Big Picture Questions: Does MTA Chairman Jay Walder Comprehend Atlantic Yards Link to MTA Cutbacks?

Wednesday morning we were among those who addressed the Metropolitan Transportation Authority meeting just before its board approved, in the words of the New York Times, “a punishing slate of service cuts on Wednesday that would amount to the most significant erosion of New York City’s transit system since its recovery from the ruinous days of the 1980s.” (See: M.T.A. Approves Big Service Cuts in Mass Transit, by Michael M. Grynbaum, December 16, 2009.)

Were We Really Heard by the MTA’s Chair?

Our message was that the MTA’s giveaways to the proposed Atlantic Yards Forest City Ratner mega-monopoly are probably the most prominent example of why the MTA is was having to vote to implement these cutbacks. After we and the rest of the public spoke, MTA Chairman and Chief Executive Jay Walder made a statement that sounded uncannily as if he had listened to and taken to heart what we and others said that morning about the drain on the budget due to Atlantic Yards. Maybe it sounded that way until you remember how politicians and political appointees with an idée fixe about the Transaction Fixée (The Wired Deal) can mouth all the words of good, responsible government without meaning any of them.

Reasons MTA Deficit Is Attributable to and More than Covered by Public Expenditures on Atlantic Yards

Diverting financial resources into Atlantic Yards is making the MTA budget cuts necessary in a number of ways.

1. Wasteful Mind Set. First, the support for Atlantic Yards establishes a strange mind set for wasting public dollars. As we pointed out, the arena for which state agencies now propose to issue bonds will be a net loss to the public. The NYC Independent Budget Office has conservatively calculated that net loss at $220 million dollars. With changing events the exact figure for the public’s net loss could be tweaked a little bit but is apparently growing. The portion of the taxpayer-supported bonds that were initially supposed to be issued to finance the arena are in a slightly lower amount than originally projected, which will reduce the figure somewhat, but New York City is mysteriously suddenly ponying up another $31 million dollars which increases the net loss. Further, it turns out that an additional $400 million in tax-exempt bonds were secretly authorized in violation of the state’s open meeting law. Unless that issuance is prevented it will really drive up the net loss to the public, to about $620 million. We are not talking about how much the project will cost the public; we are only talking about the net loss it will be after much greater public expenditures that will, all told, come to $2-$3 billion. That the arena will be a net loss to the public is not the same thing as saying that, once built it would be profitable for the public to tear it down again but it is pretty close to that. In this case the arena is likely to be such a drain that it might well be worthwhile to do so.

2. Hundreds of Millions Lost to MTA. Atlantic Yards represents the MTA disposing of assets and opportunities worth hundreds of millions of dollars that could be used to close its budget gap.

3. State Budget Cuts to the MTA. The emergence of the MTA’s deficit in recent weeks is partly because of $143 million in state cuts. The state (in addition to what the MTA is spending on Atlantic Yards) is misdirecting far more than this $143 million state cutback amount into Atlantic Yards.

4. City Funds Not Available. The MTA is making the argument that part of what it is cutting back, free Metrocards for New York City highschool students, are expenses that the MTA should not bear and that others should bear instead. The city (which mysteriously just came up with another $31 million for Atlantic Yards) easily has more than enough money that it is misapplying to Atlantic Yards to make this debate academic if those funds were properly redirected. Among other things, the city is forgoing a huge amount in real property taxes on the arena and is putting in more than a hundred million additional dollars into the project in direct expenditures.

Others Making the Same Point About Atlantic Yards

We were not alone in pointing out that the MTA’s deficit could not be looked at without looking at Atlantic Yards as a cause. Lucy Koteen made similar point and many signs were being held in the audience of attendees saying things like: “To the MTA: Ratner’s Got Your Money.” City Council Member Tish James spoke, making much the same point and issued a press release to this effect as well (See: December 16, 2009, Tish James Press Release: Save student Metrocard program, crucial service, and MTA jobs — Cancel the Atlantic Yards sweetheart deal for Forest City Ratner!) From that press release:

"Cancel the sweetheart deal for Forest City Ratner," said Council Member James. "Forest City Ratner should pay the $100 million owed now for the purchase of the Vanderbilt Yards. I also question why Forest City Ratner is not being made to pay the millions of dollars owed for the naming-rights deal upfront? And, had the MTA accepted a higher bidder, they would have received their funds upfront and their current budgetary gap could have been cut almost in half."

Noticing New York’s Big Picture Points on Wednesday

Wednesday morning we only had two minutes to speak. We did our best to make some of our above stated points succinctly and so say a bit more in addition.

We started out by telling the MTA board that they didn’t “get the big picture” and to assist them in getting that big picture we brought some BIG posters which we held up as we spoke. See the picture below (click to enlarge).
MTA’s Sidestepping of Bids (One Story for the Press with Another for the Courts)

We also focused on the way that the MTA didn’t obtain bids from Forest City Ratner before it gave away its property. It didn’t obtain a meaningful bid in the very first instance and this summer when presented with another meaningful opportunity and every reason to do so the MTA again sidestepped getting any bid.

We pointed out that the last time we had been in the room the MTA had made a point of having its representatives tell the waiting press outside that it was not getting bids to compete with Ratner because there were no other potential bidders. We pointed out that it was clear from the record of its own board meeting that it had not even considered doing so.

They really couldn’t get any other bids?, we asked. We pointed out that Willets Point just got 29 responses to its Request for Qualifications from developers and that Coney Island just attracted 50 interested bidders. We told the board that members it was clear that the reason they didn’t even try to get other bids was that they were treating Atlantic Yards as rigged deal, the point of which was to give a handout out to FRC.

What were MTA representatives telling the press last June about how they couldn’t find other bidders to compete against Ratner? Here is a WNYC radio report from Monday June 22, 2009 after the MTA’s Finance Committee meeting:

The developer for the Atlantic Yards project has scaled back its offer for an MTA rail yard in Brooklyn. Instead of paying 100 million dollars at closing, Forest City Ratner would give the MTA just 20 million dollars up front, then pay the rest in installments, with interest, over the next 22 years. MTA chief financial officer Gary Dellaverson says the MTA should take the offer because it would be risky to find a new buyer.

DELLAVERSON: I have no idea when it would be more propitious than now to engage in a second transaction on this property.

The replacement rail yard that Forest City Ratner would build for the MTA would also cost less, with 25 percent less capacity than the original design. The full MTA board could vote on the new offer when it meets this Wednesday.

Here, two days later is another WNYC report (available on line) where Mayor Bloomberg’s representative on the board. Jeff Kay, makes essentially the same misrepresentation that there were no other bidders available. The report also notes that the MTA rejected a better offer it unexpectedly received from Develop Don’t Destroy Brooklyn:

The MTA board overwhelmingly approved a new deal for the Atlantic Yards development in Brooklyn by a 10 to 2 vote.

REPORTER: Some board members expressed regret that they were accepting less cash up front and a less valuable rail yard than originally proposed in 2005. But Jeff Kay, who represents Mayor Bloomberg on the board, said it was better than nothing.

KAY: There is no other market, no one else has come forward with a credible proposal at this time.

REPORTER: At the last minute, opponents of the Atlantic Yards project offered to pay $120 million over a period of 12 years for the rail yards. Developer Bruce Ratner is paying $100 million over 21 years under the new deal.

Board members did not appear to take the counter-offer seriously and the board chairman refused to comment when asked about it.

(See: News: MTA Approves New Deal for Atlantic Yards, WNYC Newsroom, June 24, 2009.)

The MTA couldn’t find interested bidders to bid against Ratner? The developers we know are interested.

The MTA was subsequently sued by community groups and elected representatives for not seeking other bids in violation of the Public Authorities Accountability Act. Interestingly, when the MTA went to court to defend themselves, being unable to find other bidders for the site was not exactly the story they told to the court. The story they told they told the court was more about how the MTA, the city and the state had gotten so deeply involved in pushing subsidies to Forest City Ratner without a contract that bidding the property out to other bidders would put the public in jeopardy (rather than, as would more truthfully be the case, putting the financially weak Forest City Ratner in jeopardy). From Atlantic Yards Report:

Forest City Ratner had begun significant work on the Vanderbilt Yard under a license agreement. The city and state had contributed well over $200 million in subsidies, part of a $305 million direct allotment. And FCR had bought most but not all of the land needed for the project.

The MTA said that a new appraisal would not only have "seriously jeopardized" its efforts to maximize its return regarding the disposition of Vanderbilt Yard property rights, but also the costs associated with track relocation and platform construction.

But the latter is because FCR was already working on it.

As Forest City said in legal papers, "ESDC and FCRC already have achieved substantial progress in implementing the Project, and the public would not be served by opening the Project to new bidding."

(See: Wednesday, December 09, 2009, As challenge to MTA deal awaits a judge, did Forest City Ratner really have the MTA over a barrel, or was it the other way around?)

Forest City Ratner’s rights have now been restructured to give it an option to do only as much of the megadevelopment as it ultimately decides it wants to. That restructuring is, of course, absolutely inconsistent with the idea that other developers can’t replace Ratner.

So there’s one story for the public and the press, another for the courts. Finally there is real story that is really true and the real story is that it is a rigged deal. Nevertheless, in the first legal go ‘round on the litigation about the bidding, the court (sort of) bought the MTA’s version of events. (See: Thursday, December 17, 2009, Judge, deferring to MTA version of the case, dismisses lawsuit challenging revision of Vanderbilt Yard deal.) That is because whatever stories public officials tell, courts have been deferring to them and thereby promoting rigged deals and government misconduct.

The same thing was true in the eminent domain abuse case brought against the Atlantic Yards project. The public authorities involved told the public one story (Atlantic Yards was an “economic development” project) and told the courts another (that it was ostensibly to remove “blight”) while the real truth was again something quite different, that a wired no-bid deal was being handed to Ratner to eliminating the competition from other developers in his back yard.

MTA Can Stop the Atlantic Yards Deal and Get Back on Track

We told the MTA that this was a deal that they could easily stop and that they could thereby recoup for proper use the hundreds of millions of dollars in misdirected moneys. All it would take is for the MTA to settle the lawsuit brought against it by the coalition of community groups and elected representatives and then properly bid out its property to multiple developers.

Investigation Needed

We told the MTA that this matter needs to be investigated and told them we were asking Attorney General Andrew Cuomo and State Comptroller Thomas DiNapoli to do so. (See: Sunday, December 13, 2009, To Attorney General Andrew Cuomo and State Comptroller Thomas DiNapoli: Investigate and Halt Issuance of Arena Bonds.)

More of the Big Picture

We said more, which we will get back to. Had we had more time we also would have said that the MTA cutbacks must be looked at in terms of big-picture city development policy.

These cutbacks to lower income neighborhoods are equivalent to a form of affordable housing cutback. Here we are cutting back on transportation to areas where there is affordable housing (and where perhaps more could be built). At the same time we are diverting MTA revenues into the net-loss-to the-public Nets arena and luxury housing developments like Hudson Yards and Atlantic Yards. Atlantic Yards represents an unfair transfer of wealth to an already wealthy developer at the expense of those less privileged. (See: Tuesday, December 15, 2009, Russianoff on MTA land sales: "they decided that it was a higher value to help the mayor and the governor".)

MTA Chairman Walder’s Statement: Uncannily As If He Heard Us
Here is what Chairman Walder said after listening to what the public speakers had to say. See if it doesn’t sound exactly like the ideas we have been expressing. (We were able to compile what Chairman Walder said from several NY1 reports and the New York Times. Eventually his entire statement should be available when the MTA posts its video archive of the meeting on its site.)

Can we really say that the money that is sent to the MTA, all the taxpayer money that comes to the MTA is well spent? Are we in a position to be able to say that? Because if we are going to be in an environment where we are talking about truly painful things, in which we are doing things that hurt people’s lives and well-being then we need to be able to say that and, unfortunately, I’m not sure that we can.

* *

In the two months that I’ve been here, it’s apparent to me that we don’t operate in a way that ensures that every taxpayer dollar that we receive is being used as effectively as possible . . .

We need to rethink every aspect of our operation. We need to permanently reduce the cost of what we are doing. In short, we need to take the place apart. Now I know that this is hard, but in the economic time this is what businesses all across the state are doing. They can’t afford to fail when they do and I don’t think we can afford to fail when we do it.

Why We Fear Chairman Walder Wasn’t Really Listening: Dysfunctional New York

As we said, Chairman Walder’s remarks sound like a heartening recognition of what we were saying. The reason why we fear it means nothing more than political theater is because our politicians are very adept at mouthing the right words about good government while doing exactly the opposite. And in fact, this is one of the points we made Wednesday morning at the MTA board meeting, holding up our poster with the heading “Dysfunctional New York.” (We have made this point before in more detail):

• May 20th: Bloomberg said he was turning off the spigot for Atlantic Yards. May 27th: It was revealed that Bloomberg and his representatives on the MTA board were giving Forest City Ratner an Atlantic Yards package worth more than $180 million in additional no-bid subsidies from the MTA. Last Week: Bloomberg was saying to the press, "I don't know why anybody is surprised at what is happening to the MTA," . . . "It's a piggy bank that keeps getting raided.”

• Last week Governor Paterson was telling us that the state had only $3 million in cash on hand and that the legislature needed to act because dire, drastic cuts were in store. How can Governor Paterson expect legislators to take him seriously about legislative branch-controlled spending when he has refused to do anything about Atlantic Yards, which is the premier example of executive branch-controlled pork barrel spending.

Therefore, why shouldn’t we expect the same thing from Chairman Walder, the saying of one thing while meaning something else entirely.

In Dysfunctional New York Others Also Ignore the Obvious Facts
In dysfunctional New York, Chairman Walder is not the only one with deceptive rhetoric we need to navigate around to make sense of the world. City Council Speaker Christine Quinn was present at the MTA board meeting to speak out against the cuts. Unfortunately Speaker Quinn was not present this summer to protest the MTA’s giveaways to Forest City Ratner. It was to be expected: She rarely challenges Bloomberg or his giveaways to the real estate industry. Ms. Quinn has never taken the opportunity to criticize Atlantic Yards and she has frequently supported the kind of eminent domain abuse occurring in connection with the Atlantic Yards mega-monopoly, the Columbia expansion taking over West Harlem and the wholesale eviction of the Willets Point neighborhood.

Similarly, the Working Families Party, closely connected* with ACORN, has been sending out e-mails urging protest of the MTA cuts. (Sample quote: “Even Ebenezer Scrooge would cringe. But the real problem isn't just the MTA - it's Albany.”) But the WFP hasn’t taken a position against Atlantic Yards despite its drain on the city, state and MTA budgets. Everyone believes the reason that WPF hasn’t is that the perpetually self-interested ACORN has essentially been bought and paid for by Forest City Ratner.

(*See the multi-part City Hall “All in the Family” series: Part 1, Part2, Part3, Part 4. and Part 5.)

Of course, we can always hope Chairman Walder will live up to his words to “rethink every aspect” of the MTA’s “operation” “take the place apart” and make sure that “that the money that is sent to the MTA, all the taxpayer money that comes to the MTA is well spent” so that “every taxpayer dollar that we receive is being used as effectively as possible.”

Mr. Walder is yet another of the public officials who have the power and responsibility to kill Atlantic Yards. Let’s see if one of those public officials takes that responsibility seriously and acts accordingly.

ADDENDUM: (Added December 19, 2009) We can’t resist adding this one new link to our post. The MTA says it couldn’t get any other bids? And the economic downturn was a factor? Here via Atlantic Yards Report by way of City Hall News are hot-off-the-presses quotes from City Hall News Seth Pinsky, president of the New York City Economic Development Corporation (NYC EDC) (emphasis supplied):

. . . in recent months, we at the New York City Economic Development Corporation have become aware of a secondary benefit of our new-found market position. Specifically, we have begun to see a rise in the number of bids—and bidders—chasing the $2.5 billion in capital projects that we plan to manage over the next five years. . . . . this is also great news for taxpayers, because increased competition for bids almost always means better rates for the public. Over the long run this will result in projects completed more quickly and more efficiently.

(For more, see: Saturday, December 19, 2009, NYC EDC's Pinsky: "increased competition for bids almost always means better rates for the public".)

One more thing about Mr. Pinsky’s insights: We told the MTA board exactly that back in June reprising of our comments before ESDC.