Schumer Announces Plan to Break Deadlock at Ground Zero: Port Authority Should Move to Freedom Tower, Silverstein to Give Up Property if he Fails to..
SCHUMER ANNOUNCES PLAN TO BREAK DEADLOCK AT GROUND ZERO: PORT AUTHORITY SHOULD MOVE TO FREEDOM TOWER, SILVERSTEIN TO GIVE UP PROPERTY IF HE FAILS TO MEET RIGID TIMETABLE
Calls on Mayor to Commit All Liberty Bonds to Commercial Development at Ground Zero
Schumer: "To Break Deadlock at Ground Zero, Every Party Must Give Up Something"
Today U.S. Senator Charles E. Schumer laid out his plan to break the deadlock at Ground Zero in a major speech at a breakfast sponsored by the Association for a Better New York (ABNY). Schumer called for the Port Authority to lease Freedom Tower and abandon their efforts to take Tower 3. He called for Larry Silverstein to commit to beginning construction on each tower within 60 days of each site being ready; eliminate or at least halve his developers fee for the site; and submit to regular examination by an independent auditor. Schumer also called on the mayor to commit all Liberty Bonds to ground zero.
The text of Schumer's remarks, as prepared for delivery, follow:
Good morning. It's good to be in front of ABNY again. I know all of you share my concern for job creation in New York City. We have regained losses from 9/11 but have not kept pace with other cities in the national recovery. Over the last two years, while New York has struggled to grow jobs by 1% annually, the nation has approached a 2% rate of job growth. During the same period, many of New York City's gains have been in leisure and hospitality, health care and social assistance, and retail trade. Meanwhile the city has continued to lose manufacturing, information and construction jobs. At the end of 2005 New York City still had 150,000 fewer private sector jobs than it did five years ago.
If New York City with all of its strengths cannot grow with the national average, then we must change our policies and make a real and substantive commitment to creating new high, paying jobs that will power our city's economy through the next century.
Over the last few weeks, it has become clear to me that an essential component of our need to create jobs is the current debate over the redevelopment of Lower Manhattan. Four and a half years after the devastating attacks we are at a standstill over rebuilding the World Trade Center site. Negotiations between the Port Authority and Silverstein Properties have thus far produced no tangible results. We have moved from consensus to cacophony.
The Port Authority, with the support of the Mayor, wants to build and move to Tower 3. The Mayor wants Tower 4 to have significant residential and hotel space. These two buildings are arguably the two most desirable planned commercial buildings in Lower Manhattan. It's questioned whether the developer, Silverstein Properties, has the financial capability to fully build out the site. The Mayor and Governor still hold $3.345 billion in unused Liberty Bonds and lack a unified plan for using them moving forward.
What we are left with is the appearance of a lack of confidence in downtown and a stalled rebuilding effort. But I do not believe that the logjam is intractable or that the situation is hopeless or unsolvable. To make this happen, everyone - the State, the City, the Port Authority and Larry Silverstein -- has to give. Larry Silverstein is a very fine developer and a good New Yorker, but because this is ground zero and because he would be using Liberty Bonds, there are special responsibilities for all parties.
I believe that compromise is possible under the following conditions:
At the centerpiece, the whole plan cannot work unless the Port Authority moves to the Freedom Tower. The Port Authority must abandon its efforts to take Tower 3, the most desirable commercial space on the site, and agree to move to the Freedom Tower instead.
In exchange for this major tenant, Silverstein Properties would first have to agree by contract to set a rigorous construction timetable. Under the contract, if Silverstein Properties does not begin construction on a site within 60 days of it becoming ready, they would be required to turn over the leases of the remaining unbuilt sites to another developer. Second, Silverstein would agree to reduce by at least half the developer's fee for the site. And third, in order to end the debate on the financial capabilities of Silverstein Properties, they would agree to be subject to regular examination by an independent auditor.
In addition, the Mayor should drop his proposal to use Liberty Bonds for any other hotel or commercial project until an agreement at the World Trade Center is reached. Liberty Bonds are intended above all for redevelopment of commercial space at ground zero, no matter the developer. Silverstein Properties, or whoever the developer, should be given the first right to the remainder of the $3.345 billion of Liberty Bonds, upon certification from the independent auditor that they are able to induce those bonds to build commercial buildings at ground zero.
Let me be clear that this is not a typical real estate deal nor is it a cut and dry public works project. However, I believe this framework would prevent progress from being caught up in endless indecision and potential litigation stemming from the debate over whether or not, and how, to remove the current developer from part of the site. This framework will allow us to reestablish the job-creating commercial space that is so critical for the future of New York City. It also will ensure progress is made in a timely fashion so that ten years from now we have more than just a construction site and big ideas. I will go into further detail on the specifics of this deal in a moment but now I would like to discuss the major principal behind it, and that is creating jobs downtown by building the commercial space lost on September 11th.
Creating Commercial Space
Very early on in the redevelopment process, I made clear my view that our focus should be job creation and regaining the commercial space that was lost on 9/11. I believe that still must be the goal today. Osama Bin Laden and the 9/11 hijackers targeted the political, military, and economic centers of the United States. They viewed New York City and the Twin Towers as a mighty symbol of our nation's power and prosperity. While we can put up a Freedom Tower for symbolic purposes, we will not have made a statement about the resilience of our City, and the resilience of our nation, unless we truly rebuild Lower Manhattan as an economic center of the free world. This means restoring commercial space and creating the jobs to fill that space downtown. An empty Freedom Tower would be as bad a symbol as not building a Freedom Tower at all.
Before 9/11 the three biggest commercial districts in the country in terms of office space were Midtown Manhattan, the Chicago Loop, and Lower Manhattan. That's the way it's been for years. Since 9/11, Washington DC has surpassed Lower Manhattan in terms of commercial space. That is not happy news. News like that ought to grab our attention and serve as wake up call.
Prospects for Downtown
We have only a limited chance to return Lower Manhattan to its place as a world class business district and we must seize it. Office buildings are factories in the post industrial city. Each new job in commercial space creates a significant ripple effect for the economy. Residential space does not have that kind of multiplier effect and hotel space, while it creates some jobs, does not touch the benefits of major business tenants for a city's job market. Now that the Goldman Sachs building is going into the ground, the World Trade Center site is the only site in all of Lower Manhattan ready to go for any kind of new commercial space construction. Unlike some, my fear is that the 10 million new square feet of space planned for the site won't be nearly enough to compensate for the millions of square feet we have lost to residential conversions and to fill the growing demand for office space downtown. Supply of commercial space is shrinking and without new construction at ground zero it will continue to shrink. If we don't act at ground zero, downtown and our city will be the lesser for it.
It's important to note as well that the office space at ground zero won't just be any office space. In addition to incorporating state of the art materials and designs, the towers will be served by Santiago Calatrava's breathtaking transit station, bringing together transportation links that connect two states, four boroughs and millions of people. Through it, more than 250,000 daily commuters and visitors will have access to the Hudson River ferry terminals, PATH trains, 14 different subway lines, and, knock on wood, a direct rail link to JFK Airport. We are investing billions in this transportation infrastructure. It does not make sense to sink nearly $10 billion of mass transit funds into downtown, making it one of the premier transit centers of the world, one of the few places where millions of people can move in and out daily, quickly and easily and then make it a residential center, albeit a beautiful one. We would be doing a great disservice to New York City and to its businesses if we did anything but develop world class commercial space at the site.
Yet as I've said, much of the public rhetoric paints a more doubtful picture, saying that five years from now this brand-new, state of the art commercial space will not command more than $35 per square foot. Even today, it is my understanding that the World Financial Center is doing deals in the mid $40 per square foot range, so I just cannot accept that buildings like Towers 3 and 4, which will be twenty years younger and fronting on Church Street above a major transportation hub would go for less than that. I believe that demand for space in Lower Manhattan will be much greater, while still offering a more affordable alternative to other Manhattan locations. Unfortunately, every time we say that space will never go above $35 square foot, we are exhibiting little confidence in the success of downtown and of New York City as a commercial center.
I also know that downtown has experienced a rebirth as a residential community. I think it is a wonderful development that thousands of New Yorkers have made new homes in Lower Manhattan. But I have to point out that it is happening naturally on its own. Buildings continue to convert to residential and we should not be giving up the opportunity to create jobs and bring more companies downtown by making a significant part of Tower 4 residential.
Moving the Port Authority to the Freedom Tower.
I feel very strongly that it is a mistake of great proportions to give up the most desirable building, Tower 3, to a government entity and that doing so could sink the whole project. As I've said, Tower 3 will have the advantages of a location on Church Street and being next to a transportation mega hub. Its layout will be designed to attract top notch firms and we should be saving this space for those kinds of tenants. To give the best commercial site at ground zero to a government entity follows exactly the wrong approach.
This does not however mean that there is no place for the Port Authority and other government tenants at the site. On the contrary, any major tenant regardless of whether it is public or private will bolster the market.
So today, I am calling upon Governor Pataki to move the Port Authority not only back to the World Trade Center site but into the Freedom Tower itself. The Port Authority needs 700,000 square feet and can serve as an anchor tenant. We all know that the Freedom Tower may well be the hardest building to rent. An anchor tenant like the Port Authority not only fills up 1/3 of the space, but sends a signal to the world in the building's future, safety and viability. The Port Authority as anchor tenant will help attract other tenants to the Freedom Tower, a challenge that many planners perceive as a problem with the present plan. Tower 3 does not need such help. It will attract large tenants on its own. It does not need the kind of boost the Port Authority will give to the Freedom Tower.
Tangentially, it will also aid our efforts to bring other government entities, especially Federal tenants like the US Customs office, back to the World Trade Center and the Freedom Tower.
I recognize that this is not an easy decision for the Governor and the Port Authority to make. Having lived though both attacks, the Port Authority knows first hand the costs of the 1993 bombing and September 11th, as they tragically lost more than 80 workers, including 37 of their police officers.
But as the owner of the World Trade Center and moreover as a major public Lower Manhattan tenant, the Port Authority has the opportunity to show the world that New York and the Freedom Tower are stronger than ever.
The symbolism of the building itself as a beacon of American resilience -- all of the strength we hope to broadcast when it takes its place in the New York City skyline -- will be lost if it sits empty.
For those who want to be regarded as true leaders in this effort to rebuild at ground zero, the commitment to the site cannot stop just as soon as the building begins to rise. This means making sure the Freedom Tower is a full and functional building with major tenants. Putting the Port Authority and other government tenants at the Freedom Tower would be a major step towards this goal.
Now I'd like to talk about what Silverstein Properties must do in return to make rebuilding a reality.
Role for Silverstein Properties
Silverstein Properties has an obligation to demonstrate that they have the financial ability to proceed, to build the buildings as quickly as possible and fill the buildings quickly, at the risk of being removed from ground zero and being replaced by another developer. Rebuilding Lower Manhattan cannot be curtailed because one developer does not have the capacity to build quickly and effectively or because he or she wants to wait until tenants willing to pay speculatively high rents come along. We cannot let ground zero be a construction site for the next twenty years.
Let me be clear to the development community, and I would ask that he Mayor and the Governor and the Port Authority join me in this assertion: the redevelopment of ground zero is a unique project and with the development rights comes an acute obligation to the public to rebuild with as much speed, grandeur and vision as possible. The stipulations we must put in place surrounding the development of the site should in no way become the norm for the development community in New York. In addition, they should of course be subject to change under extreme circumstances, including unforeseen natural disasters and terrorism.
In exchange for being given first right to the remainder of the Liberty Bonds and for the promise of the Port Authority as the anchor tenant, two huge benefits, for the Freedom Tower, Silverstein Properties would submit to the following:
First, to put an end to the debate over competing financial analysis from the City and SPI, the developer must subject itself to regular reviews by an independent auditor who does not have an axe to grind. I have examined both the City and Silverstein's dueling documents and there are assumptions made in both. The City's financial analysis says that SPI is going to run out of money in 2010, with only two towers built and no capacity or incentive to continue building. SPI maintains that they are in good shape to complete Towers 3 and 4 as well if given the balance of the Liberty Bonds.
There is a need for an independent accounting process, removed from politics, to sort through these stalemates. This entity could be easily formed in the same way that we choose arbiters to settle disputes. At regular intervals, this body should be given access to SPI's financials to determine whether SPI has the capacity to continue to build-out the rest of the site. If they determine that SPI's financing schemes will not allow for continuation or completion, then there will be a simple choice for the developer: change your plans or let someone who can build, build.
Second, SPI must commit by contract with penalties to beginning construction on each tower as soon as the site becomes ready. It's important to note that control over this timetable rests at first with the Port Authority. Without the eastern bathtub slurry wall in place, construction cannot begin on the Towers 2, 3, 4 and the exterior of the Calatrava transit hub.
The City has estimated that slurry wall and site prep will be complete by late 2007. The Port Authority should commit to that date or be required to agree to reduce the ground rent on the site to ease the burden of leaving the developer with an un-buildable, empty lot.
For its part, SPI must commit to having a shovel in the ground for each building within 2 months of the site's infrastructure being completed. If this commitment is not met, SPI must agree in advance, through contract, to hand over the site to another developer. If SPI begins Tower 2 according to this timeline, they then have the right to build Tower 3. If SPI begins Tower 3 on time, they have the right to build Tower 4. Conversely if a building is not begun on time, SPI must give up the right to build that tower and all other unbuilt towers planned for the site. So for example, if Tower 2 is on schedule, and Tower 3 does not meet the two-month start date, then Towers 3 and 4 would be turned over to another developer.
Third, slow movement on renting World Trade Center 7 has given people reason to doubt downtown and the ability of SPI to rent its buildings quickly at reasonable rents. SPI must show New York that they are making significant progress renting out World Trade Center 7 and aggressively finding new tenants for the remaining buildings on the site. The Port Authority and SPI must work together to establish reasonable standards and timetables for filling all the buildings on the site. Yet I am confident that before long, these standards will be met naturally by the market. These are top notch buildings and anchor tenants will beget anchor tenants. If we strategically use the rental incentives enacted by the State, once these buildings begin to fill, the space will go quickly.
As I said, it would be part of the contractual agreement between Silverstein Properties and the Port Authority that if these three measures are not met, the Port Authority would have the right to remove the developer from the rest of the site.
In addition there should be an immediate commitment from SPI to eliminate or at the very least cut by half the traditional developer's fees that are now proposed as 5%. I am not asking SPI to forgo profit; rather I am asking them to make a demonstration of good faith that I believe will ultimately lead to a more successful and financially viable project.
I believe these are the kinds of ideas necessary to reach a fair deal for all parties that is in the best interest of the number one stakeholder at ground zero, the people of New York. I urge the Port Authority and Silverstein Properties to reach a consensus finally that will pave the way for the rebirth of downtown as the vibrant business district and neighborhood New Yorkers deserve.
There is one last piece that I need to address that I believe will help us secure a healthy future for the ground zero site. That is the Liberty Bonds. Unfortunately, they have become a chip in the bargaining machinations between stakeholders on the site and that cannot continue. At the very least, we need to hold these bonds in abeyance and not commit them to other downtown sites, before we know if they will all be needed at ground zero.
Liberty Bonds
Right now, only $3.345 billion from the original $8 billion allocation for the Liberty Bond program remains uncommitted. Without a doubt, giving the City and State flexibility in administering the Liberty bond program was an important tool. When we needed to do a little more to create 4,000 new jobs that Goldman Sachs would bring to downtown, $1.65 billion in Liberty Bonds were there to provide the necessary assistance; when we needed to help get 7 World Trade Center off the ground, $475 million in Liberty Bonds helped make that a reality . Yet to date, these are the only two commercial projects downtown that have received liberty bond financing.
Billions have been committed to residential projects and commercial projects outside of Lower Manhattan but no money has been officially designated to ground zero. Not many bonds are left and many fear that the remainder will not be spent wisely.
We are making the easy choices, funding the projects that the market favors instead of helping build the challenging projects the city needs. And today, we are at risk of further depleting the entire pot of Liberty Bonds before we even put a shovel in the ground at the World Trade Center site. These bonds were created to help redevelop ground zero. That was our intent and the intent of Congress and I do not want to have to go back to my colleagues and explain that all of the bonds have been issued and we still have an empty construction site in Lower Manhattan. For only a little of more than $2 billion of the $8 billion of Liberty Bonds to go towards commercial space downtown is not what congress intended when the bonds were passed. We pushed back the sunset of the Liberty Bonds program once, and if we need to do it again to make sure we have a tool for rebuilding ground zero we will do it again. But I will not make these efforts to help construct residential and hotel space at the expense of building job-creating commercial space.
The governor has done the right thing and committed to pledge his remaining portion to ground zero. Today, I am calling on the Mayor to not commit his Liberty Bonds to other retail, hotel or commercial projects until we know what is needed to rebuild the World Trade Center site. Holding the remaining Liberty Bonds hostage and threatening to use them for other projects either inside or outside downtown throws the future of redeveloping ground zero into doubt and uncertainty. We are also sending the wrong signal about how serious we are in redeveloping the word trade center site.
The success of the rebuilding process has always been contingent on the ability of the Mayor, the Governor, the Port Authority and the developer to reach consensus. Our record to this point has been mixed and we are now at yet another moment where all parties must put aside their differences, come together to find a solution that will allow Lower Manhattan to get back on its feet and become an economic engine once again for this great City. In December, the Governor gave the Port Authority 90 days to work out their differences with Silverstein Properties. However, 74 days in, there is still no deal. I hope that all of the parties will consider the framework I outlined today and immediately come together to reach agreement so that the true rebirth of downtown can finally get started.
http://schumer.senate.gov/SchumerWebsite/pressroom/press_releases/2006/PR80.Speech.022706.html