‘Stacked Deck’ Prompts MSG to Sue MTA, Jets, City

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Madison Square Garden filed suit yesterday against the Metropolitan Transportation Authority, the New York Jets, and the city, alleging the bidding process for the right to develop the MTA’s West Side rail yard was rigged in favor of the football team.


The suit in Manhattan Supreme Court has been expected since the MTA board voted unanimously last week in favor of the Jets’ offer. The team wants to build a 75,000-seat domed stadium over the rail yard. Madison Square Garden is seeking an injunction against the MTA and the Jets to prevent the development of the property, requesting either that the project be awarded to the Garden or that the bidding process be repeated.


“The MTA, the mayor’s office and the Jets stacked the deck in favor of the Jets at the expense of all New York taxpayers, subway riders, and commuters,” the Garden’s attorney, Randy Mastro, said. A deputy mayor in the Giuliani administration, Mr. Mastro is a partner at Gibson, Dunn & Crutcher.


The MTA board recognized the Garden’s offer of $760 million – $410 million in cash upfront, with the rest in “allotted payments” for a platform over the rail yards – was a more lucrative offer than the Jets’ proposal, but the football team won out in the end because of political pressures, the Garden alleges in the suit. The Jets valued their bid at $280 million in cash, with an offer of $440 million more from six developers who had a nonbinding agreement to buy transferable development rights should the area be rezoned. The Jets’ plan is based on pledges of $600 million in city and state subsidies for the platform and a retractable roof over the stadium.


“The MTA board’s principal rationale for this remarkable decision, as board members admitted, is that the stadium is a favored project of the two ‘stake-holders’ who appointed them – the mayor and the governor,” the suit alleged.


The board members, at their meeting last Thursday, also cited the extension of the No. 7 subway line and the value of the eastern rail yards as reasons for choosing the Jets’ bid.


That is unlawful, the Garden argued.


“You put out bid specifications, and let bidders address those areas. There was no mention anywhere of the no. 7 extension or the eastern rail yards in the bid proposals, so it is wholly improper to use this criteria,” Mr. Mastro said.


Other complaints included that the bidding schedule was accelerated – bidders were given only 27 days to submit full proposals and the MTA board was given only 10 days to make its decision – and that two of the executives working for the consultants the MTA hired to evaluate the bids, Newmark, made contributions to NYC2012, which supports the Jets’ stadium proposal.


“In just six months, Cablevision and Gibson Dunn have sued to stop the Olympics, the expansion of the Javits Center, the extension of the No. 7 line, the rezoning of Manhattan’s far West Side, the creation of the New York Sports & Convention Center, and hundreds of thousands of new jobs,” the Jets said in a statement.


The Jets sued Cablevision last month, alleging the company was violating antitrust laws by offering $600 million to build a mixed-use development over the rail yards. The bid was meant to block the Jets from building a stadium that would compete with Madison Square Garden, the Jets argued, and was not an honest offer to develop the site.


And Madison Square Garden filed an earlier suit against the Jets, saying that in its environmental impact statement the Jets failed to consider several environmental impacts from a stadium, especially transportation issues. It is still wending its way through the courts.


“‘If you can’t beat them, suit them’ is unfortunately how some people go about it,” Mayor Bloomberg said yesterday of the Garden’s new lawsuit.


“I think it is clear that the Jets have worked with the MTA for a few years and came up with a bid, and the MTA took one look at it and unanimously – not just the governor’s and the mayor’s appointees, but everybody that was on that board – said it wasn’t even close in terms of value to the MTA and the things that they are charged with doing. The Jets had the best bid,” Mr. Bloomberg said.


One of Madison Square Garden’s arguments drew support from a former MTA chairman, Richard Ravitch.


“The MTA decided to accept considerably less consideration from the Jets than at least one other bidder was pre pared to pay here on the hope that it might be able to obtain a rezoning later to transfer and sell air rights that do not currently exist,” Mr. Ravitch testified in an affidavit accompanying the Garden’s suit. “It is my profound conviction that the MTA’s board members have a legal responsibility and fiduciary duty to do what is in the interest of the Authority. … Here, however, this disposition process did not produce the most dollars possible for the MTA’s offers for the benefit of the riding public and therefore was not in the interest of the authority.”


As the mayor said, the Jets had spent several years working on a deal with the city to build a stadium at the site. Their original offer for the air rights was $100 million. After the MTA said it wanted $300 million, the Jets agreed to arbitration, but the MTA opened up the process to bids when officials of the Garden, whose officials view the planned stadium as a threat to its convention, sports, and entertainment business, offered $600 million less the cost of the platform.


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