Volume 16 • Issue 47 | April 16-22, 2004

SPECIAL REPORT


How to spend Downtown’s last billion?

By Josh Rogers

Spend $100 million here and $100 million there and pretty soon you’ve spent the $1 billion left to help Lower Manhattan after 9/11.

The Lower Manhattan Development Corporation board voted on Tuesday to earmark $176 million in federal Community Development Block Grant funds — most of which will go to buy and demolish the Deutsche Bank building. If the money is allocated, it will leave about $1 billion to pay for a competing set of priorities for Lower Manhattan including affordable housing, park space, part of a rail link to J.F.K. Airport and the Long Island Rail Road, a new school, a recreation center and cultural facilities.

Most of the advocates with ideas for the money have not identified specific dollar amounts for the various priorities, but if you had to identify the two ends of the spectrum, it would break down between those who favor using some of the money for affordable housing and those who think some should go to the rail link.

L.M.D.C.Partial Action Plans already approved

The Lower Manhattan Development Corp was initially received $2 billion in federal Community Development Block Grants in 2002 and then received two targeted supplemental grants of $750 million and $33 million. The U.S. Dept. of Housing and Urban Development has approved five partial action plans and the two supplemental grants.
PAP No.
Purpose of Partial Action
Plan Date Approved
Total Expenditure for PAP

1
Residential Grant Program,
Employment Training Assistance Program, Interim Memorial, and Planning and Administration
9/25/2002 $306 million

2
Business Recovery and Economic Revitalization
11/22/2002
$350 million

3
Cultural and Community Development
6/14/2003
$24 million

4
Short Term Capital Projects, Long Term Planning, Supplemental Funds for Business Recovery Grant Program
8/6/2003
$156.1 million
S-1
New York Firms Suffering Disproportionate Loss of Life
9/15/2003
$33 million
S-2
Utility Restoration and Infrastructure Rebuilding
9/15/2003
$750 million

5
Tourism and Communications
1/28/2004
$2.4 million

Total Funding Allocated to Date $1.59 billion

Community Board 1’s World Trade Center redevelopment committee sat down to try and figure out its spending priorities about a week ago and started to form a resolution. The committee consensus was to pay for park space improvements along the Hudson and East Rivers, which they estimated might cost about $270 million, a new school at about $55 million, a new rec center perhaps for the 92nd St. Y at about $50 million, at least $50 million for affordable housing, unspecified improvements to Fulton St., a library for about $5 million, and about $15 million for upgraded facilities at N.Y.U. Downtown Hospital for about $15 million.

Rail link
The board has been in favor of building the rail link, but most members of the committee felt that since it will cost a minimum of $2 billion or $3 billion, it would not be a good use of the limited amount of C.D.B.G. money.

“They are either going to support this project or not,” said Jeff Galloway, a committee member. “If they are, they’ll come up with the money.”

The L.M.D.C., a state-city agency created by Gov. George Pataki at the end of 2001, is studying four ways to build the airport link either by building a new tunnel or using existing subway tunnels. The corporation expects to pick an option at the end of the month and identify the way to pay for it. Kevin Rampe, L.M.D.C. president, said no decision has been made to use C.D.B.G. money for the link, but it is one of the funding sources under consideration.

Downtown business leaders though are pushing to use some of the development money for the link. “A goodly chunk of it has to be for transportation,” said Carl Weisbrod, president of the Downtown Alliance, which manages the Wall St. area’s business improvement district.

Weisbrod, also a director on the L.M.D.C. board, said the rail link will lead to more jobs, another oft-cited priority of the groups pushing for affordable housing. He said better transportation will trigger economic development Downtown leading to more high-paying jobs. He said those jobs will help restaurants, hotels and retail shops, all of which have been struggling since 9/11.

“Why is this all suffering in Lower Manhattan,” Weisbrod said after Tuesday’s L.M.D.C. meeting. “It’s because we lost 60,000 jobs that used those services.”

David Dyssegaard Kallick, a fellow with the Fiscal Policy Institute, said although building a rail link would no doubt create some jobs at the high end, it will not help people of all income levels, and if jobs are the goal, there is more bang for the buck building cultural centers, schools and community facilities.

“It’s hard to spend a billion dollars and not have economic development, but is this the best way to spend it,” Kallick said of the rail link. “Just look at the numbers — this idea of a rising tide lifting all ships just doesn’t happen.”

Housing
Kallick said affordable housing is the most pressing need. A recent forum co-sponsored by the institute in which 150 attendees each spent 12, $100-million coins, showed that as a group, the participants would have spent $468 million on housing, $276 million on local economic development, $204 million on community services and facilities $180 million on cultural centers and $72 million on the rail link.

If the intent of the forum was to get the L.M.D.C. to rethink its priorities, it may not have worked. An L.M.D.C. staffer who attended the March 16 spending forum, sponsored by the institute and the Regional Plan Association, said at the C.B. 1 committee meeting that most of the attendees were the same advocates she had seen at many other forums. “That meeting was stacked,” said the staffer.

As for affordable housing, Weisbrod said now that there is no more tax-free Liberty Bond money available to build apartments, developers are likely to once again construct “80-20” buildings in which 20 percent of the apartments are targeted to people of moderate income with below-market rents. Liberty Bonds, another post-9/11 federal program, provides $8 billion tax-free bonds to build apartments and offices, mostly in Lower Manhattan. Much of the remaining commercial bonds are expected to be used to rebuild offices at the World Trade Center site. The residential bonds required that only five percent of the units be set aside for middle-income people.

“Why would anyone do an 80-20 when they could do a 95-5 and get the same tax benefits,” Weisbrod asked.

Madelyn Wils, chairperson of C.B. 1 and also a member of the L.M.D.C. board, said more money needs to be devoted to affordable housing, but it shouldn’t come out of the C.D.B. G. funds.

“I am totally in support of affordable housing, but this money was not given to us for this purpose,” Wils, who has taken several lobbying trips to Washington, said in a telephone interview. “There has been plenty of money put aside for affordable housing. Affordable housing is a very important issue but it’s not the primary issue in Lower Manhattan.”

She pointed to the city’s surplus money generated from Battery Park City buildings that once was supposed to be targeted for below-market apartments, but which the city now uses for general expenses. The city announced a few weeks ago that it wants to use an estimated $350 million in B.P.C. money to help pay for its plan to expand the Javits Center with a stadium for the Olympics and the New York Jets.

Wils is a strong supporter of the rail link, but said she would only favor using community development funds for the link if it became clear that the project wouldn’t happen without it.

She does support East River improvements by brightening the area under the F.D.R. Drive, fixing up Pier 15 and building plazas at Burling and Peck Slips. She thinks that can be done for about $100 million, rather than the $200 million the C.B. 1 W.T.C. committee guessed might be the price tag. Wils did not attend the committee meeting. The Lower Manhattan section of the Hudson River Park will cost $70 million to build, and the Hudson River Park Trust, which has run out of money to build the rest of the park, has applied to the L.M.D.C. for the funds.

Last month, Rampe, the L.M.D.C.’s president, said that once the rail funds were identified in April “we’ll have a lot of pieces in place to have that discussion” about how to spend the C.D.B.G. money. He said on Tuesday he expected most of the decisions would be made in the next few months, particularly after the L.M.D.C. reviews its studies on housing, Fulton St. and the area near Greenwich St. south of the W.T.C.

The L.M.D.C. has applied for $52 million to build 300 affordable apartments at Site 5B in Tribeca, but housing advocates argue that much more is needed.

Development grants
The law to create Community Development Block Grants was signed by President Gerald Ford in August of 1974, two weeks after he took office. It is administered by the Dept. of Housing and Urban Development, which must approve L.M.D.C. expenditures. The grants usually go to lower income neighborhoods, but since the neighborhoods immediately surrounding the W.T.C. are among the wealthiest in the city, the C.D.B.G. provisions were adjusted for the federal 9/11 relief package.

Of the $21.4 billion Downtown package passed by Congress and signed into law by President Bush after Sept. 11, 2001, $2.7 billion was set aside for C.D.B.G. Seven hundred million dollars of the grants went to the Empire State Development Corp., which used them on Downtown business retention deals and grants and $2 billion went to fund a new agency, the Lower Manhattan Development Corporation. At the board’s first meeting in January 2002 L.M.D.C. chairperson John Whitehead joked that he presided over the first organization to ever get $2 billion that it never asked for from Congress.

The grant money also pays for the L.M.D.C. operating budget, which under C.D.B.G. guidelines, can’t be more than five percent of the total grant. In April, the L.M.D.C. approved its $30.9 million budget for the fiscal year ending in March 2005, which might dampen some of the persistent rumors that the agency will be disbanding soon.

Much of the C.D.B.G. money has been spent on partial action plans put out by the L.M.D.C. The first plan approved was for a $306 million residential grant program in Sept. 2002 to encourage people to stay and move Downtown with two-year rent and mortgage subsidies. That was followed by a $350 million business grant program. In Sept. 2003, Congress passed two supplemental C.D.B.G. funds, $750 million to restore and repair utilities and other 9/11 related damaged infrastructure, and $33 million for firms that had many workers who died on Sept. 11. All told, $1.59 billion has already been approved.

Partial Action Plan 7 regarding the Deutsche Bank building received initial approval from the L.M.D.C. board on April 13. The public has until April 30 to comment on the plan, yet on April 15, it still was not on the L.M.D.C. Web site, www.renewnyyc.com. An L.M.D.C. spokesperson e-mailed a copy of the plan to Downtown Express immediately after a request was made.

Bettina Damiani of Good Jobs New York, a division of the Fiscal Policy Institute, said a big problem with the 9/11 related grants is that decisions are made before the public gets adequate notification. Other C.D.B.G. expenditures cannot be allocated until there is a public hearing, but the L.M.D.C. grants do not have the same requirement.

“Two weeks is not enough time for the community to evaluate these plans,” Damiani said. “The governor sets the rules because Congress allowed him to do it.”

Deutsche Bank
Even members of the L.M.D.C. board expressed concerns about the latest partial action plan at the April 13 meeting. The L.M.D.C. estimates the costs associated with buying and deconstructing or demolishing the building could increase to $164 million.

The black-netted damaged building hovering over the W.T.C. had been tied up in litigation between the bank and its insurers. Last year Gov. Pataki reached across party lines to appoint George Mitchell, former Democratic leader of the U.S. Senate, to mediate the dispute. Mitchell negotiated an agreement whereby the L.M.D.C. would buy the building for $90 million and pay up to $45 million for deconstruction.

Acquiring the site was crucial to the revisions of the W.T.C. site plan by architect Daniel Libeskind. By adding the Deutsche site and the adjacent Milstein site, which still has not been bought and is another potential use for the block grants, park space can be added, the office density can be reduced in the W.T.C. area and a tour bus parking garage separated from the proposed W.T.C. memorial can be built.

In addition to the previously announced $135 million to buy Deutsche, the L.M.D.C. also needs to buy $10 million in insurance for the deconstruction. The insurance is presumably higher because of concerns about possible pollution caused by deconstruction of a building that was covered in potentially dangerous chemicals from the Twin Towers and where mold was allowed to grow for many months before it was cleaned. The L.M.D.C. is looking to set aside another $19 million to pay for things like construction managers, public outreach to alleviate neighborhood concerns about the effects of the demolition and potential lawsuits.

Weisbrod was the first board member to raise concerns about the rising Deutsche costs. Whitehead, the L.M.D.C.’s chairperson, said he was aware that there would be added costs connected to buying the building, but he didn’t know it would be so much.

“I was a little surprised to see that – not that the number was there but that it was as large as it was,” said Whitehead.

Rampe said afterwards that it is essential to spend extra money to alleviate neighborhood concerns and the L.M.D.C. is also buying a valuable asset.

There has been talk of the Port Authority, which owns the W.T.C. site, taking possession of the Deutsche and Milstein sites. Wils said she has not heard anything definite, but she assumes the money will eventually come back to the L.M.D.C. and go back into the C.D.B.G. pot.

“I expect the L.M.D.C. will recoup the costs of those properties,” she said.

As for the local politicians’ views on how to spend the C.D.B.G. money, they have so far voiced general priorities.

Judy Rapfogel, chief of staff to Assembly Speaker Sheldon Silver, told Downtown Express: “We need schools, parks, community programs like developing the Y. Shelly also believes in order to have a strong community we need to focus on transportation.”

She said Silver has not decided whether the C.D.B.G. money should go to the rail link, but he will listen closely to Weisbrod and Wils, who are dealing with the Downtown spending choices on a daily basis.

Councilmember Alan Gerson, said housing is the top priority and he thinks it is important the L.M.D.C. looks for other ways to pay for the rail.

Gerson’s priorities?
“Housing, hospitals, cultural uses, schools, parks, streetscape improvements across the board.”

Josh@DowntwonExpress.com

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