Real state

State Council approves skyline-changing real estate plan for blocks around Penn Station

Patch News

By Gabriel Poblete, THE CITY

July 24, 2022

A redevelopment plan to radically alter the area around Penn Station has been given the green light by a state authority.

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On Thursday, directors of the Empire State Development Corporation approved Gov. Kathy Hochul’s plan to allow major new development on eight sites that surround the Midtown Manhattan transit hub, paving the way for more than 18 million square feet. new space.

While most of this space would be offices, it also requires 1,800 new apartments – 540 of which would be rented below market price to households earning specific incomes.

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Hochul said the project will raise funds to finance the future restoration of the notorious station. The plan would give developers a break on city property taxes in exchange for fees to the state that would go directly toward future transit improvements.

The plan, officially known as the Pennsylvania Station Area Civic Land Use Improvement Project, has come under heavy criticism from local stakeholders who want it scrapped or suspended, as well as lawmakers and good government groups. who called on the Hochul administration to share more details about the plan.

The ESD approval is a key milestone for a project launched years ago, first by former Governor Andrew Cuomo. If he actually revamps the much-hated Penn Station — the nation’s busiest railroad hub — Hochul will have succeeded where many governors have failed.

The governor did not respond to a request for comment on the vote on Thursday.

The MTA, which will manage the station’s future restoration, said Penn Station would be transformed into a 250,000-square-foot, light-filled, one-level train hall. The transit center will see an increase to 20 entrances from its current 12, and will get 18 new escalators and 11 elevators. The promise of a new underground connection to the 34th St-Herald Square subway station is also in his plan.

To allow for real estate development and possible transit improvements, the state will replace the current rules of property rules to allow developers to build beyond what city zoning allows. It does this using the Urban Development Corporation Act of 1968, which gives the state broad authority to circumvent existing zoning rules if it deems an area to be “degraded”.

The next vote on the real estate plan will take place on July 27 during the vote of the Public Authorities Control Council, which approves financial transactions for state authorities. If the PACB gives its agreement for the project, the directors of ESD will decide on the conventions for the development of the sites.

The approval of the obscure control council is not assured, however. As previously reported by THE CITY, some state legislators are trying to restore the powers of the board of directors, which would give them more clout and independence from the governor. Cuomo and the legislature weakened those powers in 2020 after the board used them to help broker a deal that would have brought an Amazon headquarters to Long Island City.

A bill to give more latitude to PACB members has passed the legislature and must be signed by the governor before taking effect. Hochul has yet to say whether she will support him.

A big win for the developer

Thursday’s ESD Director’s vote revealed more details about how the Penn-area real estate plan will benefit a major property owner in the area: Vornado Realty Trust.

The company owns or manages five of the eight development sites around the transit hub, and its chairman, Steven Roth, has championed the project for years. He has also been a major contributor to Cuomo and Hochul’s political campaigns over the years.

The state’s plan uses a financial system called PILOT, or payments in lieu of taxes, which means developers get tax relief in exchange for a royalty paid to the state. ESD officials have not yet specified how much the fee will be, but gave a benchmark for tax breaks: no more than Hudson Yards got, according to Gabriella Amabile Green, vice president of real estate at ESD.

“ESD agreed that no property would receive a tax abatement greater than that of the Hudson Yards financing district at the time of signing each development agreement,” she said at Thursday’s hearing. .

The highest abatement in the Hudson Yard district is 20%, she said, which means landlords get a 20% reduction on their total tax bill for the value of their land and of their property.

Tax watchdogs who have raised questions about the project’s calculations — for Vornado and the state — were unimpressed with ESD’s lack of detail ahead of Thursday’s vote.

Reinvent Albany, a good government group, said in a statement that it was “deeply disappointed by the cynicism and disregard for fundamental transparency demonstrated by ESD and the Hochul administration’s handling of the Penn redevelopment deal.” Station”.

The group released a report last week that Vornado would save $1.2 billion in the Penn plan if the PILOTs were framed like those at Hudson Yards. The analysis estimates the state would be between $3.4 billion and $5.9 billion short overall.

Ahead of Thursday’s vote, Hochul and Mayor Eric Adams announced Monday that the state and city have reached a financial framework agreement.

In the agreement, the city will receive an amount equal to what it currently generates in taxes on the development site with an annual increase of 3%. The city’s Independent Budget Office found in May that the state generated $60 million in taxes in fiscal year 2022 from the 55 lots that make up the eight future development sites.

The deal would see PILOT dollars fund up to 12.5% ​​of the cost of rebuilding and potentially expanding the station, and half of improvements to transit infrastructure, including underground concourses and subway entrances in the neighborhood, while also paying 100% for the improvement of surrounding streets, sidewalks and public spaces.

PILOT dollars earmarked for rebuilding Penn Station aren’t meant to cover the full cost of the project, ESD staffers argued at the meeting, saying it puts them on a path to greater federal funding for the project, which will also draw on New Jersey Dollars. The state legislature and governor have already approved $1.3 billion for the project.

“This [PILOT money] is one source, but it’s not the only source, and we believe there is a very viable plan that we have been working on for several years to generate billions of dollars from real estate revenue,” Holly Leicht, vice executive -president of real estate development and planning at ESD, said during the meeting.

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