After Pataki, Silverstein Properties Faces the Board of the Port Authority

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The New York Sun

While the focus of the latest impasse at ground zero has been on Governor Pataki and the 74-year-old developer who controls a 99-year lease on the site, Larry Silverstein, it is the Port Authority’s 12-member board of commissioners that could have the final word on a new redevelopment plan.


Negotiations over a new lease for ground zero between representatives of Silverstein Properties and executives of the Port Authority, which owns the site, are speeding up with the hope of reaching the broad outlines of a deal before the board’s meeting tomorrow. In a new deal, Mr. Silverstein would likely give up his rights to build the Freedom Tower, another tower abutting ground zero to the south, and be forced to share some of his insurance proceeds from the September 11, 2001, terror attack. In exchange, he would still build the three most commercially viable sites, and his rent payments to the Port Authority would be considerably reduced.


The Port Authority board of commissioners, with six representatives from New Jersey and six from New York, is a diverse mix of appointees with backgrounds in real estate, law, labor, engineering, the press, and politics. The board, which includes the vice president of an electrical supply distributor and a failed candidate for New York State comptroller, has veto power over the future of ground zero.


The New Jersey delegation includes two members appointed by one of the state’s former acting governors, Donald DiFrancesco; three by a former governor, James McGreevey, and one by another former acting governor, Richard Codey.


Mr. Pataki appointed all of the New York delegates. Two of the New York appointees are Long Island based developers with strong ties to a former senator, Alphonse D’Amato. Another is the CEO of Cendant, Henry Silverman. He is one of the highest paid executives in the nation, making about $24 million in 2005, according to Forbes magazine.


Representatives from Silverstein Properties and from Governor Pataki’s office in the past have expressed their frustration with the dual nature of the Port Authority board.


Messages left with all 12 board members were not returned yesterday. State and city officials as well as representatives of Silverstein Properties would not comment on the status of negotiations, although a deal could be put on the table tomorrow.


The renegotiation of the lease is an attempt by the Port Authority, with the encouragement of the Bloomberg administration and to some extent Mr. Pataki, to reclaim some of the development rights of the 16-acre site. They say the developer will run out of money before fulfilling his obligation to rebuild 10 million square feet of office space.


Sources familiar with the politics of the Port Authority’s board said there are different degrees of motivation to seal a deal. Some commissioners are said to oppose the terms Mr. Silverstein would get in a new lease, and others are said to want to buy out his development rights completely.


Mr. Pataki is said to be the actor that is most anxious to cut a deal, but heading into the last few months of his lame duck term in Albany, it is questionable how loyal the New York commissioners will be to him.


Two sources familiar with the negotiations said Mr. Pataki’s leading development official, Charles Gargano, who is also vice chairman of the Port Authority, recently tried to bring the New York delegation more in line with the governor’s position. New York commissioners reportedly have said in the past that they favored buying out Mr. Silverstein’s rights to the site instead of agreeing to a swap of building rights.


That situation has now changed, sources say, as the prospect of buying out Mr. Silverstein, and the likely court battle that would follow, is believed to be unfeasible or undesirable.


Yesterday, Mr. Pataki told reporters: “We cannot just look at this strictly in dollar-and-cents terms.”


While Mr. Pataki will leave the governor’s office at the end of the year, Governor Corzine, who has a much wider political horizon, can exert more control over New Jersey’s delegation. Mr. Corzine has not detailed his preferences for the site publicly, other than to say that he supports the Port Authority chairman, Anthony Coscia, a lawyer who headed New Jersey’s development agency for more than 10 years.


The New Jersey delegation is said to be less motivated to close a deal and is seeking to extract more cash for the Port Authority out of a new arrangement.


That cash could be used for projects in New Jersey or on the site, specifically to help pay for tens of millions of dollars worth of infrastructure costs necessary to build the World Trade Center memorial.


A former executive director of the Port Authority, George Marlin, said: “Governor Corzine is under a great budget pressure. He may look to extract some money from the agency to support some transportation issues on his side of the river. That may relieve some of his budget pressures.”


While Mr. Corzine has been preoccupied with tense budget negotiations in Trenton, two sources familiar with ground zero said Messrs. Corzine and Pataki have been in contact recently over development plans, a signal that Mr. Pataki could be vetting a new plan with the hopes of carrying it past the New Jersey delegation.


According to the Port Authority’s 2006 budget, published in December, the bi-state agency, which operates the region’s airports, bridges, tunnels, and ports, among other activities, will spend just over $5 billion this year. The Port Authority will spend more than $75 million related to the redevelopment of the World Trade Center. The expected revenues generated from the empty site are more than $151 million, much of which is generated by Mr. Silverstein’s monthly payments of more than $10 million.


The New York Sun

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