Any developers will have to pay for building a platform over the rail yards because the MTA, which runs the city's subways, buses and suburban commuter train lines, will continue to use the yards.
MTA Chairman Peter Kalikow defended the agency's ability to handle the plan, telling reporters: 'We've done billions of projects in the last few years; almost all of them came in on budget.'
Yet members of the MTA's board, which unanimously approved the deal, fretted that the nation's biggest mass transit agency -- which has wracked up huge cost overruns on previous projects -- would be on the hook if it costs more than $2.1 billion to extend the No. 7 subway line to the West Midtown site.
That is the maximum amount Republican Mayor Michael Bloomberg has committed to spend on lengthening the subway from its current ending point at Times Square -- the intersection of Broadway and Seventh Avenue with 42nd Street -- west to 11th Avenue and south to 34th Street.
Katherine Lapp, MTA executive director, said the accord between New York City and the MTA will be clarified to ensure that the city bears the costs of acquiring any additional land that is needed, possibly through eminent domain.
The MTA's budget for the recent rebuilding of the downtown Fulton Street subway station ballooned by as much as $200 million, partly because buying the land needed cost so much more than had been expected, said Gene Russianoff, a senior attorney for transit advocacy group the Straphangers Campaign.
Noting that the city previously had promised to pay the entire cost of the No. 7 subway link, Russianoff added, 'If the city says it's a free subway, it should stay a free subway.'
Lapp also assured several skeptical MTA board members that the agency's estimate for the No. 7 line was reliable.
Though the MTA is run by the New York governor, who appoints most board members, one of New York City's representatives is its budget director, Mark Page. He was pressed about the city's plans to sell bonds to finance the subway extension.
Page told the board the 'outlines' of the new accord would allow the city to sell the debt, which will partly be backed by payments in lieu of taxes from the site's developers.
Either the MTA or the city can walk away from the deal if New York City has not closed on its first bond sale for the subway link by December 31, 2007. Page, referring to this provision, added, 'The decision point on this question is fast closing in on us.' He later declined to comment further.
New York City had wanted to buy the western half of the rail yards, which spread over a total of 26 acres, for $300 million. But this prompted an outcry because the western half's 13 acres were recently appraised at nearly $1.3 billion.
The MTA and the city have now agreed to sell that site to the highest bidder. And the MTA will sell the city 4.5 million square feet of transferable air rights for the eastern half of the site for $200 million. Developers who buy the rights can build larger buildings on the eight blocks north of the site.
The air rights' minimum price is $103 per square foot. Though the city will handle the sale of the air rights, the MTA would have to agree to any sales for less than that amount.
The MTA board was assured that it can still reject its new deal with the city if the bids are unacceptable, for example.
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