Posted Sep 14, 2010, 11:28 PM
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New Yorker for life
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Join Date: Jul 2001
Location: Borough of Jersey
Posts: 51,815
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http://online.wsj.com/article/SB1000...111757600.html
Liberty Bonds Stalled
Delay Could Drive Up 1 WTC Costs
By ELIOT BROWN
SEPTEMBER 13, 2010
Quote:
As the city's tallest skyscraper One World Trade Center rises, it awaits approval for what will be the final $700 million piece of a generous incentive program meant to spur rebuilding in Lower Manhattan.
There is only one problem: The federal legislation authorizing the tax-exempt Liberty Bond program has been expired for more than eight months.
While the tower's developer, the Port Authority of New York and New Jersey, has expressed confidence that Congress will pass legislation extending the program, a failure to do so could add tens of millions of dollars onto One World Trade Center's total cost.
Sen. Charles Schumer plans to vote on a package of tax extenders when Congress renews its session this week. "If necessary I will seek an extension for Liberty Bonds through 2011 so that all available financing options exist for the rebuilding of Ground Zero," he said in a statement.
The Liberty Bond program was first passed in the wake of the 2001 terrorist attack as a means of encouraging developers to return to downtown. In successive years it spread around tax exemptions on $8 billion in debt to help build more than a dozen apartment towers and office buildings.
The bulk of the financing approvals were made years ago on projects such as the new Goldman Sachs tower, which received $1.65 billion in tax-free bonds, and a large set of residential towers that helped fill out Battery Park City. By the time the legislation expired at the end of December, every major project in the program had received financing other than One World Trade Center.
Now, the reauthorization legislation, which only calls for an extender through December, has languished in the Senate after passing the House as part of a larger bill late last year. While Port Authority officials had initially hoped the program would be extended months ago, it is part of a large package of tax extenders that have been unable to pass through both houses of Congress as of yet.
"We're working hard with our Congressional delegation to ensure an extension is in place in time to utilize the bonds most cost effectively for One World Trade Center, and we're confident that we will receive the extension," said Stephen Sigmund, a Port Authority spokesman.
The Port Authority expects it will need to sell the tax-free bonds by late next year to complete the financing on the $3.1 billion tower. Given the agency estimates that the interest rates on Liberty Bonds debt are about 1% lower than standard taxable debt it would receive, should there never be a reauthorization of the program, the agency would spend about an additional $7 million a year in interest costs over the course of the $700 million loan with standard taxable debt.
The delay in the reauthorization would seem to vindicate a decision made by the developer of three other World Trade Center towers, Larry Silverstein. Rather than roll the dice with Congress, Mr. Silverstein opted to pay a small premium to sell his $2.59 billion in Liberty Bonds and place them in an escrow account just before the legislation expired.
This fall, Mr. Silverstein is planning to refinance those bonds with a $1.36 billion bond sale tied to his 4 World Trade Center, which has commitments for two-thirds of its space from government tenants. The bond sale isn't expected to be a tough one given that even if Mr. Silverstein defaults, the Port Authority has agreed to keep paying off the loan.
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