Thursday, March 04, 2010

Despite eerie parallels, more outrage over Queens video casino deal than Vanderbilt Yard bids; however, FCR, not AEG, had an 18-month head start

What's the difference between the Metropolitan Transportation Authority's (MTA) questionable procedure for disposing of the Vanderbilt Yard--the key public property in the Atlantic Yards project--and the state's recent selection of Aqueduct Entertainment Group (AEG) to run a video casino at Aqueduct Raceway?

Well, there are several similar red flags, and the Vanderbilt Yard deal is clearly more of an outlier regarding one fundamental issue.

But the press and politicians are far more exercised about AEG.

AEG background

A month ago, news broke concerning the selection (bid documents) of AEG, hich has ties to influential Queens Rev. (and former Congressman) Floyd Flake. Circumstantial evidence pointed to a sweetheart deal tied to Gov. David Paterson's desire to gain Flake's support for his reelection bid.

The role of consultant Darryl Greene, who pleaded guilty in 1999 to a misdemeanor count of mail fraud, also drew criticism.

The press piled on, and an investigation is under way. By contrast, the Vanderbilt Yard deal in 2005 drew much less outrage--criticism in news stories, but no similar editorial assault.

And, as the graphic below suggests, had the press and/or elected officials been exercised, the public might have been concerned.

Indeed, press scrutiny of the AEG deal continues. Greene withdrew, but the Daily News reported Wednesday that he's on the board of a nonprofit still involved in the AEG project. On Tuesday, the Daily News reported suits faced by rapper Jay-Z's partner in an investment company that has a piece of the deal.

Points of comparison

(Right-click on the graphic below to open up a larger version)



Details on the Vanderbilt Yard deal

Remember: there were only two bidders and, while Extell Development Co. bid $150 million cash and Forest City Ratner bid $50 million cash, the MTA chose only to negotiate with FCR, which raised the stake to $100 million.

The MTA's argument, then and in court (where it survived gentle judicial scrutiny, after the deal was revised), was that the other elements of the deal were worth much more.

Perhaps, but Extell was never allowed to revise its bid.

Four years after Forest City Ratner won the bid, it last year was allowed to renegotiate more favorable terms in 2009, putting only $20 million down, paying the rest at a generous 6.5% interest rate, and agreeing to build a smaller yard that would save some $100 million.

Why FCR's deal was more of an outlier

But the key point of comparison, I believe, comes before the two bids, not after. Whatever the irregularities regarding the bids for the Aqueduct video casino, all the bidders began from the same starting line.

In the deal for the Vanderbilt Yard, Forest City Ratner was anointed this key piece of public property 18 months before a Request for Proposals (RFP) was issued.

Seth Pinsky, President of the New York City Economic Development Corporation, said last week that RFPs were the way to go: "Similarly, many of our larger developments will involve models where the city and or state are putting in significant seed money to bring infrastructure, then we plan on RFPing the development parcel to the private sector because we believe the private sector does that kind of development best."

That didn't happen with the Vanderbilt Yard--nor the Atlantic Yards project as a whole.

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