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Daniel Goldstein

Daniel Goldstein

Posted: December 8, 2009 12:33 PM

The MTA $200 Million Shortfall: Where Did All of the Money Go?

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As reported in the Times, MTA revenue is $200 million short in its 2009 budget. How could that be, where did that shortfall come from?

Some simple math...

In 2005 the MTA appraised the 8-acre Vanderbilt Yards at $214.5 million. They then undertook a sham RFP process. Extell Development Company bid $150 million and Forest City Ratner (which wanted the Yards for its 22-acre Atlantic Yards project) bid $50 million. The MTA told Ratner that bid was too low and after six weeks of "negotiating" Ratner upped it to $100 million.

Ratner was then supposed to pay the MTA $100 million cash at closing. He didn't.

Fast forward to the Summer of 2009. The MTA announces that it has "negotiated" a new deal with Ratner. Despite having Ratner over a barrel the MTA strikes a deal where Ratner pays only $20 million at closing. The rest would be paid over a 22 year period. The MTA and Ratner expected to close in 2009. But they haven't

$100 million minues $20 million is $80 million. At minimum the $200 million MTA shortfall, should be only $100 million and $120 million maximum. Of course had the MTA had a competitive bidding process for the Vanderbilt Yards there is a reasonable chance they'd have no shortfall this year.

The culmination of the "negotiation" with Ratner this past year was at the MTA Board meeting to approve the new lowball deal. The MTA did not seek any other bidders when they understood that Ratner was no longer willing to fulfill his financial commitments.

So why did they rush to screw transit riders? They had to help Ratner.

MTA CFO Gary Dellaverson explained: "It relates to Forest City Ratner's desire to market the tax-exempt bonds. That's the primary driver of the timing."

And that is the primary driver of the bulk of this shortfall. The math is simple.

Now, according the Times Dellaverson says is "shocked." Shocked! Specifically he said the situation is, "a shocking development, both because of the magnitude of the underrun (about 20 percent) and the late date of its discovery."

 

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