The Port Authority of New York and New Jersey authorized the release Wednesday of $159 million of insurance proceeds from private insurers to enable developer Larry Silverstein to restart the stalled construction of 3 World Trade Center without new public debt or loan guarantees. After months of often fractious negotiations, the board commissioners—who are appointed by the governors of both states—voted unanimously at a public hearing in Jersey City to change an earlier proposal that would have given Silverstein $1.2 billion in loan guarantees to help him complete the 80-story building on the 16-acre site. Patrick Foye, the Port Authority executive director, said that under the new agreement, Silverstein must raise the money privately and that the Port Authority would not be guaranteeing his loan.
The proposed changes to the 2010 agreement had sharply divided the Port Authority board. Kenneth Lipper, whom New York governor Andrew Cuomo appointed last year, led the charge against the earlier financing deal, arguing that private funding for the project was readily available and that the troubled agency's resources and borrowing should be devoted instead to renovating midtown Manhattan's crowded Port Authority Bus Terminal rather than subsidizing a billionaire who could afford to raise the funds privately, albeit at a much higher interest rate. Lipper praised the new agreement as "excellent" for the public and the Port Authority, noting that it would not saddle the troubled authority with new debt or loan guarantees or require new cash outlays the agency can ill afford. "We're back on mission," Lipper said, following the vote.
In a statement, Silverstein also praised the new deal, saying it would enable him to "jump-start" the long stalled tower, "employ 3,000 construction workers and stay on target for an early 2018 completion." Eight stories of the 2.5 million square-foot, $2.4 billion tower have already been built and Silverstein was increasingly eager to complete a financing deal with the Port Authority to avoid losing his anchor tenant, GroupM, a giant media firm. The company's agreement with Silverstein enables it to opt out of its lease at the end of June for 516,000 square feet of space in Tower 3, which has been stalled for years. In his statement, Silverstein echoed Foye's and Lipper's confidence that his company, Silverstein Properties, would be able to raise the money privately to complete the tower. He has also agreed to take back two floors that he leased to the Port Authority in a neighboring office building, 4 World Trade Center.
"Financing the World Trade Center is part of our mission," said Scott Rechler, the Port Authority's vice chairman and its acting chairman. "We cannot rest until this mission is accomplished."
Under the modified deal, which was first reported by Crain's, the board will release $50 million of the $159 million in insurance proceeds immediately, part of a reserve fund that private insurers were forced to pay Silverstein after the Twin Towers were destroyed in the 9/11 terrorist attack, only six weeks after Silverstein had signed a 99-year lease for them. The commissioners also voted to allocate up to $80 million—a $10 million increase from the 2010 deal—for potential cost overruns in the Tower 3 project. But several commissioners said it was highly unlikely that the funds would be needed, since Silverstein had built Towers 4 and 7 in record time and under budget.
Negotiations over the rebuilding of the World Trade Center complex have been exceedingly prolonged and tense. Despite the unanimous vote of the commissioners on Wednesday, notes of discord stemming from the legacy of those talks and earlier deals with Silverstein could be heard. William "Pat" Schuber, whom New Jersey governor Chris Christie appointed in 2011, said that Silverstein has had a pattern of making deals that he subsequently tries to amend—"to his benefit," he added. "As a word of caution," he said, "this is it!" Schuber said he would not support any other changes in the deal unless they were "of huge value to the Port Authority."
Even the new deal, moreover, failed to satisfy Margaret Donovan and Richard Hughes, leaders of the Twin Towers Alliance, which has long argued that Silverstein has had too much control over the rebuilding of the World Trade Center site and "too little skin in the game," as Hughes put it. Speaking at Wednesday's heavily attended meeting, both Hughes and Donovan criticized the new deal as not in the public interest. Though the Port Authority has taken steps in the wake of the so-called Bridgegate scandal to increase transparency, Donovan called the agency "mortally ill" given its recent history of cronyism, insider deals, and secrecy. The alliance has filed a Freedom of Information lawsuit in New York state court seeking documents about the deal's financing which the Port Authority has refused to release. "We want to know how much Larry Silverstein has spent on the project, and what has given him such control over this project and all of Ground Zero," said Donovan.
Others who spoke during the public comment period were more impressed with the changes for which commissioner Lipper and others have lobbied. "This is a new Port Authority," said Murray Bodin, an engineer who has followed the project closely. "This board has changed. The organization has changed."
Judith Miller is a contributing editor of City Journal, an adjunct fellow at the Manhattan Institute, and a Fox News contributor. Alex Armlovich is a research associate at the Manhattan Institute.