New York State will have to foot the bill for at least $3.25 billion for upgrades in and around Penn Station under Governor Kathy Hochul’s plan to funnel real estate proceeds to help fund the project, according to figures released Tuesday.
The state’s Empire State Development also expects to generate up to $3.75 billion from so-called payments in lieu of taxes, or PILOTs, from developers after they finish building a predominantly-office complex the size of Hudson Yards around the reviled transit hub as part of the scheme.
ESD finally published a breakdown the dollar amounts Tuesday for several Penn Station projects, months after good government groups and lawmakers had been asking for more specifics, and just a day ahead of a crucial vote on the project in Albany Wednesday.
Watchdogs have criticized the scheme for teeing up huge tax breaks for developers like Vornado Realty Trust, whose CEO Steven Roth is major political donor of Hochul’s, and for a lack of key details around its financing.
The preliminary cost-sharing lays out how much the state and the PILOTs will fund for four projects, including a facelift of the notoriously-cramped station, a future expansion of new tracks to the south, upgrades for nearby subway stations, and improvements to the streetscape in the area.
The total cost for all of those initiatives that will span decades comes in at a whopping $22 billion, half of which ESD hopes the federal government will fund, with the remaining half to be split between New York and New Jersey.
The Empire State’s total share is $7 billion, as much as $3.75 billion could come from the PILOTs, while the remaining $3.25 billion will come from the state.
While the real estate fees will make up more than half of the state’s share, they will pay for less than one-fifth (17%) of the overall upgrades under the current plan.
ESD also expects to earn about 2.5 billion from other revenues like selling air rights, and similar payments substituting other taxes.
Mayor Eric Adams last week agreed to a non-binding “financial framework” with the state, which only had percentages of how much the PILOTs might cover for the state, but no exact dollar amounts.
ESD’s board — which is controlled by Hochul — signed off on the proposal Thursday, but it could still get vetoed by the obscure Public Authorities Control Board, or PACB, Wednesday.
The new filings still omit important information about the complex project, according to transparency advocates.
Not included are how much property taxes the city could lose out on over as much as 80 years under the agreement, or whether the state will end up paying more if development plans get set back by a recession, as was the case with Hudson Yards.
“This is a two-page document about a financial deal with billions of dollars,” said Rachael Fauss, a senior research analyst at the good government group Reinvent Albany, which opposes the project.
The PILOT numbers just note the maximum amounts the state could collect from developers, not what private firms will actually have to end up contributing.
“We still don’t understand what the total cost to the state may be,” Fauss said. “There are many other options that don’t involve speculative bonding off of revenues 80 years into the future.”
Governor Hochul and senior aides have argued that they didn’t want to give away more details ahead of negotiations with property owners and the federal government.
ESD officials have said that the elaborate scheme had a better shot at securing cash from Uncle Sam than by going through the state’s usual budget process.
“The state’s long overdue solution to reconstruct Penn Station and revitalize the surrounding area will benefit millions of commuters, residents, and riders,” said ESD spokesperson Matthew Gorton in a statement Tuesday. “We are proud of the open, public process this project has gone through over the last two years, strengthened by the input of civic groups and community members who made their voices heard and helped improve the plan. The time to act is now, and we are eager to move this project ahead.”
