Let the free market and public decide Downtown’s future


By Dan Steinberg and David Dyssegaard Kallick

In the heat of his reelection campaign, Mayor Mike Bloomberg garnered front-page headlines by pledging to take a more active role in the stumbling process of rebuilding ground zero.

Maybe it’s time to buy Larry Silverstein out of his lease, Bloomberg mused to the editorial board of the New York Daily News. Ten million square feet of high-end office space may ultimately provide the highest rent for World Trade Center developer Silverstein, but it will require government subsidies and a potentially long wait because there’s neither enough insurance money nor a strong enough commercial office market to build it all now. Instead, why not get going faster and with fewer subsidies and a different mix of office, residential, retail and public space. “I think it’s time to see what the marketplace really wants and perhaps we can better accommodate that,” Bloomberg innocently remarked.

For long stretches of his first term, Mayor Bloomberg was notably absent from the public discussion regarding the future of ground zero. His return to the field is welcome. Though the mayor doesn’t control much at ground zero, maybe he could provide some real leadership in the current vacuum of a lame-duck governor, a Lower Manhattan Development Corporation in disarray and a Port Authority that seems increasingly nervous about a slow and unrealistic office-building program.

For years now, the public and civic groups have said that what they want — and what they’ve been promised — is a vibrant, 24-7 community. What they don’t want is a massive office district that “looks like Albany,” as participants said at the July 2002 “Listening to the City” forum. A joint letter of the American Planning Association’s New York chapter, Civic Alliance, New York New Visions, and Labor Community Advocacy Network released this month reinforces the point: the mix of uses at ground zero needs to be rethought, and city government needs to play a more active role in guiding the process.

Funny, that’s where the real estate market points, too. There is tremendous demand for residential real estate, despite a recent topping off of prices. Why not take away the contractual obligations of the lease by buying Silverstein out? Remove all the subsidies for commercial space, and instead use the money for things that are truly in the public interest, such as affordable housing, schools, parks, museums or public transportation that connects Lower Manhattan river to river.

Or, who knows, maybe the office market will pick up — vacancy rates are currently tightening — in which case office buildings can be built without subsidies. Then, we can save the public dollars for the public goods Downtown wants and needs.

Unfortunately, the process so far has been characterized by a series of missteps that are later made up for through expenditures of public money. The bruhaha about Goldman Sachs’ recent decision to stay in Lower Manhattan and build an office adjacent to (but not in) the World Trade Center site is a case in point. The governor and the mayor fumbled decisions about the West St. tunnel, among other matters. When Goldman Sachs threatened to abandon its plans to build, the tunnel was scrapped and the public wound up committing about a quarter-billion dollars of subsidies to regain the good will of one of the world’s richest companies. The decision about the cultural institutions at ground zero was a similar debacle, with the governor supporting the Drawing Center at ground zero, then pushing it out when it came under attack by members of the families of victims of 9/11. Now, L.M.D.C. is proposing to give the center $10 million to find a different Downtown location. The Drawing Center probably deserves it, after what it’s been through. But this is a process that’s broken.

Assembly Speaker Sheldon Silver’s “Marshall Plan” for Lower Manhattan — essentially a package of subsidies for Downtown — is another wasteful expenditure of public dollars that misses the real opportunities for growth. As a recent article in Crain’s New York Business suggests, the new incentives aimed at rewarding firms relocating to Lower Manhattan have failed to trigger much leasing activity. That’s no surprise: tax breaks are less likely to stimulate economic growth Downtown than decisive political leadership at ground zero and government investment in security and transit infrastructure.

It’s senseless to pay businesses to go against the market. On the other hand, it’s easy to pay them to do what they would be doing already. That’s what the “Marshall Plan” does by eliminating the commercial rent tax for retail businesses below Murray St. What an odd choice of subsidies: the Downtown retail market is strong and growing as a result of the residential boom in the area. This market is also supported by about 280,000 workers, an estimated 8 million tourists annually, and beginning in March, 15,000 construction workers expected daily.  After the release of a May report from the Real Estate Board of New York examining market conditions, the board’s president, Steven Spinola concluded that the neighborhood “is undergoing a major retail revival.”  

All in all, the public will get much more out of this project, and ground zero will be rebuilt more quickly, if it moves smartly with the market rather than directly against it. Just before the election, Bloomberg said he wanted to get more involved. Now’s the time for the mayor to put his shoulder to the wheel and to take the lead at ground zero, reshape the mix of uses on the site and stop the proliferation of subsidies. Mr. Mayor?

David Dyssegaard Kallick is a senior fellow of the Fiscal Policy Institute, a non-profit think tank, and the coordinator of the Labor Community Advocacy Network. Dan Steinberg is a research analyst at Good Jobs New York, a group that has closely monitored 9/11 spending policies and which is part of the Fiscal Policy Institute.

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