By Elizabeth O’Brien
Even with the projected five-year extension of the deadline for Liberty Bond financing, there may not be enough demand to exhaust the remaining commercial bonds Downtown, said Andrew Alper, president of the Economic Development Corporation.
Excluding a $1 billion request from Goldman Sachs to help finance its planned headquarters in Battery Park City — an application still under review — there is $4.8 billion in commercial Liberty Bonds left, said Alper, president of the city agency that oversees the commercial bonds. In May, the U.S. Senate approved a five-year extension of the financing, but the House has not yet moved on the measure that would push the deadline to Dec. 31, 2009.
Speaking at a June 30 City Council hearing, Alper said developers must prove the feasibility of their projects before they can receive Liberty Bonds, by showing, for example, that they have secured commitments from potential tenants.
“It’s not just first come, first served,” Alper said.
Contrary to popular belief, private investors — not the government — assume the full risk of projects financed with Liberty Bonds, Alper said.
In 2002, Congress approved a program of $8 billion in tax-exempt Liberty Bonds to help New York City recover from the World Trade Center attack. Of that amount, $1.6 billion was set aside for residential construction, and $2 billion was earmarked for commercial construction outside of the so-called Liberty Zone south of Canal St. Applications for commercial Liberty Bonds must include plans for at least 100,000 square feet.
The residential portion of Liberty Bonds is expected to be fully allocated by the original deadline at the end of this year. It remains unlikely, however, that the commercial Liberty Bonds will be exhausted by December, a gap that reflects the comparatively sluggish market for office space.
Alper said city officials have traveled the world to entice businesses to come to Lower Manhattan, making trips to Britain, France, Germany, Japan, Korea and China.
“And it’s working,” Alper said of his globetrotting initiative, noting that publishing companies are among the many industries showing interest in the area.
But Janno Lieber, senior vice president for Silverstein Properties, urged the city to look no farther than the World Trade Center site when allocating the remaining commercial Liberty Bonds.
Lieber, Silverstein’s project director for World Trade Center development, testified before the City Council that it would be a “tragic mistake” if Liberty Bonds are exhausted before the World Trade Center site is completed. Lieber told Downtown Express he was confident that insurance proceeds would cover the construction of 7 World Trade Center and that the balance of the entire project could be financed by a combination of Liberty Bonds, insurance proceeds and more conventional financing.
Market forces will dictate the pace of rebuilding at the World Trade Center site. While 7 World Trade is currently rising on the northern end of ground zero, and construction on the Freedom Tower will begin on July 4, it is unknown when the site’s four remaining commercial towers will be completed.
An E.D.C. official said that 7 World Trade Center was given Liberty Bonds without tenants lined up because the city knew Silverstein had enough insurance proceeds to keep the rents at a manageable level. However, Silverstein will not be granted similar leeway for his other commercial buildings, the official said, especially since the developer’s insurance award will likely be far less than the $7. 1 billion he had hoped for.
Carl Weisbrod, president of the Downtown Alliance, also testified that the remaining commercial Liberty Bonds should be used at the World Trade Center site.
“It’s hard to image a higher economic or moral priority” than rebuilding ground zero, Weisbrod said.
The Lower Manhattan Development Corporation has also opposed using Liberty Bonds outside of the Liberty Zone and has expressed concern that there will not be enough money to fully rebuild the World Trade Center site without bonds.
Councilmember Alan Gerson, whose district includes Lower Manhattan, pressed Alper on why community input was not factored more into decisions about Liberty Bond allocations.
“Why commit money before allowing the community to fully weigh in?” Gerson asked.
“I guess the question is, why wouldn’t we?” Alper responded. He said Gerson’s request went beyond E.D.C.’s mandate regarding Liberty Bonds.
Alper noted that if the project isn’t approved, then the financing simply goes back into the pot. For example, Alper said, the city turned down Forest City Ratner’s application for $400 million in commercial Liberty Bonds to finance part of the New York Times headquarters in Midtown, because it felt the project could be adequately financed without them.
One project that the Lower Manhattan community is particularly concerned about is the 50-plus story, mixed-use tower proposed for the N.Y.U. Downtown Hospital site bordered by Spruce, Beekman, Nassau and Gold Sts.
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