If you ever find yourself wondering why some of the infrastructure in America’s largest and richest city seems so inadequate, you need look no farther than the southern tip of Manhattan for part of the answer. The Port Authority of New York and New Jersey — responsible for lower Hudson bridges, tunnels, the over-capacity Port Authority bus terminal and the woefully inadequate regional airports — is on the hook for a net $7.7 billion in World Trade Center rebuilding costs. In today’s New York Post, Nicole Gelinas of the Manhattan Institute explains why.
In the greatest of ironies, the 9/11 attack destroyed the Twin Towers barely a month after Governor George Pataki had leased them to the private developer, which was supposed to extricate the Port Authority from the real estate development business once and for all. But after the attack, with the feds dangling up to $20 billion in rebuilding aid, Pataki and other pols were willing to “indulge starchitects dreaming of abstract-art skyscrapers and a ’soaring’ PATH-train hub,” Nicole writes.
Costs skyrocketed (surprise). Largely as a result of its Trade Center commitments, the Port Authority’s debt has risen from $9.5 bilion to $19 billion in the past 10 years. ”And,” she adds, the Authority “won’t even start repaying some of those bonds until 2039.”
Here’s the scary part:
It will be at least another decade before anyone knows whether the towers will repay their investments. The signs aren’t promising.
The complex will have high operating costs. In 2000, the last year of the old WTC’s operations, costs were $203.9 million ($272.8 million in today’s dollars). Without any buildings yet open for business, operating costs — not rebuilding costs — were $106.3 million last year. When the buildings are complete, it’ll be roughly $500 million a year.
To cover those bills, the agency would have to lease all the available office space in the two towers being built for at least $80 per square foot, nearly twice today’s rates.
The old WTC was profitable when Wall Street was growing. Today, Wall Street is contracting. Conde Nast, the tenant signed for one-third of the 1WTC space, is cost-cutting. The nearby World Financial Center is losing tenants to Midtown.
And tech firms — the ones that, if we’re lucky, will be the city’s new big growth industry — are happy with older, cheaper space. Their clients aren’t like the folks bankers call “muppets,” impressed by fancy views.
But the muppets are folk who use New York and New Jersey transportation. And the Port Authority can’t offer them much.
By all means, read the whole thing, which is an excerpt from an article in the forthcoming Fall edition of City Journal.