Moynihan Stumbles

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Sweet Dreams!

He did it! Assembly Speaker Shelly Silver has put off a decision on Moynihan Station for another month.

We tackled this issue last week, and expect it could go on in this cat-and-mouse way until 1) Madison Square Garden makes a deal, 2) Silver and Charles Gargano, the Governor’s economic development chief, get tired of the game, or 3) Spitzer gets inaugurated.

The Public Authorities Control Board was supposed to vote on the renovation of the Farley Post Office in west Midtown this afternoon, but alas! State Comptroller Alan Hevesi raised more questions in a last-minute letter. Gargano contends his staff has already answered them, and to prove it, made public the response by the subsidiary overseeing the project.

Full ESDC response after the jump.

-Matthew Schuerman

STATEMENT BY CHARLES A. GARGANO
CHAIRMAN, EMPIRE STATE DEVELOPMENT CORPORATION

We had hoped that the Moynihan Station project would be approved today by the Public Authorities Control Board, but the vote was postponed in order to respond to the questions received today in a letter from the State Comptroller. We have provided answers to those questions (text attached), and continue to be available to answer any questions at any time, as we have for the past several months.

Moynihan Station is one of the most important transportation projects in the country, which will benefit hundreds of thousands of commuters and visitors. It has overwhelming public support and funding is in place.

We are confident that the answers provided to the Comptroller will resolve any remaining concerns, and that the PACB will vote to move forward on the Moynihan Station project in the coming days.

# # #

September 20, 2006

Honorable Alan G. Hevesi
Comptroller of the State of New York
Office of the State Comptroller
110 State Street
Albany, New York 12236

Re: Moynihan Station

Dear Sir:

This letter is in response to your letter to me dated September 19, 2006, downloaded from your press release and website and received in my office today, and is further to my letter to you of August 28 and the three Moynihan Station project briefings previously held with PACB and Comptroller staff. We will continue to respond in writing to any questions you may have. In response to the points raised in your September 19 letter:

1 Million SF Development Rights
As previously discussed, the 1M SF of development rights were openly and competitively bid as part of Moynihan Station’s extensive RFQ/RFP process (beginning July 2004 and continuing through designation in Summer 2005). As part of that process, developer teams bid on use of up to 1M SF of Farley air rights in connection with the Moynihan project. The Related/Vornado team “bid” $110M guaranteed (possible in part because of R/V ability to utilize TDRs on the off-site parcel; other competitive bidders made smaller, conditional offers assuming on-site use of air rights, dependant on ability to secure a tenant).

Additional Development Rights
As previously discussed, additional unused development rights will remain at Farley. ESDC/ MSDC have no plans to utilize these excess development rights, and their use is not part of the Moynihan Station General Project Plan (“GPP”). Pursuant to applicable State law, any future use of unused development rights would require a full public review, including a modified or new GPP, supplemental or new environmental review, and full PACB approvals. Of course, any future use of development rights by a private entity would require a public procurement process by independent appraisals and open competitive bidding in accordance with State law.

Future Design Modifications
As previously discussed, developer will be contractually bound to construct the train station in accordance with the GPP and the drawings attached thereto, and as per construction documents consistent with the GPP which are nearly complete and which will be attached to the contracts to be signed by developer. Developer will have no right to make design changes. MSDC will entertain non-material cost-saving design modifications during the construction period, but approval of any such modifications will be at MSDC’s sole discretion. It is not expected, nor is it customary, that PACB will have an on-going design review role for this project so long as the design continues to conform to that set forth in Moynihan’s GPP. Neither ESDC nor MSDC have any power or authority to consent to a modification not in accordance with the GPP and the environmental impact statement for the project.

Loan Concept, PILOT, Tax Credits, Transportation Leases
MSDC has answered all questions previously posed regarding the proposed loan arrangement and is prepared to answer any other questions. Most importantly, no developer payment, either for construction or as PILOT, will be altered or reduced within a loan arrangement. New York City has approved the PILOT schedules for the Moynihan project which are attached to the GPP. The City’s two representatives on the MSDC Board of Directors voted to approve the final EIS and final GPP (inclusive of PILOT attachments) on August 14. Tax credits will be secured by developer, and, as previously discussed, tax credit value attributable to the train station work will fund project construction. Also as discussed during project briefings, the transportation leases would be executed simultaneously with closing with developer and USPS; it would not be prudent to execute leases with the transportation tenants prior to taking ownership of Farley.

Federal Approvals
ESDC/MSDC environmental consultants have worked closely with USPS and FRA over past many months in developing Moynihan’s draft, and then final, EIS. USPS and FRA are not required to conduct a separate Federal EIS. Instead, Moynihan’s final EIS will be paired with a federal Environmental Assessment (EA), already completed by USPS and FRA, to serve as the basis for requisite Finding of No Significant Impact (FONSI) statements which are expected imminently.

Operational Costs
As set forth in my August 28 letter, GPP Section VI.E(iv) describes the estimated $4.6M public sector contribution by ESDC/MSDC for public (non-USPS) common area charges for the first year of operations. As previously discussed, developer will pay all operating expenses associated with the private development portion of Moynihan, and will also pay the majority of public common area charges as well. Using conservative estimates of expenses (assumed high) and revenues (assumed low), MSDC projected, in a spread sheet delivered in August, that revenues will cover public sector expenses for the life of the Project. As set forth in the previously delivered spread sheet, future operating surpluses in early years will be directed into an escrow trust fund which would be used to fund any future operational shortfalls in later years. MSDC projections, which include a 35% annual contingency for expenses, show that Project operations cash flow will remain positive for several decades, and that the resulting escrow fund will support expected public obligations for the life of the lease. A condominium board, through which the public entities essentially will determine expenses for public (non-USPS) common area charges, will oversee Project expenses. It is expected that any operational surpluses will be dedicated to Moynihan expenses and improvements.

Scope / Madison Square Garden
The Moynihan Station project before the PACB does not include an arena in Farley’s Annex because no complete arena development plan has been proposed. We understand the developers initiated and presented a preliminary concept to several elected officials, but that is not part of the project before the PACB. Moynihan’s final EIS did study an “arena alternative”, but any future project which includes an arena at Farley is expected to require at least a supplemental EIS and an amended GPP, and must receive all requisite public approvals, including further PACB approval, a process which would take many months to accomplish. As previously stated by ESDC/MSDC and by developer, there is no reason to delay Moynihan Station in the meantime.

As set forth in my August 28 letter and as previously discussed, the functional heart of Moynihan Station can be built regardless of what happens at Farley’s Annex. New Moynihan Station elements that will not preclude an MSG relocation to the Annex include: a beautiful large train hall with soaring glass roof; at least two dozen new vertical circulation points (stairs, escalators, and elevators) from train platforms granting direct access to street and subway; a substantially widened and lengthened West End Concourse; an expanded connection to the existing Penn Station; and numerous new connecting corridors. These transportation enhancements are necessary, and can be built, regardless of how the Annex is developed.

Please let us know if you have any further questions.

Please also note that ESDC and MSDC agree with your observation that all development projects “benefit from a thorough and open debate”. A very thorough and open debate concerning the Moynihan Project has been ongoing for the past many months in the public approval process, which included environmental review, public hearing, and comment period. In that spirit, MSDC also has provided written documentation as requested by the PACB and your office. Some of that documentation consists of documents being concluded in negotiation, which documents are not subject to disclosure. As in any ongoing contractual negotiation we would like to preserve the confidentiality of the materials provided to PACB and Comptroller staff.

Very truly yours,

/s/

Robin Stout
President
Moynihan Station Development Corporation