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

July 2, 2008
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 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.


The Costs of Terrorism
Some people I’ve come across in the last few years, including those in the global building community, remain skeptical about the likelihood of a terrorist attack in their city, their community, or against prominent symbols and icons in their country. But, events since 9/11 have shown that Al Qaeda terrorists have attempted to influence 2004 elections by attacking commuter trains in Madrid, successfully attacked public transport in the U.K. in 2005, have tried suicide car bombs at the Glasgow Airport in 2007, and continue to recruit and train people at camps in Afghanistan to launch attacks against Western targets.

A July 1, 2008, front-page story in The New York Times details how Al Qaeda operatives in Algeria set off a pair of bombs outside a train station—the second one timed to hit emergency responders. “We will not hesitate in targeting it whenever we can and wherever it is on this planet,” one of the planners told a reporter.

Despite the billions in reconstruction for the Trade Center site, the overall costs of the attacks of 9/11 to Americans and global citizens are impossible to quantify. There is no value engineering technique or magic bullet to reduce the costs of what Americans have paid—and will continue to pay—for the blood and treasure lost since that day, and going forward.

From the thousands of civilian and military dead and injured in the United States, Iraq, and Afghanistan, resources spent, political capital squandered, leadership opportunities gone awry, public careers lost and won, to the nature of foreign policy and domestic program decisions—the impact of 9/11 will resonate for decades to come. These ripple effects have and will continue to haunt federal, state, and local levels of American government, and affect foreign policies and relations with other countries around the world.

The hard and soft costs of going to war overseas and creating a sprawling Homeland Security agency at home are only part of the post-9/11 financial record. Historians, pundits, and scholars will cite the billions of federal U.S. dollars appropriated by Congress spent on fighting the global war on terror and debate what missions were or were not accomplished.

Chances are good that the Beltway armchair analysts won’t consider the intangible values of what was lost and what is no longer visible outside the federal government. Along with the 3,000 people who perished, and federal payouts to the families, the New York region can also claim the unoccupied sites in and surrounding the World Trade Center; the substantial publically funded capital reconstruction costs for buildings, transportation, and infrastructure; and decreased revenues and jobs. The ongoing delays in schedules and cost overruns translate to a shrinking tax base for the New York metropolitan region, and the financial industry in Lower Manhattan, at a time of soaring fuel prices, increased transportation costs and a weakened economy.

If, as one political advisor suggested in June 2008, a U.S. terrorist attack before the November 2008 election would be good for one political party; the lessons learned from Lower Manhattan 7 years after 9/11 are that a terrorist attack anywhere in the United States would take a tremendous economic and human toll on all Americans and global citizens who live and work here.

Has Government Failed Us?
In his new book, Your Government Failed You: Breaking the Cycle of National Security Disasters (Ecco, 2008), former White House counterterrorism advisor Richard A. Clarke explores how the federal government not only failed to prevent the 2001 terrorist attacks in New York and Washington D.C., but also has proven itself incapable of handling the majority of the most crucial national security issues, from Iraq to Katrina and others. As a 30-year insider at the highest levels of the federal government who was the only federal official to apologize to the grieving families during the 9/11 Commission hearings, Clarke details the systemic problems in government and how to confront and prevent them.

While Clarke focuses on America’s national security programs, ultimately, it was the failure of these programs, agencies, and the system that led to the events of 9/11, destruction of the World Trade Center, and the monumental task of reconstruction. Now, New Yorkers and the federal government are financing an $18 billion urban reconstruction project without a clear budget or schedule on the horizon.

Maintaining national security is of paramount importance. Ensuring that buildings and infrastructure are designed to mitigate risks and threats remains the major challenge for the building industry. The astronomical costs of rebuilding the World Trade Center site are just one of the many end results of what happened when the U.S. government failed to protect its citizens “against all enemies” in the months leading up to 9/11.

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