Tuesday, October 06, 2009

The ESDC still hasn't shared the KPMG report; on video, lawyer explains how AY "timeline" may be longer than ten-year "timetable"

A dozen business days after September 17, when the Empire State Development Corporation (ESDC) approved the 2009 Modified General Project Plan, the ESDC has still not released the KPMG report that provided the basis that a ten-year timetable for the project is "not unreasonable."

In a brief press conference after the board meeting, as shown in the video below, ESDC Senior Counsel Steve Matlin said that the ESDC would look at the issue of releasing the report "in the next few days."

Also in the interview, Matlin said he could not describe potential penalties facing Forest City Ratner if it didn't meet the project timetable because the issue was still under negotiation.

And he acknowledged a tension between a project timeline would last well beyond ten years, but an official timetable of a decade "that we expect to achieve, we want to achieve."

The official word

According to a memo to the ESDC board:
Corporation staff has regularly reviewed the financial projections for the project to ensure that the Project remains viable as economic conditions change. In addition, the Corporation has retained the services of KPMG to perform a limited up-date of the analysis that it performed in 2006 based on the prior iteration of the Modified General Project Plan. Corporation staff and KPMG believe that the Project remains viable and that the project schedule is achievable based on existing and projected economic conditions.

The interview




The video begins with ESDC Senior Counsel Steve Matlin explaining to WNYC's Matthew Schuerman that "We think ten years is a reasonable period."

I and the Daily News's Erin Durkin (whose story never ran) try to follow up, and ESDC spokesman Warner Johnston tries to keep some order.

"Can you explain, did the KPMG report respond specifically to the Joshua Kahr report?" I asked. (The Kahr report, submitted by the Council of Brooklyn Neighborhoods (CBN), argued that the ten-year timetable was unrealistic.)

"The KPMG report was commissioned before we--certainly before I saw the Kahr report," Matlin said. "We did share it with KPMG. To what extent they looked at it and--they certainly didn't respond to it directly, but I'm sure they looked at it."

He gave a verbal shrug: "Different opinions."

"Can we get a copy of that KPMG report?" I asked.

"The KPMG report was provided to the directors on a privileged and confidential basis and, quite frankly, we're looking at now whether we can release the document," Matlin responded. "We may have to redact a portion. There could be some proprietary information. So we haven't reached that decision, but we're going to look at it in the next few days."

Timing questions

Durkin asked about penalties for not fulfilling the timeline for the first two buildings as well as Phase 2, the 11 towers east of Sixth Avenue.

"There are penalties," Matlin responded. "We're still negotiating. We don't have final lease agreements. There are still ongoing negotiations. So I'm not sure I want to state right here what those penalties are going to be. But we do have a general understanding of penalties and timeline."

Does that apply to all the buildings? (There were no penalties regarding Phase 2 in the September 2007 State Funding Agreement.)

"There is going to be a timeline for Phase 2," Matlin replied. "The timeline, which people have pointed out, is going to be well beyond ten years, but there are incentives for the developer to build out the project in a much more expeditious way. And that's why we think the ten years is doable. What people are having a problem understanding, which I can understand, is that there's the timetable that we expect to achieve, we want to achieve, and then there's a timetable for when remedies kick in. And the reason for that is, notwithstanding the wishes of ESDC and the wishes of Forest City, it may take longer. And we recognize that and they recognize that."

There may be incentives to build the project faster, and there are carrying costs. Then again, Forest City Ratner has 22 years to pay the Metropolitan Transportation Authority for the rest of the Vanderbilt Yard, at a generous interest rate.

So the only way to meet the ten-year timetable would be to pay off that mortgage, so to speak, well ahead of time.

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