No deal on NY World Trade Center rebuilding impasse
* Recession leaves banks wary of real estate development
* Mayor Bloomberg says project too important to give up
NEW YORK, June 16 (Reuters) - Private developers of New York's World Trade Center site and the public agency that owns the land have failed to reach a deal to allow construction to go forward, the city's Mayor Michael Bloomberg said on Tuesday.
Amid much fanfare, the redevelopment of the Lower Manhattan site was touted as a symbol of the city's revival after hijacked planes flew into the twin towers on Sept. 11, 2001, destroying the buildings and killing nearly 3,000 people.
But battles over insurance, designs and security have long delayed redevelopment of the 16-acre site, which is owned by the Port Authority of New York and New Jersey and was leased by developer Larry Silverstein just weeks before the 2001 attack.
With the U.S. recession leaving banks wary of lending for real estate projects, Silverstein wants the Port Authority to guarantee loans for two of its three planned office buildings. But the Port Authority only wants to guarantee one tower even though it would become the owner if Silverstein defaulted.
"We are disappointed that we have yet to reach agreement to address the latest impasse at the World Trade Center site," Bloomberg and New York State Assembly Speaker Sheldon Silver said in a statement.
"The cause is too important to give up -- and we will continue to work with all the parties to fulfill our collective obligation to rebuild the site," they said.
The Port Authority is already building a 1,776-foot (541-metre) skyscraper, which was called "Freedom Tower" but is now One World Trade Center to make it easier to market. It will be the city's tallest tower and is due to built by 2013.
A study commissioned by the Port Authority found that it would take until 2037 to lease all the planned office towers and in April the agency said it was taking a cautious approach to the rebuilding during the economic downturn.
The agency is run by the governors of New York and New Jersey. Bloomberg has no control over the site, but hosted a meeting of key players, including the Democratic governors of both states, more than a month ago, setting a deadline of June 11 for an agreement to be reached to move the project forward.
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"We have made significant progress over the past four weeks," Silverstein said in a statement, of the discussions led by Bloomberg, Silver, New York Governor David Paterson and New Jersey Governor Jon Corzine.
"All the stakeholders -- public and private -- must work together to make good on our repeated vow to rebuild the World Trade Center, and I am confident we can find a way to move forward together," he said. "As I have said many times before, failure is not an option."
The Port Authority said it agreed that progress at the site must continue.
"We are working with all parties to advance the private development in a way that protects public resources for the people of this region," the agency said in a statement. "We will continue to negotiate in good faith."
In the meantime it said the public development of the site for which the Port Authority is responsible -- a memorial to the victims of Sept. 11, a transport hub and the skyscraper One World Trade Center -- would move forward.
Australian mall owner Westfield Group (WDC.AX), which operated the World Trade Center retail property before the attacks, last week offered to pay $1.25 billion for the development of a retail complex at the site.
Peter Lowy, group managing director, Westfield Group, said the best way to move the redevelopment of the World Trade Center site forward was for "retail to lead, because we can lease it, we can finance it and we can execute it." (Additional reporting by Joan Gralla, editing by Jackie Frank)
