IT looks like the Metropolitan Transportation Authority is moving in a “new direction” — just as Gov. Paterson demanded last month. At a meeting yesterday, the new MTA management sacrificed the interests of straphangers and the local economy — to support the politicians’ favorite “economic development” boondoggle, the Atlantic Yards development in Brooklyn.
Developer Bruce Ratner wants to renege on his deal with the MTA — and the MTA is going along with it.
Back in 2005, Ratner’s Forest City offered to pay the MTA $100 million up front for the MTA’s portion of the Atlantic Yards site — an extremely valuable tract of urban land. Now Forest City wants to pay the MTA only $20 million this year — and only if it can find buyers for its tax-exempt bonds for the multibillion-dollar project. It says it’ll pay the MTA the rest later — a lot later, over 20 years starting in 2012.
Ratner’s original proposal to build a stadium and an apartment and office complex came with promises of great jobs for minorities, affordable housing and a truckload of trendy architecture. That won the project the political support to get hundreds of millions of dollars’ worth of tax breaks (plus other subsidies).
But lots of those “public benefits” have vanished in recent months: The stadium lost its “starchitecture” features; the affordable housing and the office tower have disappeared.
And now the MTA is going to let Ratner get away with not even paying for the site for dec ades.
This is crazy. The MTA needs this cash now to invest in physical assets like subway cars and signal refurbishment; its budget for these areas already faces a huge cash shortfall.
Remember, the MTA is so cash-strapped that it had to beg the state for a permanent $2 billion-a-year bailout a couple of months back. Yet now, in effect, it’s proposing to lend money to a speculative developer at a 6.5 percent interest rate for decades.
That rate is laughable — market-rate financing is unavailable at even twice that rate.
And at the same time it’s getting into the construction-lending business, the MTA also intends to borrow to fund its operating budget. At the same finance meeting yesterday, the MTA proposed issuing $600 million in short-term debt for a few months until the bailout money comes through.
Yet the agency’s finances are still deteriorating: Ridership and fare revenues continue to fall. Why is it lending Forest City money it doesn’t have?
Ratner is breaking another important promise: He also undertook to build the MTA better rail yards that could increase ridership capacity. Now Forest City proposes a scaleback of more than 25 percent from what it first offered. That translates to tens of millions of dollars, at least, in lost value for public transit.
The developer and the MTA’s very flexible management team are using everyone’s favorite catch-all excuse: the bad economy.
But Forest City was supposed to have closed this deal years ago. Instead, its executives have imposed endless delays as they sought to get everyone else to take on the usual financial risks of a development project — the risk that the economy would sour, the risk that the project couldn’t raise money and so forth.
You can’t exactly blame Rat- ner’s company; it’s just trying to get everyone else to boost its profits and minimize its risks. But you should blame the MTA for going along.
The MTA should have flatly recommended yesterday that its board think of Forest City’s new proposal as yet more wasted time — and tell the company it’s got a month to come up with what it originally promised or the MTA would go out and find a better deal.
After five years of delay, the MTA instead wants its board to approve the giveaway plan tomorrow. The board should vote it down and start from square one in finding a responsible deal for its valuable land, as is its legal duty.
Yes, it’s hard to do a real-estate deal now. But the MTA can hardly do any worse. And the rail yards aren’t going anywhere.
Nicole Gelinas is a City Jour nal contributing editor. nicole@city-journal.org