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Leasing of Trade Center May Help Transit Projects, Pataki Says - New York Times

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Saturday, May 17, 2008

New York and Region

Leasing of Trade Center May Help Transit Projects, Pataki Says

By RONALD SMOTHERS Published: July 25, 2001

Gov. George E. Pataki, speaking yesterday at the closing of the $3.2 billion deal to lease the World Trade Center, said the money from the deal could help finance the long-stalled Second Avenue subway and plans to provide tunnel access for Long Island Rail Road trains to Grand Central Terminal.

The governor said that financing such transportation projects with proceeds from the 99-year net lease would bring the Port Authority of New York and New Jersey out of the real estate business and back to its main mission of developing and maintaining regional transportation facilities. The Port Authority opened the trade center 30 years ago.

''When I came into office in 1995, the Port Authority had hotels, shopping malls, industrial parks and we asked why,'' Governor Pataki said. ''We have worked hard to put those developments in the hands of the private sector experts who pay taxes. And today the Port Authority returns to the core mission of dealing with transportation.''

Aides to the governor and others said that the possibility of using the funds for mass transit had emerged in discussions in recent weeks, as the Pataki administration sought an alternative to the unsuccessful efforts to get federal aid for the two projects. In addition, the two projects were dealt a blow by the defeat last year of the state transportation bond issue, which would have allowed the Metropolitan Transportation Authority to borrow money for the projects.

Mr. Pataki disappointed many mass transit advocates and M.T.A. board members earlier this year when his proposed budget failed to make up for the loss of financing and instead directed the agency to come up with the $320 million it needed to keep their five-year capital plan on track. If he follows through on his suggestion, New York's expected $50 million annual share of the trade center lease proceeds could help advance the two projects.

The governor's comments came as he stood with Acting Gov. Donald T. DiFrancesco of New Jersey on the sun-baked plaza of the trade center in a ceremony marking the transfer of the final installment of the $616 million down payment on the deal. Yesterday was also the beginning of a 90-day transition period in which control will move from the Port Authority to the partnership of Silverstein Properties and Westfield America.

Touted as the largest real estate deal in the city's history, the transfer of the trade center to private operators comes at a time when the economy and by extension the real estate market is cooling significantly, said Bruce E. Surry, executive managing director at Insignia/ESG, the commercial real estate company.

But while the transaction was happening at ''a difficult time in the market cycle,'' Mr. Surry said that the Silverstein and Westfield partnership was apparently able to get financing for the deal from bankers who were betting that the downturn would not be severe enough to affect the fortunes of such an iconic property as the World Trade Center.

''The economy is a problem, but it's not a problem of the level of the one we had in 1991,'' Mr. Surry said, recalling the last recession, when occupancy at the World Trade Center dipped to 78 percent.

Conspicuously absent from the ceremony was Mayor Rudolph W. Giuliani, whose administration has been at odds with the Port Authority over everything from the trade center lease to the operation of the city's airports. A spokesman for the mayor said that he did not know whether the mayor had been invited.

Either way, the event was likely to intensify the tensions between City Hall and the bistate agency. The Giuliani administration contends that the 99-year lease is in effect a sale of the two towers, and therefore requires the ''buyer'' to pay the full real estate taxes on the buildings. The city has estimated that amount at $100 million a year; the Port Authority now makes a $26 million payment to the city in lieu of those taxes.

Neil D. Levin, the executive director of the Port Authority, maintained that the agency still owned the buildings but stood ready to negotiate with the city on a ''fair'' payment in light of the new lease arrangement. The city has chosen not to negotiate with the agency and has instead in letters to Silverstein Properties and Westfield put the partnership on notice that they ''will be responsible for payment of the taxes in full.''

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