By Julie Shapiro
The city is worried that a cash shortfall will further delay the demolition of the Deutsche Bank building.
The Lower Manhattan Development Corp. will run out of money for the project by October and will need up to $35 million to finish it, the agency’s leaders said last week.
Cas Holloway, special advisor to the mayor, confronted Avi Schick, chairperson of the L.M.D.C., about the money at the L.M.D.C.’s board meeting June 11.
“The payment of contractors on a timely basis is to a large extent what drives the manpower that is put on the job by those contractors,” said Holloway, who is a member of the L.M.D.C.’s board and chief of staff to Deputy Mayor Ed Skyler. “I want to make sure we don’t find ourselves in a situation where we have to scramble to ensure we have a backstop of funds to pay for the work.”
Schick assured Holloway and the other board members that that would not happen.
“We will definitely not get caught short,” Schick said.
David Emil, L.M.D.C. president, later added, “Believe me, we do not want to get into a situation where there is a cash problem.”
But Holloway remained unconvinced.
The L.M.D.C. agreed in principle at the board meeting to give contractor Bovis Lend Lease another $20 million to complete the project, and the L.M.D.C. said they could need an additional $10 to $15 million to get the building down.
The L.M.D.C. has not yet identified a source for the money, and if the L.M.D.C. needs to use more than about $10 million of its federal funds to cover the shortfall, the allocation will have to go through a 90-day public comment period. Given the need for the money in October, Holloway pushed Schick to schedule another L.M.D.C. board meeting in July for an update, rather than waiting until August.
“It’s going to be close, and there’s no reason for it to be close,” Holloway said of getting the money on time if the board did not meet again until August.
Schick continued to hedge, but then Carl Weisbrod, another board member, took Holloway’s side, and Schick immediately agreed to a July meeting.
The mayor and his staff have repeatedly advocated for closing the L.M.D.C. and transferring its functions to the city, though that does not appear likely to happen soon because it is opposed by the governor.
With the new cost increase of up to $35 million, the total cost to clean and demolish the Deutsche Bank building could reach $225 million, exactly five times the original, $45 million project estimate when the L.M.D.C. bought the building in 2004 for $90 million.
The L.M.D.C. hopes not to have to sink any more public funds into the project. Instead, money could come from the Deutsche Bank, the building’s prior insurers and even from Bovis itself, rather than from the L.M.D.C.’s federal funding stream, Schick said.
The building’s prior insurers have given $63.5 million to the project so far, but Schick said they owe more. The L.M.D.C. also has several claims against Bovis related to the August 2007 fire in the building that killed two firefighters and numerous other delays on the project.
And now the Brooklyn U.S. attorney is investigating Bovis for overbilling on five New York projects, including the Deutsche Bank building and the 9/11 memorial at the World Trade Center site. James Abadie, head of Bovis’ New York office, resigned Monday.
As a result of the probe, Schick expects to get money back from Bovis, but he said it may make sense for the L.M.D.C. to front the cash and then fight it out with the lawyers later on.
“We need to get the building down first before any of that,” he said of the legal wrangling.
Robert Harding, a board member, said the L.M.D.C.’s legal analysis of the Bovis investigation was lagging, and Schick agreed that he’d hoped to have more legal information to share with the board at the meeting.
Last week, after news of the Bovis investigation became public, Schick and Emil met with Michael Bellaman, Bovis’ United States C.E.O., at Bellaman’s request.
“He said Bovis is committed to getting to the bottom of it, whatever that means,” Schick said of the investigation. Bellaman committed that the investigation would not disrupt work at the Deutsche Bank.
Schick also spoke to Bellaman about the recent accidents at the building, which prompted two massive responses by the Fire Dept. in one week after pieces of equipment malfunctioned.
At the meeting with Bellaman, Schick said he reiterated “the need to have their best people on the job,” a refrain that many took up after the August 2007 fire.
The 26-story Deutsche Bank building is now being cleaned so it can be demolished. It is decontaminated down through the fourth floor and the facade is removed down through the sixth floor. The L.M.D.C. expects to begin demolition in the middle of July and finish by the middle of January 2010.
Julie@DowntownExpress.com
