White House seeks to loan U.N. funds for renovations

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The Bush administration's new budget includes a $1.2 billion, 30-year loan to renovate the aging United Nations headquarters and build a new annex, although U.N. officials expressed disappointment that Washington will charge interest on the loan.

The loan was part of a $31.5 billion foreign-operations budget request released Monday that also includes major new funding for the fight against AIDS and a revamped U.S. foreign-aid program targeting poor countries that implement political and social reforms.

State Department spokesman Richard Boucher said yesterday the loan request, contained in the foreign-operations account of President Bush's proposed fiscal 2005 budget, was a "practical way to move forward" with U.N. Secretary-General Kofi Annan's plan to renovate and modernize the U.N. headquarters.

The loan to fund the U.N. Capital Master Plan still must win approval by Congress and the U.N. General Assembly. The world body must agree to accept the 5.54 percent interest rate. Interest and principal is to be paid off by all member states.

The loan announcement came on a day when Mr. Annan was in Washington for meetings with Mr. Bush and other senior administration leaders on the troubled political transition in Iraq.

Catherine Bertini, the U.N. undersecretary-general for administration and management, who accompanied Mr. Annan on his Washington trip, called the loan provision "great."

"It's exactly what we wanted, but we were hoping it would be interest-free," she said.

If approved, Washington will pay out $400 million a year for three years, and the organization will have 30 years to pay it back, plus interest. The total bill, with interest, will be close to $2.5 billion.

As part of its assessed contribution to the U.N. budget, the United States will supply 22 percent of that repayment figure -- $265 million on the principal alone.

Diplomats said yesterday they did not know enough about the loan to comment, but several were dismayed that Washington would charge interest.

One European envoy noted that the Swiss government donated the building and most of the operating costs for U.N. operations in Geneva.

The highly recognizable U.N. Secretariat building, the best-known example of the International architectural style, is dangerously outdated and in disrepair.

The 39-story, green-glass rectangle leaks heat in winter and air-conditioning in summer, is riddled with asbestos and lacks a sprinkler system.

A 2002 report from the U.S. General Accounting Office (GAO) affirmed the need for a speedy interior renovation, noting that each year's delay would add millions to the project's cost.

The GAO also backed the U.N. suggestion of a second office tower, which would house U.N. staff during the three-year renovation, and then consolidate far-flung agencies, programs and offices now renting space. The city of New York has made available a nearby asphalt playground for the proposed tower, although the community is reluctant to see it developed.

State Department officials, briefing reporters on background yesterday, said Mr. Bush's proposed foreign-operations budget cuts back on some traditional bilateral aid programs to fulfill the president's funding promises for AIDS and for the new Millennium Challenge Account, a program to target development assistance to countries that embrace economic and political reforms.

cBetsy Pisik reported from New York.