Sunday, October 11, 2009

Public authority reform still stalled; could the Vanderbilt Yard deal with Forest City Ratner have gone through had this bill been enacted?

Remember public authority reform?

The state legislature, led by Assemblyman Richard Brodsky and State Senator Bill Perkins, in July passed a bill that would require board members of public authorities (like the Empire State Development Corporation and the Metropolitan Transportation Authority) to vote according to their fiduciary duty, not the elected official who appointed them; establish a new budget office for the authorities, prohibit authorities from selling land below market value in most cases; and require the state controller to review major authority contracts.

Gov. David Paterson never signed the bill, given that Mayor Mike Bloomberg and others complained that it would tie their hands. (Democratic mayoral candidate Bill Thompson supports the bill.)

Resolution coming?

On October 2, Daily News columnist Juan Gonzalez reported:
After weeks of secret negotiations, Gov. Paterson and the Legislature are nearing a deal on a law to drastically reform how some 700 public authorities operate across the state.

Maybe not so fast. The Bond Buyer reported October 5 that the deal was still stalled, with the Dormitory Authority of the State of New York adding its objections. Also, the New York State Economic Development Council argues that the bill could delay projects.

Below-market sales

The Bond Buyer reported on one crucial sticking point:
[Bloomberg's director of legislative affairs Michelle] Goldstein said that the ability to dispose of property for less than market value provides “crucial flexibility that is necessary to undertake economic development projects and other community initiatives.” Current rules already require transparency, she said.

Requiring that property be sold or leased at fair market values allows the public to “know the real value of the subsidy,” Brodsky said. Instead of disposing of property at a discount to stimulate economic development, authorities would still be able to provide an equivalent grant, he said.

“There’s no reason in the world why an entity which is in the business of doing economic development deals could not take the proceeds of a fair-market sale and return it to the party involved in a simultaneous transfer,” Brodsky said.


With AY, the MTA made the biggest sacrifice

Brodsky's explanation seems logical, but it gets more complicated when the entity doing the economic development deal is not the entity that's making the sacrifice.

Remember, the MTA in September 2005 decided to sell development rights to the Vanderbilt Yard to Forest City Ratner at below-market rates --and before the MTA in June 2009 revised the deal to require a lower upfront payment and a 22-year payment schedule for the rest.

In both cases it was less of a boon for the MTA than a boon for the mayor, governor, and ESDC. In other words, the MTA's constituency--straphangers--bore a disproportionate impact. Had the fiduciary duty kicked in, the board members might have had cause for pause.

No comments:

Post a Comment