Hevesi writes PACB

Subject: Hevesi writes PACB
Date: 6/3/2005 8:23:38 AM Eastern Daylight Time
From: kitchen@hellskitchen.net
Sent from the Internet (Details)


June 2, 2005

Honorable George E. Pataki
Governor
State Capitol
Albany, NY 12224

Honorable Sheldon Silver
Speaker, New York State Assembly
Legislative Office Building, Room 932
Albany, NY 12248

Honorable Joseph Bruno
Majority Leader, New York State Senate
Legislative Office Building, Room 909
Albany, NY 12247

Dear Governor Pataki, Speaker Silver, and Majority Leader Bruno:

The Public Authorities Control Board (�the Board�) has been asked to
approve plans to construct the New York Sports and Convention Center
(NYSCC). The project calls for a multipurpose sports and convention center
located on the far West Side of Manhattan, generally bounded by West 30th
Street, West 33rd Street, and 11th and 12th avenues. The project is
expected to cost nearly $2.2 billion and to be funded from various sources.
It is expected that the contributions from New York State and New York City
would be capped at $300 million apiece, and that Jets Development LLC (�the
Jets�) would be responsible for the balance and any cost overruns.

Among other considerations, the Board will have to decide whether �there
are commitments of funds sufficient to finance the acquisition and
construction� of the project, as required by Section 50 of the NYS Public
Authorities Law.

The Mayor believes he has the authority to unilaterally dedicate payments
in lieu of taxes (PILOTs) to meet the City�s financial obligations under
the project agreement. Members of the City Council believe otherwise, and
have recently approved­­ legislation by a wide margin that would require
the Mayor to obtain the Council�s approval before dedicating such
resources. It is expected that the City Council will override an
anticipated mayoral veto and that the issue will have to be resolved by the
courts. The Mayor has not identified other sources of funding in the event
that PILOTs are unavailable for this project, although more than half of
the City Council recently stated their support for the project.

In addition, the recently enacted State budget does not include funding to
meet the State�s obligations to this project, and the State has not
identified the source of its $300 million contribution. Under the project
plan, the City has pledged to cover the State�s contribution if State
resources are not available. As mentioned above, however, the Mayor is
having difficulties meeting the City�s financial obligations­ let alone the
State�s. In the event that the City does assume the State�s financial
obligations, the State has agreed to offset the City�s contribution through
other means, but those means have not been disclosed.

The Board will also have to consider whether assurances from the Jets and
its financial advisors, stating that the Jets can finance the project and
any cost overruns, are sufficient. The project has already grown in cost
from $1.4 billion to $2.2 billion. In addition, the State and City could
incur additional costs from the conversion of the project into an Olympic
stadium. Without adequate protections, the liabilities of the State and
City could grow beyond their initial contributions.

Local elected officials, transit advocates, area residents, and the
transportation workers� union have filed a number of legal actions related
to this project. These lawsuits call into question the bid process that
awarded the development rights to the Jets. Litigants contend that the
Metropolitan Transportation Authority (�the MTA�) violated State law by not
accepting the highest bid, and that the process favored the Jets.

On June 2, 2005, the presiding judge concluded that the MTA had not acted
arbitrarily or capriciously in accepting a lower bid and dismissed the
cases. Nevertheless, it is troubling that the MTA accepted a bid of $250
million from the Jets for one third of the development rights, which is far
less than the MTA�s own appraisal of $923 million for all of the
development rights. The judge ordered a temporary stay that prevents the
Jets and the MTA from closing on the transaction until the close of
business on June 7, 2005 to allow the litigants an opportunity to seek a
further stay. There also remains outstanding litigation regarding the
environmental review process.

In conclusion, the members of the Board will have to decide whether the
State, City, and the Jets have adequately demonstrated the availability of
resources to meet their obligations under the project plan. In my opinion,
it is premature for the Board to consider this project because the State
has not identified the source of its contribution; the Mayor�s ability to
use PILOTs to fund the City�s contribution remains unresolved; a stay has
been issued on the final transfer of the development rights to the Jets
until June 7, 2005; and there is outstanding litigation.

Sincerely,
Alan G. Hevesi