Several big New York City real estate developers share something in common: They have received public subsidies designed to help revitalize lower Manhattan after the terrorist attacks of Sept. 11.
The subsidy program was explicitly meant to support the area most devastated by the attacks. Yet almost $850 million - about half the total allocations to date - has been approved for development in midtown Manhattan and Brooklyn, locations far removed from ground zero. Some of the projects are also landing in Queens.
The Liberty Bond Program, an $8 billion initiative approved by Congress in 2002 and administered jointly by the city and state of New York, provides subsidies in the form of low-cost tax-exempt bond financing to real estate developers for major commercial and residential projects. Developers save tens of millions of dollars in interest payments and property taxes, and institutional investors get to purchase no-risk, tax-free government bonds. Thanks to a wide consensus among lawmakers, the provision easily made it into the federal budget.
No one contends that subsidies are a bad idea, not even the program's worst critics. But some see a problem in the way the money is allocated and the kinds of projects it funds. They're questioning how some of these decisions will help the living victims of Sept. 11. "If the public is giving a benefit to developers, what's the public getting in return?" asks Brad Lander of the Pratt Institute Center for Community and Environmental Development in Brooklyn.
Among the projects under consideration, Forest City Ratner won more than $100 million for its Atlantic Terminal project near downtown Brooklyn, which will house the Bank of New York. Barry Diller's InterActiveCorp received preliminary approval for $80 million. Its new Frank Gehry-designed office tower will be built in the Chelsea neighborhood of Manhattan. Additionally, $400 million was approved to help build the Astoria Energy LLC power plant in Queens. And to help pay for his midtown project - the new offices of The New York Times - Bruce Ratner is asking for $150 million.
"We're very, very happy with programs like this," says Richard Anderson of the New York Building Congress, which includes many of the city's developers and contractors. "This is more than disaster relief: It's reinforcing the economic center of the United States."
The rationale behind allowing Liberty Bonds to help fund projects outside the so-called liberty zone was to "provide modern office space for displaced and decentralized businesses." But the Bank of New York, Astoria Energy, The New York Times, and InterActiveCorp were never tenants of the buildings destroyed or damaged on Sept. 11.
"The Liberty Bond Program shouldn't be used outside of lower Manhattan," says Judy Duffy of Community Board 1, which represents the downtown community. The board passed a resolution last December urging the city and state not to approve any further Liberty Bond financing of projects outside the liberty zone.
Government-sponsored financial assistance for urban development and revitalization is not a new idea. Tax-exempt bond financing, one such example, has been readily available to qualifying candidates such as nonprofit organizations for years.
But this Liberty Bond program is unique, both in scope and purpose - and protest against it has escalated in recent weeks. "Liberty Bonds are an essential part of rebuilding lower Manhattan," offers Kevin Rampe of the Lower Manhattan Development Corp. "The LMDC supports Liberty Bond funding for projects that will benefit lower Manhattan."
For some people, one of the biggest concerns with the program is its approach to housing. "While downtown is in a process of revitalization, I believe that more of the Liberty Bonds should be used to build affordable housing in Lower Manhattan," says Rep. Jerrold Nadler of New York.
But the program was not meant to provide low-income housing, notes Janel Patterson, spokeswoman for the New York City Economic Development Corp. Although not under obligation to do so, the state decided to make 5 percent of new housing available to middle-income tenants, she says. Liberty Bonds cannot finance condos or cooperative apartments.
"All the pots of money allocated for rebuilding lower Manhattan have been geared to gentrifying the neighborhood," complains Bettina Damiani of the watchdog group Good Jobs New York.
Others are more satisfied. Michael Slattery of the Real Estate Board of New York thinks the program is achieving its goals, "in some ways, stunningly so," he says.
"We've seen a level of new construction activity that's unprecedented in lower Manhattan," Mr. Slattery says. "[The program is] being used for what it was intended to be used for."
The Liberty Bond Program will expire at the end of this year, but a five-year extension is expected to be passed.