In the face of criticism from the Lower Manhattan Development Corp., the board of theNew York City Industrial Development Agency plans to proceed with the preliminaryapproval of $650 million in tax-exempt Liberty bonds for a proposed Bank of Americaheadquarters in midtown Manhattan.
Andrew M. Alper, IDA president, said yesterday that One Bryant Park LLC, a partnershipbetween the Durst Organization and Bank of America, deserves up to $650 million inLiberty bond financing because the planned headquarters is a significant project for thecity and cannot be done without tax-exempt incentives.
"Clearly this project is significant," Alper said. "It's a major statement. It's a lotof jobs, both to be retained and to be grown." Charlotte-based Bank of America said itwould keep 2,850 jobs in Manhattan if the city helps it and Durst build One Bryant Park.Bank officials also said the company could potentially add another 2,129 jobs in thecity.
However, the IDA was heavily criticized yesterday for its plan to subsidize a bankheadquarters in Midtown using bonds intended to revitalize lower Manhattan. In whatappears to be an unusual breach with state officials overseeing development at GroundZero, John C. Whitehead, the LMDC's chairman, submitted testimony opposing the deal.
"I believe the proposals for allocation of Liberty Bonds to incentivize large-scalecommercial real estate development outside of Lower Manhattan's Liberty Zone runscounter to our city's, state's and nation's rebuilding objective," Whitehead said. "Sucha deployment of resources to areas beyond the Downtown district erodes space in LowerManhattan and thereby adversely impacts the pace of revitalization."
Alper said that he and Whitehead had agreed to disagree. "Our preference would be to useall of the Liberty bonds inside the zone," Alper said. But, he added, "Right now we justdon't see the demand."
Alper said the Bank of America project deserves the Liberty bonds because of itssignificance to the city and because without the low-cost financing it would not befeasible. He said the estimated return on the project is "in the single digits. To builda two-million-square foot building with one million square feet of unoccupied space -spec space - with single digit returns, we think is a good justification to require usto provide some incentives."
If the board induces the sale today, it would need final approval later before the bondscan be sold. The companies have proposed building a 57-story office tower in Midtown,with the bank a 49.9% partner in the development as well as a tenant, occupying onemillion of the two million square feet of space.
Of the $8 billion Liberty bond program, $2 billion can be used for commercial projectsoutside the Liberty Zone. Prior to today's board meeting, the IDA had committed toLiberty bond financing for only one project outside the zone - $113 million for ForestCity Ratner's proposed Bank of New York back office in Brooklyn. In another newdevelopment yesterday, Alper said the city is no longer negotiating with Forest CityRatner for Liberty bonds to help finance a proposed New York Times Co. headquarters inmidtown Manhattan.
While the Liberty bond proposal is being brought before the board, Alper said the cityand Durst and Bank of America are still negotiating a package of tax incentives tofurther subsidize the project. He said he would have preferred to bring both the taxpackage and the Liberty bonds to the board for approval today, but that the timingrequired he at least get the Liberty authorization.
According to Alper, the Empire State Development Corp. needs to "know there's financingin place" in order to proceed with a condemnation process at the site of the proposeddevelopment. "The ESDC timing basically means that we have to get the IDA board toconsider a preliminary application for these bonds to keep their process moving. We'llhave to come back to the IDA board at a later date to talk about the tenants and thepotential of other developer incentives."
The federal government approved the Liberty bond program after the Sept. 11, 2001,terrorist attacks. The Liberty zone is in lower Manhattan below Canal Street.
