Thursday, July 16, 2009

Brodsky: "it seems... provable" that MTA did not fulfill fiduciary duty with Atlantic Yards deal (but he won't look further)

Assemblyman Richard Brodsky, who in early June criticized the Metropolitan Transportation Authority's (MTA) expected acceptance of a lowered initial cash offer for the Vanderbilt Yard from Forest City Ratner as a violation of its fiduciary duty but then remained quiet as the deal proceeded, has returned to his criticism, saying "it seems to me provable" that the MTA did not fulfill that duty with Atlantic Yards and two other deals.

However, he indicated that the Committee on Corporations, Authorities and Commissions, which he chairs and which has looked closely at the Yankee Stadium deal, would not look into the Atlantic Yards deal. (As noted below, I think there's room for an inquiry.)

At panel on MTA

Brodsky spoke last night on a panel on the future of the MTA, sponsored by New York Civic and held at the Museum of the City of New York. The panel was held just after Gov. David Paterson nominated Jay Walder to be chairman and CEO.

Early on, he offered some familiar criticisms:
The MTA is a state authority. State authorities are generally Soviet-style bureaucracies that are accountability to nobody. They are not part of the executive branch under the state constitution. They were created for two reasons: to excuse elected officials from the political responsibility for doing unpopular things like raising fares and to borrow money without the full faith and credit of the state behind them. We can discuss whether those are worthy outcomes.

For the last 20 years, whatever virtues they've had have essentially been lost to visible notice, as we've seen them be the vehicles for a set of bad decisions, corruption, and then strange decisions. The decision to put $4 billion in public money into Yankee Stadium was made by a state authority under the direction of the mayor. Now you can can like that or not like but the power of state authorities is enormous.


There's considerable debate on whether Yankee Stadium is $2 billion in public money, much less $4 billion.

Brodsky continued:
We took a stab at reform in 2006, when Governor Pataki signed a bill I authored, which made several reforms... But we made a mistake in that bill. We severed the board of the MTA from the CEO function. That was a mistake which we've now repaired. One of the things I think we need to consider, as the new CEO of the MTA apparently takes his position, is what are the fiduciary obligations--that is, the duty to the system--of the leadership of the MTA, as opposed to their duty to the people who appointed them, the mayor and the governor. That is a matter that I believe will be considered at some length in the confirmation process.

He said in early June, regarding Atlantic Yards, that the board had a fiduciary duty.

Regarding Atlantic Yards

A little later in his remarks, Brodsky brought up AY:
The fundamental reform we adopted in the fiscal package two months ago was to restore to the chairman of the board and the CEO a fiduciary duty to the system, rather than a political allegiance to the mayor and the governor. And that independence will be at the heart of whether Mr. Walder is able to succeed in bringing reform to the MTA.

Take the Seven line extension, take the West Side Yards, take Atlantic Yards. In all those cases, it seems to be me provable that, whether you like the projects or you don't--I'm not taking a position on the projects--that the MTA's fiduciary responsibility to the system and the riders was to maximize the value of the assets it was putting out. It could not do that in many of those cases.

That struck me as a violation of the fiduciary duty. But because I passed a law in 2006 that had a mistake in it, we had a CEO of the MTA who was not bound by the fiduciary duty. Now we can fix that. The law gives Mr. Walder a clear defense that, when the next time the Mayor says, "Go build me a subway line to nowhere." Whether he will use that will become, I think, the chief measure of his success or his failure.


What is to be done?

After the panel, I asked Brodsky if there was anything for his committee to do regarding the deal for the MTA's Vanderbilt Yard. He said he didn't think there was, but that Walder could look into it.

I didn't say so, but I suspect that Brodsky's counterpart on the Senate side, Bill Perkins, wouldn't mind some help in getting questions answered

Beyond that, Brodsky, who has examined the curious assessments for the Yankee Stadium site, produced to generate PILOTs (payments-in-lieu-of-taxes) needed to pay off construction bonds, could look into the same issue regarding the Atlantic Yards arena site.

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