The value engineering continues.
That was the message out of today’s MTA finance committee hearing, at which a new agreement for the purchase of the Vanderbilt rail yards was announced. With the Nets arena cut down to size, the rail yards beneath Bruce Ratner’s Atlantic Yards project will also shrink from nine tracks to seven. Also, as previously expected, the developer will pay only $20 million upfront for the rights to build the arena, with the remaining portion of the $100 million deal being paid out over the next 22 years.
The committee took no action on the new arrangement, which critics are already calling another sweetheart deal for Forest City Ratner, waiting instead for a new General Project Plan from the Empire State Development Corporation, which is due out tomorrow. The committee and full board is then expected to vote on the new agreement on Wednesday, though given the tough questions asked by committee members at today’s hearing, it could be a close call. Still, in a staff report prepared for the committee, a favorable vote was recommended.
Following testimony from 18 speakers, split roughly between opponents from the neighborhood and advocacy groups and supporters from the Carpenters trade union and BUILD, MTA chief financial officer Gary Dellaverson outlined the new deal as revised from one initially approved in 2005. “We did not complete these discussions until yesterday,” he noted, as a means of apologizing for the lack of a prior briefing to the committee. “Today there will be no vote. Everything we’re having right now is a conversation.”
In addition to the upfront payment, the new deal for the remaining six development plots to the east of the arena includes four annual payments of $2 million beginning on June 1, 2012, followed by 15 $11 million payments. The total cost for the remaining parcels thus reaches $173 million, but that accounts for inflation, with the “net present value” remaining $80 million. Originally there was to be an upfront payment of $100 million.
As for the new rail yards, they are expected to cost $147 million, down from an expected $240 million. (Some accounts put the ultimate amount at closer to $340 million in infrastructural and environmental work, much of which is now out of the deal.) The scaled-down seven-track yards will have a capacity of 56 cars, down from the 76 cars allowed by nine tracks. While questions had been raised as recently as a month ago about whether a reduction in tracks would jeopardize the planned East Access megaproject, MTA officials said this was no longer the case.
“Helena is satisfied her usage will not be impacted,” H. Dale Hemmerdinger, the board chair said, referring to Helena Williams, president of the Long Island Railroad, which operates the yards. A number of committee members struggled to grasp how this was possible, repeatedly asking question about it, without ever getting a clear answer. It was also revealed that the developer approached the MTA about value engineering the site toward the end of last year, and worked with Parsons Brinckerhoff on “value engineering” the design of the station.
Part of the reason the quality of the station is so important, beyond it being one of the oft-trumpeted public benefits behind Ratner’s development package, is that the inclusion of new “state-of-the-art” rail yards was one of the reasons given for dismissing a competing bid offered by Extell development.
“They’re delivering what the railroad needed,” Dellaverson said in defense of the changes. “It’s a step up from the default position we have now. But it’s not quite what was first proposed.”
To ensure Ratner begins construction on those compromised yards by June 30, 2012 and completes them by September 1, 2016, the developer must secure a letter of credit for $86 million, which would then be forfeit to the MTA and used to complete the project. That number was arrived at as the bare minimum the agency would need to upgrade the yards. Ratner is also obligated to complete the temporary yards before the arena opens, though those completion on those facilities is expected by year’s end.
Asked why the MTA continued to support Ratner’s bid for the yards, and whether he could continue to be counted on, given repeated renegotiations, reversals, and revisions to the proposed development, an agency spokesperson declined to comment, though the possibility of a meager payment during these cash-strapped times is a factor.
During the meeting, Dellaverson said the deal was a winning one for the agency. “Our intent, if we were to prioritize, is transportation first and financial second, and this satisfies those needs,” he said.
In a statement, Ratner insists it is forces beyond his control that have hobbled the project thus far, but those obstacles will be overcome. “While the world has changed significantly since Atlantic Yards won public approval in December 2006, and we are trying to adapt to those changes, the project and the project benefits, including the arena, the jobs and the affordable housing will remain the same,” Ratner said.
Should Ratner fail to find financing for the project, he has until next March to cancel the deal. Ditto, should no significant construction take place by April 2011. Goldstein is already considering additional litigation to push Ratner over that threshold, though he continues to hope it will not come to that. “They’re propping up FCR and that’s not their job,” he said of the MTA. “Their job is to get the best deal for their riders.”