Back to Basics: Get the Port Authority out of the real estate business - sell WTC site
By GEORGE J. MARLIN
Saturday, July 27th, 2002
When more than 4,000 participants gathered eight days ago
at the Jacob Javits Convention Center and soundly rejected the
redevelopment plans for Ground Zero, Port Authority officials wisely
concluded that it was time to go back to the drawing board. Better yet,
they should go back to first principles get out of the real estate
business and back to their basic job.
After he took office in 1995, Gov. Pataki realized that the
Port Authority had not completed a major capital project in two decades.
As executive director of the PA at the time, I found myself running not
only airports, bridges and tunnels, but also a hotel, industrial parks and
a language school.
Unnecessary layers of Port Authority management had created
a bloated bureaucracy. Staff activities drained resources.
Pataki and the PA's board of directors made it clear that
they would accept nothing less than fundamental change. They wanted
greater efficiency and a return to the Port Authority's core mission of
The mission statement the board officially adopted directed
the agency "to identify and meet the critical transportation
infrastructure needs of the bistate region's businesses, residents and
With the governor's blessing, the agency responded
forcefully to carry out these principles. We made the first operating
budget cuts since 1943, at a saving of $105 million. We avoided toll and
fare increases that once seemed inevitable. Yet customers saw improved
service everywhere, from newly scrubbed, brightly lit tunnels to more
courteous, better trained staff at the airports. We preserved the
multibillion-dollar capital plan and reduced the time needed to deliver
To make the agency leaner and more responsive, we stripped
away management layers, consolidated departments and redirected resources
from staff to line departments. The size of the bureaucracy shrank by 15%.
And when challenges arose, the reenergized staff responded magnificently
to emergencies such as the blizzard of '96 and the crash of TWA Flight 800
just as they did on 9/11.
It was during this period of adjusting the workforce to the
right size and privatizing the Vista Hotel, the Yonkers and Elizabeth
industrial parks, the World Trade Institute and the Brooklyn grain
terminal that the PA began studying options for the World Trade Center.
When this process ended in 2001, six weeks before 9/11,
real estate developer Larry Silverstein took over the Trade Center in a
partial privatization deal by leasing the buildings for 99 years. The Port
Authority maintained ownership of the land. New Jersey opposed an outright
sale. Further, a complete sale was considered unwise because the Trade
Center complex was exempt from the city fire code. A private owner would
lose that exemption, and engineers informed the PA that it would be
extremely difficult and costly to make the structural changes necessary to
comply with the code.
Others argued that an outright sale would cost the Port
Authority too much money. State government buildings are exempt from city
property taxes and can purchase cheap electricity about half the price
of Con Edison's rates from the New York Power Authority.
Because these substantial savings were factored into
existing Trade Center leases, a private owner would have had to reduce the
purchase price to make up for these lost privileges. The value lost to the
Port Authority on the sale could have totaled several hundred million
dollars. Thus, the 99-year lease was created.
The buildings that eventually rise at Ground Zero, whatever
their exact size and configuration, really should comply with the city's
fire code. What's more, the city is entitled to full real estate taxes on
So why not get the Port Authority out of the real estate
business altogether and get it back full time as a transportation engine
for the region?
Remember, when it was completed in the early '70s, the
World Trade Center was for years a white elephant whose economic viability
was saved only when the state government became a primary tenant.
Also, independent studies have concluded something that the
business community already knows: Government bureaucrats are not suited to
be in the competitive real estate market.
With a fragile economy, the city doesn't need another
downtown development flop. Until last week, the Port Authority proved it
was heading down that road again until the public vociferously objected.
Once Pataki and Mayor Bloomberg agree on an appropriate
memorial for the victims of Sept. 11, the remaining land should be sold to
private developers who have the market experience and risk capital to
determine the proper residential and commercial mix. Silverstein could be
given a first option to buy as part of the renegotiation of his lease.
If the Port Authority gets back to first principles, the
public will be the winner. Hallowed ground will be preserved. Land values
will be maximized by revitalizing downtown. The cash-strapped city will
receive full property taxes on the WTC site. The PA can pay down bonded
debt with the sale proceeds. Another boondoggle will be averted.
And lower Manhattan will no longer be under the thumb of
government social engineers.
Marlin, who was executive director of the Port Authority of
New York and New Jersey from 1995 to 1997, is the author of "Fighting the
Good Fight: A History of the New York Conservative Party.
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