A 60-day, top-to-bottom review of the United Nations's renovation plans - meant to bring down the $1.2 billion cost of the project, described by many real estate experts as over-inflated - has instead sent the project's estimated price tag soaring to $1.9 billion.
The new number is derived from an official U.N. report on the renovations to be released today and obtained by The New York Sun. The report, issued in the name of Secretary-General Annan and prepared by Fritz Reuter, the new director of the Capital Master Plan, as the United Nations calls the renovation project, was intended to "challenge all assumptions" about how the refurbishment should be conducted in order to make it less expensive, the U.N. undersecretary-general for management, Christopher Burnham, told the Sun earlier this fall.
The U.N.'s price increase comes as the Senate approved language yesterday restricting U.S. payments to the world body for the purpose of its upgrades.
On Capitol Hill yesterday, lawmakers outraged by the ballooning costs issued warnings that American support might be curtailed in light of fiscal irresponsibility at the United Nations.
Senator Sessions, a Republican of Alabama, told the Sun yesterday that he was "disappointed at the surge in cost," saying the spike further demonstrated the need for congressional oversight of the project.
"This is our money," said Mr. Sessions, who introduced legislation in April that would cap the amount of any American construction loan offer to the United Nations at $600 million. "They just don't seem to get it."
The U.N. report also recommends scrapping plans to vacate the world body's headquarters during the renovation, as had been planned for under earlier renovation models. That change eliminates the need for either a new "swing space" building or for leasing 700,000 square feet of commercial office space in New York City.
The United Nations says it needs to undertake a complete overhaul of its Turtle Bay campus - which is more than half a century old - owing to the dilapidated state of its facilities.
Initial planning for the project was conducted in 2000 and again in 2002, yielding a cost estimate of $1.2 billion. The United Nations determined it needed to empty its premises entirely during the renovations, citing dangers posed by asbestos and other construction hazards. Offices of the world body were to be temporarily housed in a 900,000-square-foot, 35-story "swing space" to be erected by the United Nations Development Corporation, a city-state public benefit corporation, over a neighboring city park.
Because the New York State Legislature did not issue the approvals necessary for the U.N. to seize Robert Moses Playground, the U.N. sought to rent about 700,000 square feet of commercial office space as an alternative.
Today's report, however, states that the "failure of plans for the UNDC5 building," as the swing space is called by the U.N., render it "no longer a realistic option for swing space in the foreseeable future." Moreover, "no commercial solutions were found to accommodate the activities of the General Assembly and other intergovernmental organs," the report states.
As a result, the secretary-general is recommending that the world body undertake its renovation in stages, under one of the four strategies for the refurbishment project set forth in the new report. Under "Strategy IV," the option endorsed by the secretary-general, a "phased approach" is undertaken. Ten floors of the Secretariat building at a time would be vacated and renovated, and the United Nations would lease approximately 228,000 square feet of commercial space in Midtown Manhattan to house the displaced staff.
The world body would also rent commercial space in Long Island City to temporarily house the Dag Hammarskjold Library, and would erect temporary conference facilities on the U.N.'s North Lawn, a park on the world body's campus that is closed to the public. Under all four options, the U.N. would abandon plans to renovate the building occupied by the U.N. Institute for Training and Research, and today's report suggests the possibility of jettisoning that building as a U.N. property altogether, saying it "is not a cost-effective building to operate over the long term."
The total cost of the endorsed "Strategy IV," according to the report, is $1.588 billion, yielding a total project cost of $613.76 per square foot, according to the document.
The report also sets forth "common assumptions" that apply to all four renovation strategies, including the one recommended by the secretary-general. Under these provisions, the report says, an additional $161 million in "scope options for additional security, sustainability, and redundancy" might be applied, on top of another $63.9 million for a "new multifunction hall and large conference room" to be added at a later date. The report says that the cost estimates do not include furniture or equipment such as computers, servers, or broadcast cameras, stipulating: "In order to provide proper furniture and equipment, it will be necessary to incorporate a provision of up to $100 million in the regular budget in the years leading up to the completion of the Capital Master Plan."
Adding the scope options and other add-ons to the base price of the new plan yields a total adjusted cost of around $1.912 billion. America, which shoulders 22% of the U.N.'s operating costs, could expect to pay around $420 million.
The project would be completed in 2014, four years later than the United Nations said it had hoped to finish the upgrades.
According to the report, the increased cost estimates result from the elimination of UNDC5 as a swing space option, construction-cost inflation, and a more precise understanding of the costs of the project now that 60% of the design work has been completed. The report says that the design work will be 100% completed between October 2005 and January 2006, and says the total cost of the design development and construction documents phase will be around $152 million.
Back when the refurbishment project was set to cost around $1.2 billion, the American government had offered a 30-year, 5.54% interest loan to fund the renovation. The secretary-general had recommended to the General Assembly that the United Nations accept the loan offer, despite several member states' complaints that America had not provided the loan interest-free.
The secretary-general now recommends that the costs of the Capital Master Plan be covered by one-time or annual cash assessments from member states, to be set aside in a "capital master plan special account." The report states that the United Nations would need to raise $45 million from member states for the fund before construction commences, and must maintain the fund's balance at 20% of annual expenditures in order to cover "temporary cash-flow deficits" and unexpected expenses. Breaking with U.N. practice, the report says, interest or fines may be imposed on member states that are late in paying their assessments.
In order to be permitted to begin construction, Mr. Annan says in the report, the United Nations must be able to provide a guarantee that it can pay the projected cost of the project. The American loan offer, the report states, "could act either as a source of project funds or as a credit enhancement vehicle to enable the United Nations to access short-term borrowing or letters of credit in international capital markets."
Senator Sessions, who was involved in Senate hearings in July at which real-estate developer Donald Trump testified that the U.N.'s renovation project was excessively costly and would probably end up carrying a price tag of $3 billion, pointed to Mr. Trump's testimony, saying the U.N.'s costs were already beginning to skyrocket. A spokesman for Senator Coburn, the Oklahoma Republican who chaired the hearing, expressed similar concerns.
Mr. Sessions said the wariness was shared by others in Congress, including Senator McConnell, a Republican of Kentucky who is influential on foreign policy appropriations matters. Mr. Sessions said that yesterday the Senate approved 94-5 the loan-capping language he introduced in April, plus a provision that would prohibit the American government from financing interest costs for any loans to international organizations, including the United Nations and the renovation project.
Calls requesting comment placed to the offices of Messrs. Reuter and Burnham, and to the president of the United Nations Development Corporation, Roy Goodman, yesterday and earlier this week went unreturned.