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<p>How New York City got a better deal by going with the less prestigious choice.
By Nitasha Tiku 12/20 9:54pm</p>
<p>Gleaming the cubes.</p>
<p>On Monday, the lobby of the Weill Cornell Medical College, which resides on a particularly gray stretch of the Upper East Side, was crawling with men and women in wooly blazers dotted with carnelian buttonsthe technical name for the maroon hue that invariably moves Cornell students to chant some version of Go Big Red!</p>
<p>Inside the auditorium, as an assembly of press, pols, and local technorati waited for Mayor Bloomberg to appear, a giant projector flashed a mosaic of the Cornell University logo.</p>
<p>The news had been leaked to every major news outlet by midnight on Sunday; there was no point in being coy.</p>
<p>Today will be remembered as a defining moment, Mayor Bloomberg told the crowd, officially announcing that a 50-50 joint proposal between Cornell and the Technion-Israel Institute of Technology had won the $100 million grant to build a new engineering mecca and applied sciences campus. The project is designed to help New York surpass Silicon Valley as a global innovation capital, creating 30,000 jobs and as much as $1.4 billion in tax revenue.</p>
<p>For the next hour, a stream of political operatives, from New York City Economic Development Council president Seth Pinsky to councilmember Jessica Lappin, who represents Roosevelt Island, where the 2 million sq. ft. build-out will stand, took to the podium to express their breathless excitement at the scope of the $2 billion initiative.</p>
<p>Cornell president David Skorton debuted a video of an aerial rendering of the gleaming net-zero energy building. Set to a dramatic score, it looked like a CGI version of a utopian futureyou know, the part in the sci-fi flick before the apocalypse sets in. There are visions of sugarplums dancing in my head right now, said New York City Public Schools Chancellor Dennis M. Walcott in response to the bit about Cornell and Technion instructing 200 of his teachers in science education every year.</p>
<p>Of all the applications we received, Cornell and the Technions was far and away the boldest and most ambitious, Mr. Bloomberg said of the sweeping offer, which included a $150 million venture capital fund, startup accelerator, and ambitious plans to construct 300,000 sq. ft. by just 2017as close to the end of his third term as the mayor was likely to get.</p>
<p>But what should have been an effortless victory lap for the citys yearlong plan to remake its economy for the coming century was clouded by a note of confusion. Stanford, after all, was pegged the front-runner at least as far back as March, when Mayor Bloomberg gave a speech in Palo Alto, noting, Were particularly pleased that Stanfordwhich has a top-flight engineering schoolis considering the idea. Stanford batted its eyelashes back by launching a TumblrNew York native!featuring a video of Larry Page and Sergey Brin talking up the Mayors initiative.</p>
<p>Indeed, as late as Friday morning, the schools negotiating team was still locked in meetings with EDC officials; a few hours later, news hit the wire that Stanford had withdrawn its bid. And not long after that, Cornell issued a hastily-written press release revealing that it had received a $350 million anonymous donation. The largest gift in the schools history was announced late on a Friday afternoon.</p>
<p>At the time, it was hard to say what was chicken and what was egg. Was Stanford trying to save face with a preemptive break-up, or did Cornell win by default? Surprisingly bitter recriminations followed from the various players as everyone tried to spin the narrative in their favor.</p>
<p>Part of the difficulty of understanding where negotiations broke down is a silence clause stipulated in the request for proposal (RFP). But numerous sources, who spoke under condition of anonymity, painted a picture of tense discussions and onerous demands that left several schools wary, including Stanford.</p>
<p>Cornell, eager to increase its presence in New York City, was more compliant at the negotiating table and better versed in what it took to get city approval, including fundraising before commitments were made. Sources said the $350 million gift, for example, had been secured for months. We need to expand beyond Ithaca, President Skorton said plainly from the podium.</p>
<p>Cornell needed it more. But NYC Tech needs Stanford more, tweeted New York Citybased venture capitalist David Pakman, alluding to the latters prestige within tech circles and facility with spinning out successful startups. (Theres a reason China and Russia are trying to build their own Silicon Valley.)</p>
<p>In the end, it seems the city got a better deal for taxpayers by going with the one that wanted it more, rather than the one it was supposed to want.</p>
<p>A university source familiar with the negotiations said Stanfords decision to drop out wasnt based on any one issue, but rather due to a whole host of things that held them liable for factors outside of [their] control, such as big-ticket penalties for missed construction deadlines and the citys desire to indemnify themselves for any toxicity at the Roosevelt Island site. Although a Phase II study was commissioned this year, a full scale analysis of the medical dump under the hospital cannot be done until the building is razed. Should serious hazards be uncovered, the school will be on the hook not only for the clean-up but also potentially for resultant delays.You had a lot of institutions that wouldnt even apply because of the terms, and they got even more severe in the negotiation process, said the source.</p>
<p>City officials counter that such stipulations are par for the course. If we didnt include these types of commitments, there would be a chorus of people saying: How could the city write a blank check to a university that in five years could just decide it wasnt into it?! one official said. Its standard in any kind of long-term land lease or land sale that the city would ask the recipient to agree to certain benchmarks. (Cornell and Technion are leasing the land for the next 99 years, at which point they can pony up $1 to buy.)</p>
<p>However, legal representation for schools besides Stanford also balked at the contract. The legal document that we got was essentially, if you signed it, it would require you to build even if you didnt hit the [fundraising] target, another university source said. If you state that by this date, youre going to have this much faculty and this much building completed, and you dont get it completed, youre left open to a legal challenge. It was enough for our general counsel to raise a red flag to say they are not comfortable with signing this.</p>
<p>Even institutions that have negotiated to build in New York City before hadnt encountered this level of vulnerability to legal action. There wasnt any contract we signed that if our endowment goes to Madoff and then goes to nothing, were required to build, said another source familiar with land use issues in New York.</p>
<p>The citys aggressive negotiating stance also created friction. As has been reported, Stanford did not take a shine to Mayor Bloombergs assertion during a talk at MIT in late November that Stanford is desperate to do it, even if he said the same of Cornell. The bigger stumbling block, according to our sources, seems to have been another remark uttered during that same speech: According to Mr. Bloomberg, the desperation meant that, We can go back and try to renegotiate with each one. A university source said Stanford had no idea that everything was back on the table. The school responded in good faith, and everything was changing, said the source, wryly adding, But apparently Cornell said yes to everything.</p>
<p>Seth [Pinsky] famously negotiates every last penny off the table, and that spooked Stanford, acknowledged a New York City real estate executive. They thought they had a partner and were shocked with his hard line. They were told not to worry about the particulars and that it would be fixed in the end, but despite assurances, they ultimately felt uncomfortable partnering with the city.</p>
<p>A city official pointed out that it was that same aggressive stance that helped Mr. Pinsky close complicated and thorny deals on Hudson Yards and Willets Points, which the city had been trying to navigate for years.</p>
<p>In fact, a source with knowledge of the negotiation process said familiarity with the way the city does business helped Cornell, which already employs more than 5,000 New York City residents. There are things the city is going to ask you to do that [Cornell] was very comfortable with, its not clear that the other side was that comfortable, said the source before dropping a bit of local trivia, They know what a ULURP is.</p>
<p>ULURP, or Uniform Land Review Procedure is the citys notoriously arduous standardized review process. In October, Columbia University president Lee Bollinger told the schools newspaper, Ive been through a ULURP process. Nobody in their right mind should go through a ULURP process more than once in their life. Of course, Mr. Bollinger was talking about how the ordeal might hold back his competitors for the tech campus RFP, noting that it took Columbia three-and-a-half years from submitting rezoning plans to getting mayoral approval to develop in Manhattanville. Its something candidates no doubt had in mind considering the penalties for delays.</p>
<p>Its binding, Mr. Bloomberg shot back to a question from the press corps about the contract. Keep in mind, if were gonna invest, commit this land, turn down other people who wanted it, and invest $100 million, you dont do that unless you have a binding commitment
One of the attractive things about Cornell is that they know how to do business in the city. Just look around, he added, referring to Weill Cornell Medical College.</p>
<p>But both city officials and Cornell say it was the schools superior offering that clinched the deal. The catalyst was that Cornell was beating them in every single category, said source close to Cornell, citing the speed of construction, the size of the campus, and the amount of students and faculty it will serve.</p>
<p>Cornell was hungrier, Cornell was more humble in the processI think it helped them win the proposal, said Charlie Kim, CEO of Next Jump, a loyalty rewards company, who sits on the advisory committee that helped select winners. Mr. Kim said the committee met a thirty to forty-five days ago and then again last week to go into more detail. I think probably after reviewing everything, and this is kind of my opinion, I felt Cornell-Technion was the number one recommendation.</p>
<p>City officials claim the rush to sign the papers was merely a reflection of the way discussions were being structured. The city was simultaneously negotiating with everyone that applied, trying to move each deal as far along as possible. When Stanford dropped out, the deal with Cornell was already near completion.</p>
<p>And what of the mysterious $350 million donation? Though some speculated that the money had come from Mayor Bloomberg himself, The New York Times revealed Monday evening it had been a gift from Cornell alum Charles Feeney, the Duty Shop Group entrepreneur and subject of the book The Billionaire Who Wasnt: How Chuck Feeney Made and Gave Away a Fortune Without Anyone Knowing.</p>
<p>Which isnt to say Mr. Bloomberg wont be opening up his wallet to see that his legacy-defining project remains on track. Although Cornell and Technion have been granted the full $100 million, the city left open the possibility of approving a second smaller-scale project, like plans from NYU and the Polytechnic Institute to transform the derelict former MTA headquarters into a Center for Urban Science and Progress, or Carnegie Mellons proposed partnership with Steiner Studios to build a digital media campus at the Brooklyn Navy Yard, both of which will now likely have to rely on philanthropic donations.</p>
<p>You assume that when they make phone calls, Id be on the list, Mr. Bloomberg said at the press conference, while trying not to crack a smile. But I also have some commitments to some other educational institutions, as you know.</p>
(That’s a compliment!)</p>
You’re arguing against points I never made and contradicting your own. </p>