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New York Post

 

Liberty Misspent

September 06, 2011

By Nicole Gelinas

PRINTER FRIENDLY

Political use of rebuild bonds

To see how thoroughly New York’s pre-9/11 culture infected the city’s “recovery,” look at what happened to the Liberty Bonds that the feds awarded us for rebuilding.

After the attacks, President George W. Bush and Congress delivered $20.5 billion in aid -- including up to $8 billion in Liberty Bonds to build real estate.

No government (federal, state or local) guaranteed the bonds’ repayment. But the bonds are exempt from all taxes. Since the investors who buy the bonds don’t have to pay such levies, they don’t mind making lower interest -- saving the companies money.

The feds gave up $1.2 billion in tax revenue for this purpose; the city and state gave up less but still tens of millions.

(Tax-exempt bonds weren’t the best vehicle for rebuilding, by the way; the Port Authority, which bears much of these costs, can already borrow tax-exempt. But our senators didn’t ask for the same amount of aid in another form.)

Mayor Bloomberg and then-Gov. George Pataki chose the companies that would get the bonds. You’d think they’d have used the vast majority of the funds to defray the huge cost of One World Trade Center and its other rebuilding commitments. In fact, just $3.8 billion -- 59 percent -- went to the WTC, the city’s Independent Budget Office reported last week.

Of that, WTC developer Larry Silverstein got about $3.1 billion, reasonably enough, to build 7 World Trade and his other buildings. (The Port Authority will end up guaranteeing some of Silverstein’s debt, after all, as the rebuilding financing grows ever more tangled.) The Port Authority itself took about $701.6 million.

Who got the rest?

* Goldman Sachs: $1.7 billion for its downtown tower.

* The Durst family: $650 million for the Bank of America building -- in Midtown.

* Developer Forest City: $90.8 million for the Bank of New York Mellon building -- in Brooklyn.

The remainder went toward smaller projects -- most having nothing to do with 9/11 rebuilding. Oh, and the National Sports Museum got $52 million to open in Lower Manhattan in 2008 -- and promptly defaulted on its bonds.

The whole debacle shows how New York turned a straightforward -- if tragic -- job into a complicated and tragicomic one.

Albany and City Hall should have laser-focused on cleaning up the Ground Zero site. They and the Port Authority should have quickly rebuilt flood protection, transit and other supporting structures, and built a simpler memorial -- and then turned the job of building towers to Silverstein. If he couldn’t do the job, rebid it to someone else.

Instead, New York squandered time and money doling out favors.

Has the result made us stronger? Consider the companies that benefited from these Liberty Bond subsidies:

* Bank of America: Its stock was down more than 8 percent Friday. The company’s 2008 purchase of subprime mortgage giant Countrywide Financial may turn out to be fatal.

* BoNY Mellon: It lost its CEO last week. Among other problems, state Attorney General Eric Schneiderman wonders whether BoNY Mellon dealt fairly with its investors in a complex mortgage deal it did with BofA.

Goldman is, well, Goldman. But it faces questions about whether investment banks will be as profitable in the next decade as they were in the last.

If Goldman, BofA and BoNY Mellon don’t do well, no amount of subsidies will save their jobs in Gotham. Connecticut is discovering that fact about UBS, the Swiss bank that got goodies to locate in Stamford but is now stumbling.

If the banks do well, they’ll have no choice but to be here.

And if they’re worried about terrorists destroying their businesses and killing their workers, a few hundred million in subsidies won’t make that prospect attractive.

That is, the companies will need to be here -- but only if New York does well. If the city keeps crime down, keeps transit and roads in good shape and delivers reasonable public services, developers will want to build buildings -- with or without government subsidy. They’ll want to collect rent from the businesses who find New York the place to be.

Those businesses might be Goldman -- or companies we’ve never heard of.

But if New York hands out subsidies at the expense of doing basic jobs -- as it has with its 9/11 resources -- the subsidies won’t be enough.

Original Source: http://www.nypost.com/p/news/opinion/opedcolumnists/liberty_misspent_WnVFbDPCBHHmhcgq77JSaL

 

 
 
 

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