The White House ordered the Justice Department Thursday night to consider other places to try the 9/11 terror suspects after a wave of opposition to holding the trial in lower Manhattan.
The dramatic turnabout came hours after Mayor Bloomberg said he would "prefer that they did it elsewhere" and then spoke to Attorney General Eric Holder.
"It would be an inconvenience at the least, and probably that's too mild a word for people that live in the neighborhood and businesses in the neighborhood," Bloomberg told reporters.
"There are places that would be less expensive for the taxpayers and less disruptive for New York City."
State and city leaders have increasingly railed against a plan to try Khalid Shaikh Mohammed in Manhattan federal court since Holder proposed it last month.
Sen. Chuck Schumer said he was "pleased" that the administration is reconsidering the location of the trial.
Earlier in the day, Schumer spoke "with high-level members of the administration and urged them to find alternatives," said the senator's spokesman, Josh Vlasto.
The order to consider new venues does not change the White House's position that Mohammed should be tried in civilian court.
"President Obama is still committed to trying Mohammed and four other terrorist detainees in federal court," spokesman Bill Burton said Thursday.
"He agrees with the attorney general's opinion that . . . he and others can be litigated successfully and securely in the United States of America, just like others have," Burton said.
Burton referred questions about the location debate to the Justice Department. While not commenting publicly, a department official disputed the characterization that the White House ordered the possible move.
But another insider told the Daily News that Justice officials have been caught off guard by the fiery opposition in New York.
"They're in a tizzy at Justice over Bloomberg," a federal law enforcement official said. "It's like a half-baked soufflé - the plan is collapsing."
Julie Menin, the chairwoman of Community Board 1 who helped rally opposition to the plan, called the shift "a step in the right direction."
"I'm thrilled the White House is reconsidering," Menin said. "The trial has to be moved out of New York City."
Meanwhile, a source told The News that Police Commissioner Raymond Kelly was the driving force behind the push by Manhattan business leaders to change the mayor's mind on the trial.
Kelly made an "extremely powerful" speech to a roomful of 150 prominent business leaders about how disruptive and costly the trial would be for lower Manhattan at an annual police charity event on Jan. 13, the source said.
"What turned this around was when Ray made a presentation to the Police Foundation," the source said. "Everyone went from thinking, 'Justice will be served' to thinking 'We are screwed.' "
What followed was a barrage of complaints to the mayor from some of New York's most powerful tycoons - part of a tide of pressure that led Bloomberg to turn against hosting the trial.
Estimates put the cost of a multiyear terror trial in lower Manhattan at about $200 million a year. Leaders have suggested other venues for the trial, such as the Military Academy at West Point or Stewart Air National Guard Base in upstate Newburgh.
The federal government has said they would reimburse the city for the costs, most of which cover overtime for increased security, but they won't reimburse business owners for lost revenue during the chaos, said Steven Spinola, president of the heavyweight business group Real Estate Board of New York.
"Is the federal government going to give the city $1 billion plus the cost of propping up businesses? I don't think so," Spinola said.
"The mayor clearly has been thinking about this. The tide is turning," he said.
With Kenneth Lovett, James Gordon Meek and Rocco Parascandola