While yesterday’s FAQ hit on a few of the big misconceptions surrounding the MTA’s current budget crisis, there is one more major topic I’d like to hit on today. That topic focuses on the MTA’s current real estate holdings and the money they could draw in.
Over the last few weeks, these holdings have been in and out of the news. Most recently, we’ve heard that the MTA still expects $1 billion for the Atlantic Yards land even as the real estate development deal falls apart. Before that, Julia Vitullo-Martin published an error-filled piece in The Daily News about the MTA’s real estate. Her premise is one that deserves some attention, if only to dispute it.
When Vitullo-Martin wrote her piece, the MTA had yet to pass this Doomsday budget they unveiled upon the New York City world this week. But her point — that the MTA isn’t making the most of its real estate holdings — remain. Basically, she asked, “Shouldn’t we first insist that the MTA take advantage of any and all underused real estate that it already owns or controls under long-term leases?”
Her problem however is that she identifies parcels that either aren’t owned by the MTA or are like the Hudson Yards lands and are already included in plans for redevelopment. The MTA disputed the article and issued a statement:
The MTA is continually assessing its real estate to identify properties, like the Hudson Yards, that can provide revenue to the MTA without disrupting service. These opportunities are limited because so much of the MTA’s real estate is operated under master lease, wherein it can only be used by the MTA for transportation purposes. Nonetheless, we continue to find new revenue opportunities and use these funds to pay for critical capital needs, with $1 billion in the 2005-2009 capital program from asset sales (and another $500 million tentatively identified in the 2008-13 plan produced during the congestion pricing debate). It is bad public policy to sell assets to pay for operating expenses in any case, and to imply that the current fiscal crisis could be avoided in this way is simply not accurate.
Basically, that statement sums it up. Is the MTA making the most of its real estate holdings, as Vitullo-Martin alleges they aren’t? The answer to that is tough to pinpoint, but the fact remains that dealing with real estate holdings is a one-off solution. Let’s say the MTA really can get a few hundred million dollars for the Jay St. holdings in Brooklyn. In today’s market, that’s highly unlikely. But what happens when the budget comes due next year, and the transit agency can no longer sell real estate to cover a budget gap?
Like many critiques of the MTA, the real estate one is a red herring. We would all prefer the MTA to make ideal use of all of their lands, but forcing them to do so now would solve the problem for just one year, if that. We need long-term solutions and not some short-term measure. Hopefully, our politicians realize this as well.
10 comments
a good point. 1-it’s a terrible time to sell property, but 2-if they contemplated such a dumb move, i’d rather spend another buck each time i ride the train, than see Fort Greene get white washed of its culture with some behemoth project. I’d rather we develop a transit system than develop a community that doesn’t need any more developing.
The real estate red herring is one that keeps showing up again and again. As if property dispositions could simply occur ad infinitum to supply a limitless source of income. What is she smoking?
Oh yeah, and let’s not consider operational or capital needs 10, 20, 50 years from now. Get outta here!
Selling property to fill a budget gap is a bad idea; agreed. But what about re-opening some of the closed/boarded up concession that are abundant on platforms in the IRT and leasing them? (I think of spots at Hoyt St in Brooklyn an Franklin St in Manhattan on the West Side IRT). I don’t know if they can really bring in any substantial amount of rent (recurring monthly/yearly income), if there is a demand at these little-used stations, or if trash/platform safety would become a problem.
It might not help at all, but it just might throw some regular income in the MTA pockets…
I don’t think it’s a matter of trash or platform safety. Some of those concession stands just don’t bring in much revenue.
Re: MTA still expects $1 billion for the Atlantic Yards land. That article was wrong — it should read $100 million from the sale of the Vanderbilt Yard, and $1 billion from all MTA-owned properties. See here:
http://www.nolandgrab.org/arch.....offic.html
Of course, even the $100 million for the Vanderbilt Yard appears to be in jeopardy, as you rightly point out. We should also remember that the MTA assessed the value of the Vanderbilt Yard at $214.5 million, yet agreed to part with it for less than half of their own appraisal, which speaks volumes as to why the MTA is in such fiscal straits.
It does seem like a really bad idea to part with their real estate, especially now. Why not lease these properties in order to preserve and generate future income in perpetuity?
[…] M.T.A. has tried all kinds of revenue-raising schemes, but what about capitalizing on its real estate holdings? [2nd Ave […]
I think you miss the point. The reason for MTA assets sales should not be to plug short term funding caps but rather to lower debt (or to pay for long term capital improvement projects).
Using assets sales to pay off MTA debts improves the MTA’s balance sheet and lowers the cost of borrowing money.
If the MTA was able to hypothetically sell $1 billion worth of real estate and use that money to redem $1 billion worth of MTA bond at 4% interest rate that could amount to a $40 million a year savings on debt payments!
Even a modest $100 million in assets sales could save the MTA $4 million a year.
In addition all real estate sold to private non governement entities would go back on the property tax roles and could generate millions of dollars in extra property tax for NYC every year.
If times are tough cut. Assets sales to pay down debt should be the 1st item on the MTA’s agenda.
We’re talking about billions of dollars the MTA needs to cover, not millions. And when you sell a property once, that’s it. You don’t get to sell it again the next year for another $4 million to pay off debt. It’s a fault plan.
You can certainly argue that the MTA should better utilize their real estate assets in the city, but they will never be a solution to the MTA’s massive financial problem.
The MTA has to do something about 370 Jay, pictured above. That decrepit POS has sat mostly empty for such a long time ever since most of them were moved to 2 Broadway. It’s dark and looks like crap from the outside. It’s one building the MTA should sell or at least lease out to someone instead of letting it sit and rot.
You are missing the point. Its not about selling real estate assets to plug budget gaps. There are a few things happening here:
1. A corporate culture where waste is okay – why do they hold on to valuable real estate only to keep it vacant? Why did they open new leases on new property to leave other buildings vacant? There is a lot of operating money down the drain.
2. Its irresponsible for a government entity to leave vacant, blighted buildings in city centers that are undergoing major private investment.
3. Nobody makes a case that they should keep 370 Jay Street – so why hold on to it? Because they can?
4. The argument that the MTA cant do anything with the buildings because they dont own them is a red herring – Its master-leased – they hold the lease forever – they can do whatever they want with it. One option is to simply give it back to the City – there is nothing to prevent them from doing that. Also what happens if they use the building for non-‘transportation uses’? Does someone take it away from them? I dont think so – only further proof that they can do whatever they want with the buildings.
5. You’re point about timing the market is misguided. People were urging them to sell the building at the very height of the real estate market. What was the excuse then?
6. Sell 370 Jay Street – its not doing anyone any good. In fact its doing everyone very bad.