Barbara Crossette
Bush Close to Backing $1 Billion Loan to U.N.
Mon Aug 11 19:29:09 2003

Bush Close to Backing $1 Billion Loan to U.N.

by Barbara Crossette


UNITED NATIONS—Relations between U.S. President George W. Bush's administration and the United Nations, which reached a near-breaking point over Iraq this year, may be about to get a needed boost. After meetings with top administration officials, Secretary General Kofi Annan and other U.N. officials are optimistic that the White House will soon give its formal support to a plan to finance the renovation of the shabby and outdated U.N. headquarters with an interest-free U.S. loan of nearly $1.2 billion.

The loan could, of course, be blocked on Capitol Hill, where there is no shortage of people who would punish the organization for real and imagined sins. One senator has apparently already told Undersecretary General Catherine Bertini, an American in charge of U.N. management and budget, that she'll never get that kind of money from the U.S. Congress, which has to approve the deal. The United Nations hopes the White House will give its approval in time for the General Assembly to approve the plan later this fall and for the loan funds to be included in the next U.S. federal budget proposals early next year.

Proponents of the loan were greatly encouraged by a report this spring by the General Accounting Office, the investigative arm of Congress, written at the request of Senator Michael Enzi, a Republican from Wyoming and a member of the U.S. delegation to the General Assembly. The U.N. is proposing to renovate virtually the entire site in midtown Manhattan between First Avenue and the East River on which the U.N. stands.

Active backing from Bush, who, with some of his close advisers, discussed the plan with U.N. officials in July, is necessary to line up more support in Congress. The United Nations remembers that even in during former President Bill Clinton's administration, when there were fewer vociferous critics in the executive branch, the White House and State Department were often reluctant to take on Congress on behalf of the United Nations. Moreover, this year everyone knows that a presidential election is coming.

Lending a hand, Mayor Michael Bloomberg of New York, who will be another key player in the process of bringing U.N. headquarters into the 21st century—the city and the organization will have to cooperate to find temporary quarters for U.N. offices while major rebuilding work is undertaken—is lobbying the Bush administration for approval, officials say.

In May, the GAO wrote in a letter to Senator Enzi that the U.N. complex "no longer meets current safety standards and needs major renovation, which U.N. officials estimate could cost almost $1.2 billion."

"Because the United States is host country to the United Nations," the GAO continued, "the U.N. secretary general anticipates that the United States will provide a no-interest loan for the renovation, similar to the one the United States provided when the U.N. complex was built between 1949 and 1952."

The report added that not only safety, but also fire, security and technology standards were insufficient or in violation of established codes.

"As the host country and the largest contributor to the United Nations, the United States has a significant interest in this project," the final GAO report said. The independent U.N. Association of the United States tracks the progress of the renovation plan on its Web site,

U.N. headquarters was built for an organization of about 50 members at an initial cost —for the Secretariat, General Assembly and conference buildings alone—of about $420 million in 2003 dollars. It now has 191 member nations. There are a few more buildings, including the Dag Hammarskjold Library. But when General Assembly time comes around in the fall the site is stretched beyond its limits. Makeshift cubicles have to be constructed for heads of government to meet because there are no meeting rooms left to use. In some offices, there is barely room to push back a desk chair without hitting the next desk. Windows get stuck opened or closed. Employees have complained of unhealthy working conditions as paint peels and the heating and cooling system pollutes the air.

The GAO said it approved of the U.N. conceptual building plans for the five-year renovation project, and found that U.N. procedures met construction industry standards, from the competitive bidding on contracts to the involvement of experienced consultants in developing detailed proposals and estimates.

Where the GAO expressed caution is on the issue of policing the work. It recommended—and U.N. officials agree—that the organization's Office of Internal Oversight Services, an inspector general's team, be strengthened to oversee the progress of the construction and everything related to it, most of all managing costs to prevent overruns. The GAO also recommended fine-tuning the U.S. State Department task force that would monitor the operation from Washington.

The interest-free loan would be handled this way: the United Nations would get a line of credit worth about $1.2 billion, not cash. The organization has no large financial resources, but must depend on money coming from countries as assessments or gifts to pay its bills, and it would repay the money borrowed against the line of credit through assessments of member nations.

In extending the line of credit, the United States would incur extra costs of at least $700 million over the 25-year repayment period, the GAO estimated. That includes $563 million for the interest subsidy to cover interest actually lost by making the loan interest-free to the U.N. Another $28 million would go to a default subsidy to cover possible nonrepayment.

Additionally, the United States would, like other nations, be assessed to repay the loan—about $126 million over the 25-year period. Furthermore, the United States could lose tax revenues if New York's U.N. Development Corporation, which handles properties around the U.N. headquarters, gets a tax exemption for construction bonds used to finance space it would provide the organization while the renovation and some rebuilding were in progress.

All this may not be an easy sell in Congress, more so since there has been almost no public discussion of the world body's urgent needs and therefore no public campaign to aid the organization. No wonder U.N. officials have tied their hopes to the personal intervention of President Bush.
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