NY Times January 31, 2004

Bush to Seek '09 Deadline for Liberty Bonds

By JOSEPH P. FRIED

President Bush plans to ask Congress to extend until 2009 the Liberty Bond program, which provides tax-free financing to help New York City rebuild after the Sept. 11 terrorist attacks.

The program permits the state and city to issue a total of $8 billion in tax-exempt bonds for commercial and residential construction projects, primarily in Lower Manhattan. Financing with such bonds lowers the cost of the projects.

The program is scheduled to expire at the end of this year, and state and city officials fear that much of its $8 billion authorization will go unused if the Liberty Bond program is not extended.

Gov. George E. Pataki and Mayor Michael R. Bloomberg have urged the Bush administration to ask Congress to extend the program until 2009, and yesterday Treasury Secretary John W. Snow said that the president would do so, as part of his budget request for the 2005 fiscal year.

The governor and the mayor expressed gratitude for the president's planned action, which comes in a presidential election year. Mr. Pataki said he had received assurances from the Republican heads of the Senate and House tax-writing committees that they "would work with us to enact the extension."

Mr. Snow said only about $2 billion of the potential $8 billion in Liberty Bonds had been issued or approved so far. "It has taken longer than expected for the city to be in a position to utilize the full potential for these bonds," Mr. Snow said.

State and city officials have said this is so because the demand for commercial projects in Lower Manhattan has been weak, because of a high vacancy rate. They hope that an improving market over the next few years will spawn new office construction downtown that will increase use of the bonds.

The Bloomberg administration also sought a change in how the $8 billion authorization was allocated, but this will not be part of the president's request to Congress, said Andrew M. Alper, president of the city's Economic Development Corporation.

The program permits no more than $1.6 billion of the $8 billion to be issued as bonds for apartment construction in Lower Manhattan. As of October, 19 residential developments in the area, with nearly 7,000 apartments, had sought approval for a total of $2.3 billion in Liberty Bonds.

Senator Charles E. Schumer also praised the president's planned action, but said it was only part of what needed to be done. He said the $8 billion Liberty Bond authorization should be doubled by redirecting to the program unused tax benefits from other parts of the federal aid package.