How Atlantic Yards impacts the MTA’s bottom line

Late last week, amidst all of the talk about the MTA’s budget crisis, State Sen. Pedro Espada nearly made a good point. In a letter to MTA CEO and Chairman Jay Walder, Espada urged the authority head to examine the state of the MTA’s real estate holdings. His point though was a bad one.

“MTA budget gap needs must be measured against real numbers, and the MTA must prioritize fiscally prudent lease and sale of assets before deciding to leave children, seniors and hard-working citizens stranded without a safe, reliable and affordable means to get to and from work, school, grocery shopping and doctor’s appointments,” Espada wrote. “I would like to hear from you as soon as possible regarding the MTA’s real property holdings as a solution to the Authority’s serious budget concerns.”

Now, it doesn’t take an economic genius to understand the folly of Espada’s remarks. First, he is urging the MTA to sell its real estate holdings during one of the greatest periods of market depression in U.S. history. Second, MTA real estate sales are simply another one-off quick fix and provide no long-term secure solution to the agency’s financial problems. To sell now, in other words, would be folly.

Unfortunately, for transit advocates, Espada missed an opportunity to make a point. He could have used the MTA’s summertime decision to accept just $20 million up front from Bruce Ratner for the Vanderbilt Yards land rights to question whether the MTA is fiscally smart enough to take advantage of its real estate holdings. Originally, in 2005, the MTA extracted a promise for $100 million from Ratner, and even then, the price was a below-market rate. Today, the deal looks even worse.

Last week, Atlantic Yards opponents lost a legal challenge to the renegotiated terms of the Atlantic Yards deal. A state judge upheld the lower upfront payment in light of the fact that all new deals must be subjected to an open bidding process. This, he said, was simply a renegotiation of a payment plan. “If every change were to be viewed as a new plan so as to trigger anew each mandated review process, no development plan could ever reach final approval — let alone ultimate completion. The MTA had a rational basis for continuing to use the 2005 appraisal rather than ordering a new one in 2009,” the judge wrote.

There may indeed be a solid legal argument the MTA can make here, but it is one to which I find myself very unsympathetic. At a time when the agency must maximize its revenue potential, the authority — and the state along with it — is simply handing over free money to Bruce Ratner while the rest of us face the specter of service cuts. A full market rate payment for the Vanderbilt Yards land wouldn’t close the 2010 gap by itself, and since the MTA can sell that land only once, it wouldn’t help the future. But a better deal would benefit both the authority and its riders.

As the Ratner deal becomes one step closer to reality, Pedro Espada’s words are the last ones we should be following. If this is the best the MTA can do with its real estate holdings, the authority is far better off not selling during a depressed market or perhaps not even selling at all.