By Daniel Geiger Crain’s New York Business
Amid an unusually heated debate over whether to commit more than $1 billion to back the building of a new World Trade Center tower, the agency puts off a vote to May. One director calls the postponement a way of “gently” putting the proposal “to eternal sleep.”
Locked in an unusually contentious and public debate about whether to commit more than $1 billion to back the construction of a soaring new office and retail tower at the World Trade Center site, the Port Authority of New York and New Jersey Wednesday postponed its vote on the project to May.
The delay puts off by another month a decision by the Port Authority whether to pledge $1.2 billion as a financial guarantee that would allow developer, Silverstein Properties, to raise the financing necessary to proceed with construction of the 53-story [sic], 2.8 million-square-foot building known as 3 World Trade Center.
The vote was postponed because negotiations with Silverstein Properties were not finalized, according to Port Authority Executive Director Pat Foye.
The question of whether to back the tower has created an unusual split between the Port Authority’s board of commissioners, which in the past has kept its decision making behind closed doors and then rubber stamped its conclusions in public.
In the case of the discussion about whether to pledge more money to guarantee the financing on 3 World Trade Center, board members at the Port Authority have openly debated the merits as well as the risks of the deal. Ironically, critics of the bistate agency have hailed news of that disagreement as evidence of a new transparency in the wake of the “Bridgegate” scandal.
Last year, it was revealed that Port Authority officials and at least one member of New Jersey Gov. Chris Christie’s staff, arranged for an illegal closure of access lanes at the George Washington Bridge as an act of political revenge. Since then there have been revelations showing that board members David Samson and Anthony Sartor, who both have since resigned, may have had conflicts of interest during their tenures at the Port Authority.
Scott Rechler, vice chairman of the Port Authority’s board of commissioners and a top official who has been instrumental in bringing reforms to the agency, has championed the tower deal. Mr. Rechler says that raising the Port’s financing guarantee from a current amount of $200 million to $1.2 billion would allow the agency to favorably restructure its deal with Silverstein Properties for the site. The Port Authority, for instance, would be able to collect rent much sooner than the current deal in place and would receive about $130 million for the tower’s retail space. Mr. Rechler has stressed that the financial guarantee would only result in the Port Authority actually having to spend that money if Silverstein Properties defaulted on the tower, an unlikely scenario Mr. Rechler said. He also notes that even if that did come to pass the Port Authority would end up owning the building at a huge 50% discount.
Ken Lipper, a Port Authority board member who was appointed last year, has disagreed with that position, stating that the Port Authority should reserve its money and financial capacity for transit oriented projects, such as a sweeping renovation of the dilapidated bus terminal on West 42nd Street. He told Crain’s Wednesday that he views the postponement as a way of “gently putting the $1.2 billion government guarantee proposal to eternal sleep.”
“Let the private sector carry out its appropriate role of allocating credit at fair price and time that is reflecting market risk … (and) we can return to our core transportation infrastructure mission, as Congress intended in forming us a century ago,” he insisted.
There has been debate at the Port Authority whether the financial guarantee would even encumber the Port Authority’s potential capital spending, because creditors at the World Trade Center site are subordinate to the authority’s debts on capital spending.
Sources say that the delayed vote will not derail a large tentative lease at 3 World Trade Center that Silverstein Properties has arranged with GroupM, a media firm. The company, which has pledged to take about 515,000 square feet of office space for its headquarters in the new tower, has committed to take that space, sources said, so long as the Port Authority approves the tower deal before July.
