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More evidence that government is too big

2004 May 22
by Skip Sauer

From today’s Washington Post:

Six months after the Sept. 11, 2001, terrorist attacks, Congress approved an $8 billion program to repair this city’s damaged office towers, build apartment buildings and finance the rebirth of the financial district.

But two years later, city records show that much of the money, dubbed Liberty Bonds, has gone to developers of prime real estate in midtown Manhattan and Brooklyn and to builders of luxury housing.

Local and state officials — over the objections of their own downtown development chief — gave one developer $650 million from the Liberty Bonds to erect an office tower for the Bank of America near Times Square, miles from the shattered precincts of Ground Zero. According to city records, another developer got $113 million to build a tower for Bank of New York in Brooklyn. One of the few projects downtown has gone to actor and sometime developer Robert De Niro, who picked up nearly $39 million from the bonds in November to build a boutique hotel in Tribeca, directly north of Ground Zero.

Congress designated $1.6 billion of the Liberty Bonds for rental housing. Nearly all the money from those bonds has gone to prominent developers to build luxury apartment towers in the neighborhoods around Ground Zero, accelerating its transformation into one of New York’s richest neighborhoods, the city records show.

I have nothing against luxury housing in lower Manhattan – it meets the market test. But luxury housing that meets the market test doesn’t require $1.6 billion in subsidized bonds.

Today three-bedroom apartments near Ground Zero rent for $6,500 a month — and sell for more than $1 million. Manhattan residential occupancy rates — more than 95 percent — are higher than before the terrorist attacks, according to real estate statistics.

Yet the state and city agencies that award the bonds — the New York State Housing Finance Agency and New York City Housing Development Corp. — awarded nearly all the residential Liberty Bonds to subsidize the rental market.

Common Cause New York reported that 30 percent of the state’s residential share of Liberty Bond proceeds went to Leonard Litwin, who is a major campaign contributor to Pataki.

State housing officials said that political favoritism played no part in their decisions and that loans were handed out “on a first-come, first-served basis.” Litwin, they say, had projects in the works and simply got in line when the Liberty Bonds came available.

That’s it folks — projects already “in the works” get millions in subsidies. What good are the subsidies then?

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