Ground Zero Bonds Could Be Diverted to Build Corporate Towers

By Jeff McKay | July 7, 2008 | 8:21 PM EDT

( - A portion of funding intended to revitalize the part of New York City struck by terrorists on Sept. 11, 2001, might be used to construct new corporate headquarters miles away from "Ground Zero," critics say.

In the aftermath of the 9/11 terror attacks, Congress passed an economic stimulus package to rebuild and revitalize the area that became known as Ground Zero.

That revitalization effort included the creation of New York Liberty Bonds, an $8 billion initiative to provide low-cost, tax-exempt financing for major projects to revitalize lower Manhattan and ensure the city's long-term economic health.

According to a press release from the office of N.Y. Gov. George Pataki, the Liberty Bonds were specifically designed to "repair and replace damaged and destroyed commercial space; improve lower quality commercial space; create multifamily residential rental and complementary retail development; provide modern office space for displaced and decentralizing businesses in central business districts throughout the city; attract new residents and employers to New York City; and encourage environmentally responsible design and construction."

The interest on these commercial loans is exempt from federal, state and city taxes.

However, a loophole was added to the legislation that allows $2 billion -- or 25 percent of that money -- to be used in areas outside of the "Liberty Zone," which includes the immediate area surrounding where the Twin Towers stood.

The New York Times and the Bank of America hope to tap into that loophole to create new homes for their companies in Manhattan's Times Square, over three miles from Ground Zero and home to the city's costliest real estate.

Property in the Times Square area is currently worth $100 to $200 per square foot.

"To use this money outside of the 'Zone,' money intended for rebuilding Lower Manhattan, is an abuse," said Manhattan Libertarian Party spokesman Jim Lesczynski. "We don't believe this money should be used for private companies seeking corporate welfare."

According to plans submitted by the companies, the Bank of America is seeking over $1 billion in Liberty funds to build a 55-floor skyscraper on 42nd Street to include more than two million square feet of office space, becoming the Charlotte-based banking conglomerate's New York headquarters. The New York Times wants $650 million to build an office tower a few blocks from the Bank of America's proposed tower.

If approved, both projects would drain nearly 25 percent of the tax-exempt money designated for Ground Zero rebuilding and almost all of the "loophole" money from the Liberty Bonds.

Both companies have stated that the new offices would be a necessity to keep their businesses based in Manhattan. The Times has previously threatened to move its offices from Manhattan to New Jersey.

Douglas Durst, developer for the Bank of America project, did not return calls made by

The Times project is being developed by Forest City Ratner Companies. Bruce Ratner, a well-known fundraiser for both former Mayor Rudy Giuliani and former President Bill Clinton, heads this group.

A spokesperson for the Ratner group asked that all questions regarding the Times property be asked of the New York Times.

A spokesman for the Times said the company "would not be able to comment at this time."

The Times is no stranger to tax breaks and taxpayer-funded handouts. In 1994, New York City gave the Times a $29 million tax break to build a new printing plant in Queens rather than New Jersey.

Proposed Liberty Bond funding is expected to generate $650 million for the Times' pursuit of their 52-story Midtown tower.

The proposed plans for the New York Times skyscraper include more than 1.3 million square feet of space, of which only 900,000 square feet would be used by the Times. The rest of the space, mostly the skyscraper's upper floors, would be leased.

This, in turn, would make the Times the landlord of more than 400,000 square feet of prime real estate.

The Times is also in hot water with local businesses that are being forced to relocate after the city condemned their property to make room for the new tower.

One of those businesses, a 16-story building owned by the Orbach family, had a 100 percent occupancy rate before the city condemned the property.

"The deal has nothing to do with dilapidated buildings or urban renewal," said Sidney Orbach. "It has everything to do with greed. It's abusive."

A public hearing for the Bank of America development plans has yet to be announced.

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