The Corner

U.N. Sticker Shock: New Building Will Cost at Least Five Times Previous Estimates

On Wednesday, New York officials signed off on the Memorandum of Understanding that sets the stage for New York City to sell Robert Moses Playground to the United Nations. The international organization wants the land to build a second skyscraper to house its burgeoning bureaucracy.

The financial implications of this project for the U.S. government are unclear. News reports estimated the new building to cost between $370 million and $475 million. However, experience with the current U.N. renovation project (originally estimated at $600 million, the Capital Master Plan has cost more than $2 billion) raised serious concerns that the new tower would turn out to be vastly more expensive than these estimates suggest.

It turns out those concerns were justified. Last month, the U.N. Secretary-General quietly released a report titled “Feasibility Study on the United Nations Headquarters Accommodation Needs 2014–2034” (A/66/349). There, on page 13, is an initial cost estimate for the new building.

The U.N. has not promoted these estimates. And no wonder. Constructing a new building on the north lawn of the current U.N. headquarters is estimated to cost $1.97 billion. Constructing a new building in another location is estimated to be $2.42 billion.

In other words, according to the U.N., the new tower will cost about five to six times the earlier, widely reported cost estimate.

Total costs will be even higher. The report notes that the new estimates don’t include financing costs. Nor does it likely include the additional security-related costs. (Why should it? The U.N. deems those expenses to be the responsibility of the host country—us!).

The organization typically sticks the U.S. with 22 percent of the tab “shared” by all members. What the new estimates mean, then, is that the new U.N. building looks to leave U.S. taxpayers on the hook for some $500 million to $600 million, rather than the $100 million to $200 million initially forecast.

That still won’t be enough for Turtle Bay. In the same report, the U.N. projects that it will need to lease additional space—even after the new building is complete. Why? Because it expects to greatly increase the number of U.N. staff in New York over the period.

If these staff projections are realized, one wonders how the U.N. Development Corporation would be able to prematurely terminate its current leases on two city-owned buildings. The buildings are leased at below-market rates, and their sale is supposed to be a key source of funding for Mayor Bloomberg’s East River Greenway project.

Interestingly, the report projects that continuing to lease required space will be even more expensive in the long run than building a new tower, due in part to the perceived need for additional leased office space for more staff and the fact that the currently leased buildings will become more expensive when the current below-market-rate leases expire after 2023.

But the assumed staff increase is critical. If the staff is not increased or is located outside New York, the cost will be reduced.

Although the report acknowledges that U.N. operations are expected to decentralize in the future, it still bases its projection for increased office-space needs on the rapid growth in U.N. staff (and budget) in recent years. The report does not indicate why the anticipated additional staff must be housed in U.N. offices in New York, rather than in other countries with lower living costs. The extremely expensive cost of living in the Big Apple translates into significant pay-scale adjustments for U.N. staff based there. Neither does the report offer insight into why many tasks performed by U.N. staff could not be handled by contractors not requiring U.N. office space. The U.S. should challenge these staff projections.

All of this only serves to underscore the need for the U.S. government to oppose this project until a detailed financial analysis of the project is provided, including a definitive estimate of the cost for the U.S. taxpayer.

Brett D. SchaeferBrett D. Schaefer is The Heritage Foundation’s Jay Kingham Fellow in International Regulatory Affairs.