Twenty years after September 11, the World Trade Center redevelopment story encapsulates the political, economic, and cultural forces that rule New York City and even the United States. In the early months, there were broad hopes that the process would align with high ideals. Tens of billions of dollars of federal money were available, every major actor sought a say, and many paths could have been pursued. What emerged, thus, presents a naked reflection of what drives the city.
Seeking to privatize their real estate operations and lock in revenue, in July 2001, only six weeks before the attacks, the public owners of the World Trade Center complex, the Port Authority of New York and New Jersey, leased much of their commercial property to billionaire developer Larry Silverstein, who already built and operated 7 World Trade Center. Silverstein only put up a modest amount of his own money, just $14 million, and was heavily leveraged in the deal, with General Motors’s financing arm GMAC as his primary lender.
The public sought something inspiring and transcendent in the WTC rebuild. A billionaire developer and his government allies had other plans.
After the attacks destroyed the Twin Towers and surrounding properties, the lease agreement gave Silverstein Properties arguable legal grounds for redevelopment rights, provided that it kept paying “rent” for buildings that no longer existed. The lease contract had a provision that the towers could be redeveloped in the case of disaster, although the wording also implied that they should be rebuilt exactly as they were, an idea that few decision-makers took seriously.
Immediately after the attacks, Silverstein called around and spoke to the press, seeking to establish the premise that the same massive 10 million square feet of office space should be rebuilt with government support and his lease maintained. While the government probably could have immediately condemned the lease under eminent domain, an option that officials repeatedly contemplated over the years when Silverstein’s escalating demands for subsidy became unbearable, the contract was not voided (as a powerful governor like Nelson Rockefeller or mayor like Fiorello La Guardia would have likely insisted). Instead, New York and New Jersey officials gave Silverstein and his lawyers a chance to seek large payouts from his insurance policies in order to supplement federal support for rebuilding. And, of course, officials feared any attempt to void Silverstein’s lease would result in aggressive and long-lasting litigation (although perhaps underestimating the popular backlash Silverstein would have experienced).
To manage the billions of dollars of federal money that would come to New York, Mayor Rudy Giuliani and Governor George Pataki created a new public entity called the Lower Manhattan Development Corporation that could make decisions without any input from elected legislators. In a crucial move, while the number of board members was split evenly between the city and state, the governor was given the right to appoint the chairperson, giving the state a trump card on key issues. Pataki now brags that he and Giuliani intentionally set up the LMDC this way to prevent then Democratic mayoral candidate Mark Green from having control over funds were he to win. Selecting former Goldman Sachs chairman John Whitehead, rather than a strict Pataki loyalist, to be board chairman did give the LMDC a measure of independence, but its overall structure as a subsidiary of the state’s Empire State Development Corporation, combined with the Port Authority’s control by the state, put city government at an inescapable disadvantage for the entirety of the redevelopment. At one point in 2003, the city explored establishing its own authority by trading its ownership of 5,610 acres of land at JFK and LaGuardia airports to the Port Authority for the 16 acres at the World Trade Center, but Pataki apparently nixed these negotiations for political reasons. Exasperated by limited ability to influence “Ground Zero,” Mayor Bloomberg diverted his attention to the West Side development now known as Hudson Yards.
Visions of a Greater Good
In the months after the attacks, there was broad public interest in how the redevelopment should proceed. Across the country, people hoped that a rapid construction would embody national pride and send a proud and defiant “message to the terrorists.” Equity was a critical consideration, given that a central element of the catastrophe was the self-sacrifice of working-class building staff and first responders. In New York City, dozens of civic coalitions and organizations, like New York New Visions and the Labor Community Advocacy Network, were formed and had meetings to discuss core principles and organize. Invariably, public demands were much broader than the commercial interests of replacing hefty square footage of office space in Lower Manhattan. They included desires for new transportation projects (such as a downtown connection to JFK, subway improvements, or an underground West Side Highway), affordable housing, hospitals, educational institutions, an open street grid at the Trade Center, historic preservation, and parks and open spaces. Some of these ideas expressed in an early report by the civic group New York New Visions, such as the desire for mixed-income housing, were copied almost word for word to become the core redevelopment guidelines promulgated by LMDC in April 2002.
In addition to billions of dollars of Housing and Urban Development money given to LMDC (which Hillary Clinton and Chuck Schumer ensured could bypass traditional HUD rules about support for housing), the federal government also created $8 billion of extremely favorable tax-free instruments called “Liberty Bonds,” referencing the public campaign to support World War I. The beneficiaries of these bonds, determined by both the city and state, reveal a great deal about government priorities and how the New York elite conceived economic stimulus. No bonds went to support social projects like new affordable housing developments, public hospitals, or NYCHA repairs. Instead, they went to large corporate developments, like the Bank of America building in Midtown ($650M) and a new headquarters for Goldman Sachs ($1.65B). Alongside support for construction of many luxury residential buildings, Liberty Bonds also had some quite spurious recipients like a new museum for sports history on Broadway that received $52 million, yet folded in one year and defaulted.
In July 2002, responding to civic interest in the redevelopment, government authorities, who were focused on how to replace the destroyed office space and preserve Lower Manhattan as a major commercial district, presented a series of planning options for the World Trade Center complex to a large public gathering called “Listening to the City” held at the Javits Center. Six blandly similar options, prepared chiefly by architectural firm Beyer Blinder Belle, of various configurations of blocky skyscrapers were shown on big screens. The public reaction was noisy and aghast, and the most famous, quotable comment in response was: “It looks like Albany.” In their defense, these images represented general site plans, not actual skyscraper designs. But it didn’t matter. The public sought something inspiring and transcendent in the redevelopment, perhaps longings that contemporary New York corporate architecture would never be able to assuage.
The subsidies given to Silverstein Properties will forever stand out as examples of extreme government support of private profit.
While LMDC had to go back to the drawing board to figure out how to produce a measure of consensus around a master plan for the site, key decisions were already being made. The Port Authority, on its own initiative, was already building vast underground infrastructure that would support a future transportation hub and an array of skyscrapers. These moves prefigured enormous expenditures and complex engineering, necessitating costs that even the hefty federal support would never be able to cover.
In late 2002, the Lower Manhattan Development Corporation organized a new competitive process for a master plan (albeit with a reduced office space commitment of 6.5 million square feet). They established a contest of six accomplished architectural teams out of 407 submissions. The final decision came down to the teams of Rafael Viñoly, who advocated latticework replacements for the towers that some described as “skeletons,” and of Daniel Libeskind, who combined a memorial park with an array of towers, including a 1,776-foot tower whose design evoked the Statue of Liberty. Libeskind’s patriotic showmanship in his public presentation, recalling his Polish immigrant background, combined with the support of Governor Pataki, assured his victory. For a brief moment, the public reaction was quite enthusiastic. While Silverstein had some quibbles, for instance over the provision of open space and location of the centerpiece tower away from the planned transportation hub, both he and the Port Authority could take comfort that the process did validate the essential decision to rebuild. In turn, the Port Authority made its own move for architectural glory in July 2003 when it selected the famous Santiago Calatrava to design the transportation hub.
Libeskind’s victory though was technically only for the master plan, which set the location of the towers and not their design. Silverstein had already engaged architect David Childs of Skidmore, Owings, and Merrill to produce what Pataki would call the “Freedom Tower.” Libeskind, who had never before designed a major skyscraper, was not taken seriously by Larry Silverstein, who compared him to a general practitioner attempting brain surgery. Despite the government compelling a design contract that required collaboration, Childs and Silverstein marginalized Libeskind, and developed a tower that, while functional, did not produce the awe that many sought. Furthermore, once the design was complete and made public, the NYPD took a look and demanded its own revisions for security reasons, producing additional delays.
With Pataki always needing to make progress on the site to advance his national profile and presidential ambitions, Silverstein, a shrewd and fierce negotiator, was able to continually seek new subsidies and arrangements, albeit in the face of delays that were not necessarily his fault. Public frustration started to grow.
By late 2003, Silverstein compelled the Port Authority to pay off Silverstein’s creditor GMAC, giving him access to insurance payments that had been held in escrow for GMAC. They further compensated Westfield, the site’s former retail operator, while still giving it future options for a retail monopoly. The deal also repaid Silverstein’s and his investors’ equity, even while the billionaire was still able to maintain development rights and continually take various fees out of the insurance settlement money. Former city official Harvey Robins said, “Only in New York can a developer strike a deal with government to get his money back and still walk away with a prime piece of real estate.” While the Port Authority and Silverstein would fight each other tooth and nail for years over details, in another sense, they relied on each other. Both were committed to a commercial development program that required large outside government subsidies, and they defended this prerogative against Mayor Bloomberg, who advocated for more flexible possibilities.
Bringing the Culture War to Ground Zero
The Lower Manhattan Development Corporation was made responsible for the cultural features of the site, including selecting the memorial design. A memorial competition begun in 2003, and completed in January 2004, attracted thousands of proposals, and deliberation was done by a 13-member jury that notably included Maya Lin, designer of the Vietnam Veterans Memorial in Washington, D.C. The winning design, of waterfalls flowing into two “voids” at the tower footprints, was by Michael Arad, a young architect who worked for the city designing government buildings. Despite the design’s Lin-influenced minimalism, it became technically very challenging to implement, as it envisioned visitors descending on ramps along the waterfalls. Rather than the victims’ names being placed on above-ground parapets, as they are now, Arad had sought them placed below ground alongside the waterfalls. By June 2006, the design had to be rethought.
When anticipated costs for the memorial’s construction escalated toward $1 billion and fundraising slowed, the nonprofit board that LMDC had seeded identified a dramatic solution. In late 2006, they invited Michael Bloomberg, as mayor and as philanthropist, to become chair of the private organization. This decision accelerated their fundraising and gave Bloomberg a point of authority over the rebuilding. This choice has also meant that at times of difficulty, Bloomberg could personally fund the memorial organization with near-zero-interest loans, credit lines, and direct gifts of tens of millions of dollars.
The entirety of the cultural building at the center of the memorial is devoted to a museum focused solely on the attacks.
A major controversy involved additional cultural activities at the site. The original Libeskind plan called not for a massive “Memorial Museum” at the site as we see today, but a public center that would house a set of artistic and educational institutions. Chosen by LMDC, these included the Drawing Center, the established New York museum focused on drawings; the Signature Theater; the Joyce International Dance Center; and, most provocatively, a new museum called the International Freedom Center that would contextualize September 11 within a global arc of progress toward freedom. Even though the center had an American exceptionalist theme and was sponsored by businessmen linked to George Bush, a right-wing member of the September 11 Memorial nonprofit board named Debra Burlingame (whose brother died at the Pentagon) initiated a public campaign arguing that the Freedom Center, as well as other cultural programming, would dishonor the victims and promote leftist politics. After months of op-eds and protests, Burlingame and a small group of activists under the banner “Take Back the Memorial” were able to force Pataki to pull the plug. Thus, she created conditions for the entirety of the cultural building at the center of the memorial to be devoted to a museum focused solely on the attacks. With her power at the institution as a board member retained, she said, perhaps a little tongue in cheek, that she, a Republican political operative linked to anti-Muslim groups, would be able to control its agenda. “The victors write the history, right?”
In September 2006, after another hard-fought negotiation over funding, Silverstein left the development of what he considered the less lucrative “Freedom Tower” to the Port Authority, but maintained rights to 2, 3, and 4 World Trade Center on the eastern portion along Greenwich Street, which the Port Authority was supposed to make construction-ready by 2008. One World Trade Center ultimately cost $3.9 billion dollars, and its fiscal impact contributed in 2011 to a near doubling of Port Authority tolls from $8 to $15 for drivers entering the City at a half-dozen bridges and tunnels, including the Holland Tunnel, Lincoln Tunnel and the lower level of the George Washington Bridge. Opening in 2014, it cost multiples more than its peer in the United Arab Emirates, the $1.5B, 2,717-foot Burj Dubai.
With the Port Authority having enormous trouble maintaining deadlines and fiscal discipline for an extremely complex and ambitious campus, eventually Governor David Paterson’s executive director Chris Ward, nominated in 2008, became widely credited for shifting toward a practical focus on construction and the art of the possible, putting the memorial and 1 World Trade Center back on track. Yet the 2008 financial crisis and the unclear financing for 2, 3, 4 World Trade Center caused further uncertainty about the achievable extent of commercial development. Ward, with Governor David Paterson’s remarkably steady support in 2010, withstood heavy political and legal pressure from Mayor Bloomberg and Silverstein for the Port Authority to act as Silverstein’s banker and devote billions of additional public funds out of its transportation priorities. While Silverstein had some right to complain that his insurance payouts had been sent to the Port Authority as rent without the construction progress that previous negotiations required, Silverstein had essentially been treating the insurance money as his own, removing hundreds of millions of dollars in management and development fees. The ultimate deal in August 2010 forced the city ($130M), Silverstein ($300M), and the state ($80M) to all put up equity, yet it still dedicated over $2 billion of the remaining Liberty Bond allocation to the Silverstein towers. Two more buildings have now been built. 4 World Trade Center opened in 2013; 3 World Trade Center opened in 2018; 2 World Trade Center is indefinitely suspended (alongside Silverstein’s obligations toward ground rent).
Ward also brought progress to the Port Authority’s elaborate, dove-shaped transportation hub designed by Santiago Calatrava and now known as the Oculus. With Calatrava forced to comply, designers scaled back its complex engineering of retractable wings and instituted other examples of “value engineering” throughout the site. While many decry its $4.6 billion cost that perhaps makes it the most expensive train station in history — remarkable considering the relatively low ridership numbers on the PATH — it is important to note that much of this cost included connecting infrastructure that improves the entire site.
Even though the new World Trade Center buildings did obtain some important leases such as Spotify and Condé Nast (whose rent was priced below cost), the amount of government subsidy in this flavor of capitalism is mind-blowing and perhaps incalculable. Scholar Lynne Sagalyn, whose narrative book Power at Ground Zero anchors our understanding of the redevelopment, counts at least 11 forms of financial assistance for the Silverstein towers: heavy commitments from government agencies as tenants; tax-exempt Liberty Bonds; pledged government “backstop” on project debt; direct subsidies for tenant rents; public sector equity in the towers; commercial rent tax breaks; abatement of ground rent at Tower 2; modifications in ground rent payments; fixed payments for supporting infrastructure; interest-free loans in the form of early substructure work; and interest rate protection in the form of synthetic bond swaps. Even if we accept that the World Trade Center was a uniquely challenging project that government on its own wouldn’t have done any more responsibly, the Silverstein arrangements will forever stand out as examples of extreme government support of private profit.
Increasingly, many are tempted to look on the bright side and say that people shouldn’t have put such high expectations on the World Trade Center, knowing that large public-private projects are typically delayed and overbudget. But, still, if there was ever a time to overcome defeatism and figure out how to get it done to meet public desire, this was the time. And government’s failure to meet broader societal demands for a more equitable redevelopment — especially when trapped by a billionaire private developer — does reveal something fundamental.
Perhaps most discouraging, it is obvious to everyone but real estate boosters that the new World Trade Center “campus” is not built for New Yorkers. The public is prohibited from entering and touring the new towers that they financed at such a high price in taxes and in sacrifice, and 1 World Trade Center charges $32 for an individual to take an elevator to the top. The Oculus mall run by Westfield has largely high-end, luxury stores, making the opulent structure feel mostly like a cathedral to commerce. The Memorial Museum charges $26 dollars a ticket to enter a building holding human remains, has a tacky gift shop, pays executives half-a-million-dollar annual salaries, and delivers a voyeuristic experiential exhibition that many locals find disturbing. Despite a fair amount of public appreciation for Michael Arad’s memorial design, the park itself does not have a welcoming, natural, or communal feel and mostly attracts tourists. The plaza — on government land — prohibits the most basic exercise of free speech and congregation, including even small gatherings. We also don’t know whether the public benefit of the unfinished Performing Arts Center, now named “The Perelman” after Trump-supporting billionaire banker Ronald Perelman, will be worthy of the large public investment of hundreds of millions of dollars and prime real estate when it opens in 2023, twenty years after being envisioned.
In the case of the early public demand for affordable housing, the record is horrendous, and middle-class and working-class families of Lower Manhattan may forever be displaced. Due in part to Liberty Bonds for luxury construction and various tax incentives for office conversions, since 2001, the population of Lower Manhattan below Chambers Street has tripled from around 20,000 to 64,000, but the absolute number of affordable housing units has declined, perhaps to less than 1,000 units. The dozens of civic groups that made affordable housing production one of their core demands after September 11 were ignored and in face of the long delays in the reconstruction, they mostly gave up, disbanded, and moved on. Not a single, new affordable complex was built in all of the district.
The last unaccounted World Trade Center lot — 5 World Trade Center at the site of the former Deutsche Bank building at 130 Liberty Street — still could be an opportunity for over 1,000 units of affordable housing, but the responsible government entities appear committed to the luxury residential boom in Lower Manhattan. Heavily damaged in the September 11 attacks, the LMDC purchased the building with federal funds after Deutsche Bank failed to reach an agreement with its insurers. Even though LMDC, as an ad-hoc entity, had no experience administering a demolition, it spent hundreds of millions to dismantle the building in a disastrously-managed process that led to the deaths of two firefighters in a 2007 fire due to gross negligence. Astoundingly, the demolition was not completed until 2011.
The new World Trade Center “campus” is not built for New Yorkers.
Led by the late affordable housing advocate Tom Goodkind, who died of 9/11-related cancer, residents of Lower Manhattan have long advocated that Tower 5 become an affordable housing development, ideally with preference for 9/11 survivors and first responders. Yet officials appointed by former Governor Andrew Cuomo have claimed, citing a convoluted LMDC land swap with the Port Authority that gave the option to privatize the Memorial and Performing Arts Center sites for $1 dollar each, that they now, in turn, need to privatize 5 World Trade Center to achieve some magic number of revenue to compensate the Port Authority. And, after Cuomo initiated an inadequate bidding process in 2019, who did the LMDC and Port Authority choose in February 2021 to develop the site as a luxury residential skyscraper? Their one-time antagonist Larry Silverstein, in a joint venture with Brookfield Properties. If the World Trade Center’s General Project Plan is changed to allow for residential development and the project moves forward, the partnership would operate at least 10 properties in the vicinity. In other words, after billions and billions of dollars of public resources supported the billionaire developer, Silverstein now seeks to turn the entire district into a Hudson Yards-style monopoly, mixed-use megacampus.
The grassroots movement to compel a 100% affordable building at Tower 5 offers one last opportunity to redeem the World Trade Center in small measure. Otherwise, the triumphant societal forces of the redevelopment will be forever clear.
Todd Fine is president of the Washington Street Advocacy Group, an organization that uses creative, guerrilla advocacy tactics to promote historic preservation and historical memory in Lower Manhattan and across New York City.
Sidebar: NYC’s Next Real Estate Mega-Development?
Despite the challenges of the World Trade Center, New York State’s appetite for public-private, monopoly mega-development continues. Purportedly to “finance” the redevelopment of Penn Station, the actual tracks and platforms, not only fancy halls and entrances, former Governor Cuomo’s Empire State Development Corporation has proposed a plan for a massive campus of 10 skyscrapers of 20 million square feet of office space in Midtown.
Why does a train station require skyscrapers?
Well, rather than having taxes or transportation fees fund the project, the state’s rather opaque economic development agency claims it can finance the station with junk bonds tied to proceeds from speculative real estate development around the station. This development would be almost entirely directed and owned by Vornado Realty, whose CEO Steven Roth was one of Cuomo’s top all-time donors.
After the state uses eminent domain to seize and demolish blocks of property around the station, between 6th and 9th Avenues from West 30th to 34th — including St. John the Baptist Church, the last structure of the original Penn Station, the famed Hotel Pennsylvania, and the establishments of many small businesses — Vornado would be given large development rights. Since the land would no longer be under city jurisdiction, the buildings would not have to pay normal city taxes, even though this revenue would be desperately needed to support such huge, new demands on local infrastructure. Instead, so-called PILOTs, payments in lieu of taxes, would pay off the bondholders.
In theory, Vornado could build an array of skyscrapers that would challenge and overshadow the Empire State Building, and have many other congestion effects on Midtown, yet, given the continued uncertainty about the future of office work, it is unclear if the company would ever build at all. In that case, if the PILOT revenue never materialized in full, New York taxpayers would be on the hook to pay off the bonds at a premium. Given the lessons of the World Trade Center, that outcome seems highly likely.
Todd Fine is president of the Washington Street Advocacy Group, an organization that uses creative, guerrilla advocacy tactics to promote historic preservation and historical memory in Lower Manhattan and across New York City.
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