Friday, August 21, 2009

What if the public authorities reform bill had passed before the MTA revised the Vanderbilt Yard deal?

Given that Atlantic Yards is both a poster child for the reform of public authorities as well as the great unmentionable, it's worth pausing to consider how the reform bill might have affected the project had it passed months ago.

Short answer: it would've made Mayor Mike Bloomberg sweat as he spent actual city money on the project.

Remember, the bill has passed the state legislature but had provoked opposition from Bloomberg, and thus awaits revision or veto at the hands of Gov. David Paterson.

The mayor particularly objects to a provision that requires public land to be sold at market rates, thus hampering the city and other jurisdictions from pursuing targeted projects. The rebuttal is that the deal could be done at market value, and the city, should it want to push for such things as affordable housing, could then give the developer a grant.

The Vanderbilt Yard deal

In June, we learned how the MTA, following the lead of Paterson and (especially) Bloomberg, agreed to revise the deal for the Vanderbilt Yard with Forest City Ratner. Instead of paying the $100 million promised for the 8.5-acre railyard, FCR would pay $20 million for the parcel it needs for the arena block, less than three acres, and pay the rest of the $80 million over 22 years at a generous 6.5% interest rate.

Also, the developer would save more than $100 million, given that the MTA agreed to a smaller, not larger, replacement railyard. The temporary railyard would linger longer.

All told, Forest City Ratner would save well over $100 million and the MTA would be deprived of $80 million it needed for its capital plan, which faces huge deficits.

Moreover, by accepting a smaller railyard and a longer-lasting temporary yard, the MTA would lose a significant amount of value--more than $100 million--that could be represented by improved service.

If reform had been in place

So, what if the board members had a strongly enforceable fiduciary duty--as opposed to the weaker one imposed by the MTA bailout bill--and felt compelled not to budge from the original $100 million deal, which itself was a compromise?

(Remember, the land was appraised at $214.5 million with the cost of a replacement railyard factored in, and rival Extell bid $150 million, though it was not allowed to flesh out its bid. Forest City argued that the value of its bid was much larger than the appraisal, though it's claims were questionable.)

Mayor Bloomberg, who wants the project to go forward--because of his belief in megaprojects, the desire to cut a ribbon, love for pro sports, coziness with the real estate industry?--would've had to spend some political capital and actual capital.

He could have done so. After all, he's the guy who put an additional $105 million in city funds into the project in 2007. The City Council doesn't have a line item veto.

Bloomberg coming clean

But Bloomberg would've had to have been more open in finding this new money--at least $100 million. He could have cut library hours. He could have continued to cut the starting salaries of cops. He could've closed health centers here and there.

Whatever he did, though, he would've had to tell us, and done so in the face of Independent Budget Office testimony--at the May 29 state Senate oversight hearing--that the arena was a money-loser for the city.

He would've had to confront his statement in May that no more city subsidies were available. And elected officials would've quoted Bruce Ratner, who told the Brooklyn Paper that "We don't need anything more."

On June 24, Gene Russianoff of the Straphangers Campaign told the MTA board, "“I think a rush to judgment here will further undermine the public’s faith in your credibility."

"I’m here to discuss your duty not to squander your assets," said Assemblyman Jim Brennan.

The implication was that the board was making a decision but burying the impact.

In city government, a larger number of officials would have been able to point to the cost of the deal and some would have had the independence to criticize it for its impact on other services.

Forest City Ratner still might have gotten what it wanted. But the political cost to the mayor would have been much, much higher. Still, isn't he supposed to take the heat, not the unelected MTA board members?

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