Panel rules Port owes Silverstein millions


By Julie Shapiro

The Port Authority had to pay Silverstein Properties more than $20 million in penalties after failing to deliver pieces of the World Trade Center site.

Independent arbitrators ruled last week that the Port did not correctly prepare the sites for Towers 2 and 4, which the Port was supposed to turn over to Silverstein at the end of last June so Silverstein can build the towers. For every day the sites are late, the Port has to pay Silverstein $300,000.

The Port claimed the sites were ready in October and stopped paying the penalty, but Silverstein objected, pointing to a 200-foot wall sitting in the way of Tower 4’s foundation.

A panel of three arbitrators decided that Silverstein was right and said the Port had to resume paying the daily penalty, plus interest. The Port paid October and November’s penalties and will pay the December penalty at the end of the month, spokesperson Steve Coleman said.

The Port is now working on a plan to dismantle two 25-foot sections of the wall, but Coleman could not give a timeline for that work. The wall shores up part of the No. 1 subway box.

Work on Tower 4 is well underway, with Silverstein pouring the concrete core that will house the elevators and staircases. But Silverstein will not be able to install several of the tower’s structural columns as long as the wall stays in place. The tower is scheduled to open in 2012, but unless the Port gets the wall down soon, that date could slip, a source familiar with the project said.

While the Port contends with the Tower 4 wall, the agency also has to finish up some smaller jobs on the Tower 2 site, the arbitrators ruled. Those include filling a void along Church St., burning off rock-bolt projections and getting the Metropolitan Transportation Authority to approve the installation of caissons.

Even once all those jobs are done, the Port will likely still be paying Silverstein $300,000 a day, because the agency is about to miss another deadline. As of Dec. 31, they are supposed to turn over additional pieces of the Tower 2 and Tower 3 sites near the future Greenwich St., where the building lobbies will be, but those sites will not be ready. Coleman would not estimate how long it would take the Port to finish that work.

The Port also missed a deadline at the end of last year to turn parts of the Tower 3 and 4 sites over to Silverstein and paid $14.4 million for the delay. For missing the June deadline, the Port will pay more than $50 million.

That sounds like a windfall for Silverstein, but it barely offsets the rent Silverstein is paying to the Port Authority for the Trade Center land. Silverstein pays the Port $215,726 a day, and the delays will make the towers more expensive for Silverstein to build.

Coleman said the money to pay Silverstein is coming out of the Port’s operating budget. Also, the Port would have paid contractor Phoenix Constructors a $14 million bonus if Phoenix had met the June 30, 2008 deadline, and that saved money will help pay Silverstein, Coleman said.

The Port also had to pay for the arbitration, but Coleman declined to release that figure.

Downtown Express reported earlier this fall that communication had broken down between the Port Authority and Silverstein, but it appears that the arbitration restored a measure of accord.

“Absolutely relations are good from a working perspective,” a source familiar with the discussions told Downtown Express. Compared to previous disputes between the Port and Silverstein, “This was pretty low key,” the source said. “There wasn’t the kind of public recriminations or craziness that used to mark the project.”