Bond added to New Orleans WTC project

New Orleans CityBusiness, Jul 15, 2008 by Ariella Cohen

A layer of insurance for the city has been added to the 99-year lease that will transfer control of the iconic World Trade Center into the hands of a private developer.

"All parties agreed to a bonded construction contract," said Sean Cummings, executive director of the New Orleans Building Corp. As landlord of the city-owned tower, the NOBC has steered the redevelopment plan for the mostly empty office building and negotiated a lease with development firm Full Spectrum, which was selected through a public bidding process to redevelop the tower into a tourist attraction featuring a four-star hotel, condos and a cultural museum.

The addition of the bonded construction contract came after urges for a performance bond from a governmental watchdog group, the Bureau of Governmental Research, and City Council President Jackie Clarkson. Clarkson and BGR feared that the city could face undue risk without an explicit bonded guarantee that the redevelopment of the 33-story tower would be completed.

"If there are not adequate provisions for default, the city and the World Trade Center of New Orleans are in jeopardy," said Clarkson, who requested the deferment of a June 5 council review and vote. The mandatory vote was again deferred last week to allow for a review by the council's legal counsel.

Details of the construction contract haven't yet been hammered out, Cummings said.

Under the latest proposed lease, Full Spectrum would pay $30 million and an annual payment equal to 60 percent of the taxes that would be owed on the riverfront property if it wasn't tax-exempt.

The annual payment as well as $24.25 million of the one-time payment would go to the New Orleans Building Corp. to fund the redevelopment of the public riverfront that surrounds the tower.

The other $5 million will go to the World Trade Center organization as payment for a lease assignment for their headquarters.

BGR also asked the city to reconsider the decision to funnel the development's annual payments back into the riverfront, rather than putting the cash into the city's needy general coffers, and to require the annual payment to be equal to 100 percent of the taxes that would be owed if the property wasn't exempt. Cummings said the NOBC was not reconsidering the amount owed by Full Spectrum. In the past, the developer has said that the payments are critical for funding the redevelopment of the riverfront.