Volume 16 • Issue 50 | May 7 - 13, 2004

Talking Point

Subsidize Silverstein to redevelop the W.T.C.

By David Stanke

With the jury findings on the first Silverstein case falling largely against the developer, the greatest danger for Downtown is that plans developed based on years of discussions and compromise will be thrown open for discussion again, further delaying progress on redevelopment of the World Trade Center.

The Lower Manhattan Development Corp., Port Authority, and Governor Pataki need to seriously study how to move forward with W.T.C. rebuilding beyond the Freedom Tower and permanent Path Station. The only change in the last week has been the loss in funding. Until now, it was assumed that Silverstein Properties would drive commercial development. But with insurance proceeds falling dramatically short, other options will come up for consideration. The federal government needs to step in as the insurer of last resort in cases of terrorist attacks and support Silverstein Properties’ efforts to rebuild.

The federal government is responsible for defending private property against foreign attack. Consider Article 4 of the U.S. Constitution: Section 4. “The United States shall . . . protect each (state) against invasion; and . . . against domestic violence.” In failing this responsibility, the government must at least support those who experience the losses. Past aid, either direct or in Liberty Bonds, has been applied on haphazard basis for political expediency. Monies have gone to Midtown businesses and to Queens. The remaining bonds and more should go to rebuilding what was actually lost on 9/11: the World Trade Center.

The need for government action in response to 9/11 has been clear from day one. Payments were made to victims’ families for the economic loss associated with the deaths. Payment amounts were based on lost earnings, thus directly related to economic damage done. Property owners, business, and renters received support in the form of direct grants and subsidized loans, even if they did not experience direct damage from the attacks. Public companies and residents were given financial incentives to stay. If all of these businesses and individuals deserved support, why shouldn’t the owner of the property rights directly attacked on 9/11?

To rebuild the W.T.C. office space, it will cost Silverstein and his investors at least $8 billion, with less than half of that covered by insurance. Of everyone who experienced losses on 9/11, why should this one business be left behind?

There are issues with government directly funding private enterprises, but it is a common practice. One of the stated reasons for the victims’ compensation fund was to prevent them from suing the airlines. Government also regularly subsidizes large portions of our agricultural and steel industries, simply from international competition. If the federal government can protect and subsidize industries from market conditions and legal damages, why shouldn’t it protect the organization that directly suffered from the attacks? Why should American and United Airlines, whose planes were hijacked for the attacks, get better treatment than Silverstein Properties, which had no way to protect itself from this attack?

There are alternatives to having Larry Silverstein direct the rebuilding, none of them good. The Port Authority and L.M.D.C. could auction off building rights on the rest of the site to the highest bidder. But what is the advantage of having multiple developers doing different segments of the site? It simply adds complexity to an already complex situation. In an integrated site with shared infrastructure, more interests will lead to more arguments and more delays.

The site plan could also be modified, but that would introduce a new set of difficulties with very little benefit. When Silverstein completes one or two buildings, remaining property could be developed under new guidelines, further delaying development. The infrastructure plans for these 16+ acres need to be finalized for any work to proceed. Alternative development ideas floated in the early planning discussions made little economic sense. The W.T.C. is, at its core, a transportation hub with branches reaching across the region to residential areas. The L.M.D.C. and Port Authority plans recognize that the most valuable use for property of this sort is a commercial office space and a retail center. The taxes developed off this economic engine can be used for many needed facilities away from the site. Subsidizing non-market development on the site would be fiscally irresponsible for the city and state.

There is a cost to everyone if the Feds do not stand behind those taking direct losses at the W.T.C. Insurance costs will make city living more expensive. In our condo building south of the W.T.C. on Liberty St., 9/11 was nearly a financial tragedy. If the W.T.C. elements that damaged the facade of our building had fallen 10 yards farther south, the front of our building may have been completely destroyed. Our insurance policy was insufficient as it was. Added damage could have bankrupted the building. Now, in addition to higher insurance rates for the same coverage, we have to consider increasing our insurance limits to support rebuilding a substantial portion of the building. Such coverage is extremely expensive, and necessary only because of terrorist threats. The federal government must either stop the threat or stand as the ultimate guarantor of terrorist losses.

There are other reasons for the Feds to guarantee against terrorist losses. The federal government distributes funds across agencies and states to protect the U.S. from attack. New York and a handful of other urban centers are the front line in this war. These locations have the highest property values and the most desirable targets. And yet anti-terrorism funds are allocated based on the old rules of partisan politics. Our president is waiting for the report of the 9/11 Commission he so determinedly fought, for guidance on restructuring intelligence and law enforcement agencies to best defend the country while he spends over $100 billion on a war that was not a war on terrorism. Ultimately, the cost of failing to stop an attack must be born by those responsible for stopping it. If the President Bush thinks he’s winning the war on terror, then let’s see him put his money where his mouth is and commit to protecting private property.

On Sept. 10, 2001, Silverstein Properties was taking control of the W.T.C. and finalizing insurance contracts to cover an extensive amount of possible damage. They probably considered hurricanes, earthquakes, fires, and even car or truck bombs when setting their insurance coverage. But if National Security Advisor Condoleezza Rice couldn’t “have predicted that these people would take an airplane and slam it into the World Trade Center, take another one and slam it into the Pentagon,” how could Larry Silverstein have done so?

Our government took too long in responding to the hazardous situation of the damaged Deutche Bank building. They provided residential cleaning only under intense political pressure. FEMA walked out of New York after 18 months, while we were still struggling to clean and rebuild our building. These delays have been costly to Downtown and to individuals affected by the attacks. The cost of inaction in support of Silverstein Properties could be even worse: years of delays and court battles as tourists around the site stop asking, “How did this happen?” and start asking, “Is this the best we can do?” If President Bush comes to the W.T.C. for political purposes, I suggest that he bring a checkbook with him. We still have some damage to repair.

David Stanke is co-president of BPC United, a group of Downtown residents, and can be reached at bpcunited@ebond.com


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