Incentives should get downtown's heart pumping.

New York State and City officials this week announced an agreement on a new incentive plan for lower Manhattan.

Nicknamed "the Marshall Plan," the legislation calls for significant sales and tax breaks for businesses relocating to lower Manhattan, in addition to the allocation of $3.5 billion in Liberty Funds to the rebuilding of Ground Zero.

Among the new plan's provisions: businesses leasing space anywhere on the World Trade Center site will get $5 per s/f from the state for the first 750,000 s/f and businesses leasing space at World Trade Center 7 will get $3.80 per s/f; both incentives will have to be matched by Larry Silverstein. The commercial rent tax will be permanently waived for Ground Zero tenants and suspended for a five-year period for all lower Manhattan tenants. There will be sales tax exemptions on office equipment for companies relocating to the World Trade Center site and there will be a new deadline (June 30, 2006 as opposed to 2007) on tax incentives for the conversion of downtown office building to residential or mixed use.

"This lower Manhattan 'Marshall Plan' agreement marks a dramatic and long overdue step toward fulfilling our moral obligation to rebuild Ground Zero in the aftermath of the September 11 terrorist attacks," said Assembly Speaker Sheldon Silver, one of the architects of the plan. "This comprehensive plan contains significant incentives that will promote faster economic growth and revitalize our unique lower Manhattan community."

Carl Weisbrod, president of the Alliance for Downtown New York, noted that the legislation "will help jumpstart a tenancy at 7 World Trade Center and will be a significant benefit for buildings outside the immediate World Trace Center site."

"I am very, very pleased with it," Weisbrod said. "We've seen over the years how incentives really help the lower Manhattan market. The downtown residential market, to some extent due to the incentives, is very hot right now. To switch some of those incentives toward the commercial side now will have significant benefits. That's what we saw in 1995 and I think that's what we'll see now."

According to Cushman & Wakefield senior director Richard Kennedy, who also serves as vice chairman of downtown Community Board #1, "The incentive package is just a tremendous boost to lower Manhattan. This is a great start and it will help jumpstart the economy for people who consider lower Manhattan to be their new home. It's a terrific program and a tribute to city officials who are working so hard to put it together."

However, another downtown broker, CB Richard Ellis senior vice president Thomas Kaufman, said that people's reluctance to relocate to lower Manhattan has less to do with economic incentives (there are plenty) and more with their association of the area with 9/11.

"It's almost a psychological issue--from an economic point of view, you don't need a lot more," Kaufman said. "So the [incentive plan] is a symbolic gesture--doing what's necessary to change that perception. I think with this concerted effort it will make a difference. Ultimately, the [price] gap between midtown and downtown will grow so large that it will be almost irresponsible for companies not to consider it."

Downtown brokers also think that what lower Manhattan needs is one big new tenant to lure smaller companies in.

"Any help is appreciated, so we thank both the state and the local government for pushing this through. Time will tell whether this is enough," said Neil Lipinski, principal and senior managing director with Colliers ABR. "With respect to commercial incentives, it does put a little bit of fire under tenants to make a decision before the expiration date. Clearly, we need to land a big fish to show that downtown is alive and well; that big fish, of course, is Goldman Sachs. And once you have a bigger leader showing the way, you'll have smaller companies following."

Larry Silverstein, who has been busy doing the announcement rounds for the Freedom Tower redesign this week, didn't returned calls, but as recently as a month ago, the developer said he would agree to give more incentives to prospective tenants if the state government offered to do the same.