Taking a seemingly neutral stand in the battle between Larry Silverstein and the Port Authority over financing for three World Trade Center towers, Gov. David Paterson said Wednesday he is "cautiously optimistic" about an agreement.

 

Speaking to a group of Lower Manhattan business leaders, Paterson said meetings between state officials and Silverstein executives are continuing into Wednesday, just two days before a deadline set by an arbitration panel. Without a resolution to the dispute, the panel is likely to impose a settlement of its own.

 

“I believe all sides have put real and tangible offers on the table,” said Paterson, who in the past has sided with the bi-state agency. “So how do you describe that—cautiously optimistic. Would you say that, Larry?”

 

“I’d say that,” replied Silverstein, who sat next to Port Authority executive director Chris Ward at a table near the governor.

 

The presence of the two men together was not lost on Paterson.

 

“You know, maybe with the disinfectant of public scrutiny we should just sit down and work it out right here,” Paterson said, to which the crowd applauded and a laughing Silverstein slapped Ward on the knee.

 

Earlier in the intransient negotiations, Paterson took a backseat to the involvement of Mayor Michael Bloomberg and Assembly Speaker Sheldon Silver, whose intervention failed to break the impasse. Now, according to a source familiar with the negotiations, the governor is “absolutely engaged and committed to getting it done.”

 

Previously, Paterson has sided with the Port Authority, saying he opposed putting public money at risk by financing private development. On Wednesday, Paterson blamed the economy rather than either of the warring sides for the lack of progress.

 

“The problem is we’re all in the same plight and we’re all going to have to share in the sacrifice,” he said.

 

Monday night, CB1’s World Trade Center Redevelopment Committee took a far less neutral position. For the first time in the 15-month-long stalemate, it sided with the Port Authority and passed a resolution urging Silverstein to "carefully consider" the Authority’s latest offer.

“We think that Port Authority’s most recent position is a reasonable one,” committee member Jeff Galloway said. “It’s a clear indication that the Port Authority is going in the right direction. We think the Port Authority should draw a line in the sand.”

In January, an arbitration panel gave Silverstein Properties and the Port Authority until this Friday to produce a new construction schedule and financing plan for the site’s eastern half, where Silverstein had originally intended to build three massive office towers. But a weakened credit market has kept him from raising money in the private market. Last month, Silverstein offered to put up $250 million of his own money toward building Towers 3 and 4—and suspend indefinitely construction of the more costly Tower 2—but the Authority rejected the proposal.

“Up until this point, I’ve been impatient with the Port Authority because I felt like they were stonewalling,” committee member Bill Love said, noting that the Authority’s latest offer was significantly more generous than its last proposal, which asked Silverstein for $625 million and only offered to back loans for Tower 4, current under construction at the corner of Liberty and Church Streets.

“To me, [last week’s offer] is a serious enough offer that Silverstein Properties really should get a room somewhere for the next 48 hours and hammer out an agreement,” Love said.

While the Port Authority’s offer may be the closest the two sides have come to an agreement in more than a year, some of its provisions are likely to prevent a deal from actually getting done by the Friday deadline.

Before the agency will back any loans for Tower 3, Silverstein would have to pre-lease bout a quarter of Tower 3’s total 2.1 million square feet, at rates almost double the average asking rent for high-grade office space in Lower Manhattan. The developer would also have to rework the tower’s design to bring down its cost, and continue to pay ground rent on the proposed sites for his three towers until his insurance proceeds—collected after the destruction of the original World Trade Center—run out.

Silverstein has not indicated to what degree he is considering the Port Authority’s offer, though a source familiar with the negotiations said his reaction to the proposal was “not immediately favorable.”

"We are pleased that the Port Authority has responded to our February 10 offer with their own proposal, which we are currently studying," Bud Perrone, a spokesman for Silverstein Properties, said in response to the offer. "We will continue to work with the Port Authority and other stakeholders in order to achieve an agreement that will protect the public’s interests and ensure the World Trade Center is rebuilt in a timely manner."

Before the committee took its vote Monday night, Galloway said it was crucial, in advance of the March 12 deadline, for CB1 to support what he believed was the most rational proposal either side has made since the beginning of the dispute. Without a firm statement from the board, Galloway said it might be to Silverstein’s advantage to rely on the arbitration panel for a new construction agreement. 

“If I were in [Silverstein’s] position, I would continue to hold out just as he has, to wait and see if the market is in fact what everyone hopes it will be,” Galloway said. “There’s no incentive for him to build these towers, or to do anything other than sit there and wait for the Port Authority to give him more and more money.”

Whatever happens between Silverstein and the Port Authority in terms of a new agreement on tower construction, the committee members agreed that, at a minimum, the two sides owed Lower Manhattan residents a plan for rebuilt streets and infrastructure at the World Trade Center site, regardless of whether Silverstein’s towers are ever built.

“We want our street grid back, we want vitality back on the streets Downtown,” said the committee's chair, McVay-Hughes. “We’re sick and tired of walking around a construction site. If a deal is not met this Friday, it’s just going to drag on longer.”