Straphangers sue to annul sale of Atlantic Yards

NEW YORK (Reuters) - The troubled Atlantic Yards project, a multibillion-dollar redevelopment in Brooklyn, came under renewed fire on Tuesday as a group of elected officials and consumer advocates filed a lawsuit seeking to annul the sale of the site.

The suit, brought by the New York public interest group Straphangers Campaign, the advocacy group Develop Don't Destroy Brooklyn, State Senator Velmanette Montgomery and other elected officials, seeks to overturn a sweetened deal made by the New York public transit authority in June.

The Metropolitan Transportation Authority had agreed in 2005 to sell the 22-acre site to private developer Forest City Ratner for $100 million in cash at the time of closing.

But in June, the cash-hungry agency revised the deal to just $20 million on closing and the remaining $80 million over 22 years.

"While the MTA is forcing service cuts and fare increases on the people of New York, they are giving Forest City Ratner just about a free ride," Senator Montgomery said in a statement.

The suit charges that the MTA violated state law that requires it to get an independent appraisal of the site and seek competitive bids.

"The MTA failed to fulfill either of these legal requirements when its board approved its new deal with Forest City Ratner on June 24th, 2009," Montgomery said.

Forest City Ratner owner Bruce Ratner intends to use the site to construct a new basketball arena for the New Jersey Nets, the National Basketball Association team that he owned until last month.

Ratner sold 80 percent of the team to Russia's richest man, Mikhail Prokhorov in September, in a more than $200 million deal that includes a partnership for the development of the arena, as well as apartment and office buildings also planned on the site.

Legal disputes, financing problems and challenges from local community groups, notably Develop Don't Destroy Brooklyn, have dogged the Atlantic Yards project for years.

Critics have slammed the use of eminent domain to clear land for the project as well as the low price paid by Ratner.

In June, Ratner dropped architect Frank Gehry to cut costs, further irking critics -- Gehry's design was a key factor in winning public support for the project in the first place.

Ratner has a year-end deadline to start building the arena, or risk losing $700 million of tax-free financing that a state agency has said it plans to issue in the fourth quarter.

The suit is Montgomery et al. v. Metropolitan Transportation Authority et al. in the Supreme Court of the State of New York

(Reporting by Ciara Linnane; Editing by Jan Paschal)