Return Home

N.Y.C. may get $5 billion for rail station
 May 30, 2002 


NEW YORK CITY -- U.S. Sen. Charles Schumer (D-N.Y.) said on Thursday (May 30) that New York City's lower Manhattan stands to get $5 billion from Washington, D.C., that could pay for a vast new commuter train and subway station that would be the equivalent of the city's Grand Central Terminal, Reuters
reported.

About $3.1 billion of that money will be freed up because the city's two mass transit agencies -- whose subway and train lines were badly damaged in the Sept. 11 attacks that toppled the World Trade Center -- were insured against such assaults.  But if there were another major attack, the Metropolitan Transportation Authority of the State of New York and the Port Authority of New York and New Jersey might have a tough time picking up the cost of replacing new lines. Both agencies told Reuters they slashed their terrorism insurance because it got
much too expensive as a result of the September attacks.

Schumer, at a business breakfast, said that the insurance both agencies had on Sept. 11 should cover the costs of rebuilding the No. 1 & 9 subway lines, and the PATH system, which carries New Jersey commuters across the Hudson River.

In October 2001, the Metropolitan Transportation Authority found it could not afford to renew $1.5 billion of insurance, which had protected properties that would cost $213 billion to replace, according to Lauren Gregory, the agency's director of
risk and insurance management.  Instead, the authority could buy only $100 million of insurance coverage. The stunning drop in protection bore out an assessment by Gregory Serio, New York State's insurance superintendent, who said a number of New York properties now lack protection because the Sept. 11 attacks dried up insurers' appetite for selling terrorism insurance.  "There probably is a significant underinsurance situation in the New York real estate market," Serio said.

The effects of the drought in terrorism insurance go well beyond public authorities.  William Rudin, president of Rudin Management Co., a real estate firm, said the cost of terrorism insurance has skyrocketed 500 percent to 800 percent. Developers around the nation are seeing projects delayed as a result, he said, which means they are hiring fewer construction workers.  The Real Estate Roundtable, Washington, D.C.-based lobbyists, said 79,000 construction jobs were lost in the first months of 2002 as a result of the lack of terror insurance.

It and other real estate groups are pushing Washington to create a so-called federal backstop for the insurance industry to ensure that it can afford to provide policies.  The Bond Market Association, a financial industry group, found
lenders put on hold or canceled commercial mortgage loans worth more than $7 billion because of the difficulty and expense property owners have had buying terror insurance.  The Metropolitan Transportation Authority previously paid $6.4
million for its $1.5 billion of coverage. But when this policy came up for renewal, the agency was charged $7.5 million for $100 million worth of coverage. Instead of the rate falling as the amount of coverage rose, the premium for each new level
of coverage would have stayed at $7.5 million, Gregory said. That made the premiums much too costly.

"I would definitely sleep easier and be more comfortable if we had been able to bring our terrorism insurance back up to $1.5 billion," Gregory said, noting that the previous policy covered everything from Grand Central Terminal to subway cars and bridges and tunnels.  A Port Authority spokesman said that before Sept. 11, the agency had $1.5 billion of coverage for property damage and business interruption due to any cause, including terrorism.  "We're in the process of putting a new program together of coverage. But given the current status of insurance markets, our expectation is it's going to cost more and cover less," the spokesman said. "Where terrorism had not been excluded in the past, today the norm is that it is excluded."

Schumer said New York City will get an extra $3.1 billion from the federal supplemental spending bill that can be used for a lower Manhattan transit hub. The pending bill loosens curbs that limit agencies to using transportation dollars to restore the system to its pre-Sept. 11 condition.  The $3.1 billion is part of the $21 billion World Trade Center recovery package the Bush administration promised.

The supplemental spending bill also includes $1.8 billion that is earmarked for a new mass transit hub at the former site of the World Trade Center.
May 31, 2002

Return Home