The Capital Costs of Terrorism: Paying the Price for Public Redevelopment

07/02/2008 | By Barbara Nadel, FAIA

The astronomical cost of rebuilding the World Trade Center site has left New Yorkers facing an $18 billion redevelopment project without a clear schedule or budget on the horizon.

Just months before the November 2008 U.S. presidential elections, both major party candidates are addressing national security as an important issue. Three years ago, on July 7, 2005, London was hit with a series of coordinated suicide bombings in subways and on buses that occurred during morning rush hour.

With the approach of the seventh anniversary of the 9/11 attacks on the United States and destruction of the World Trade Center in Lower Manhattan, the Port Authority of New York and New Jersey announced that the World Trade Center redevelopment faces up to a 3-year delay and will cost somewhere between $1 billion to $3 billion more than the current estimate of $15 billion.

Let’s step back for a moment and consider how New York got into this predicament of rebuilding 16 acres of prime real estate—and how it’s now looking at an $18 billion tab for capital reconstruction (and counting).

The numbers are staggering, but not surprising to anyone familiar with the complexities of building in New York or working on large infrastructure projects; however, this news should cause every taxpaying voter and building industry professional to consider how we got to this point and why the far-reaching impact of national and building security is so critical to the safety and economy of thriving cities and nations.

As the lead agency charged with redevelopment, the Port Authority of New York and New Jersey, which owns the 16-acre site in Lower Manhattan, issued the report about the delays, indicating that the site’s structures and the memorial won’t be completed by the 10th anniversary of the 9/11 attacks as originally planned. A follow-up report is due in September 2008.

By many accounts, the original schedules and budgets may well have been unrealistic and too aggressive, partly due to the desire of former New York Governor George Pataki (R) to use the redevelopment of Lower Manhattan as the centerpiece of his 12-year administration, and as a springboard for his ill-fated presidential candidacy.

With 26 separate, adjacent, and intertwined infrastructure and building projects under way, the Trade Center site redevelopment plans call for an 8-acre memorial; five office towers, including the iconic Freedom Tower (designed by SOM); a transit hub and PATH station connecting underground subway and commuter rail lines; and a performing-arts center. According to published reports, in April 2007, state officials learned that an underground security vehicle screening facility was more than 4 years behind schedule and budget, in part, because it’s located below several other facilities that required complex coordination. This fact was not made public at the time because the potential reaction from contractors and loss of leverage to maintain schedules and budgets was a concern. The current New York Governor David Paterson (D), who took office on short notice in spring 2008 after the abrupt resignation of Eliot Spitzer (D), ordered a progress report from the Port Authority.

News reports in the past year have indicated significant delays and substantial cost overruns at the planned transit hub and memorial, which are located above commuter rail lines. The winged transit facility, designed by renowned Spanish architect and 2005 AIA Gold Medalist Santiago Calatrava, FAIA, was budgeted for $2.2 billion and may run as high as $3.4 billion. The final design is still not complete.

This leaves real estate developer Larry Silverstein, responsible for building the Freedom Tower and other commercial towers on the site, in a difficult position as far as renting out premium space to prominent tenants. Delays in the transit building and other infrastructure, including the vehicle security screening center, also slow development of 500,000 square feet of retail space on the site, a prime source of tax revenues and jobs in the region.

The complexities of building on one of the most prominent U.S. urban sites cannot be underestimated, and maintaining the public trust is of paramount concern. With 19 public agencies, two private developers, 101 contractors and subcontractors, and a myriad of muscular political forces at play, these major projects are being designed and built by different teams. Coordination becomes a delicate game of dominoes, where scheduling, construction, and completion of several key projects affect others above and below, and adjacent to, the site.

New York City’s Mayor Michael Bloomberg (IN), who faces term limits and may aspire to higher office, chairs the memorial rebuilding effort. Gov. Paterson appoints key executives at the Port Authority, which oversees the project. With the original completion date of 2011 now delayed, the Governor and the Mayor both have a stake in moving redevelopment along, especially since Bloomberg is rumored to have his eye on running for governor in 2010.

According to news reports, former Gov. Pataki, at the end of his administration, claimed he had expedited redevelopment of the site by signing a 99-year lease with Silverstein, which stipulated various responsibilities during construction. The deadlines and penalties included $300,000-per-day payments to Silverstein if the Port Authority failed to deliver land on schedule. As of June 2008, the agency has reportedly paid Silverstein more than $14 million in penalties, and counting. The public may never learn the total project costs of rebuilding the World Trade Center site.

Not surprisingly, coordinating the many power players, public infrastructure projects, and private commercial interests involved at the Trade Center site has proven to be a Herculean task in moving the project ahead on schedule and on budget. The Port Authority’s latest report calls for a new committee to oversee the project, composed of stakeholder representatives.

At times like this, some wistful New Yorkers might wish for another Robert Moses power broker to descend on the scene, call the shots singlehandedly, and get the project moving at breakneck speed. Those days and simpler times, however, are long gone. Partnering by committee and collaboration may be a more realistic 21st-century approach, with an eye to maintaining—or regaining—the public trust.

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