Could Penn Station Plans Go Off the Rails?
Andrew Cuomo may have left center stage, but the former governor’s colossal Empire Station Complex (now less grandly renamed the “Penn Station General Project Plan”) definitely hasn’t. Freely wielding State eminent domain powers while sidelining the City’s own land use review process, it proposes to expand and rebuild the nation’s busiest transit hub with revenues generated by surrounding it with new private development that would rival what has been built or planned in nearby Hudson Yards.
Will this be a welcome shot in the arm for our economy and spirits – an opportunity to be bold and build big? Or does it rest on dubious financing that might ultimately leave taxpayers holding the bag? We asked Rachael Fauss, who’s birddogging this issue for the nonprofit group Reinvent Albany, to break it down for us.
Urban Matters: Before we get into the merits of the plan, give us an idea of its goals and scope.
Rachael Fauss: The Penn Station GPP has the stated goals of addressing so-called “substandard and insanitary conditions” at Penn Station and the surrounding area, and providing “essential revenue” for the station’s renovation and potential expansion. It would allow construction of up to 10 towers by the current developer in the area, Vornado Realty Trust, and capture a portion of taxes that would have otherwise gone to the City through “payments in lieu of taxes,” or “PILOTs,” to fund upgrades at Penn Station. These PILOTs would be bonded against to raise a portion of the revenues needed for the project. The State could use eminent domain to seize any property not currently owned by Vornado.
UM: What’s the current status of this project? Governor Kathy Hochul is on board with it; does that make it a done deal?
Fauss: Governor Hochul announced revisions to the plan in November addressing some local opposition: scaling back the size of the potential towers and adding affordable housing and a “public realm fund” to improve the streetscape. But many of the project’s controversial elements didn’t change, including: allowing a massive redevelopment to occur outside of the City’s land use process, and the potential siphoning off of City tax revenue to pay for the Penn Station improvements.
Empire State Development, the State authority managing the project, held a final hearing on the GPP last month, and public comment is open through Feb 22nd. The ESD board, appointed by the governor, will consider public comments and any staff revisions and could vote on a final plan as early as this spring. After that, it must be approved by the Public Authorities Control Board, which is appointed by the Governor and Legislature. This is the same board that helped kill Governor Cuomo’s Amazon headquarters proposal. Any PILOTs would need to be agreed to by the City.
In other words, there are still a number of steps before we’re stuck with it for good, and it could be reformulated or further scaled back by the governor or ESD. Indeed, the City Planning Commission recently withheld its support for the project due to unanswered questions about its financing and askedfor revisions in a number of areas (though the Commission’s support is not required for it to proceed).
UM: Normally, you’d expect the City’s own officials to take the lead in such a sweeping undertaking. What gives the State the right to bigfoot this massive urban redevelopment project?
Fauss: The State Legislature, at Cuomo’s urging, passed a law in 2018 declaring Penn Station a “public safety hazard.” This paved the way for the State to propose the GPP, override local control of the area, and allow eminent domain to be invoked. Additionally, ESD has wide latitude over State economic development projects under State law. 
In this case, the most longstanding, vocal opposition from City government has come from the community boards in the affected area rather than the mayor or City Council. City government leaders should be concerned about the hit to the City’s tax dollars and the precedent being set by the State attempting to take over such a large swath of Manhattan. It remains to be seen how our newly elected City leaders will view the project and use their bully pulpits to seek changes.
UM: The City recently rezoned East Midtown for bigtime commercial overhaul. Hudson Yards hasn’t yet met revenue expectations. Now the State seems to think Manhattan can absorb another 18 million square feet of topline development around Penn Station. Isn’t there a limit?
Fauss: A lot has changed since Cuomo first announced the Empire Station Complex – changes due to Covid-19. There is a lot more uncertainty about commuting and working patterns. While we all want to be optimistic about the future, we also need to be realistic about the risks of undertaking a project like this, and part of that is independently assessing the demand for commercial office space. However, the way the project is structured, the consequences of development not occurring don’t fall on the private developer. The State would instead be on the hook for bond payments against the PILOTs if development doesn’t generate enough revenue. In this type of public-private partnership, unfortunately, the public is taking the brunt of the risk.
UM: The new Moynihan Station for Amtrak passengers has been widely applauded. But for daily city and suburban commuters, Penn Station remains a cramped, soul-crushing experience. The streets around it could really use some pizzazz, too. Why shouldn’t we just say: Go ahead, anything is better than this dreary status quo?
Fauss: Mass transit improvements are climate-friendly and needed. But there are a lot of ways to fund Penn Station improvements that don’t involve private development. New York State could fund this directly through the State budget, but has chosen a complicated financing scheme involving ESD, the MTA, the City, and a private developer – not to mention the involvement of New Jersey and the Federal government in the Gateway Tunnel project that also affects Penn Station. Following the money is always of concern in government, and the financing for this project is as complicated as it gets.
UM: Reinvent Albany and other good government groups clearly have misgivings about how this project is structured and unfolding. So, in one minute or less: Why should New Yorkers hit “Pause” on it?
Fauss: ESD has not been fully transparent about the project’s financing. It would be irresponsible for the State and City to sign off on it without knowing exactly how much PILOTs could raise, because taxpayers will be on the hook for the rest of the cost. The State would also pay for any shortfalls if the development does not occur as planned. This is exactly what happened in Hudson Yards with the Number 7 train extension. ESD has also not told the public what tax breaks or subsidies Vornado may receive as part of any PILOTs.