions have to be made rather quickly, because of a variety of dates,” he said. 

Those dates could be the Empire State Development Corporation’s need to issue a revised Modified General Project Plan (Plan) as a prelude to a public hearing and condemnation, on a schedule designed to ensure that arena bonds are issued before a crucial December 31 deadline.

Is this basically a done deal? Pally said there was significant backing, from both the political structure and from many individual board members, for the project, and to make changes to continue to make it happen. “What those changes are I don’t know yet, and how they’d impact the project,” he said.

FCR’s payments

As I wrote last month, according to the ESDC’s Modified GPP, Forest City is supposed to consummate its purchase prior to or contemporaneously with the first acquisition by ESDC of a parcel not owned by the MTA--presumably by eminent domain.

The 9/15/05 sale letter indicates that, of the $100 million, a 10% non-refundable deposit was payable on contract execution and the balance at the closing.

The contract, apparently, will be executed at closing, an MTA spokesman told me--essentially conflating the two events.

When is closing? Only after the completion of all approvals, including a GPP. Given that there may be another GPP, closing may have to wait until later this year.

The deal was once expected to close at the end of 2007. It looks to be nearly two years late.

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