by Robert D. Yaro, President and Peter Herman, Chairman of the Board, RPA
With recent court rulings making it increasingly unlikely that Larry Silverstein will receive more than $3.5 billion in total insurance payments, it is time to strip away the financial and legal fictions that have led to poor decisions for rebuilding Lower Manhattan. Hopes for a large settlement and Mr. Silverstein's leverage as the leaseholder for the destroyed office buildings have clouded rational assessments of what is in the best interests of New York City and the metropolitan region. However, the financial reality is now clear. There isn't enough money to build the current plan for the World Trade Center site with its proposed 10 million square feet of office space. The cost for the entire plan is estimated at $10 billion or more, and even a $7 billion settlement might not be enough to supplement other available sources. In addition, much of the insurance money has already been spent on legal fees and lease payments.
The legal fiction, that Mr. Silverstein's contractual rights to replace all of the lost office space override any debate of what is really needed, has been cracked by recent news of proposed buyouts and lease renegotiations. These contractual rights are far more ambiguous than Mr. Silverstein has maintained. More importantly, these private contractual rights can be renegotiated, overridden through condemnation or bought out, as the Port Authority has proposed in the case of Westfield Properties, the retail developer. A potential deal with Westfield has already allowed for a reduction in retail space on the site, from the original 1 million square feet. We should now turn our attention to a similar reduction in office space.
Now that it's clear that we are not obligated to build 10 million square feet of office space - and that the public money doesn't exist to do it - we must reexamine the premise on which the program is based. With a huge amount of vacant office space and a great deal of uncertainty in the employment outlook, it could be many years before the city needs any new office construction. This is of particular importance in Lower Manhattan, where below-market office rents could keep space vacant in other parts of Downtown, reduce foot traffic and retail demand. Office development that isn't driven by market demand could repeat the mistake of the original World Trade Center, which led to depressed employment and underutilized space in the rest of Lower Manhattan for a decade and a half after its construction. Now that the insurance proceeds seem unlikely to cover most of the proposed construction, it is even more critical that we devote scarce resources, both money and land, to the most important priorities for Lower Manhattan.
Fortunately, we can reduce the development program at the site and still revitalize downtown on schedule. The public agencies must first push for a global settlement among all the financial stakeholders to avoid years of continued litigation and squandering of public resources. Gov. Pataki has taken the first step in this regard.
Unburdened by outdated leaseholder arrangements and with full knowledge of the amount of insurance money available, rebuilding officials can then scale back the development program within the framework of the approved Libeskind master plan. Construction must move ahead on schedule on the memorial, Freedom Tower, PATH station and other infrastructure while revisions are made to the office density on the rest of the site. Remaining insurance funds should be directed toward vital transportation and quality-of-life improvements throughout Lower Manhattan, using the Mayor's Vision as a blueprint, which calls for revitalized commercial streets, residential neighborhoods and public spaces throughout Lower Manhattan. It is these amenities and transportation improvements that will help revitalize downtown, not unnecessary new office construction.
The door has finally opened to a rational examination of Lower Manhattan's future. We could wade blindly into years of litigation, or we could push for a settlement that spares delay and removes the hurdles that have kept us from moving forward in the public interest to this point. Above all, the ultimate outcome at ground zero, perhaps the most significant development project of our time, should be dictated not by the outdated lease of a private developer but by the broadest possible public interest.
With recent court rulings making it increasingly unlikely that Larry Silverstein will receive more than $3.5 billion in total insurance payments, it is time to strip away the financial and legal fictions that have led to poor decisions for rebuilding Lower Manhattan. Hopes for a large settlement and Mr. Silverstein's leverage as the leaseholder for the destroyed office buildings have clouded rational assessments of what is in the best interests of New York City and the metropolitan region. However, the financial reality is now clear. There isn't enough money to build the current plan for the World Trade Center site with its proposed 10 million square feet of office space. The cost for the entire plan is estimated at $10 billion or more, and even a $7 billion settlement might not be enough to supplement other available sources. In addition, much of the insurance money has already been spent on legal fees and lease payments.
The legal fiction, that Mr. Silverstein's contractual rights to replace all of the lost office space override any debate of what is really needed, has been cracked by recent news of proposed buyouts and lease renegotiations. These contractual rights are far more ambiguous than Mr. Silverstein has maintained. More importantly, these private contractual rights can be renegotiated, overridden through condemnation or bought out, as the Port Authority has proposed in the case of Westfield Properties, the retail developer. A potential deal with Westfield has already allowed for a reduction in retail space on the site, from the original 1 million square feet. We should now turn our attention to a similar reduction in office space.
Now that it's clear that we are not obligated to build 10 million square feet of office space - and that the public money doesn't exist to do it - we must reexamine the premise on which the program is based. With a huge amount of vacant office space and a great deal of uncertainty in the employment outlook, it could be many years before the city needs any new office construction. This is of particular importance in Lower Manhattan, where below-market office rents could keep space vacant in other parts of Downtown, reduce foot traffic and retail demand. Office development that isn't driven by market demand could repeat the mistake of the original World Trade Center, which led to depressed employment and underutilized space in the rest of Lower Manhattan for a decade and a half after its construction. Now that the insurance proceeds seem unlikely to cover most of the proposed construction, it is even more critical that we devote scarce resources, both money and land, to the most important priorities for Lower Manhattan.
Fortunately, we can reduce the development program at the site and still revitalize downtown on schedule. The public agencies must first push for a global settlement among all the financial stakeholders to avoid years of continued litigation and squandering of public resources. Gov. Pataki has taken the first step in this regard.
Unburdened by outdated leaseholder arrangements and with full knowledge of the amount of insurance money available, rebuilding officials can then scale back the development program within the framework of the approved Libeskind master plan. Construction must move ahead on schedule on the memorial, Freedom Tower, PATH station and other infrastructure while revisions are made to the office density on the rest of the site. Remaining insurance funds should be directed toward vital transportation and quality-of-life improvements throughout Lower Manhattan, using the Mayor's Vision as a blueprint, which calls for revitalized commercial streets, residential neighborhoods and public spaces throughout Lower Manhattan. It is these amenities and transportation improvements that will help revitalize downtown, not unnecessary new office construction.
The door has finally opened to a rational examination of Lower Manhattan's future. We could wade blindly into years of litigation, or we could push for a settlement that spares delay and removes the hurdles that have kept us from moving forward in the public interest to this point. Above all, the ultimate outcome at ground zero, perhaps the most significant development project of our time, should be dictated not by the outdated lease of a private developer but by the broadest possible public interest.
@RegionalPlan