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September 14, 2005

DDDb Press Release: The MTA Accepts Low-Ball Bid From Bruce Ratner

Ratner and MTA Rip Off Taxpayers With Deal Well Below Competitor Extell's Offer and Half the MTA's Appraised Value
Develop Don't Destroy Brooklyn Planning Lawsuits

NEW YORK, NY—At a special meeting today, the MTA board approved the disposition of 8.5-acres of prime Brooklyn real estate to the lower bidder, Forest City Ratner (FCR). The Ratner offer is less than half the MTA's appraisal of $214.5 million and well below the $150 million cash offer made in July by Extell Development Company.

"Any way you look at it, there is no justification for today's MTA decision to hand over 8.5 acres of valuable property for Bruce Ratner's low-ball offer. The MTA's so-called bidding process has been a charade from the start. The MTA and Ratner have treated taxpayers with disdain, and have ignored the desires of the community," said Develop Don't Destroy Brooklyn (DDDB) spokesman Daniel Goldstein. "We know that Ratner stands to make a huge profit on his project, something on the order of $1 billion, yet he is determined to rip off the straphangers of New York City by nickel-and-diming them. He refuses to come even close to the MTA's appraised price on this valuable piece of property, and the MTA is willing to abet this. Why isn't the MTA demanding full market value?"

At the May 4, 2004 City Council Economic Development Committee hearing, FCR Executive Vice President Jim Stuckey made a promise that the company is apparently unwilling to meet: "What I will say to you is that for the land, the public land, the MTA land, is that, what we have agreed to is that we will lease or buy that land at the fair market value… by whatever independent process that they normally use."

The sole MTA "no" vote was cast by board member Mitchell Pally, Suffolk County's appointee, who excoriated chairman Kalikow for not getting anywhere near fair market value for the railyard.

"Apparently there is only one MTA board member looking out for transit riders and willing to speak the truth, and that is Mr. Pally. The MTA has never truly wanted an open bidding process or sought fair market value. After holding a closed and rigged bidding process with a ludicrous RFP response timeframe–which was barely advertised–granting special treatment to Ratner, relegating competitors to the sidelines and refusing to ever meet with Extell, the MTA has once again agreed to the lowest offer for their property," said Goldstein. "Its time for our public officials, agencies and our public-interest organizations, many of whom sued the MTA for taking the low bid on the West Side railyards, to raise their voices and consider suing to protect the public from the MTA's mismanagement and Ratner's continued feeding at the public trough."

Regardless of the MTA and FCR agreement today, their deal would not close for at least six months, which is the earliest the State-mandated environmental review process would reach a conclusion. The MTA risks a repeat of the West Side Hudson Yards debacle—where they never see their deal close—as Ratner's project will face legal challenges, including a vigorous challenge to the State's use of eminent domain—which could take many years—as well as legislation that could scuttle the entire project.

Additionally, the MTA's decision to enter into a contract with FCRC is also a violation of the State Environmental Quality Review Act (SEQRA). The contracting action pre-determines the outcome of the environmental review and makes the legally mandated environmental analysis a hollow exercise. The MTA's action, together with the February Memorandum of Understanding between ESDC and FCR, demonstrates that both agencies have pre-judged the Ratner project and are prepared to approve it without changes, regardless of the adverse environmental impacts disclosed through the environmental review. The State's review process requires that agencies incorporate the potential environmental impacts of their actions as early in the process as possible to avoid situations exactly like this where the momentum of a project overwhelms an objective analysis of the environmental impacts. Rather than putting the consideration of environmental impacts at the beginning of the process, the MTA has put those considerations at the end of the process

The MTA's action for the Vanderbilt Yards is in stark contrast to the procedure used for the West Side Yards/Jets Stadium project. There, the MTA's review and acceptance of proposals came after the SEQRA review was completed, not before. In that case MTA arguably had the benefit of the environmental impact statement to guide its decision making. Here the decision-making came first and the environmental review will come later.

"DDDB will not passively accept this blatant disregard of New York's most important environmental law. As the review of this project moves into the next stage, DDDB will insist that the Environmental Review Statement (EIS) include a detailed discussion of the Extell proposal as a viable alternative," Goldstein stated. "DDDB is confident that an honest, objective review will demonstrate that the Extell plan presents an environmentally sound proposal that also meets the needs of providing affordable housing, jobs, an increase in the tax base and superior financial benefits to the MTA."

Goldstein added, "Ratner wants the taxpayers to pay and pay and pay, for a meager return for the public and a mega return for his real estate firm. "The $100 million low-ball deal comes one week after the City's Independent Budget Office (IBO) released an incomplete and exaggerated report, based on highly questionable assumptions, projecting a miniscule surplus, less than 1% of the public investment, for New York City from Ratner's arena.

The IBO study fails to consider additional "extraordinary infrastructure" costs, covered by taxpayers, as identified in the Memorandum of Understanding between the City, State and FCR. The FCR bid details these costs to be at least $163 million. Notably, the IBO refused to estimate revenues for the much larger development of 17 towers associated with the arena, citing "methodological limitations." The IBO report also relies on Ratner's guess that 50% of Nets' game tickets will go to New Jersey fans. This assumption is grossly exaggerated. Said Goldstein, "the translation is that the projections of public revenue in reports written by Ratner's paid consultant, Andrew Zimbalist, are purely speculative. That means political leaders backing Ratner's plan, such as Mayor Bloomberg and Governor Pataki, have based their support on biased speculation by Ratner's paid consultant and have failed to protect the public trust."

Posted by lumi at September 14, 2005 7:52 PM