New Port Authority Chief On At WTC Site Problems
The Port Authority’s new Executive Director, Chris Ward, has publicly confirmed what everybody knows. The rebuilding of the World Trade Center is billions of dollars over budget and years behind schedule.
Ward was recommended for the Port Authority job by Governor Paterson on May 2, and duly elected by the 12 commissioners representing New York and New Jersey on May 8. He succeeded Anthony Shorris, Governor Spitzer’s choice, who was asked to resign. On June 11, just over a month after Ward’s selection, Paterson asked him for a report on the status of the multiple projects that were supposed to be underway on the huge excavation. Ward’s response was issued on June 30. It is 37 pages long.
The intention of the June 30 document is to insulate the new governor and the new management of the Port Authority from the prior mistakes of everyone else. Ward is accountable for what happens from now on, but he should not be faulted for the fits, starts and stops that preceded his arrival. “Cut me a break” is the implicit theme of his mea non culpa. We welcome Ward, (He and I are alumni of the Department of Consumer Affairs.) For him to compile and issue the report while he is still close to the starting gate is appropriate, provided that its contents are fair and accurate.
John F. Kennedy said in 1961, at a press conference after the failed invasion of Cuba at the Bay of Pigs, “There is an old saying that victory has a thousand fathers, but defeat is an orphan.” A similar expression: “La victoria trova cento padri, a nessuno vuole riconoscere l’insuccesso” appears in the 1942 diary of Count Galeazzo Ciano, son-in-law of Benito Mussolini and former foreign minister of Italy. Count Ciano was executed by a firing squad in 1944 for “high treason;” his father-in-law did not intervene in the case, and met his own fate a year later when he and his mistress were captured and hanged by Communist partisans as they were fleeing to Switzerland to board a plane to escape to Spain, then ruled by Generalissimo Francisco Franco.
We return to the case of the World Trade Center, however, where defeat has had scores of fathers and mothers. An array of governors, mayors, deputy mayors, authorities, development corporations, their trustees and senior employees, construction companies, demolition contractors, architects, judges of architectural competitions, city planners, property owners and lessees, victim’s relatives and their lawyers, and anyone else who had a hand in the project for the last six years and nine months share responsibility for what has, or has not, happened. We cannot apportion blame, and we assume the good faith of all parties. The result of their efforts, however, has been eminently unsatisfactory.
One thing abundantly clear is that the division of authority between all these players left no one in a position of sufficient authority to make substantive decisions about the project, and make them stick. What we saw was the antithesis of the Robert Moses days, during which he was, either directly or through pliant allies, the sole decision maker over city construction. The large hole in the ground where the World Trade Center once stood is a testament to the futility of excessive division of authority and responsibility.
The delay is particularly destructive because construction costs have been rising at the rate of one percent or more per month, and the cost of materials has joined the upward march. One percent a month is 36 percent over three years, without compounding. The more expensive the building, the higher rental must be charged to cover the construction mortgage. The higher the rent, the less competitive the building is in comparison with others, and the less likely it is to be filled in case the rental market weakens.
The contrary argument is made that there is no need to rush to judgment on what will be built on the site. Perhaps new office buildings are not the structures most urgently needed. The argument that leaving part of the site unbuilt would be a victory for Osama bin Laden was ridiculous when it was made and is more so today. If there were no other office space available in the city, one could see the need to fill the gap posthaste. But since it takes years to plan and construct a building, and no one knows what the market will be in 2011, one might as well build on the theory of: “You’ve gotta be in it to win it.” Of course, that doesn’t mean you’ll win it.
Inability to meet mortgage payments often leads to foreclosure by the lender, in which the builder’s equity interest is wiped out. It is then possible to reduce rentals somewhat, and make the building more competitive. Or the bank or other lender may choose to sell the building, hoping to recover its investment, or if not taking the loss immediately. They still have a cause of action for a deficiency judgment against the builder, collectible if he has not already been wiped out.
That is highly unlikely to happen at the World Trade Center site because the safety net generally protects large corporations and lending institutions. The collapse of Bear Stearns is the exception rather than the rule, and it has been said that their exposure to risk was 25 times their capital. Imposition of a substantial margin requirement would make catastrophic losses less likely, but would also limit the incomes of brokers, traders and speculators. We will see whether the Securities and Exchange Commission takes any action with regard to the behavior which has contributed to a national recession and the loss of hundreds of thousands of jobs.