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December 16, 2009
DDDB PRESS RELEASE: Bruce Ratner Has the MTA’s Money
Sweetheart Deal With Developer Is Large Part of MTA Budget Gap
New York, New York—Cutting the MTA student Metrocard?! You can blame Bruce Ratner's sweetheart deal.
The MTA board meets this morning to approve drastic service cuts because of an "unexpected" budget gap. How could that be, where did that shortfall come from?
In large part this gap is because the MTA expected to receive $100 million in cash by the end of this year from developer Bruce Ratner for rights to the Vanderbilt Yard—8 acres of the proposed 22-acre Atlantic Yards project. That is until the MTA, with Ratner over a barrel, approved a deal where the developer would only pay $20 million by the end of the year.
"Transit riders should recognize that the MTA cuts are in large part due to this sweeter, sweetheart deal the authority needlessly cut with Bruce Ratner this past summer. Both Governor Paterson and Mayor Bloomberg wanted the MTA to approve that deal, now paying negative dividends for riders," said Develop Don’t Destroy Brooklyn spokesman Daniel Goldstein. "Everyone has got their ideas of how to close the budget gap, by either cutting student cards or taking money earmarked for other purposes, but how about this: It is not too late for the Governor and Mayor to make the MTA strike a new deal with Ratner that requires him to pay what he committed to paying—$100 million at closing, rather than $20 million."
Some simple math explains how Ratner got a sweetheart deal while transit riders now get a lump of coal…
In 2005 the MTA appraised the 8-acre Vanderbilt Yards at $214.5 million. They then undertook a sham RFP process. Extell Development Company bid $150 million and Forest City Ratner (which wanted the Yards for its 22-acre Atlantic Yards project) bid $50 million. The MTA told Ratner that bid was too low and after six weeks of "negotiating" Ratner upped it to $100 million.
Ratner was then supposed to pay the MTA $100 million cash at closing. They didn't.
Fast forward to the summer of 2009. The MTA announces that it has "negotiated" a new deal with Ratner. Despite having Ratner over a barrel the MTA strikes a deal where Ratner pays only $20 million at closing. The rest would be paid over a 22-year period. The MTA and Ratner expected to close in 2009. But they haven't.
$100 million minus $20 million is $80 million. At minimum the MTA shortfall should be $80 million smaller. Of course had the MTA had a competitive bidding process for the Vanderbilt Yards there is a reasonable chance they'd have no shortfall this year.
The culmination of the "negotiation" with Ratner this past year was at the MTA Board meeting to approve the new lowball deal. The MTA did not seek any other bidders when they understood that Ratner was no longer willing to fulfill his financial commitments. They are being sued for that.
So why did they rush to screw transit riders? They had to help Ratner. MTA CFO Gary Dellaverson explained: "It relates to Forest City Ratner's desire to market the tax-exempt bonds. That's the primary driver of the timing."
Now, according to the NY Times, Dellaverson says he is "shocked." Shocked!
And that is the primary driver of the bulk of this shortfall. The math is simple.
Posted by eric at December 16, 2009 1:23 PM