| NEW YORK, April 23
NEW YORK, April 23 The "Bridgegate" scandal that
rocked New Jersey Governor Chris Christie's administration
earlier this year is threatening a deal that would allow
developer Larry Silverstein to finish building the next World
Trade Center skyscraper.
Silverstein needs a guarantee from the Port Authority of New
York and New Jersey to secure a $1.2 billion construction loan
for 3 World Trade Center. On Wednesday, the agency's board will
vote on whether to approve that guarantee, part of a deal that
would provide hundreds of millions of dollars more to the Port
Authority and allow it to foreclose on the $2.4 billion tower if
Silverstein cannot pay debt service costs.
But Silverstein's deal, even with the concessions to the
Port Authority, has become entangled in a fierce debate within
the agency over its mission, including whether it should be in
the real estate business at all.
Those questions have emerged since the so-called Bridgegate
scandal erupted earlier this year. Operatives loyal to
Christie's administration caused massive traffic jams on the
George Washington Bridge in September, an alleged act of
political retribution against a local New Jersey mayor who did
not endorse Christie for reelection.
The controversy has led to scrutiny of every corner of Port
Authority operations, as well as the resignation of the agency's
deputy executive director and board chairman, both Christie
Most pertinent to Silverstein, it has also led to open
debate at the authority - something in which it has not
frequently engaged - and to the creation of an internal
oversight committee examining operations, governance and
Critics have charged that rebuilding the World Trade Center
area, which stalled for years after the Sept. 11, 2001 terrorist
attacks decimated the site, has taken too much time and energy
away from other projects that are more critical to its bi-state
The rebuilding of the World Trade Center "opened the door"
for an expansion into areas outside the agency's mission, said
Robert Yaro, president of the Regional Plan Association.
While the RPA was originally in favor of the authority
leasing the site, the association had also hoped the Port
Authority would sell the land, he said on Monday during a
meeting of the Port Authority's new oversight committee.
"The only thing to do now is to finish the project," he
said, adding that the agency should then get out of all other
Port Authority commissioner Kenneth Lipper has lobbied
openly and repeatedly against the Silverstein loan guarantee.
Acting Board Chairman Scott Rechler has said he supports it,
At least three board members from each state must approve
Silverstein's agreement for it to pass. If it fails, the
original 2010 deal would remain in effect, and construction of
the tower could be indefinitely delayed. Silverstein has so far
been unable to raise the senior debt in part because the market
for letters of credit had dried up because of the recession.
Silverstein has made progress on two of the other four
planned towers at the site. The "Freedom Tower" at One World
Trade Center is slated to open later this year, and the smaller
4 World Trade Center opened in November.
He has already spent about $500 million of insurance
proceeds to build the lower eight floors of 3 World Trade Center
under the 2010 agreement because some of the below-ground
infrastructure there was needed to support a Port Authority
"To have a dark stump, ad infinitum, sit in the middle of
our reborn downtown is going to be incredibly discouraging to
potential tenants, to residents, to shoppers, to tourists," said
Janno Lieber, Silverstein's head of construction at the site,
about what's at stake in Wednesday's vote.
Under the revised agreement, which the parties have been
negotiating for at least nine months, Silverstein would pay up
to about $100 million over many years for the credit enhancement
from the Port Authority - something he has never paid the agency
for before, according to two sources with knowledge of the deal
who requested anonymity because of its sensitive nature.
Once the space is open, the agency is also slated to receive
a $230 million payment from retail operator Westfield America,
as well as additional ground rent of at least $70 million.
(Reporting by Hilary Russ; Editing by Richard Chang)