The Penn Station Area Is on the Verge of Redevelopment. Here’s What We Know About the Looming Transformation
As many as 10 new towers will ring the edge of the much-despised Midtown rail hub to fund possible future transit projects, under Gov. Hochul’s skyline-changing plan.
There’s near-unanimous consensus that Penn Station is a messy, uninspiring labyrinth overdue for a revamp.
Revitalizing the transit hub, however, has eluded New York governors for decades. Gov. Kathy Hochul is hoping she can change that.
Her administration has a plan to raise money from the development of new private towers around Penn Station to help fund part of the state’s share for redeveloping the station itself in the future.
But the project, which Hochul mostly inherited from her predecessor Andrew Cuomo, is facing major questions and criticism. Nearby residents and business owners, as well as area elected officials, have called for the skyline-altering concept to be halted, or scrapped.
State lawmakers and watchdog groups are meanwhile questioning whether the real estate will bring in enough money to cover the costs of overhauling the transit hub. The watchdog group Reinvent Albany estimates the state may end up with a shortfall between $3.4 billion and $5.9 billion.
Two state authorities, the Empire State Development Corporation and the Public Authorities Control Board, have voted to approve the general project plan as of late July, even as many questions remain unanswered.
Going forward, ESD must hammer out the specifics of the agreements between the agency and developers of future buildings. ESD and PACB must vote to approve those agreements, as well.
If you’re just tuning in, here’s what you need to know about the big Penn Station neighborhood redo:
What does the state want to change? What’s the plan for Penn?
The proposal on the table would pave way for major new construction surrounding Penn Station: ten new buildings on eight development sites.
The Pennsylvania Station Area Civic Land Use Improvement Project would create 18 million square feet of space, roughly equivalent to the size of Hudson Yards.
Hochul’s plan effectively transfers control of the footprint where those towers will go up from the city to the state, a scheme Mayor Eric Adams endorsed after ESD pledged to reimburse the city for that lost tax revenue.
State officials hope the redevelopment will generate revenue from payments made by developers and owners of new property, which could then be used to make improvements to the existing Penn Station, along with the subway stations, streets and sidewalks around it.
A long-long-term goal is, perhaps, to fund a future expansion of Penn Station to the blocks directly to its south.
Whose idea is this anyway?
You can thank former Gov. Andrew Cuomo for getting the ball rolling.
Cuomo first unveiled a concept to overhaul Penn Station in 2016, one part of which was realized — the transformation of a postal facility into Moynihan Train Hall. Then, in 2018, he laid the stage for the state to oversee the project with language declaring the Penn area a “public safety hazard” in that year’s approved budget. (More on why that’s important later.)
He introduced an updated project concept in his 2020 State of the State address — delivered just weeks before COVID-19 arrived in New York, and state officials began an initial review in July 2020. He pushed the plan even as scandals threatened his power.
After Cuomo resigned, Hochul put her stamp on the project in November 2021, making promises that it would be scaled down by 1.3 million square feet, include affordable housing and create plazas open to the public.
Who are the major players?
The Empire State Development Corporation, or ESD, a state authority, is leading the redevelopment negotiations and shepherding the project through multiple phases of planning and approval. The ESD directors voted to approve the project in late July, a key go-ahead for the plan.
One property holder, Vornado Realty Trust, stands to benefit most from the proposed scheme. The real estate company, which owns or manages nearly 20 million square feet of office space in Manhattan, owns more than half of the proposed development sites. Vornado chairman Steven Roth has been a booster of the project for years, as well as a big supporter of Cuomo.
Roth once described the former governor as “the master builder of our generation” and Roth and his wife gave at least $384,000 to Cuomo’s political campaigns since 2005, THE CITY previously reported.
Roth has also given tens of thousands of dollars to Hochul. The real estate mogul is a longtime friend and business partner of former President Donald Trump, and among his major donors, the Albany Times Union has reported.
While ESD is dealing with the financing aspects, MTA is the agency tasked with rehabilitating Penn Station. The agency issued a solicitation in June for architectural and engineering designs for the Penn Station overhaul.
What will the redevelopment look like?
The proposed redevelopment would significantly change the blocks around Penn Station and Madison Square Garden.
- Ten new buildings on eight development sites
- Up to 18 million square feet of office, retail and hotel space
- Nearly 1,800 apartments, including up to 648 affordable units
- Eight acres of public space
A lot will change. But one notable fixture of the area will not: the block where MSG sits, directly on top of Penn Station, is not included in the current proposal, and the project does not address its future.
Who’s going to pay for it?
ESD estimates that revitalizing Penn Station will cost the state $7 billion.
Hochul is proposing collecting payments in lieu of taxes, or PILOTs, through which property owners pay an agreed-upon fee to the state.
Albany lawmakers grilled ESD officials at a June hearing about the financials of the project — and sought the power to vote it down. But those same lawmakers who are members of the Public Authorities Control Board, or PACB, approved the plan in a July 27 vote.
The New York City Independent Budget Office raised concerns about the fiscal health of the project in a May analysis. The IBO found that the city collected over $60 million in taxes in fiscal year 2022 from the 55 lots that make up the eight future development sites.
Hochul and Mayor Eric Adams reached an agreement for the financial framework of the PILOTs, under which the city would continue collecting what it is currently generating in property tax revenues from the development sites, with a 3% yearly increase.
The PILOT dollars would also cover the full cost of street and sidewalk improvements and half the costs of transit infrastructure improvements, the governor’s office said. But it would only cover an eighth of what it would take for the reconstruction and potential expansion of Penn Station, with the state seeking additional funding from the federal government and New Jersey.
The Reinvent Albany report, produced with the Schwartz Center for Economic Policy Analysis at The New School, assumes that the Penn-area property owners will get a 20% discount off what they would have spent on New York City taxes — and projects that Vornado will save $1.2 billion.
Richard Ravitch, the former chairperson of both the MTA and the Urban Development Corp., a precursor of ESD, urged the PACB to vote no on the project in an op-ed, pointing out that the board’s “sole authority is to make sure that taxpayers can afford the projects their government is proposing” yet their agenda for the Penn vote had no price tag listed for the project. The amount read only “N/A.” (Ravitch is on the Board of Directors of THE CITY.)
How is this going to get done, and how long will it take?
The state projects improvements to Penn Station will be finished in 2032, while new developments around it won’t be fully completed until 2044.
ESD says it may wield two landscape-changing tools to get the job done: eminent domain and a law allowing the state to reshape the city if it’s “blighted,” or run down.
That law, the Urban Development Corporation Act of 1968, allows the state to go around the city’s regular land use approval process, which gathers local input and brings projects up for a vote in the Council and mayor. Under the UDC, the state can allow developers to build structures larger than what the city’s zoning allows.
The state also may use eminent domain to seize properties in order to make room for a potential expansion of Penn Station to the block between 30th and 31st streets, and Seventh and Eighth avenues.
Amtrak recently awarded a $73 million design contract for the project, as it sets its sight on the $12 billion expansion, according to The New York Times. The expansion, part of a project known as Gateway, is tied to the creation of two new one-track tunnels under the Hudson River.