Port Authority eyes new site for World Trade Center art center

NEW YORK, July 23 (Reuters) - A performing arts center, planned for the new World Trade Center site in Lower Manhattan, might now be built across the street on the plot where Deutsche Bank's former building is being demolished, an official of the Port Authority of New York and New Jersey said on Thursday.

However, the cash-strapped Port Authority is wary of losing rent if it includes the arts center in a new office tower on the old Deutsche bank site.

"You wouldn't want to end up burdening a revenue-producing site with a critical art function," Port Authority executive director Christopher Ward, said at a web cast news conference.

Fitch Ratings in June said the agency's "primary credit concern" about the Port Authority was the "potential for increased leverage and reduced liquidity," citing the agency's $9.5 billion commitment to the World Trade Center cost, a Hudson River tunnel, and other projects.

Residents of Lower Manhattan say the neighborhood badly needs the arts center, but moving the center to the nearby Deutsche Bank plot would free up space on the main site, which engineers call one of the world's most complicated construction projects.

Arguments over designs, insurance and security have added years to the rebuilding of the site which was destroyed in the attacks on New York of September 11, 2001. So far only the foundations of two towers have been rebuilt up to around street level.

Now New York property prices have fallen, along with commercial rents, and JPMorgan Chase's(JPM.N) has lost interest in building a new office tower on the Deutsche plot after snaring Bear Stearns's midtown headquarters building when it bought the former investment bank.

Fitch warns the Port Authority may also have to boost spending on both the Hudson River tunnel and the World Trade Center, putting further pressure on its credit rating.

Larry Silverstein, developer of the WTC site, wants the Port Authority to guarantee his financing, saying its delays are forcing him to seek real estate loans at a time when banks are wary of this sector.

New York Governor, David Paterson, said the public should not make loans that the private sector rejects. On Thursday, eager to get out of paying Silverstein $300,000 a day in late fees, the agency said it will speed its work by moving a subway support wall 10 feet west within two months.

"It's not a simple engineering task nor an inexpensive one, but we undertook it," Ward said. The north-south subway that splits the site in two will continue to run.

Building a temporary wall will allow the parking garage's foundation to be dug while the Deutsche Bank building is brought down, the agency said.

Silverstein Spokesman Bud Perrone said: "It is nice to hear that -- 32 weeks after the arbitration panel mandated the removal of the Port Authority's wall in the middle of the Tower 3 site -- they are now taking 'aggressive action,' which may result in this work getting done after a couple of more months."

Once the agency finishes its work, Silverstein must complete his towers on time -- or risk losing them to the agency if he defaults on his rent.