Sunday, June 22, 2014

Before MTA Committee meets, Staff Summary positive toward Forest City's proposal to move ahead on platform work while pushing back permanent railyard

It looks routine. Tomorrow, the Metropolitan Transportation Authority's Long Island Rail Road Committee will discuss Forest City Ratner's proposal to move ahead on building of the platform needed for vertical development over the Vanderbilt Yard, while asking for 15 months' delay in the required completion of a permanent railyard.

A Staff Summary (below) provided to the committee looks favorably on the proposal: the platform work would be helpful, while the delay in the railyard is acceptable, because the permanent railyard was needed to support the East Side Access project bringing trains to Grand Central Statement, which is delayed:
This proposed amendment is in the MTA's interest, as progressing the construction of foundation work for the overbuild platform for the air space development, at the same time as the LlRR Permanent Yard is constructed, would eliminate significant future disruption to operations in the LlRR Permanent Yard after its completion. The extension of the construction completion deadline will not have a detrimental effect on LlRR's operation, as completion of the L1RR Permanent Yard was initially scheduled to coincide with the completion of the East Side Access project, which has been delayed, and in the meanwhile the LlRR Temporary Yard that FCR has provided will continue to suffice for all of LlRR's purposes. 
So I don't expect a lot of dissent, nor on Wednesday, June 25, when the MTA's full board should approve the plan. MTA Headquarters, 347 Madison Avenue (44th-45th Streets), 5th Floor Board Room, 10 am.

After all, the MTA is controlled by the governor and mayor, who support Atlantic Yards.

The plan and the pitfalls

The railyard is used to store and service LIRR trains. Previously, it operated in the western segment of the Vanderbilt Yard, now part of the Barclays Center. A temporary railyard was built to the east, presaging a larger, modernized yard.

As I wrote 4/29/14, the permanent railyard, with capacity for 56 cars (though it was supposed to be bigger), is supposed to be finished by 9/1/16. Forest City twice got the MTA to push back the deadline to formally start the permanent railyard and post the completion guaranty for the work.

Under Forest City's new proposal, the current deadline to post that completion guarantee, 6/30/14, would remain. But Forest City wants an extension of the deadline to finish the permanent year to 12/1/17.

The public material leaves some fuzziness. As I wrote, Forest City Ratner's letter about the plan does not estimate exactly how much time would be saved, how much of the necessary work would be completed, or when the platform would be built.

Forest City has until 2025 to start the platform, which is needed to construct six towers over the below-grade railyard, the clearest example of the blight the project was supposed to remove. There's no timetable to build the platform, though the proposed work is described as accelerating progress on it.

Also, I'd suggest, an agreement by the MTA on Forest City's plan to proceed with partial foundation work would make it more difficult to unwind the deal should Forest City and its joint venture partner, the Chinese government-owned Greenland Group, not meet promised milestones.

Similarly, partial progress could give the joint venture leverage to gain future extensions or concessions in renegotiations. Beyond the deadline for the permanent yard, the Vanderbilt Yard deal, announced in 2005, was subject to a major renegotiation in 2009 in Forest City Ratner's favor.

A new Tech Memo from ESD

According to the MTA Staff Summary, lead agency Empire State Development (ESD) has completed a Technical Memorandum, which concludes that the extension of the permanent yard completion date will have no significant environmental impact not previously addressed.

That document is not yet public, but I will try to get a copy.

MTA Staff Summary

According to the Staff Summary (below)
PURPOSE
To request authorization for the Chairman and/or his designee( s) to enter into amended project agreement( s) ( 1) permitting the developer of the Atlantic Yards overbuild project to commence early construction of overbuild platform foundations, simultaneously with its construction of the LIRR permanent yard facilities, and (2) in consideration of the expanded scope of work, and upon the posting of an additional guaranty, extending the completion deadline for the LIRR permanent yard from September 1, 2016 until December 1, 2017,
BACKGROUND
In June, 2009, the Board authorized the Chairman and/or Executive Director and their designees to enter into contracts with entities associated with the Forest City Ratner Companies ("FCR") which, among other things: (1) authorized the sale to FCR of a fee interest in property that did not have a continued transportation use, and a fee interest in the air space above a limiting plane over property that did have a continued transportation use; (2) required construction by FCR for LIRR of first a temporary rail yard (the "LIRR Temporary Yard") and then a permanent rail yard ("LIRR Permanent Yard"),
to replace the then existing yard, which was to be displaced by an arena; (3) required payment by FCR of $20 million in cash for the arena parcel; (4) required payment by FCR of $80 million for the air rights parcel, with payments to be made in specified installments; (5) required construction by FCR of a new subway station entrance for NYCT; (6) required FCR to provide the MTA at contract signing with an $86 million letter of credit to secure construction of the LIRR Permanent Yard (the "Letter of Credit"); and (7) required FCR to supplement such letter of credit when FCR commenced work on the
LIRR Permanent Yard with a completion guaranty from FCR's parent company Forest City Enterprises (the "Parental Guaranty") . In December, 2006, the Board adopted a resolution adopting findings pursuant to the State Environmental Quality Review Act ("SEQRA"); Empire State Development Corp. ("ESD") was the lead agency with respect to SEQRA.
Pursuant to the Board authorization, the execution and delivery of the relevant agreements occurred in March, 2010. Pursuant to such agreements, FCR posted the Letter of Credit, has paid the MTA the $20 million purchase price for the arena site, and has been making the required payments with respect to the air rights over LIRR Permanent Yard. It has also completed the LIRR Temporary Yard and the new NYCT subway station entrance, and is otherwise substantially in compliance with the requirements of the project agreements. FCR recently partnered with a Chinese investor, the Greenland Group. 
Although (as previously reported to the Board) FCR has been permitted to defer posting the aforementioned parental guaranty until June 30, 2014, FCR has performed substantial excavation and other preparatory work in order to ensure that the LlRR Permanent Yard could be completed by June, 2016, as the agreements currently require. And, as required, FCR is prepared in all events to post such parental guaranty by such deadline. However, FCR is currently requesting an amendment to the relevant agreements, which would: (1) authorize it to commence early foundation work for the platform to be constructed over the L1RR Permanent Yard during the construction of the LlRR Permanent Yard; and (2) in recognition of such increased scope of work, extend the construction completion deadline for the LlRR Permanent Yard until December 1, 2017. Such amendment would be contingent upon the Parental Guaranty being modified to include completion of such foundations.

This proposed amendment is in the MTA's interest, as progressing the construction of foundation work for the overbuild platform for the air space development, at the same time as the LlRR Permanent Yard is constructed, would eliminate significant future disruption to operations in the LlRR Permanent Yard after its completion. The extension of the construction completion deadline will not have a detrimental effect on LlRR's operations, as completion of the L1RR Permanent Yard was initially scheduled to coincide with the completion of the East Side Access project, which has been delayed, and in the meanwhile the LlRR Temporary Yard that FCR has provided will continue to suffice for all of LlRR's purposes. Moreover, as part of its environmental review of the overall Atlantic Yards Project, lead agency ESD has completed a Technical Memorandum, which concludes that the extension of the LlRR Permanent Yard completion date will have no Significant environmental impact not previously addressed; that memorandum has been provided to the Board under separate cover.

RECOMMENDATION
That the Board approve the attached resolution, authorizing the Chairman and/or his designees to take any and all actions on behalf of the MTA and LlRR, including entering into and executing any and all agreements, amendments, and other documents, and to perform such further acts as are necessary, desirable or convenient, in order to effectuate the above­ described transactions.
Following that is a third page containing a resolution authorizing an amended agreement.

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