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NEW YORK CITY-The Port Authority of New York and New Jersey has not yet met its obligations to provide Silverstein Properties Inc. with a construction-ready site for what will be World Trade Center Tower 4, a three-member arbitration panel has ruled. As a result, the Port Authority, which owns the 16-acre WTC site, must continue work on site 4 as well as site 2. The Port Authority is liable for paying SPI daily penalties with interest retroactive to Oct. 5–the day the authority certified site 4 as construction-ready and site 2 as partially ready.

At issue was a 400-foot-long wall the authority had constructed on site 4, in the so-called East Bathtub of Ground Zero, which SPI claimed interfered with its ability to lay the foundation for Tower 4. The wall was constructed to support the “box” surrounding the tracks that the No. 1 subway train rides on through the site. For its part, the authority maintained that the wall was not part of the plot it had agreed to turn over to SPI, and that the parcel as certified on Oct. 5 met the specifications in the original lease agreement. The two parties agreed last month to bring the matter to arbitration.

The panel ruled that “by changing its plan for excavation under and support of the subway box, and by erecting the soldier pile wall, the Port Authority has neither completed the East Bathtub preparatory work nor delivered Site 4 in construction-ready condition.” On site 2, the authority is required to “burn off” the rock-bolt projections in the north slurry wall of the East Bathtub.

According to a joint statement from the Port Authority and SPI, “The arbitration panel ruled that work must continue on World Trade Center sites 2 and 4 in order to complete the Port Authority’s site turnover obligations, and as a result, the panel reinstated liquated damages effective to Oct. 5. In anticipation of this ruling, the Port Authority and Silverstein Properties had already begun working cooperatively to resolve the outstanding issues that remain.” The authority had already paid SPI–headed by developer Larry Silverstein–a reported $43.5 million in penalties when the original June deadline was missed.

The arbitration process “quickly resolved this dispute, working exactly as intended,” according to the statement. “We appreciate the hard work and professionalism of the three-member panel. Both parties remain 100% committed to delivering on our shared commitment to rebuild the World Trade Center. We are also pleased that in their ruling the arbitrators recognized the joint cooperation that has and will continue to exist between the Port Authority and Silverstein Properties in resolving the myriad of complex construction issues that have arisen and will inevitably arise as construction moves forward.”

The authority has informed SPI that it will not meet its Dec. 31, 2008 deadline for the final site turnover obligations, “which include tracts of land for Towers 2 and 3 that abut the Number 1 subway box and temporary World Trade Center PATH Station,” according to the joint statement. “We will work jointly to resolve the issues that will cause this last deadline to be missed.”

For its part, the panel noted in its decision that the authority and SPI had “admirably cooperated” in resolving conflicts and problems. “Now that they are into actual construction, that level of cooperation must not only continue but increase, particularly in communicating with respect to problems as soon as they arise, so that efficient and practical adjustments and solutions can be developed with minimal difficulty.”

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