9/11 residential bonds close to being used up
By Elizabeth OBrien
City and state officials said last week that the residential allotment of Liberty Bonds designed to rebuild Lower Manhattan after the Sept. 11, 2001 terror attack would likely run out by the programs original Dec. 31 deadline.
In 2002, Congress approved up to $8 billion in tax-exempt bonds as part of its post-Sept. 11 economic stimulus plan. Of the $8 billion, $1.6 billion was earmarked for residential projects. Developers have already requested much of that amount, and many credit the program with spurring housing construction at a time when the weakened economy meant they otherwise would have had little incentive to build.
By contrast, the far larger portion of commercial Liberty Bonds has languished with fewer takers. Developers have been more reluctant to build offices Downtown when 12.5 million square feet of commercial space remains empty south of Canal St., according to the Downtown Alliance.
Until a week ago, it had seemed likely that most of the commercial Liberty Bonds would go unclaimed by the Dec. 31, 2004 deadline, while all of residential bonds would be allocated by the end of this year. On Feb. 2, President George Bush, responding to requests from the mayor and the governor, asked for a five-year extension of the Liberty Bond deadline in his 2005 budget.
Downtowners cheered the news that, if Congress approves the extension, developers will have until 2009 to request financing for projects.
In short, Im thrilled, said Carl Weisbrod, president of the Downtown Alliance, which runs a business improvement district.
Weisbrod said the extension would allow Liberty Bonds to be put to their primary intended use, rebuilding the World Trade Center site. The site plan and memorial design necessarily came first, Weisbrod said, and now the bonds will still be available when developers turn to commercial redevelopment.
To date, commercial projects totaling about $1.8 billion have received either preliminary or final approval for Liberty Bond use, according to data provided by Good Jobs New York, a watchdog organization tracking the bond use. This falls far short of the $6.4 billion allocated to the city and state for commercial development.
Commercial bond applications for Lower Manhattan include the $10 million the Glazier Group, which owns the Seaports Bridgewaters, has requested for the Seaport Convention Center in the Fulton Market Building. Mike Piazzola, the general manager of the Seaport Marketplace, said that the Glazier group might be using the financing to renovate and open a 30,000 square-foot meeting space within the Fulton Market Building. A Glazier official did not return a call for confirmation by press time.
Additional projects include the $35 million requested by Robert De Niro and a partner for a hotel at 377 Greenwich St., the $145 million requested by the Brookfield Group to renovate 3 World Financial Center, and the $400 million requested by Larry Silverstein to rebuild 7 World Trade Center.
Liberty bonds were key to making the 7 World Trade Center project possible and I am pleased President Bushs budget provided for a five-year extension of the Liberty Bond program, said Janno Lieber, a Silverstein executive.
Some had argued that, along with an extension of the Liberty Bond deadline, the cap on residential bonds should be raised from $1.6 billion to $3 billion to reflect the stronger demand for residential bonds. Others, like Weisbrod, opposed the idea on the grounds that it would divert necessary financing from the trade center site.
Bettina Damiani, project director of Good Jobs New York, argued against a raise in the residential cap because such a move wouldnt increase the number of affordable housing units included in the projects.
Unless they address the need for more low and moderate income housing, I dont know that there would be a need to put more into the residential pot, Damiani said.
A Treasury Department spokesperson confirmed last Monday that Bush did not request a reallocation of the Liberty Bonds.
The city Housing Development Corporation, which administers $800 million, or half of residential Liberty Bonds, collects a three percent fee from developers, which goes toward subsidizing affordable housing throughout the city. The State Housing Finance Agency, which administers the other $800 million, requires developers receiving Liberty Bonds to set aside five percent of their units for tenants making 150 percent of the area median income, or about $94,000 for a family of four.
The Housing Development Corporation has already allocated $377.6 million, according to agency spokesperson Tracy Paurowski. In addition, developers have requested $1.2 billion in Liberty Bonds from the agency, Paurowski added.
On Feb. 9, the city will hold a public hearing on a request by 15 William St., L.L.C. for $137 million to build a 32-story, 373-unit tower at 15 William St. The hearing will take place at 10:00 a.m. at 110 William St.
On the state end, current allocations and expressions of interest combined approach the $800 million allotment, according to Tracy Oats, a spokesperson for the New York State Housing Finance Agency.
On Feb. 3, the state held a public hearing on a request by Barclay Street Realty L.L.C. for $138 million to build a 56-story, 381-unit building of one, two and three bedroom apartments on a vacant site.
On Feb. 4, the state held a public hearing on a request by Albanese Development Corp. for $20 million for the Solaire, the new green residential tower in Battery Park City. While this environmentally friendly construction is almost all occupied and the developer already received $100 million in Liberty Bonds, the initial authorization was $125 million, Oats said. A recent decision by the Internal Revenue Service made Albanese eligible to cover more of their costs with Liberty Bonds, prompting the company to approach the state again, she added.
With residential financing proceeding at a fast clip, Community Board 1 officials also voiced approval of the Liberty Bond extension. C.B. 1 had also opposed a raise on the cap of residential financing, in part because necessary city services like police, fire and public schools already threaten to fall behind residential construction.
The extension of the Liberty Bond deadline was good news, said Paul Goldstein, district manager of C.B. 1. Obviously, we would like to see those funds made available for more work Downtown.