This Little Piggy...

Will wonders never cease. In the category of the kettle calling the pot black, the mayor's calling om the City Council to bid out more of its discretionary spending items. As the NY Post reports this morning, " Calling for a reforms in how the City Council doles out pork-barrel funds, Mayor Bloomberg said yesterday that large grants to nonprofit groups should be awarded only by competitive bidding."

What's that about people in glass houses? Maybe the mayor just wasn't paying all that much attention when Deputy Dan Doctoroff started to give away city property to his buddy Steve Ross at the Related Company-a process that actually began only two months into the mayor's first term when Doctoroff awarded the Bradhurst development to Related along with the public subsidy that the Giuliani folks wouldn't pony up because of the issue of fairness.

The continued aggrandizement of Mr. Ross was aided and abetted by a whitewashed DOI investigation of the potential conflict of interest between Doctoroff and Ross-old friends and former business partners; a whitewashing that continued even as Deputy Dan was leaving government to set up shop at Bloomberg LLP. The most egregious example of this favoritism is of course the Bronx Terminal Market give away.

It is useful to revisit this incredible use of personal favoritism to aggrandize a super wealthy developer. Here's our original post:

Tuesday, August 02, 2005

Immaculate Deception

The City’s EDC is still twisting, turning and spinning in its effort to explain the supposedly autonomous manner in which the Related Companies managed to, all on its own, wedge itself into a lucrative no-bid deal to develop the Bronx Terminal Market. In a press statement the City asserted the following. Our responses are listed under each item:

1) The City could not have a bidding process because it didn’t control the site The City could have quite easily and legally issued a Request for Expressions of Interests (REI) for the BTM site. By doing so it could have gauged what the level of interest was for the site, what kind of diverse visions existed for the site and, most importantly, the potential value of the site when bid for on an open market.

2) The City “engaged a mediator” who recommended that Buntzman (the old landlord) bring in a developer to “increase the property’s value” If the City engaged a mediator then there was a level of public involvement that clearly disproves that this was a private deal. In addition, the charge to see if and how the property’s value could be enhanced also suggests that the City, far from speculating, already had a decent idea of how this could be done.

3) Buntzman met with “several developers” (including Related) Who besides Related did Buntzman meet with? Can we ask these folks to step forward in order to discuss their views about “enhancing the property’s value?” Also, are they at all miffed at not being included in the development? If they could speak without fear of reprisal would they characterize the City’s role as neutral?

4) The City asked Related to assess this site’s potential. How did Related get picked to “assess the site’s value?” (It seems to us that some steps are missing here).

5) Related thought the site had potential for retail and began discussions with Buntzman that resulted in the following “private actions:” a) Related buys Buntzman’s lease and b) Buntzman drops legal action against the City. So the “private action” only became private after Related somehow got exclusivity and after some failrly public interventions by the City. The dropping of all legal actions could not have occurred without the acquiescence of the landlord and NYC and it is likely that Buntzman was made aware that Related’s offer would be the one sanctioned by the City. The question then becomes: Would Bunzman have taken $42 million from another developer?

6)The City cannot “speak to” the discrepancy between the value of the velodrome and property and the House of Detention (HOD). Here’s the one honest statement in the release. The City can’t speak to the discrepancy because, having foregone all standard real estate due diligence (like appraisals) they simply and cavalierly swap parcels using an unacknowledged or nonexistent standard of comparison.

7) Related paid Buntzman $42 million for its lease. Once again the negotiations leading to Buntzman agreeing to be bought out, as well as the City’s role in that process, remain shrouded in mystery.

8) Related will be paying ground lease rent to the City when the development lease is signed and base rate plus a percentage of the revenue when the retail development opens. Ah the lease. The press release doesn’t mention just how favorable this is and avoids pointing out that in year 99 of the final lease the Related Companies will be paying less money on 2,500,000 sq. ft (around $2,000,000 a year) than the market tenants are currently paying on 403,000 sq. ft (around $3,360,000 a year)

9) The House of Detention is not now part of the current development plan nor is the velodrome site but the City has until April 2006 to decide on the House of Detention and Related can exercise an option on the veledrome site at which time rent will be negotiated

As to the “uncertainty” involving the HOD and the velodrome this is pure hogwash. The city will transfer the jail and Related will exercise its option because all of this is contained in the Memorandum of Understanding (MOU) between Related and the City. All parties simply want to keep the more controversial aspects of the deal out of the current land use application.One last observation about how private this BTM deal is: In the documents gathered by the merchants’ lawyers a 2002 rendering was found that depicted the Olympic velodrome on the BTM site. This was a full year before the Related deal was finalized! Clearly, Deputy Dan and the City were involved from the very beginning in the effort to advance an Olympic venue and to do so with a developer who happened to be Dan’s former business partner and a stakeholder in NYC 2012.

So now we come full circle, and Mayor Mike wants to introduce an RFP process for the council's spending. And the D (umb) O I(ncompetent) is looking into the council member items. As the NY Daily News points out: "Department of Investigation probers are poring through thousands of documents bearing the names of politicians, dollar amounts and a roster of nonprofit groups - some real, some not."

DOI should get its own house in order-maybe starting at DOE; and the council, as an independent branch of government, should tell the mayor's lackeys to take a hike-and launch their own investigation with an outside independent investigator hired at the council's behest. Letting the Bloombergistas into all of this is taking hypocrisy to a new level. It's time that the city council asserted its independent authority.