In City Security Squabbles, A Banker Restores Order

This summer, Goldman Sachs realized something that much of the rest of the city hasn’t: Four years after Sept. 11, the country’s most sought-after neighborhood for terrorists doesn’t yet have a security plan, or at least not a very comprehensive one.

And so, before Goldman resumes its efforts to build a headquarters across from the World Trade Center site, it is requiring the New York Police Department to submit a security plan covering lower Manhattan for its review. Until then, the investment bank’s $161 million lump-sum rent payment will stay in an escrow account.

A high-ranking official insisted that the police agencies were already drawing up a comprehensive security plan when state and city officials broached the topic themselves as part of negotiations to keep the nation’s 74th-largest company downtown. Goldman’s executives then asked government negotiators to back up their words with a financial guarantee.

One problem that Goldman saw, according to the official, was that the New York Police Department, the Port Authority police, the Battery Park City police, and state and corporate security forces all operate in lower Manhattan with confusing jurisdictional boundaries. Part of the intent of the comprehensive plan is to delineate who is responsible for what and how each police agency will communicate with the others.

The security guarantee is just part of a package of tax breaks, low-interest bonds and other discounts over the next several years that, according to back-of-the-envelope calculations, are worth $250 million in today’s dollars. The final piece of the deal—the lease—was approved by the Battery Park City Authority on Aug. 23. The parties officially announced the agreement the same day—but oddly, Brookfield Properties, which had a claim on the site where Goldman would build, was making no comment about whether it was satisfied. Last year, Brookfield said that it wouldn’t stand in the way of the deal.

Assuming that wrinkle gets a good ironing, a groundbreaking for the $2 billion, 43-story building is expected this fall, with occupancy by 2009.

The Goldman-NYPD arrangement means that the Battery Park City Authority won’t be able to use the rent payment, due next February, to pay off its own bonds or to feed money back to the city immediately. No one knows just how long it will take to finalize the security plan, but comments from officials suggest that it will be years rather than months.

Yet state officials insist there’s no risk that the state and the city won’t come up with a security plan, and that the rent payment—a lump sum that covers 64 years—won’t slip from escrow into the authority’s general account.

“The arrangement is, there will be a security agreement which the city has committed itself to and the state has committed itself to,” said authority chairman James F. Gill, speaking after a meeting in which the lease was approved. “We are satisfied that it will happen and will not affect our collection of rent.”

In addition, authority president and chief executive Timothy S. Carey said there was more than enough money to refinance the bonds that first established Battery Park City, as well as to fund projects across the five boroughs. Mayor Michael Bloomberg and City Comptroller William C. Thompson Jr. are negotiating with the authority to devote as much as $130 million to affordable housing—which, in fact, had been where the fruits of the 92-acre landfill were originally supposed to go, before they were diverted to other uses.

Goldman’s insistence on applying financial pressure to ensure a security plan reflects its long-standing interest in safeguarding its employees and operations. That interest is also reflected in the company’s desire to construct its own building and to be that building’s sole tenant, so as to exercise the utmost control.

Goldman panicked when it lost a little bit of that control last April. That was when a deadline that Goldman chief executive Henry Paulson had imposed on Mr. Pataki passed without the Governor making a decision on a controversial tunnel outside the proposed headquarters. The tunnel, executives feared, would create a speedway right outside the entrance to Goldman’s headquarters and cause a security nightmare. It was then that Goldman put its building plans on hold.

The bank had to scream to get the state’s attention, but Goldman succeeded mightily and has come out ahead, with more goodies than it had before the spring. Now it’s using a similar tactic to make sure that it gets what it wants in terms of security.

Coordination among overlapping agencies has bedeviled anti-terrorist arrangements since the Sept. 11 attack—and was, in fact, a major weakness that the 9/11 Commission found in the city’s response back then. Only this year, after some strong-arming on the Mayor’s part, did the Fire Department finally let the police have first-responder status at so-called “haz-mat” (hazardous materials) calls.

In Washington, D.C., a central planning commission issued a plan three years ago coordinating the steps for physical improvements to block terrorists, but in lower Manhattan, the efforts have been left decentralized.

The Battery Park City Authority turned bus shelters, bike racks, boulders and trees into vehicle-proof obstacles throughout its 92 acres soon after the attacks. Meanwhile, outside the New York Stock Exchange, the Lower Manhattan Development Corporation, a state-city agency, replaced metal barriers with a wrought-iron fence as part of what Mr. Pataki called an end to “obnoxious security measures”—and yet passersby still frequently see a pick-up truck filled with sandbags to keep car bombs away.

The Port Authority police and the NYPD currently have a security agreement in place that delegates authority for the area within the World Trade Center site fence, plus the sidewalk along Church Street, to the Port Authority, according to Port Authority spokesman Steve Coleman. However, he said that the two agencies will assist in responding to incidents in each other’s territory when necessary.

Police Commissioner Raymond Kelly has been highly praised for expanding the NYPD’s anti-terrorism force many times over, as well as getting private companies extensively involved. Security directors come to special department briefings and submit blueprints for review. But the Goldman arrangement is taking that involvement a step further, making the NYPD responsible for the success of one of the most acclaimed—and expensive—job-retention deals ever. The NYPD didn’t respond to repeated phone calls and a request for comment faxed directly to Mr. Kelly’s office.

A security consultant who has done work in lower Manhattan said that he knew of no other company playing such a role in police planning, but added it was understandable that Goldman would want a comprehensive plan.

“It is routine for tenants to have arrangements with developers that they will provide such-and-such services,” he said. “So when you get into a situation where one company is the tenant and the developer, what’s happening here is they are seeking those same guarantees from the city. But it is extremely unusual. Law-enforcement institutions as a rule don’t guarantee an individual institution anything.”

Battery Park City officials emphasized that Goldman will not have veto power over the security plan, although it will be a part—along with numerous public agencies—of the plan’s formulation. The particulars of what the plan will cover are laid out in a letter from James Kallstrom, the Governor’s special security advisor, who was assigned to Ground Zero after the Goldman deal first fell apart in the spring. That letter has not been made public.

Mr. Gill, the Battery Park City Authority chairman, said the city and state alone would determine whether the goals had been met.

“The city is committed to effectuate the security plan, and when that is done, the money in escrow, which is our rent in its totality, will be released,” Mr. Gill said.

State officials said they weren’t concerned that the Goldman arrangement would set a precedent they didn’t want repeated. Mr. Carey, of the Battery Park City Authority, said that since there was only one unassigned land parcel left under his jurisdiction, it wouldn’t pose a problem. But John Cahill, the Governor’s secretary and liaison to lower Manhattan, said that similar security guarantees might be used in negotiating future job-retention agreements.

“To the extent they’re talking about a $2 billion commitment and significant numbers of jobs, we’ll certainly have conversations,” he said. In City Security Squabbles, A Banker Restores Order