What you should know about Penn Station’s $7 billion redevelopment plan

New York state officials are expected to approve Thursday a sweeping redevelopment of midtown Manhattan that would transform Pennsylvania Station, North America’s busiest transportation hub, from a dilapidated transit hub to a centerpiece of the city. The plan calls for the construction of 10 towers around the facility and provides an estimated $1.2 billion in tax breaks to developers.

The redevelopment would be among the largest real estate projects in US history: approximately 18 million square feet of primarily office space, up to 1,800 residential units, retail space and a hotel. At the center would be a renovated Penn Station, which sits below Madison Square Garden and served 650,000 passengers every weekday before the pandemic. The upgraded station would cost $7 billion, the state said.

The new Penn Station would not add new tracks or additional rail lines, but it would address the most common passenger complaints: the facility is overcrowded and dingy. It would have higher ceilings to bring in more natural light, 18 new entrances and larger underground walkways to navigate between subway platforms and train tracks.

Outside the station, a new 0.7-acre plaza would have wider sidewalks, bike lanes and landscaped seating areas.

The 54-year-old station overhaul was supposed to be the final phase of the sprawling project to add train tunnels under the Hudson River, known as the Gateway. But Gov. Kathy Hochul pushed for the station’s renovation to happen sooner. In June, the Metropolitan Transportation Authority solicited proposals from architectural design firms to design a way to “relieve crowding and improve passenger flow” at the station.

Ms. Hochul said the reconstructed station would be a “single level unified station with high ceilings that receive natural light”. Amtrak owns the station, but the Long Island Rail Road and New Jersey Transit are its main users. It is connected to the new Moynihan Train Hall, which is used by Amtrak and the LIRR. The state has not yet selected the builder of the new station.

The renovation, by itself, will not solve the station’s traffic problems. Before the pandemic, Penn Station was overwhelmed at rush hour with packed commuter trains arriving from Long Island and New Jersey clogging the tracks under Midtown. The station would have to be expanded, with more tracks, to handle the additional trains that the new Hudson tunnels could deliver.

In addition to the Penn Station redevelopment, state officials also backed a plan to build a new rail hall south of the site that would increase passenger and rail capacity, with new lines and platforms. That project could cost $13 billion and would require federal approval.

Former Governor Andrew M. Cuomo was the first to propose the project. Mrs. Hochul, however, has agreed to the plan and calls Penn Station a “hell”. State officials linked the upgraded Penn Station to construction of the 10 towers, arguing that larger development is required to help pay for transit renovations.

The project overrides local New York City control to allow developers to build buildings larger than allowed. Mayor Eric Adams has endorsed the plan.

Many other elected officials and members of the community have objected to the scale of the remodel, the tax breaks and its complex financial structure. Opponents fear taxpayers will take a hit if the project doesn’t generate the revenue supporters expect.

The most notable changes in the area could be the larger real estate project surrounding Penn Station.

The new towers would be among the tallest in New York City, topping 1,000 feet, though final dimensions would be decided later. The project calls for the demolition of many existing buildings, including potentially a 150-year-old Roman Catholic church, and would reshape the Manhattan skyline between the Hudson Yards neighborhood to the west and the Empire State Building to the east.

Some of the largest buildings would rise on the block south of today’s Penn Station, which spans West 30th Street between Seventh and Eighth Avenues, and would exceed the size of almost all commercial buildings in New York City. Today, that block includes the church, St. John the Baptist Roman Catholic Church, and parking lots. An earlier monastery on that street has already been demolished. The final building would be completed in 2044.

The state’s plan does not address what would happen, if at all, to Madison Square Garden, whose permit to operate on the site expires in 2023.

Most of the new towers would go up on sites owned by Vornado Realty Trust, the publicly traded company that is one of the largest developers of office space in Manhattan. It has about 20 million square feet of office space in the city, about half of which is near Penn Station.

Its CEO, Steven Roth, has called the redevelopment of the Penn Station area the company’s “Promised Land” and has billed its current and future towers there as the New York home for the world’s largest technology companies. Its largest tenant, Meta, the company formerly known as Facebook, leases 1.4 million square feet from Vornado, including space in the Farley Building across the street from Penn Station.

The new towers at Vornado’s five properties around Penn Station could exceed 10 million square feet, more than half the total size of the redevelopment, and will consist of a hotel, offices, retail and up to 1,256 residential units. Building them would require demolishing a wide swath of establishments, including a Hooters, an Irish restaurant and several tourist shops.

Mr. Roth, along with members of his family, gave Mr. Cuomo about $400,000 in campaign donations before he resigned, and last year Mr. Roth gave the most, $69,700, to the campaign. Mrs Hochul. He recently donated $22,600 to the campaign of Lt. Governor Antonio Delgado, who will appear on the ballot with Ms. Hochul in November. State officials and a Vornado spokesman have said the donations had no bearing on Vornado’s role in the company.

The MTA is leading the $7 billion renovation project at the station, but New York expects the federal government, Amtrak and New Jersey to contribute most of the money.

An agreement reached by the state with New York City allows developers of the 10 towers to pay to cover part of the costs of renovating the station, all costs of pedestrian and street improvements, and half of the costs of of the new underground entrances and vestibules.

Developer payments would be derived from office leases, retail sales, apartment and hotel rentals. That arrangement is part of a complex financial scheme known as payments in lieu of taxes, or PILOT, that would suspend additional property taxes on buildings for decades after they are built.

Tax breaks for developers could be lucrative, a recent analysis concluded, potentially including $1.2 billion in tax breaks for Vornado, the area’s largest landowner. The city would not benefit from additional property taxes on new buildings until improvements to the station are paid for.

There has been vocal opposition from the beginning by many elected officials and community leaders. Opponents include state Sen. Liz Krueger, who has questioned the wisdom of betting on office real estate in New York City at a time when the pandemic has upended the way people work and has driven businesses to losing space at a record rate. Additionally, the new office buildings would compete with Hudson Yards, Manhattan’s newest office district, which has a similarly structured property tax agreement.

A report issued last month by the city’s Independent Budget Office concluded that the state had provided too little information about the financing plan to determine whether it is feasible or whether taxpayers would foot the bill if revenue from the new towers they do not materialize. .

Another Manhattan state senator, Brad Hoylman, said taxpayers need to be made aware of the project’s financial risks before the board votes to approve the master plan. He was among a group of 15 senators who sent a letter to state officials in March, demanding that they “pause the Penn Station plan until these answers have been provided.”

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