(Adds underwriting detail, paragraph 4)

By Joan Gralla

NEW YORK, June 24 (Reuters) - New York's mass transit agency on Wednesday approved a sweetened deal for its Brooklyn Yards developer, Forest City Ratner (RTNR.PK: Quote, Profile, Research), which critics said shortchanged riders because the price was too low.

The upfront payment for the multibillion-dollar project that will bring Brooklyn its first professional sports team in decades was slashed to $20 million -- one-fifth of the original amount.

Forest City Ratner now has more than 20 years to build 16 office towers and apartment buildings at the site that will house a new arena for the New Jersey Nets basketball team.

The firm is required to start the arena construction this year or lose $700 million of tax-free financing that a state agency says it will sell in the fourth quarter via Goldman Sachs (GS.N: Quote, Profile, Research). A Nets official later said Barclays (BARC.L: Quote, Profile, Research) would serve as co-underwriter.

New York City's real estate developers have stalled or axed numerous big and small projects since the credit crunch pushed the country into a recession, and demand for outer-borough properties including in Brooklyn has been chilled markedly.

The Brooklyn project is a novelty because it calls for building a platform over the Atlantic rail yards to support the thousands of new offices and apartments. A similar plan for Manhattan's rail yards is on hold. [ID:nN03546702].

Metropolitan Transportation Authority board members, at a webcast meeting, did not respond to a competing $120 million offer from a partner of one of the project's opponents, Develop Don't Destroy Brooklyn.