Trust Fund Trussed?
When the titans of real estate waged a bidding war last month for control of the World Trade Center, the average citizen was, of course, nowhere in the picture. And why should common folk be part of a multibillion-dollar contest among giants like Mort Zuckerman, the Vornado Realty Trust, and developer Larry Silverstein? Sure, the building in question is owned by a public agency, the Port Authority of New York and New Jersey. But its status as an authority makes it one of the most independent, least accountable taxing bodies in government, the type of entity favored by empire builder Robert Moses.
What is surprising is that, for a moment, average New Yorkers had in fact been in on the deal. Almost. That's because ever since Governor George Pataki announced in 1995 that he wanted to put the World Trade Center into private hands, a few politicians have proposed using the tax proceeds of that privatization to fund affordable housing. But now, a host of political feuds and corporate favors threaten to ditch that planand any other that would have relied on the $100-million-a-year tax purse that the 13 million square-foot office complex was expected to generate. If that pot of revenue disappears, sources say, there are no others like it in the offing.
City Council speaker and mayoral candidate Peter Vallone was the main proponent of using Twin Towers' taxes to establish an affordable housing trust. "Part of the reason Vallone focused on the World Trade Center taxes was that it had the advantage of being new money," says one source. "That made it very attractive. You wouldn't have to rob Peter to pay Paul. If those taxes don't come in, it will make it much harder to take the housing money out of the budget."
Taxes generated by a privatized World Trade Center were expected to be about three times the tax bill paid by the Port Authority, which, as a government agency, got a break on its tax bill; most recently it was about $29 million a year. When the authority auctioned off a 99-year lease for the WTC on February 23 (it is forbidden from selling the mega-office complex outright), it assured the winning bidder, Steve Roth's Vornado Realty Trust, that it would have to pay no more taxes than the authority itself had. While the deal is not finalthe authority and Vornado, which offered $3.25 billion for the lease, have until March 14 to work out detailsthe city may wind up with no windfall. Because the Authority is so autonomous, it argues that it has wide berth to offer Vornado tax breaks, even if that stiffs the city.
Further mucking up the deal is the ongoing political battle between Mayor Rudy Giuliani and the Port Authority. In 1995, Giuliani, long a critic of the authority, sought arbitration on whether the authority has skimped on nearly $1 billion in rent due to the city. He is now trying to take over the authority's leases on Kennedy and LaGuardia airports when they expire in 2015.
Last week, Port Authority chair Lew Eisenberg said he was "willing to discuss with the City in good faith the resolution of all matters between the City and the Port Authority," suggesting that he would link the issue of WTC taxes to the airport leases. In the meantime, the city's commissioner of finance Andrew Eristoff wrote to Vornado's Roth and informed him that the company would be responsible for the full tax bill. The city plans to sue over the issue, probably invoking a state law that makes a 99-year lease the legal equivalent of a sale and therefore subject to full taxation.
Vallone first announced his housing plan for the WTC tax proceeds in his 1999 State of the City address. He proposed using the tax cache to start an affordable housing trust fund that would begin building 20,000 units of middle- to moderate-income housing within five years by providing long-term, low-interest loans to developers. Experts agree that the city needs about 250,000 additional apartments to adequately house its residents
In his State of the City speech this year, Vallone adjusted the expected taxes down to $80 million, but said it could be "leveraged into a revenue stream worth $1 billion." Last week, Vallone wrote to Eisenberg to complain about the WTC deal. "I firmly believe that any effort to privatize the World Trade Center must include returning the complex to full City tax status. . . . Failing to do so will only impair the City's ability to invest in major and critical improvements," he wrote, describing his housing plan. Besides Vallone, mayoral candidate and public advocate Mark Green mentioned the WTC taxes as a possible source of housing money in a candidates' forum last year, although it is not a central component of his housing plan.
Even if the full tax bill on the WTC was paid, it is unclear that Vallone's plan could succeed; some tenant advocates say it is merely a pie-in-the-sky scheme the candidate is proffering to overcome his landlord-friendly past. But it has at least elevated the need for affordable housing to a more visible role in the upcoming mayoral race. In fact, the first public debate among the Democratic mayoral candidates took place in Harlem last fall and focused exclusively on housing. Even the outgoing mayor is getting into the act, announcing a day-late and dollar-short housing plan in his final State of the City speech.
If plans for housing funded with WTC tax revenues go south, it won't be the first time that officials pinned their hopes for easing the housing crisis on the Twin Towers. In the 1960s, earth excavated to build the trade center was used as landfill on the Hudson River, where the luxury development of Battery Park City would eventually rise. Money from the development was to be used to build 60,000 units of low- and moderate-income housing across the city.
Instead, according to a recent investigation by New York Times reporter Eric Lipton, those dollars have been diverted. Even the most generous count puts the number of affordable apartments brought on line with Battery Park City proceeds at a paltry 4350.
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