Ground Zero Rebuilding Is Set
Back As Its Planning Falters

The latest round of talks to put the Ground Zero rebuilding on solid financial footing broke down early yesterday, dealing a blow to efforts to revive lower Manhattan's still-struggling office sector 4 years after terrorists destroyed the World Trade Center.

Private developer Larry Silverstein and the site's owner, the Port Authority of New York and New Jersey, failed to come to an agreement on a financial plan and schedule for rebuilding the site. Port Authority officials said the two sides were about $1 billion apart in their respective ideas for paying for the $8 billion rebuilding program, which includes five skyscrapers. But Mr. Silverstein's chief aide, Janno Lieber, said "very little gap remained."

The failure to strike a deal was the latest in a long line of setbacks at the site and could scare away large businesses from locating there. "The delay and the various controversies have created a crisis of confidence," said Kathryn S. Wylde, chief executive of the Partnership for New York City, a business group.

New York Gov. George E. Pataki, who has long defended Mr. Silverstein against critics of his redevelopment plan, had strong words for the developer yesterday. Silverstein Properties Inc., Mr. Pataki said, "has betrayed the public's trust and that of all New Yorkers."

Other than a temporary commuter-rail station, little has been rebuilt on the site that now draws thousands of tourists daily. Work finally began this week on a memorial, though it remains $200 million short of the $500 million construction budget.

The scuttled talks mean Mr. Silverstein won't get $1.67 billion in tax-free bonds that he has said he needs to build the project's signature Freedom Tower, planned at the symbolic height of 1,776 feet. He said a scheduled April groundbreaking will go forward, though he is counting on the bonds to complete the building.

Talks failed soon after midnight early yesterday, after the Silverstein team presented its latest proposal at the Port Authority's headquarters, according to meeting participants. Port Authority negotiators felt that the latest Silverstein terms were a step back from previous offers. The negotiations ended when Kenneth Ringler, the Port Authority's executive director, entered the room and told Mr. Silverstein: "We're done talking. Send your rent check."

Mr. Silverstein later yesterday said the terms didn't depart from those presented in earlier negotiations.

According to a Port Authority official, the difference included $500 million of insurance money the Port Authority wanted to finance the Freedom Tower -- money that Mr. Silverstein wanted to hold on to for his three buildings. And of $600 million of shared infrastructure, the Port Authority official said, Mr. Silverstein was willing to cover $60 million while the Port Authority wanted him to pay $250 million. Lastly, Mr. Silverstein was seeking $300 million to $400 million in reductions in his 95-year lease above what the Port Authority was willing to give, the official said. A spokesman for Mr. Silverstein called the Port Authority's figures "ridiculous." He estimated the gap at between $50 million and $150 million in net present-value terms.

Mr. Silverstein said the lack of resolution will make it difficult to attract top businesses to the area. "The Port Authority abruptly abandoned the talks last night without a plan to move forward. We're not sure where this leaves us now," he said. "The worst thing for business is uncertainty. Does this help? Of course not. It is in everybody's disinterest."

Mr. Silverstein said he wants to continue bargaining. But Port Authority Vice Chairman Charles Gargano seemed to rule out any new talks. There will be no negotiations until Mr. Silverstein "puts something on the table that is in the public interest," he said.

The deal would have rid Mr. Silverstein of the least-marketable office building at the site, the Freedom Tower. It is farthest from public transportation and expensive because of its height and need for stringent security. The pact also would have left him with the three best-located buildings, all closest to a planned $2 billion transit hub and nearer the heart of lower Manhattan.

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