State Oversight Board Approves Penn Station Renovation Funding Plan
By Mark Hallum July 27, 2022 4:39 pm
reprints
The effort to revamp Pennsylvania Station moved forward as New York’s Public Authorities Control Board (PACB) voted Wednesday to approve Empire State Development’s (ESD) funding plan for the project.
ESD’s proposal would increase the state’s share of the cost to about 25 percent of the $7.5 billion plan to revamp both the nation’s largest transit hub and the surrounding area At least $1.2 billion of costs would be funded through payments-in-lieu-of-taxes (PILOTs) from private developers such as Vornado Realty Trust (VNO) in exchange for permission to develop office towers around the station.
The PACB vote authorizes the state to come to an agreement with private developers for the PILOT program on a site-by-site basis, clearing the way eventually for federal funding to be authorized.
Wednesday’s vote authorized the PILOT program and solidified the agreement between the city and state to share the cost of the project, with each ponying up 12.5 percent.
During the PACB’s meeting, Holly Leicht, executive vice president of real estate for ESD, said the vote isn’t the final decision on the full funding plan for the revamp, which would need to be finalized before it can get 50 percent of the money from the federal government.
“In order to secure federal grants, the state must have a viable financial plan for how we can fund the required local share of the Penn project and value captured through a pilot structure is a familiar proven financing approach that has worked successfully in the past both in New York City for projects such as the extension of the No. 7 line and Moynihan Train Hall, as well as for other large infrastructure projects nationwide,” Leicht said during the meeting. “We are not seeking authorization to enter into any type of financing for these projects.”
Leicht was not the only one at the meeting attempting to manage public expectations about what the vote meant in the grand scheme of the controversial plan, which could see the construction of up to 10 skyscrapers in the immediate vicinity of Penn Station. State Sen. Leroy Comrie, who sits on the PACB and represents parts of Queens, explained he voted for the plan but wouldn’t allow any more tax breaks for developers.
“Today’s vote is not the final say on this massive undertaking. Future review and votes will be required, both by the PACB and the MTA Capital Program Review Board,” Comrie said in a statement before the vote. “To be clear, while I will vote yes on today’s resolution, I will not vote in favor of any future PILOT agreements for individual above-ground buildings in this project footprint until we have secured necessary federal approvals and the fair share of funding from the federal government and New Jersey.”
Comrie then thanked the work of three other state elected officials who have been vocal opponents to the plan, namely state Sens. Liz Krueger, Brad Hoylman and Robert Jackson, who released a joint statement saying they will continue to fight against tax breaks to developers for the project.
“What today’s vote did not do was establish any deals with any real estate developers for the blocks surrounding Penn Station,” the three wrote in the joint statement. “Any future deals will have to return to the PACB, and we will continue fighting alongside the community to ensure that those deals are not just corporate welfare for developers. That means much more guaranteed affordable housing, and no unnecessary tax breaks that reward developers for building projects they wanted to build anyway.”
The vote comes two weeks after a report from watchdog group Reinvent Albany that claimed the Penn Station redevelopment funding plan through PILOTs alone left a $3 billion gap, and a week after the city and state began airing more details about the financing framework.
The plan includes public realm improvements such as pedestrian plazas. Pennn Station itself will get new entrances and bring natural light into the cavern of mezzanines.
Mark Hallum can be reached at mhallum@commercialobserver.com.
