World Trade Center leaseholder Larry Silverstein has asked for the remaining $3.5 billion of bonds authorized by Congress to help Lower Manhattan rebuild after the Sept. 11, 2001, attacks, Silverstein spokesman Dara McQuillan said.
Silverstein formally asked New York City and state officials for the allocation last week. His request comes midway through the $8 billion Liberty bond program established in 2002.
While residential developers have already consumed the $1.6 billion allotment of tax-exempt, private-activity housing bonds, demand for the $6.4 billion commercial portion has lagged. The city and state can each designate half of the commercial allotment of Liberty bonds, which in total is expected to cost the U.S. Treasury about $1.2 billion in lost tax revenue over the life of the bonds.
Empire State Development Corp. spokesman Ron Jury confirmed the state had received Silversteins request and said the state and city would evaluate it together. Jury said there was no timeframe set for the decision.
If city and state officials approve Silversteins request, then the rest of the commercial bonds will be used on the World Trade Center site. McQuillan said the pace of construction would dictate how much of the bond proceeds would go towards the five office towers planned for the site. While it is unlikely that market demand will support the completion of all five towers by the 2009 deadline for issuing the Liberty bonds, bond proceeds can be used up to five years after issuance.
The comparatively slow allocation of commercial Liberty Bonds underscores the concern some feel over the pace of rebuilding downtown. Nearly four years after the terrorist attacks that killed nearly 2,800 people, a big hole yawns across the 16 acres where the twin towers once stood. The sole building that has risen near the site since then has no tenants committed to date.
There are so many plans, but little real evidence of progress, said Paul Goldstein, district manager of Community Board 1, a local body representing Lower Manhattan.
Critics charge that the city has diverted its resources to other high-profile projects, such as the construction of a sports and convention center on Manhattans far West Side.
There has been none of the follow-through that was proclaimed in patriotic terms about not letting the terrorists win, said Skip Carrier, a spokesman for state Assembly Speaker Sheldon Silver, a Democrat who represents Lower Manhattan. Carrier called the situation downtown and the administrations focus on the Far West Side terribly disappointing.
The credit markets have absorbed this unease about Lower Manhattan rebuilding. When the citys Industrial Development Agency issued $475 million of Liberty bonds last month for 7 World Trade Center the Silverstein property that was the last building to fall on 9/11 and is the first to be rebuilt investors demanded high yields partly because of a four-year call provision and partly because Silverstein has not yet signed any tenants for the 52-story building.
Silverstein holds a long-term lease on the World Trade Center site, which is owned by the Port Authority of New York and New Jersey, and on the adjacent 7 World Trade Center building.
Officials recognize that commercial activity downtown has not kept pace with other parts of the city.
Our highest priority is to rebuild Lower Manhattan [but] we cant dictate market demand, said Andrew M. Alper, chairman of the IDA, at a recent New York City Council hearing. Alper and other rebuilding officials say they are optimistic that commercial demand in the area will pick up over the next few years.
Development of new office space remains sluggish in Lower Manhattan for several reasons. One major deterrent for companies considering the area is the massive construction planned for the World Trade Center site and its environs for years to come.
Another reason is that going rents in Lower Manhattan are at least $20 per square foot cheaper than comparable space in midtown. As building costs are the same throughout the city, downtown builders fear it would be harder to recoup and profit on their investments. Liberty bonds can finance only new construction.
While few would deny that the World Trade Center site holds its share of challenges, some wonder if Silverstein deserves all of the remaining Liberty bonds.
You combine the pressures of powerful real estate interests along with the special circumstances of rebuilding the World Trade Center, and its not surprising that theyre looking to use the rest of the resources its questionable whether thats in the best interest of New York Citys economy, said Bettina Damiani, project director of Good Jobs New York, a watchdog organization that promotes accountability in the allocation of government subsidies.
Damiani said the redeveloped World Trade Center site could lead to a glut of office space that might depress the commercial market throughout the city. Silversteins five towers will contain 10 million square feet of office space between them, McQuillan said.
In this uncertain climate, the overall success of the Liberty bond program remains to be seen. Congress created the $8 billion Liberty bond program in early 2002 to spur the redevelopment of Lower Manhattan, and the residential component is credited with fueling a housing boom in the area.
Of the $6.4 billion commercial allotment, $2 billion was set aside for projects outside the so-called Liberty Zone south of south of Canal Street, East Broadway and Grand Street in Lower Manhattan, and $1.2 billion of that amount has been issued or approved.
Silversteins request for the remaining Liberty bonds will not preclude Goldman, Sachs & Co. from claiming $1 billion of the bonds to build an 800-foot-tall headquarters across the highway from the World Trade Center site.
The state-controlled Liberty Development Corp. last summer granted preliminary approval for Goldman to sell up to $1 billion of bonds through the corporation, and that amount is included in the states tally of $2.8 billion of commercial Liberty bonds committed.
While plans for the headquarters recently stalled over Goldmans dispute with the city and state over certain rebuilding plans, the company has not withdrawn its site-specific application for the $1 billion of bonds, according to the Empire State Development Corp.
A Goldman spokesman did not return calls for comment.
