Jets, Mayor Get Stadium, Win War With the Dolans

BY Matthew Schuerman
April 4, 2005

Bo ard members of the Metropolitan Transportation Authority held a tortured 45-minute discussion Thursday on why they should award the West Side Railyards to the lowest bidder.

It wasn't the final vote that was a surprise: 14-0 in favor of The New York Jets, who would build a football stadium on the site that could double as a convention hall. That vote could have been predicted that morning, or the day before, or indeed, considering how the mayor and the governor pushed for the Jets from the very start, a full year ago.

What was surprising was the logic that board members took to arrive there.

It was true, they admitted, that the Jets' rival, Cablevision, offered more cash upfront--$400 million, compared to a mere $210 million. But the MTA shouldn't just think of itself, they said, but also think of all the jobs the stadium (and conference center) will create. Or wait, maybe the MTA should just think of itself, in which case directors should think of all the goodies that come along with the stadium, like $2 billion in taxpayer money that the mayor has promised for a longer No. 7 subway line.

An hour or so later, a more candid assessment came out as the Jets love-in at the Roosevelt Hotel next door was breaking up. Steven Spinola, president of the Real Estate Board of New York, declared the Cablevision offer "Bullshit. And you can quote me." Had the MTA awarded the property to Cablevision, he said, "they never would have closed."

Jets proponents had long criticized Cablevision, which fears that the Jets stadium will draw convention and concert business away from its arena at Madison Square Garden a few blocks away, for submitting its bid two weeks ago just to cause trouble. The cable company's $4 billion mixed use development plan, with space for 5,800 apartments, a public library, school and a park, was just a ruse, they said.

A spokesman for Cablevision, Whit Clay, insisted the company was serious about delivering the $400 million "immediately following selection by the MTA," as stated in a letter sent to the transit agency on Tuesday. "There could not be a more clear statement of our intent than that letter," Mr. Clay said, and then, plaintively added, "It doesn't matter now."

Mr. Spinola was himself rebuffed by the board, in a way. He had cobbled together six major developers who proposed buying the air rights on top of the rail yards, and wanted to transfer them over to neighboring parcels that they already own or could buy. If, for instance, zoning over the rail yards permitted a 30 story building, but the Jets used only 10 stories, the developers would be able to add the extra 20 on top of what would normally be allowed in neighboring areas. But the details--where the development rights could be transferred and how much--would all have to be worked out.

But the price that Mr. Spinola was able to get these developers to put on these transferable development rights--$440 million--was too low for MTA directors, who thought they could ultimately get $1 billion.

So while the media had been ablaze comparing the MTA's choice as one between $720 million (Jets) and $760 million (Cablevision), board members saw the choice as between $210 million (the Jets offer minus the money from the developers, and discounting the staggered payment plan the franchise was proposing) and $400 million (the Cablevision offer minus $360 million that the cable company put aside to build a platform over the rail yards on which to put its development). Nonetheless, they went with the lower offer.

"If we look at the cash on the table, in my opinion, MSG's the correct choice," said James Simpson, an MTA board member and head of its real estate and planning committee. "They offer $400 million and that's it--$400 million is a lot of money."

Then Mr. Simpson went on to explain how the Jets stadium would exhaust only part of the air rights for the site, located between 11th and 12th avenues, in the low 30s. The rest of the rights, he predicted, would fetch $1 billion.

On top of those rights, though, the MTA would also benefit, because it still can sell air rights to its other rail yards, between 10th and 11th avenues, called the East Side Rail Yards. The value of those air rights, he said, would be diminished if Cablevision constructed residential high rises under its plan because they would flood the market.

"This is a major economic development project for the region and we can't think of ourselves as a transportation company," Mr. Simpson said. "We are a part of, we are the most important part of the economic engine that drives the city of New York and this is a tremendous project, tremendous jobs, and I can go home at night and sleep soundly knowing that I pushed this forward."

Gone, long gone, were the scruples, expressed just a few weeks ago by Chairman Kalikow, about getting top dollar for the MTA in order to address its own dire finances. Now the MTA would accept the Jets bid in order to help all of mankind.

But then again, not really. Another board member, Mark Page, who is also the mayor's budget director, said the board should also consider that with the Jets offer, New York City would pay for the extension of the No. 7 subway line, relieving the MTA of having to pay for it itself. Of course, someone does have to pay for the subway line--namely all the people that the MTA's grand economic development schemes are supposed to benefit: the public.

The only people to support the Cablevision offer--or rather, to oppose the Jets bid and open up the process again--were three members of the board who represent transit riders and transit workers. But they don't count--literally. They don't have a vote.

"We have a duty to protect the riders from unavoidable fare increases,"said one of the rider representatives, James Blair. "I would not support the Jets bid."

The city and the state have already offered to put forth $600 million, also financed by taxpayers through bonds. The Jets would also be exempt from mortgage taxes, sales taxes on construction materials, and, for about some 30 years, real estate taxes. Nonetheless, the Independent Budget Office predicts a modest profit for the city and state so long as the stadium books enough conventions.

The city's half of that $600 million--to pay for the platform over the rail yards and a retractable roof--is basically committed. The state's portion needs approval by state Assembly Speaker Sheldon Silver and Senate Majority Leader Joseph Bruno--both of which plan to take their time and toy with the fates of millions of New Yorkers, fans, construction workers, and everyone else who has an interest in the project. They have said they see no need to approve the project until after the International Olympics Committee decides whether to award the 2012 Olympics to New York. The Olympics would use the Jets stadium for opening and closing ceremonies and track and field events.

The bidding war started in early February when Cablevision abandoned its position on the sideline as chief cheerleader and offered $600 million for the site. The MTA was forced to open up the bidding process, a tactic that ended up increasing the offers from both Cablevision and the Jets, which had put at first said it was willing to pay just $100 million. (A third bid, from TransGas Energy, for $1.05 billion, was quickly discarded by the MTA board members, because it would require the transit agency to buy electricity from the company for 40 years.)

In the process, the stadium that the Jets wanted to build, the world's most expensive stadium-to-be in fact, got even more expensive: $1.9 billion. That makes it a third higher than the $1.4 billion number thrown around as recently as last fall, and it doesn't even include the cost of the land. A team source said that the lower number dated back to January 2002 and was never updated to reflect higher construction costs and more exact blueprints and demands from banks to expand the contingency funds.

At a celebration after the MTA vote Thursday, when Jets President L. Jay Cross was asked if the high stadium cost would force up ticket prices, he didn't exactly say no.

"We do not have the highest ticket prices in the NFL at the Meadowlands," where the Jets play now, he said. "We hope we offer decent value and we do not ever intend to have the highest prices in the NFL."

He did acknowledge that the Jets may charge seat licenses--which fans would have to buy first before they could even have the right to buy a ticket.

Earlier in the week, a Jets source said they would be able to make their money back in just the 10 Sundays a year when the team plays at home.

"Ten games a year will give us the lion's share of our revenue. We're not just talking about 75,000 seats. We're talking about suites and hospitality packages, too," the source said. "It's the same thing as building an office building in New York City, it costs a lot more, but your demand is there. This is a good investment for the Jets."