New York MTA Broke the Law: Suit

The Metropolitan Transportation Authority broke state law when it agreed to new sale terms for the Vanderbilt rail yards in Brooklyn, plaintiffs allege in a suit filed yesterday in New York State Supreme Court.

Four state lawmakers, a transit advocacy group, and a group opposed to the Atlantic Yards development allege that revised terms of the sale of the development rights to developer Forest City Ratner Cos. required a new appraisal and that the MTA consider competing offers.

“We think the MTA agreed to a pretty rotten deal with Forest City Ratner that produces little money for the transit system and that hurts the riding public,” said Gene Russianoff, staff attorney for New York Public Interest Research Group’s Straphangers Campaign. NYPIRG, a public advocacy group is party to the suit. “They didn’t do what we think state law requires.”

The suit seeks to annul the deal. An MTA spokesman declined to comment and calls to Forest City Ratner were not returned by press time.

The plaintiffs filed the case on the eve of a hearing at the Court of Appeals, the state’s highest court, on another case challenging New York’s use of eminent domain to seize private property on behalf of the developer for the project. Lower courts have thus far ruled in favor of the state.

Forest City Ratner intends to sell $700 million of bonds backed by payments in lieu of taxes to finance the construction of a professional basketball arena that would be part of a larger, $4.9 billion project.

The arena PILOT bonds would be sold by the Empire State Development Corp. The Internal Revenue Service no longer permits the kind of PILOT bond financing for sports facilities that would be used in the project but the Atlantic Yards was grandfathered in, provided the bonds are sold by the end of 2009.

An ESDC spokeswoman directed questions about the new lawsuit to the MTA.  In June, the authority approved a revision to a 2005 agreement that would have sold development rights to the yards to the developer for $100 million. A 2005 appraisal of the property valued it at $214 million. The developer had also agreed to make certain improvements to the yards.

Under the revised agreement, Forest City Ratner agreed to pay the MTA $20 million up front and then $80 million at net-present value in installments over 22 years. The developer would also scale back the amount of promised improvements to the rail yards to $150 million from $250 million. The economic downturn prompted Forest City to ask for the easier obligation.

The suit alleges that under the Public Authorities Accountability Act of 2005, the MTA is required to get a new appraisal because the land is being sold at less than market value.

“The Public Authorities Law as amended by [the Public Authorities Accountability Act] forbids MTA from selling the Vanderilt Yard unless the yard’s fair value is determined by an independent appraiser and include in the transaction record, and required MTA to look for and entertain competing offers for the yard,” the suit alleges.

Russianoff said the Straphanger’s campaign doesn’t have a position on the Atlantic Yards project but would like to the land be reappraised and its sale opened to a competitive process. The Straphanger’s main concern is that the cash-strapped MTA get a fair price for the yards to help finance its capital plans, he said.

Other plaintiffs to the suit includes four Democratic lawmakers who represent the area — Sen. Velmanette Montgomery, Assemblyman James Brennan, Assemblywoman Joan Millman, City Council Member Letitia James — and Develop Don’t Destroy Brooklyn, a local coalition that brought the eminent domain suit against ESDC.

The project would include 16 towers, mostly apartment buildings, many of which would be built on a platform over the 8.5 acre Vanderbilt rail yards, which is used by the Long Island Rail Road, a division of the MTA.

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