Rebuilding & Hidden Agendas: Not a Done Deal

IT seems that Gov. Pataki, Mayor Bloomberg and the Port Authority of New York and New Jersey have finally done what they must to allow Lower Manhattan to recover from the attacks of 41/2 years ago: Offer Larry Silverstein, who holds a lease to rebuild the World Trade Center, a fair new deal to redevelop the PA-owned property. But—as with anything having to do with the political swamp around Ground Zero—nothing is as it seems.

Over the next few days, New Yorkers will learn whether the Port Authority's latest proposal to Silverstein is a good-faith effort, or just another attempt to coerce Silverstein into surrendering his legal right to rebuild - that is, a bid by the bureaucrats to gain complete political and patronage control.

The bare economics of the Port Authority's offer, announced last week, are straightforward. Silverstein would relinquish the rights to build and control two of the five office towers planned for Ground Zero. He'd give a corresponding share of his insurance proceeds from the attack to the authority, and he wouldn't contest the state's approval of one-third of New York's remaining $3.4 billion in tax-exempt Liberty Bonds to the PA so that it could use the insurance funds and the cheap Liberty Bond financing to pay for the Freedom Tower's construction.

In return, Silverstein would win a reduction in the rent he pays to the PA. The Port Authority would also commit to renting some space at "market rents" in one of Silverstein's three towers, giving him a steady cash flow that would help to shore up shortfalls when he begins to lease out his buildings.

In releasing its offer, the PA clearly hoped the media would ask the obvious question: How could Silverstein even hesitate? Indeed, only the taxpayers and citizens would seem to have a right to complain: They'd be stuck subsidizing any losses at the Freedom Tower, the building least likely to succeed due to its ungainly government-dictated design. (The public might also question the waste of a finite resource - why give any Liberty Bonds to the PA—a municipal entity that can already issue tax-exempt debt?)

The media quickly obliged: "Take your time, Larry. What's the rush? We've been staring into the void at Ground Zero for almost five years, so who cares if the planet spins around the sun 10 or 15 more times before, maybe, you get a building or two up," the Daily News sneered yesterday - incorrectly, since Silverstein's built the only thing to go up at Ground Zero since 9/11, Seven World Trade Center.

But the devil is in the details, not in the press accounts. Yesterday, Silverstein announced that he's happy with the PA's general outline, but has some problems with the finer points.

Start with the fact that, even if Silverstein accepts this offer as is, it's not a done deal. The PA's board wouldn't actually vote on the final plan until September—and a vital piece could fall through before then. Will Albany be able to transfer $250 million to the Port Authority so that it can build the Freedom Tower? Can New York find enough local, state and federal government tenants to commit to filling up the Freedom Tower, or will it renege on that pledge before the board meeting?

Silverstein is no doubt wary that if some arcane but necessary element goes awry after he's stood up with the politicians and proclaimed a done deal, he's the one who will shoulder the blame. (Pataki's statement yesterday, ignoring the issues that need to be resolved, could only add to Silverstein's fears.)

Second, the current deal would hold Silverstein to a rigorous construction schedule. If he missed a deadline for any reason, he'd default, losing all three towers, not just the tower with the construction delay. The agreement lacks any clause to allow for construction delays caused by mundane events like stoppages for related work at the nearby memorial or at the new PATH station - or by spectacular events like a terrorist attack or an oil embargo.

Silverstein's insistence on such a provision may seem like nitpicking, the kind of thing the News derides as "treating every wrinkle at Ground Zero as a hard-fought negotiating point." But Silverstein's financial advisers doubtless know that, without a clause indemnifying the developer for some events outside his control, no lender - including Liberty Bond lenders, whose debt is only tax-exempt, not government-guaranteed - would put money at risk.

These details are vital. But that's what negotiations are for, and Silverstein, having agreed to renegotiate his long-term lease in the first place, and having endured personal insults and slander from Pataki and Bloomberg, stands to have his concerns addressed calmly and reasonably.

Here's the test: Will the PA accept Silverstein's concerns in good faith, and quietly go back to the table for wrap-up? Or will the agency bureaucrats, accompanied by Bloomberg and Pataki, start railing again for the media's benefit about how unreasonable Silverstein is?