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Add the New York City Independent Budget Office to the list of those concerned that current proposals to expand and renovate New York Penn Station are missing key details.
The current plan “lacks many of the important details on the total cost of the station projects and related improvements, expected future revenues, and how the financing plan for the station renovation would work,” according to a 21-page IBO report released Monday.
The report’s author, Sarah Stefanski, raises questions about why taxing Madison Square Garden isn’t on the table, how this proposal would be financed, and whether there is a demand for millions of square feet of office space. The report also urges New Jersey and other involved entities to be more transparent about how they would help pay for some of the cost.
The Empire State Development Corporation (ESD), which is leading the planning and financing efforts, did not respond to emailed questions about the proposal.
The primary concern raised in the report, which was requested by several community organizations, local lawmakers and the Tri-State Transportation Campaign, is the lack of detail about how the planners would use “value capture” to pay for Penn Station improvement costs, which all told could reach $40 billion, according to the report. Of that, New York Penn Station renovations are estimated at $6 billion to $7 billion.
Value capture is the idea that developers should help pay for the costs of transit upgrades and other investments around public transportation because of the inherent value in building around commuter spaces.
“ESD has indicated that it intends to provide the city with revenue equivalent to what the city’s Department of Finance currently collects in property taxes on the eight development sites (with annual escalation based on expected growth without the new development) although such an arrangement has yet to be formalized,” the report said.
Under the plan, eight developments would be built around New York Penn Station — the busiest transit hub in the Western Hemisphere before the pandemic — and provide 18.3 million gross square feet of hotel, retail, office, residential and parking space. Transit upgrades would include building eight new tracks and five platforms south of Penn Station, predominantly for NJ Transit use, and renovating the current station to improve pedestrian flow with more entrances, stairwells, escalators and elevators.
However, there are “scant details” on how the value capture financing would be structured, and there is more risk to this model compared with traditional financing, an issue exacerbated by the uncertainty of the pandemic’s effect on use of office space, the report said. Because of that risk, the author said, the planners need to firm up details about how cost overruns, revenue shortfalls and dividing surplus will be addressed.
Brian Fritsch, the communications director for the Regional Plan Association, said the report raises good questions but added that using value capture to help fund this project is worthwhile.
“It’s worth betting on New York City continuing to grow and have need for transit-oriented developments like this one next to our largest station in the metropolitan region, but none of these things are ever without risk,” Fritsch said.
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One unanswered question the report highlights is why future tax revenue from Madison Square Garden is not mentioned in the financing plan. Since 1982, MSG — the privately owned sports and entertainment venue that sits atop Penn Station — has not paid property taxes thanks to a special zoning permit. That permit is set to expire in 2023, and the tax revenue from the property is valued at about $43 million annually, according to the report.
While the report’s author dismissed the idea of moving MSG in the near term, an idea some advocates say could allow for more substantial renovations at Penn Station, Stefanski said future property taxes or a payment plan with the city could provide additional revenue to cover the cost of the station’s renovations.
The last sentence of the report calls on New Jersey and other project partners, like the Port Authority of New York and New Jersey, to be “more transparent about how they plan to finance their portions of Penn Station improvements to allow for a more complete picture of how likely this project is to be fully funded beyond just New York State’s contributions.”
Commuters, advocates and residents have also raised concerns about whether the proposed upgrades to Penn Station would substantially improve the commuter experience and fix the constraints of a station that was built for 200,000 daily commuters but was experiencing foot traffic three times that number before the pandemic.
“We’re talking $6 billion,” said Felicia Park-Rogers, director of regional infrastructure projects for the Tri-State Transportation Campaign. “To spend that type of money and not know how the finances balance out and to not address the track and platform issues is a real concern.”
Park-Rogers, who is on the community advisory committee for the projects, said the planners are assembling a design team for the Penn Station renovation and the railroads are gearing up for the federal environmental review of the southward track expansion.
Colleen Wilson covers the Port Authority and NJ Transit for NorthJersey.com. For unlimited access to her work covering the region’s transportation systems and how they affect your commute, please subscribe or activate your digital account today.
Email: [email protected]
Twitter: @colleenallreds
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