State Short $3B for Penn Station Rehab, Study Claims
By Mark Hallum July 13, 2022 5:58 pmreprints
The funding plan to redevelop Pennsylvania Station into a more graceful space could come up at least $3 billion short, according to a watchdog group that completed a financial analysis of the project.
Reinvent Albany claims the public-private partnership to raise the estimated $7.5 billion needed to restore some of the lost grandeur of the original Penn Station may not be enough to foot the bill considering the tax incentives going to developers such as Vornado Realty Trust. The watchdog group’s findings were released Wednesday.
The plan to redevelop Penn Station, started by disgraced former Gov. Andrew Cuomo and modified by Gov. Kathy Hochul, calls for 10 new buildings in the area surrounding the transit hub and would let developers to build at a higher density than normally allowed. In exchange, property tax revenues and fees would be directed to the state to finance the Penn Station’s renovation.
Payments in lieu of taxes (PILOTs) from Vornado would be given to the state for the rights to construct a series of office towers, but that will still leave the state needing to find $3.4 billion to $5.9 billion from other sources, the report from Reinvent Albany claims.
Vornado could receive a tax break of roughly $1.2 billion in property tax paid to the city while only $6.6 billion will be taken into the state through property taxes, according to the report. Reinvent Albany commissioned the report, written by Bridget Fisher and Flávia Leite from the Schwartz Center for Economic Policy Analysis at The New School, because it argued that the state “has refused to release basic financial assumptions and projections of the Penn Station project, despite a likely vote on the project’s General Project Plan at the next board meeting” of the Empire State Development, the agency spearheading much of the plan.
ESD, however, was skeptical of Reinvent Albany’s findings as the process of finding cash is ongoing.
“Since ESD was refused a copy of the report prior to its release, it’s difficult to comment on its accuracy. That said, the state is enhancing the city’s tax base by unlocking the real value of the long-neglected area, which will improve the lives of millions of New York commuters,” an ESD spokesperson said in a statement. “It’s disappointing that an organization that considers itself a citizens’ watchdog would prefer Penn Station remain a junkyard, denying New Yorkers the significant affordable housing, open space and desperately needed transit improvements this plan provides.”
Vornado issued a statement speaking to its own history delivering similar projects.
“Vornado is a key partner in this neighborhood and committed to a GPP that’s transformative for the region and reflects the vision outlined by Gov. Hochul and Mayor Adams,” a Vornado spokesperson said in a statement. “Vornado has a strong record working on successful public-private partnerships that opened Moynihan Train Hall, completed a new station entrance at 33rd Street, and will deliver a new LIRR concourse.”
In June, Gov. Kathy Hochul kicked off the design phase of the project, issuing a request for proposals (RFP) seeking firms to reinvigorate the drab underground facility into a station worthy of the title of busiest transit hub in North America.
Reinvent Albany’s report could provide fodder for detractors of the project. A mix of preservationists have condemned the replacement of historic buildings such as the Hotel Pennsylvania with skyscrapers, and community activists such Layla Law-Gisiko, who is running for New York State Assembly, say the project is a giveaway to developers.
“The report commissioned by Reinvent Albany confirms our fears,” Law-Gisiko told Commercial Observer. “The Penn Station towers are a liability that could end up costing billions of dollars to taxpayers while at the same time providing a generous corporate gift to Vornado. We urge the governor to retire this mortally flawed plan.”
It would not be the first time funding for the plan, known under Cuomo as the Empire Station Complex, has come into question. In May, the city’s Independent Budget Office (IBO) issued a report that said the state would need more like $8 billion and $10 billion, and that office space may not even get fully leased considering a sluggish return to demand as the COVID-19 pandemic becomes endemic.
“It’s not whether this project is good or bad,” George Sweeting, IBO’s acting director, told CO at the time. “We’d like to have more information about the specifics of the plan. How much is it actually going to cost? How much are they going to finance it? How are these payments structured?”
In March, Metropolitan Transportation Authority chair Janno Lieber, a veteran of Silverstein Properties who worked on its World Trade Center campus rebuild, explained funding from the Bipartisan Infrastructure Deal wasn’t a sure thing and that the state needed to scrape together what it could — where it could.
Hochul wasted no time departing from the original plan proposed by Cuomo — who left office amid allegations of sexual misconduct — in early 2020, scaling back the scope of development allowed by Vornado.
Mark Hallum can be reached at email@example.com.