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Financial dispute threatens start of WTC project

From Phil Hirschkorn

The 1,776-foot Freedom Tower is the signature building of redevelopment plan.


New York
September 11 attacks
World Trade Center

NEW YORK (CNN) -- A financial dispute may delay the scheduled April start of construction on the Freedom Tower at the World Trade Center.

The Port Authority of New York and New Jersey, which owns the 16-acre site in Lower Manhattan, failed to reach an agreement with developer Larry Silverstein on a financial plan for its redevelopment.

The plan includes the 1,776-foot-tall Freedom Tower and as many as four other buildings designed to replace 10 million square feet of office space destroyed in the September 11, 2001, terrorist attacks.

New York Gov. George Pataki, who promised Silverstein $1.67 billion in tax-free bonds to underwrite construction, had set a Tuesday deadline for reaching an agreement.

The governor said he was "deeply disappointed" that negotiations had broken down -- and pointed the finger at Silverstein.

Silverstein said he agreed to let the Port Authority take over construction of the Freedom Tower, but the insurance money has become the sticking point in reaching an agreement.

Silverstein wanted the authority to agree to relinquish part of its share if court settlements fall short of expectations. The authority refused.

"We cannot and will not allow profit margins and financial interests to be put ahead of public interest in expediting the rebuilding of the site of the greatest tragedy on American soil," Pataki said. "Our ardent desire to move forward expeditiously must not be used as leverage by Larry Silverstein for his financial demands."

"We're not going to make a short-sighted deal with Larry Silverstein," said Ken Ringler, the Port Authority's executive director.

Mayor Michael Bloomberg, who controls another $1.67 billion in bonds for the project, also called on Silverstein's company "to temper its individual interests and focus on what's best for New York City."

Charles Gargano, a Pataki ally and vice chairman of the Port Authority, said Silverstein must either meet the schedule for building the Freedom Tower "or move away from it and have someone else build it."

But Silverstein insisted he had cooperated with demands by the Port Authority to relinquish part of his lease and share some of the insurance proceeds his company received after the terrorist attacks. He also complained that while he has continued to pay $120 million in annual rent on his lease, the authority has not prepared the site for new construction.

Just six weeks before September 11, Silverstein signed a 99-year lease on the World Trade Center, which obligates him to rebuild the commercial space lost in the attacks. The Port Authority has been pressing Silverstein for proof that he has the necessary financial resources for the project.

The Port Authority has proposed taking over construction of the $2 billion Freedom Tower and a plot of land at the southern end of the site, where the damaged Deutsche Bank building now stands. The bank building is being dismantled to make room for the tower.

Under that plan, Silverstein would retain control over the eastern side of Ground Zero, where three other buildings -- considered the most commercially viable -- are scheduled to go up. His $120 million annual rent would also be reduced, but some of the approximately $3 billion in insurance proceeds Silverstein expects to receive would be shared with the Port Authority.

Plans for the site call for as many as five buildings, as well as a new transportation hub and a memorial to those who perished in the September 11 attacks.

Construction on the transportation hub began in September, and preparation work began Monday on the memorial, which features reflecting pools over the former footprints of the doomed towers. Both projects are scheduled to be completed by 2009.

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