80-year itch: Hochul, Adams deal on Penn delays taxes for decades
It may be the 22nd century before properties return to city’s tax roll
City and state officials have come to terms on paying for the renovation and expansion of Penn Station — some of it, anyway.
Gov. Kathy Hochul and Mayor Eric Adams announced on Monday an agreement over how the city will collect property taxes from the 18 million square feet of construction planned on sites surrounding the station.
As expected, the city will continue to collect the property taxes it receives now on the development sites, increasing by 3 percent each year. It will also get payments in lieu of taxes, or PILOTs, from the developers of each of the 10 future towers; the mechanism allows money to be directed to a specific purpose, in this case Penn Station work, rather than go into the general fund.
The property owners will not pay traditional property taxes on the increased value of the land for an extended period of time. 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.
The PILOTs will cover 12.5 percent of the estimated $7 billion cost of renovating Penn, and of the possible expansion of the station, reportedly a $12 billion project. The payments will fully offset the cost of public realm improvements, such as street and sidewalk work, and will take care of 50 percent of the expense of transit work, including underground concourses and new subway entrances.
Adams called the deal a “win-win” for New Yorkers.
The announcement does not include many details on the expected value of the PILOTs, nor how they will be distributed between the renovation and expansion. It also does not specify how much the state expects to make from the sale of development rights in the neighborhood.
State officials released a copy of the financial framework late Monday afternoon. Opponents have complained that the project’s finances lack transparency.
Elizabeth Marcello, a research analyst with Reinvent Albany, a watchdog group that has been critical of the state’s plans for Penn, said the announcement further blurs the lines between the expansion and renovation of the station.
“There’s still a lot of glaring questions we don’t have answers to,” she said.
Reinvent Albany recently commissioned a report that found the state could come up short of the $3.4 billion to $5.9 billion it needs to pay for its portion of Penn-related projects. It also estimated that Vornado Realty Trust, expected to be the primary developer of the sites surrounding Penn, could secure tax breaks worth as much as $1.2 billion.
The deal comes just three days ahead of Empire State Development’s expected vote on the general project plan. The GPP paves the way for the state to take over the eight sites and then lease them back to developers, who would build 10 towers.
In addition to millions of square feet of new office space, the project could include up to 1,800 residential units, with 540 set aside as affordable. The state still needs to reach separate deals with the developer of each site.