The release of Oliver Stone’s new film — one month before the five-year anniversary of 9/11 — is an occasion to think about the tragic events of that date, and what, exactly, was lost that day.
Without condoning their actions, one can say that the Al Qaeda operatives who commandeered a jetliner into the side of a World Trade Center tower — and whoever gave those young men their orders — had certainly done their homework. They knew which flight to hijack and which way to steer the plane so that it would it make the building collapse like a stack from which one of the cards had been yanked out. They also knew they were going to kill a lot of people, although they may not have killed as many as, or the kinds of people, they thought they would.
But they got one thing wrong: They believed they destroying a bulwark of American capitalism. If anything, the Twin Towers of the so-called World Trade Center were nothing more than the two tallest white elephants ever borne of governmental meddling and bureaucratic sleight-of-hand.
The Towers were built and operated by The Port Authority of New York and New Jersey. That organisation is a "public corporation," much like Consolidated Edison (Con Ed), the city’s electricity supplier. The PA was established in 1921 by the states of New York and New Jersey to administer waterfront activities of the New York-New Jersey port. Since, in those days, most goods and people moved on either boats or trains, the Port Authority’s mission seemed fairly straightforward.
However, as Lew Rockwell pointed out in his column on last month’s Queens blackouts, the nature of a so-called public corporation practically invites executives and bureaucrats to make unwise, and even reckless, decisions for which they will never have to pay the consequences. The people who run such corporations thus execute schemes into which they would never put their own money, but for which the people — you and I — pay. That is exactly what happened with the planning, construction and administration of the Twin Towers.
During the 1950’s, vast urban renewal schemes were proposed for the area that would eventually be dominated by the Towers — that is, Manhattan south of Canal Street and west of the Wall Street district. The area had been one of the manufacturing hubs of a city in which, as recently as 1960, half of the workforce worked in manufacturing. (As recently as 1970, one out of every five books purchased in the United States was printed in that neighborhood.) There were also a number of wholesalers in the area that sold everything from women’s hats to construction machinery and transistor radios. Also included in the area — adjacent to the area in which the Towers would go up — was the Washington Market: a jumble of stalls and pre-Civil War buildings from which produce wholesalers sold their wares to the city’s restaurants and stores: a sort of counterpart to the ancient Les Halles in Paris. And several city, state and federal office buildings stood in the area.
To the north and northeast of this area — from Canal to Houston Streets — one found another manufacturing district, along with Little Italy and Chinatown. These districts were also slated for the so-called urban renewal plans, which basically called for bulldozing much of the area to build a highway connecting the Holland Tunnel with the Brooklyn and Manhattan Bridges. Residents and small business owners fought vigorously against such plans, which were never implemented.
However, no such constituencies existed in the area that would be dominated by the Towers. Although more than half a million people worked there and in the adjacent Wall Street district, almost none lived there. So, by the late 1950’s, the Port Authority was moving ahead with plans to build the Towers.
A close friend of some of the Port Authority’s directors was David Rockefeller, the CEO of Chase Bank and brother of New York State Governor (and later US Vice President) Nelson Rockefeller. He argued, among other things, that the area needed such a huge building project because, although many people worked there, the area had been in decline since the Great Depression. To be fair, it must be said that anyone who noted the job losses, dilapidated buildings, outdated infrastructure (Many buildings were still using DC current.) and abandoned piers would agree with such a claim. But it also just happened that his bank had just built its new headquarters just to the east of the site that would become the World Trade Center.
During the early 1960’s, when construction of the Towers seemed more and more like a fait accompli, a group of business owners sued the Port Authority, arguing, among other things, that because the vacancy rate in the city’s office buildings was 9 percent, the Towers were unnecessary. In 1966, the appellate court ruled against the merchants and by the end of that year, more than 400 commercial tenants had moved out of the area.
In the summer of 1967, the Authority opened bids for $100 million worth of construction. By December of that year, the estimated cost of the project had swollen to $575 million, and would go much higher. But the banks (including Rockefeller’s Chase Bank) that handled the Authority’s bonds didn’t mind: They were confident that the Authority had an endless stream of cash from the tolls commuters paid on bridges (including the George Washington) and tunnels (including the Holland and Lincoln) which, by that time, had come under the Authority’s ownership.
Not only were the tunnels that linked New York and New Jersey in the Authority’s fold, so were the area’s airports (John F. Kennedy, Newark and LaGuardia). So, the definition of "port facility" had been greatly expanded to the point that nearly anything the Authority wished to include could be added. However, there was a catch: The Authority’s charter forbade it from engaging in the real estate business. Thus, it wasn’t supposed to use its borrowing power to erect office towers.
So, how did the Authority get around that one? Here’s where the name game comes in. By calling the edifices the "World Trade Center," the authority could say that their new office spaces were, in effect, port facilities. Among the results of this were that the Towers were exempt from real estate taxes and that the Authority could make much smaller “negotiated payments in lieu of taxes." In other words, the rest of us are subsidizing a Port Authority project in yet another way.
And we subsidize it still. The Towers opened in 1972. During the first decade of its operation, much of it stood vacant, and for what was occupied, the main tenant was New York State. Office vacancy rates in New York continued to climb, as the few tenants who moved into the Towers had simply decamped from digs in other parts of the neighborhood and city. So, the Towers had the effect of depressing property values in lower Manhattan, thus stalling redevelopment.
The Towers were such an albatross that in 1980 New York State Governor Hugh Carey — with the support of New York City Mayor Ed Koch — urged the Port Authority to sell them, which would thus place them on the city’s tax rolls. (How bad is a situation when taxes are better than the status quo?) But the Authority nixed the idea, its directors still convinced that the buildings were to be the crowning jewel of lower Manhattan’s redevelopment.
How much did the Towers help such redevelopment? Between 1968 and 1975, Manhattan below Canal Street experienced a net loss of 50,000 jobs. It would lose that number, again, during the following five years. About the only ones who benefited were the Port Authority and its contractors. Indeed, the New York Times reported that one foreman on the project earned $76,000 in overtime during the last year of construction. But once the buildings were finished, even many of the construction workers lost their jobs, as construction of new office and residential space in New York City came to a virtual standstill.
Even during Wall Street’s revival that began around 1983 and the ensuing real-estate boom, the Port Authority had a difficult time convincing private organizations to move into the Towers. Calls to sell the buildings never ceased; the Port Authority always responded with a plea for more time for the investment to pay for itself. In the meantime, the Towers’ slowly growing, yet still disappointing, occupancy rate was inflated by the fact that many New York City agencies had moved their offices there.
And what, you may wonder, happened to the communities that resisted the "urban renewal" plans? Little Italy has shrunk, much of it subsumed by spillover from a burgeoning Chinatown and expensive real estate in neighboring communities. However, tourists flock to the stores and restaurants that remain there, not to mention those in Chinatown. And in the old manufacturing district between Canal and Houston streets, handsome old factory and warehouse buildings with intricate stone and wrought-iron faades, most of them built during the mid- and late 19th Century, still stand. They were renovated by artists and small entrepreneurs who could no longer afford to remain in a redeveloping Greenwich Village. These urban pioneers set up work and living space — illegally, at first — in the spacious lofts and called their new community "SoHo" (for "South of Houston"). For the past two decades, it’s been one of the City’s trendiest neighborhoods. Residents and businesspeople made this transformation entirely on their own. The only concession the City government made was to rezone SoHo so that artists could work and live in their lofts.
But as the adjoining neighborhoods blossomed, even the Port Authority itself found the Towers to be less than ideal as office space. By the early 1990’s, the agency had signaled its intention to move out while still retaining ownership. Carey’s successor, Mario Cuomo, got the authority to use its own funds (which are separate from the State’s finances and, of course, include money from New Jersey) to pay a $200 million premium to move out of the towers. He used this one-time windfall to plug holes in the State’s operating budget that was swollen by, among other things, the fact that he’d built more prison space during his tenure than any other governor in the history of the United States.
Another boom in the FIRE (finance, insurance and real estate) industries ensued in the mid-1990’s, which was related at least in part to the then-rosy fortunes of dot-com businesses. A shortage of office space ensued; for the first time in their history, they were nearly full. There was never a better time to sell the Towers, but the Port Authority was reluctant to give up the world’s tallest patronage mill and get out of the state-capitalist game. The agency reasoned that it would be more profitable to lease the buildings in their entirety. So, in July of 2001 — only a few weeks before the attacks — the Authority negotiated a deal with Silverstein Properties and Westfield America, which agreed to lease the Towers and other authority-owned facilities for $3.2 billion over 99 years, with $616 million paid up front.
Under the agreement, Silverstein and Westfield America kept the exemption from property taxes that the Port Authority enjoyed, and like the Authority, was to pay only the $25 million payment in lieu of taxes the Authority was making. (According to the City, property taxes would have been over $100 million a year.) The Authority also agreed to pay any property taxes in excess of $25 million that might be incurred should the City succeed in adding to the towers to the property tax laws. In addition, Silverstein and Westfield could tap into the taxpayer-subsidized New York Power Authority lines, which cost much less than Con Ed electricity. Just before the attacks, the Towers consumed more electricity every business day than the entire city of Syracuse. The savings — financed by taxpayers — to Silverstein and Westfield would have been substantial, to say the least.
Those savings are still being paid for by the taxpayers. So are the tax breaks the Port Authority and Silverstein and Westfield received. In other words, the taxpayers of New York and New Jersey are still paying for a building which no businessman was willing to risk his own money to build and for subsidies that made it more attractive to lease at a higher price than it would’ve cost to buy it.
Some bastion of American capitalism, eh? If Oliver Stone wants to go back to making "conspiracy" movies, it looks like he’s got a plot right here.