State officials can now begin negotiations with developers to build 10 new towers around Penn Station.
The Public Authorities Control Board on Wednesday approved a deal between the city and state to help pay for part of the renovation and expansion of the station.
The development is expected to ultimately result in 18 million square feet of new commercial space and at least 1,172 apartments.
The vote paves the way for Empire State Development to reach separate agreements with private developers, most likely beginning with Vornado Realty Trust at the Hotel Pennsylvania, where demolition began early this year. The real estate investment trust envisions a 2.7-million-square-foot office tower on the hotel’s site, which it dubbed Penn 15.
State officials estimate that payments in lieu of taxes, or PILOTs, could generate up to $3.75 billion for the renovation and expansion of Penn, as well as for various public and transit improvement projects. It is unclear how the state will pay for the balance of New York’s share of the bill for these projects, estimated to be $3.25 billion.
The project’s financing has been a major point of contention. Last week, state and city officials announced a deal over how to fund a portion of the renovation work at Penn, as well as transit and public realm improvements. As part of the agreement, the city will continue to collect the property taxes it receives now on the development sites, plus 3 percent more each year.
PILOTs will also be collected from the 10 future towers, money that will be directed to Penn Station work. The city will not collect the full property taxes on these sites until the agreed-upon contributions to the project are met or after 80 years, at the latest. PILOTs are expected to cover 12.5 percent of the cost, each, of the expansion and renovation of the station.
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Wednesday’s vote approved the state’s PILOT agreement with the city. The PACB will be called upon to review individual deals reached between the state and developers as well.
Sen. Leroy Comrie, who represents Senate Democrats on the board, emphasized that the vote was “not the final say on this massive undertaking.” He said that while he supported approval of the agreement with the city, he and the board will not sign off on any PILOT deal on the individual sites until federal funding and approvals are secured.
In a joint statement, state Sens. Liz Krueger, Brad Hoylman and Robert Jackson underscored that the vote did not establish any agreements with real estate developers.
“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,” they said. “That means much more guaranteed affordable housing, and no unnecessary tax breaks that reward developers for building projects they wanted to build anyway.”
The board, composed of members selected by the Senate, Assembly and the governor, has fairly limited authority, however.
In the state’s 2019 budget, Gov. Andrew Cuomo weakened the board, making it so that members can only cast their vote based on whether there is sufficient funding for a project. Under the changes, the governor can remove members found to be “acting, or threatening to act, beyond the scope of such member’s legal authority.” The alteration was made after the board helped kill Amazon’s plans to open a new corporate headquarters to Long Island City.
The legislature approved a bill in May that would repeal Cuomo’s changes, but Gov. Kathy Hochul has not signed it and does not appear inclined to. Lawmakers argued that the measure, whose prime sponsor was Sen. Leroy Comrie, was necessary due to a lack of
“sunlight, debate or review” around Cuomo’s changes and the fact that they “created a disproportionate power dynamic advantaging only the Executive.”
That is, Hochul would weaken herself by enacting the bill.
Watchdog group Reinvent Albany had urged the board to vote down the project. The group commissioned a report that found Vornado could benefit from up to $1.2 billion in tax breaks from the project.
The Coalition to Fix Penn Station, a group that supports the project, pegged the tax incentives at no more than $643 million over 20 years, pointing out that Reinvent’s report assumed Vornado would develop all eight sites. Vornado, at this point, is the expected developer of five of the eight sites.