Funds to renovate Penn station do not increase, research proposal

New York’s plan to renovate and expand Pennsylvania Station in Manhattan will A new financial analysis concludes generating only enough revenue to cover about half of the improvements to the shabby station.

A shortfall so large that it required the state to raise more than $3 billion from other sources to pay for a station overhaul, a favorite project of the government. Governor Kathy Hochul is estimated to be worth at least $7.5 billion, new analysis released Wednesday shows. The study also estimates that developers of office towers surrounding the station will receive tax breaks that could total $1.2 billion. The state plans to use payments from those developers to offset the cost of refurbishing the station.

The evaluate, evaluate, evaluate could provide ammunition for critics of the governor’s plan, who include community leaders and renters who could suffer from one of the nation’s largest real estate projects. to move. Ms. Hochul has called for the project to proceed quickly, saying it will transform Penn Station from a “pit of hell” into a spacious, modern transit hub.

Conducted by researchers at the Schwartz Center for Economic Policy Analysis at the New School, the analysis aims to fill in gaps in the incomplete planning that public officials have shared so far. The study was conducted by Reinvent Albany, a monitoring group that has pushed for greater transparency about the proposed major redevelopment.

Reinvent Albany and some community leaders in Midtown opposed Hochul’s plan, saying it was too generous for the Vornado Realty Trust, a large office developer whose chief executive, Steven Roth, had donated Donate to the governor’s election campaign. Vornado owns most of the locations where super-tall office buildings can be built according to plan.

Vornado did not respond to a request for comment. Mr. Roth referred to the redevelopment of the Penn Station area as Vornado’s “Promised Land”.

Hochul’s plan, which inherits from her predecessor, former Governor Andrew M. Cuomo, would allow developers to build 10 super-tall towers in the blocks around Penn Station in Midtown. Instead of paying property taxes to the city on those buildings, owners will pay the state to help cover part of the cost of station renovations and extensions.

But the state agency overseeing the project, Empire State Development, did not detail the financial terms of the plan. Without specific details, some elected officials and community leaders questioned whether the plan was viable and the extent of the risk it could pose to taxpayers.

“What is the risk? How much will this cost the public? And how much subsidy are developers getting,” said Brad Hoylman, a Democratic senator whose district is around Penn Station. “These are all questions that need to be answered before ESD votes on the joint project plan.”

Matthew Gorton, a spokesman for the agency, said that the vote is likely to happen at the next board meeting on July 21. He said the agency will disclose financial details of the plan. before.

“The state is strengthening the city’s tax base by unlocking the real value of a long-neglected area, which will improve the lives of millions of New York commuters,” Mr. Gorton said. “The state has worked alongside local leaders to ensure that the city and community around Penn are strong partners in this long-standing revival.”

A report released by the city’s Independent Budget Office in May said new buildings may not generate enough revenue to keep up with state bills for station construction. In that case, New York taxpayers may have to fill the gap, the report concluded.

Reinvent Albany turned to researchers at the New School, who had previously analyzed a similar arrangement the city used to develop Hudson Yards, a large commercial district a few blocks from Penn Station in the West. Those researchers, Bridget Fisher and Flávia Leite, applied that model to the limited descriptions public officials had of the Penn Station plan.

At Hudson Yards, the maximum tax rebate available to developers is currently 20%, Ms. Fisher said. Those discounts dwindle 16 years after a building is completed, she said.

Following the same formula, developers of nine commercial towers around Penn Station – one that is supposed to become a residential building – will receive a total of $1.2 billion in tax breaks, Ms. Fisher said. Over 20 years after construction is completed, net payments to the state will total about $5.4 billion, the analysis shows.

But the state has promised that the city will not lose any of the property taxes it will receive from sites around Penn Station. According to the analysis, that would reduce the state’s revenue from the plan by about $1.3 billion, leaving only $4.1 billion to spend on the station.

Fisher says she and her research colleagues are optimistic that the development will proceed as planned, not disrupted by the economic downturn or impacted by cost overruns at Penn Station.

“This is a high price,” Ms. Fisher said. “It assumes that everything goes right with the state.” But she adds, “In less than perfect conditions, these potential sales will likely drop.”

State officials have estimated the cost ratio of New York’s terminal renovation and expansion to be between $7.5 billion and $10 billion. New York has agreed to pay about a quarter of the total cost, with the remainder provided by the federal government, Amtrak and New Jersey. Amtrak owns the station and New Jersey Transit is one of the largest users.

Before the pandemic, Penn Station was the nation’s busiest transit hub, overwhelmed during rush hour by crowds of commuters jostling to get on and off trains. No architectural gem to begin with, the 54-year-old metro station has deteriorated to a point of shame.

Last month, the Metropolitan Transportation Authority requested proposals to design the renovated station. Those proposals are due on July 28, and the state plans to select a designer later this year.