Tuesday, February 3, 2009

Ross the Boss

The following is a reprint (with permission) on an email by Phil DePaolo.

When the City Council approved the Hudson Yards development project in 2005, it gave the Bloomberg administration permission to condemn and acquire several parcels of land on Manhattan's far West Side.

One of those parcels was a city owned block along 42nd St.'s Theater Row, between Dyer and 10th Aves. The buildings there would be torn down to facilitate construction of the No. 7 line subway extension and eventually a new station on the site.

But the Council was never told the city had no intention of condemning the site.

The city had quietly decided to sell it to one of this town's biggest real estate developers, Stephen Ross, for the price of a song: $100,000.

If it sounds like a sweet deal, Ross must have thought so: He and his partners paid $107 million for the lease rights to the property, and they planed to build a 60 story building there.

Ross, chief executive of the The Related Companies, is a close friend and former business partner of former Deputy Mayor Daniel Doctoroff.

He bought the site's lease in early November 2004 in a federal bankruptcy court settlement from the partnership that controlled the block for 25 years.

But the block's real value is its development potential, thanks to the city's decision to build a new subway station for the No. 7 subway extension that will have four escalators and two elevators emptying into it.

It smelled like a back room agreement.

The city issued no press releases on its deal with Ross, and the settlement papers weren't filed with the city Finance Department until Jan. 18 2005, the night before the Council's vote.

Bloomberg said that the lease sale was a private transaction, and that City Hall had no favorites.

But Ross group had won City Hall's support as far back as July 2004.

At the time, several developers were feverishly bidding to win control of the site.

One of the developers who competed with Ross for the lease was Robert Gladstone of Madison Equities LLC. His lawyers had charged in court papers that the negotiating process was unfairly skewed in favor of the Ross group.

Madison Equities showed an unpublicized July 22 2004 agreement among the city, that stated the city agreed to back the Ross partnership.

But at the Council, the speaker claimed to be shocked to learn about the secret sale of a property it had just approved for condemnation.

"It's very surprising," said Councilwoman Christine Quinn was quoted as saying, "When you don't make complete disclosures, for any reason, it raises questions."

Given the close relationship between Doctoroff, the city's economic development czar, and Ross, it's natural to ask if the deputy mayor had anything to do with the transaction.

Doctoroff was once a co owner of the New York Islanders with Ross.

It was also reported a few weeks ago that Stephen Ross and some leading Manhattan developers were lobbying Treasury Secretary Hank Paulson to cut them in on the federal bailout bonanza. A few days later Stephen Ross despite the need for a federal hand out seems to have discovered enough cash under the sofa cushions to buy the Miami Dolphins for 1.1 Billion dollars.

Today’s New York Times is reporting that despite the M.T.A preparing massive cuts in service and increasing fares they are allowing Mr. Ross to delay a $43.5 million down payment for a site, which sits on both sides of 11th Avenue between 30th and 33rd Streets where Mr. Ross had planned a 26 acre complex of office towers and apartment buildings.

As I have pointed out, especially with the Bronx Terminal Market project, where City Hall had put up a money back guarantee. Mayor Michael Bloomberg is taking yet another bite out of ULURP, a public review process that is mandated by the city charter. Not only did the city offer Related tax incentives, tax free Liberty Bonds, low interest loans, and $14 million in cash, they promised they would reimburse the developer for the cost of the lease if it didn’t get the zoning changes it needed.

This was a bold use of the mayor’s power, and the taxpayer's money, to undermine the ULURP process and everyone who has a role in it community boards, borough presidents, the City Planning Commission and City Council.

Bloomberg and his team of dollar a day administrators are in fact quite partial to billionaires like Steve Ross, awarding them no bid contracts, and generous subsidies for developments. This needs to be fully exposed in order to demonstrate that the mayor's entire economic development strategy is, in fact, beholden to special interests, interests that often conflict with what's best for the New York City taxpayer.

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