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advisory committee. This was found to have serious disadvantages. It would still be necessary for a substantial part of the cost to be put up in cash by the members, and they were not in a position to do so. There were legal difficulties in providing for the possibility of suit against the United Nations, and there was the complicating factor of clearing the plans with the lenders so that the buildings would be adaptable to other use in the theoretical event of foreclosure. Furthermore, it was the feeling of many members that it would be inconsistent with the dignity and prestige of the United Nations for the organization to be under obligation to private financial interests. In view of these considerations, the members of the headquarters advisory committee (the United States representative abstaining from the discussion) unanimously requested the Secretary-General to approach the United States Government regarding the possibility of its making a loan.
In connection with this request, consideration was given to the possibility of making the loan through the Reconstruction Finance Corporation or the ExportImport Bank, but it was clear that neither of these organizations had the necessary statutory authority. A loan by the International Bank for Reconstruction and Development would also be impracticable since it can only loan to a member nation or to a business, industrial or agricultural enterprise on the guarantee of a member.
THE UNITED STATES OFFER OF A LOAN
Following consultations between representatives of the Department of State, the Treasury Department and the Bureau of the Budget, it appeared that the most appropriate arrangement would be a direct loan by the United States Government. In response to the inquiry of the Secretary-General, Ambassador Austin was authorized by the President to state that the President would recommend to the Congress the granting of an interest-free loan of $65,000,000. Ambassador Austin's letter of October 29, 1947, to the Secretary-General on this subject is attached. Letters explaining the proposed financing procedure had previously been sent on October 22 to the chairmen and ranking minority members of the Senate Foreign Relations Committee, the House Foreign Affairs Committee, and the Banking and Currency Committees of both Houses.
REASONS FOR MAKING THE LOAN INTEREST-FREE
It was originally contemplated that a loan by the United States Government would bear interest. On further consideration it appeared, however, that a loan without interest would probably in the long run be to the advantage of the United States from a strictly financial point of view, since it would strengthen the hands of the United States delegation at the recent General Assembly in resisting efforts to call upon the United States for the payment of a bigger share of the cost of construction than its share of the regular budget of the United Nations.
The United States now pays 39.89 percent of the budget of the United Nations. If contributions were strictly on the basis of ability to pay, it would have to contribute a substantially larger share. The basis on which the United States contribution has been kept down to this figure, and on which it is hoped that it may ultimately be reduced further, is that it would not be consistent with the sovereign equality of members if the organization were dependent upon one member for an excessive portion of its revenue. This argument, however, does not carry much weight in cases such as the construction of headquarters since it could be urged that this is an isolated transaction not establishing any precedent. In support of a larger contribution by the Federal Government toward the headquarters, attention might be called to the generosity already displayed by a private citizen and by the city of New York. Finally, the actual economic advantage to the United States arising out of the location of the headquarters in this country would be a powerful argument in favor of a larger contribution. It was feared, however, that if the United States should make a contribution to the cost of the headquarters greater than its proportional share of the regular budget this might, in turn, be used as leverage for future efforts to increase, or at least to prevent the decrease, of the United States' regular contribution to the budget.
The definite economic advantages accruing to the United States from the location of the headquarters in this country would seem to justify the Government in making a special contribution toward the construction. Making this contribution in the form of a waiver of interest has the great advantage of not prejudicing the position of the United States with regard to its contribution to the budget of the organization. The principal of the loan would be repaid in annual installments out of the regular budget of the United Nations.
ECONOMIC ADVANTAGES TO THE UNITED STATES
Apart from the enhancement of United States leadership and prestige in the organization, and the benefit to our foreign relations of having an increasing number of influential citizens of foreign countries learn from direct contact the advantages of the American way of life, the location of the headquarters in this country results in a definite economic benefit to the United States.
Certain immediate and concrete benefits will arise from the construction itself, since almost the entire cost of construction will be spent in the United States. For example, American labor will be used for the building, the bulk of the materials will be purchased in the United States, and the existence of the buildings will be a permanent asset both to New York City and to the Nation.
The location of the United Nations headquarters in the United States brings about a constant inflow of funds from other countries. It is estimated that about $20,500,000 is transferred every year from foreign hands and spent in the United States in connection with the United Nations. This includes contributions by foreign countries to the United Nations budget, expenditures of the permanent delegations stationed in New York, and expenditures by delegations coming to special meetings held at United Nations headquarters throughout the year. This is an annual inflow of money which may be expected to increase rather than to become smaller in the future. Another saving to this Government is in the travel and communications expense that would be involved in maintaining a mission and sending representatives if the headquarters were located in Europe. This is estimated at over $300,000 per year.
ACTION OF THE GENERAL ASSEMBLY
The General Assembly received the United States offer warmly and with real appreciation of the support thus demonstrated for the United Nations. It authorized the Secretary-General to negotiate a loan agreement with the United States for a period of not less than 30 years subject to repayment in annual installments from the budget of the United Nations. The Assembly's resolution expressly recognized that the loan was dependent upon approval by the Congress.
NEGOTIATION OF THE LOAN AGREEMENT
Pursuant to the resolution of the General Assembly, representatives of the Department of State and the Treasury, in consultation with the Bureau of the Budget, participated in negotiations with officials of the United Nations regarding the terms of a loan agreement. The result of these negotiations is the draft loan agreement which accompanies this memorandum. It provides for payment by the United States to the United Nations of a total of not more than $65,000,000 as required by the United Nations for the construction of the headquarters. Repayment is to be made in annual installments, beginning July 1, 1951, when it may be expected that the United Nations will be installed in the new headquarters, and ending July 1, 1982. The payments begin at $1,000,000 for the first 2 years and rise gradually to $2,500,000, tapering off again toward the end of the period. Under this schedule half the loan will have been repaid by 1966, but the United Nations will have relatively small payments to make during the first few years when the dollar shortage may still be acute and the United Nations may have additional organizational expenses. The United Nations undertakes not to allow the creation of any mortgage or other encumbrance on the real property without the permission of the United States, so long as the loan is outstanding, and recognizes that, as provided in the headquarters agreement, it cannot dispose of any of the real property without the consent of the United States, which consent may be conditioned upon repayment of the balance of all installments of the debt outstanding.
The loan agreement is now ready for final negotiation and signature. Promptly after signature, it will be submitted to the Congress for approval and implementation.
(Attachment: Letter to Secretary-General from Ambassador Austin.)
OCTOBER 29, 1947. His Excellency, TRYGVE LIE, Secretary-General of the United Nations,
Lake Success, Long Island, New York. MY DEAR SECRETARY-GENERAL: I wish to reply to your request for information concerning the extent to which the Government of the United States might be willing to assist in financing the costs of construction of the United Nations headquarters.
The Government of the United States would be prepared to enter into negotiations with the Secretary-General of the United Nations with a view to concluding a loan agreement whereby an interest-free United States Government loan would be made available for the purpose of financing all or part of the cost of constructing the United Nations headquarters. It would be the understanding of my Government that such a loan would be for an amount not exceeding $65,000,000. Further, it is understood that the loan would be extended for a period to be determined by negotiation with the Secretary-General and would be repayable in annual installments from the ordinary budget of the United Nations.
Such a loan would, of course, require the approval of the United States Congress. The President of the United States would be willing to request the approval of such a loan by the Congress upon conclusion of negotiations between the Secretary-General and my Government. It is assumed that the General Assembly will at this session make the necessary decisions and give the necessary authorizations required to proceed with the construction and financing of the headquarters. Sincerely yours,
WARREN R. AUSTIN.
FEBRUARY 11, 1948.
DRAFT FOR LOAN AGREEMENT BETWEEN THE UNITED STATES AND THE UNITED
It is hereby agreed by the Government of the United States of America and the United Nations as follows:
(1) Subject to the terms and conditions of this agreement, the Government of the United States will lend to the United Nations a sum not to exceed in the aggregate $65,000,000. Such sum shall be expended only as authorized by the United Nations for the construction and furnishing of the permanent headquarters of the United Nations in its headquarters district in the City of New York, as defined in the Agreement Between the United States of America and the United Nations Regarding the Headquarters of the United Nations, signed at Lake Success, N. Y., on June 1947, including the necessary architectural and engineering work, landscaping, underground construction and other appropriate improvements to the land and approaches, and for other related purposes and expenses incident thereto.
(2) Such sum, or parts thereof, will be advanced by the United States through the Secretary of State, to the United Nations upon request of the Secretary-General or other duly authorized officer of the United Nations and upon the certification of the architect or engineer in charge of construction, countersigned by the Secretary-General or other duly authorized officer, that the amount requested is required to cover payments for the purposes set forth in paragraph (1) above which either (a) have been at any time made by the United Nations or (b) are due and payable or (c) it is estimated will become due and payable within sixty days from the date of such request. All sums not used by the United Nations for the purposes set forth in paragraph (1) will be returned to the Secretary of State of the United States when no longer required for said purposes. No amounts will be advanced hereunder after July 1, 1951, or such later date, nor after July 1, 1955, as may be agreed to by the Secretary of State.
(3) All sums advanced hereunder will be receipted for on behalf of the United Nations by the Secretary-General or other duly authorized officer of the United Nations.
(4) The United Nations will repay, without interest, to the United States the principal amount of all sums advanced hereunder, in annual payments
beginning on July 1, 1951, and on the dates and in the amounts indicated, until the entire amount advanced under this agreement has been repaid as follows:
$2,500,000 July 1, 1952_ 1,000,000 July 1, 1968
2,500,000 July 1, 1953 1,500,000 July 1, 1969.
2,500,000 July 1, 1954. 1,500,000 July 1, 1970
2,500,000 July 1, 1955. 2,000,000 July 1, 1971.
2,500,000 July 1, 1956_ 2,000,000 July 1, 1972
2,500,000 July 1, 19572,000,000 July 1, 1973
2,500,000 July 1, 1958_ 2,000,000 July 1, 1974.
2,500,000 July 1, 19592, 000, 000 July 1, 1975
2,500,000 July 1, 1960_ 2,500,000 July 1, 1976_
1,500,000 July 1, 1961. 2,500,000 July 1, 1977.
1,500,000 July 1, 19622,500,000 July 1, 1978_
1,500,000 July 1, 1963 2,500,000 July 1, 1979.
1,500,000 July 1, 1964. 2,500,000 July 1, 1980
1,500,000 July 1, 1965 2,500,000 July 1, 1981.
1,500,000 July 1, 19662,500,000 July 1, 1982
1,000,000 However, in the event the United Nations does not request the entire sum of $65,000,000 available to it under this agreement, the amount to be repaid under this paragraph will not exceed the aggregate amount advanced by the United States. All amounts payable to the United States under this paragraph will be paid, out of the ordinary budget of the United Nations, to the Secretary of State of the United States in currency of the United States which is legal tender for public debts on the date such payments are made. All sums repaid to the United States will be receipted for on behalf of the United States by the Secretary of State.
(5) The United Nations may at any time make repayments to the United States of funds advanced hereunder in excess of the annual installments as provided in paragraph (4) hereof.
(6) The United Nations agrees that, in order to give full effect to section 22 (a) of the agreement regarding the headquarters of the United Nations referred to in paragraph (1) above (under which the United Nations shall not dispose of all or any part of the land owned by it in the headquarters district without the consent of the United States), it will not, without the consent of the United States, while any of the indebtedness incurred hereunder is outstanding and unpaid, create any mortgage, lien or other encumbrance on or against any of its real property in the headquarters district as defined in said agreement. The United Nations also agrees that the United States, as a condition to giving its consent to any such disposition or encumbrance, may require the simultaneous repayment of the balance of all installments remaining unpaid hereunder.
(7) The effective date of this agreement shall be the date on which the Government of the United States notifies the United Nations that the Congress of the United States, with the approval of the President, has made available the funds necessary to be advanced in accordance with the provisions of this agreement.
In witness whereof, the Government of the United States of America, acting by and through the Secretary of State, and the United Nations, acting by and through the Secretary-General, have respectively caused this agreement to be duly signed in duplicate at
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1948. For the GOVERNMENT OF THE UNITED STATES OF AMERICA :
Secretary of State of the United States of America
For the UNITED NATIONS :
CITY OF NEW YORK,
New York 35, N. Y., April 30, 1948.
House of Representatives, Washington, D. C. DEAR MR. EATON: I am advised that your committee is scheduled to start hearings on United Nations legislation early next week. In order that you may have before you the facts covering the commercial value of donated lands and buildings proposed to be constructed on the United Nations site with funds to be loaned by the United States, I am glad to make the following statement to be used as you may see fit.
I have bad such an analysis made by responsible people who have been following this problem from the beginning. They advise me that, based on very conservative estimates, from $50,000,000 to $60,000,000 can be realized from the sale of the property within a reasonable time after the headquarters is constructed. I am attaching a table to illustrate this.
There is no question that, if this property were put up for sale today, it would easily bring the amounts shown in the estimate. Office space in midtown New York is in terrific demand. The small amount of new office space available is being rented at from $6 to $7 per square foot, with the tenant making all alterations. The inability to demolish old buildings because of the difficulty of relocating the tenants, as well as the complete absence of unused space, has created a critical shortage of new office construction. Both the Library and the Secretariat are typical modern office buildings which could be used with little or no alterations. Furthermore, not only would these buildings provide muchneeded office space, but, inasmuch as the United Nations has built on only 60 percent of the available land, several sites for new construction would be available within the city's zoning requirements. On the north end of the site, for example, there is a plot 500 by 500 feet, which is completely free of structures. It is conservatively estimated that this could be sold today for $30 per square foot, thus realizing on this one parcel alone $7,500,000. The effect of this situation will be felt for several years to come. The General Assembly Building and the Meeting Hall Building would provide ideal space for television, broadcasting, and motion-picture studios—space which cannot be found in Manhattan today, and certainly not in midtown Manhattan.
The location of the site is perfect for commercial purposes. It is served by two bus lines—one crosstown and one north and south. It is within walking distance of the Grand Central Station, as well as most of the large hotels in the midtown area. When the city-planned Second Avenue Subway is built, it will be within one block. It is easily accessible by car from the East River Drive as well as the Queens-Midtown tunnel. The proposed garage will enhance this accessibility.
The property donated by Mr. Rockefeller, which was an outright gift and is not reimbursable in the event the United Nations abandons its site, has been shown at its original cost of $8,500,000. Already adjacent property in the area bas more than doubled its value. The United Nations plans to spend over a million dollars for landscaping the property alone. The city has already developed plans for improvements around the site costing $13,000,000 including the widening of First Avenue, the construction of a vehicular tunnel for the entire length of the site to divert heavy traffic, the reconstruction of the East River Drive, the construction of improved approaches to the drive at both ends of the site, and the construction of several parks in the immediate vicinity of the headquarters. Furthermore, removal of the slaughterhouses that previously occupied the area has made an enormous improvement in real estate values in this area. In view of all this, it is certainly reasonable to expect that the value of the property will at least double.
The figure of $65,000,000 as the total cost of the United Nations building program is, I am sure, conservative. It is not a figure taken from the air, although, of course, it is not based upon detailed estimates and bids. The scope of the project has been cut down and all extravagance and trimmings have been eliminated. In addition, a margin of safety has been provided. Cordially,
ROBERT MOSES, City Construction Coordinator.