December 24, 2004

When is $1 billion not $1 billion?

As regular readers of this website will recall, one of the many unknowns surrounding New York City's proposed Jets stadium and Nets arena projects is how much would be paid for development rights to the land, a pair of rail yards belonging to the cash-strapped Metropolitan Transportation Authority. (So cash-strapped, in fact, that the MTA has already announced subway and bus fare hikes not just for 2005, but 2006 as well.) Estimates of the land's value have ranged from a few hundred million dollars to several billion, and in July MTA chair Peter Kalikow announced he'd be hiring outside appraisers to determine how much the rail yards were worth.

In an attempt to puzzle out what's going on here, last month New York assemblymember Richard Brodsky questioned Kalikow at a hearing on the fare hikes. The exchange was recently transcribed by Brian Hatch of newyorkgames.org and passed along by John Fisher of hellskitchen.net:

ASSEMBLYMAN BRODSKY: How much have you budgeted next year for the sale of assets?

MR. KALIKOW: We put the sale of assets in our capital plan. ... In the capital plan for '05, already we have $1.4 billion.

ASSEMBLYMAN BRODSKY: What makes up that $1.4 billion?

MR. KALIKOW: It makes up, we assume, that Bruce Ratner is going to do the Net deal.

ASSEMBLYMAN BRODSKY: How much is that one?

MR. KALIKOW: We don't know yet. I'll tell you why -

ASSEMBLYMAN BRODSKY: If you got to $1.4 billion, you added up some numbers to get there -

MS. KATHERINE LAPP (MTA Executive Director): When we did the capital plan, which we sent up to the state last month, the Chairman told me to put in to the budget a target of a billion dollars of asset sales. He then told us, and we did, put out an RFP on the street for a real estate professional to come in and to catalogue all of the assets, the ones in Brooklyn, on the West Side, all the assets that we own and to determine and give us advice as to which ones they thought we could possibly sell, whether we needed it or not we would have to figure that out. He felt that an aggressive target of billion dollars should be put in the plan for that initiative. The extra $400 million that the Chairman just referred to, and you did, that's surplus income from the current plan, some investment income. So the assets sale target is a billion dollars.

ASSEMBLYMAN BRODSKY: You directed a one-billion-dollar number, fairly arbitrarily?

MR. KALIKOW: No, it was -

ASSEMBLYMAN BRODSKY: What do you guess the value of the Brooklyn deal is?

MR. KALIKOW: See, I don't know. I don't mean that to be a wise guy because the biggest problem that we can get into is ascribing values to stuff.

ASSEMBLYMAN BRODSKY: What do you think the value of the West Side deal is?

MR. KALIKOW: Again, I don't know.

ASSEMBLYMAN BRODSKY: When was the appraisal show?

MR. KALIKOW: It's not finished.