One of Governor Kathy Hochul’s biggest, most ambitious projects is a reworking of her predecessor's plans for Penn Station and the surrounding midtown neighborhood and this week the city sent a letter to the Empire State Development Corporation, which is in charge of the project, asking how exactly the state will pay for it.
The redevelopment of midtown, in the planning phase for two years now, is formally referred to as the General Project Plan (GPP). The city’s outgoing head of the Planning Commission, Anita Laremont, wrote the letter noting "the structure and terms of the GPP financing has significant economic implications and impacts on the City," and that, “it must be concretely resolved prior to affirming the GPP.”
The total cost for the project and how it will be paid for remains unclear. Former Governor Andrew Cuomo had once pegged his sweeping midtown redevelopment plan at a staggering $306 billion, which included a number of huge projects such as the Gateway project to repair the current Hudson tunnel, and build a new one; the addition of more platforms at Penn Station; and building a new Port Authority bus terminal.
Hochul has pared down the project’s scope, focusing on 10 new buildings around the train station, 8 acres of public space, and a newly renovated Penn Station that removes an entire floor to open it up for more light. At her initial announcement in November, Hochul estimated the project will cost $7 billion.
The city planning commission letter zeroes in on a price tag of $30-$40 billion, which captures the Gateway project, the midtown redevelopment, and a new Penn Station. While the Gateway project’s funding is more solidified — the federal government is covering half of the $12 billion through its infrastructure bill and New York and New Jersey are each paying 25% — midtown’s redevelopment is tied to how much the real estate developer Vornado, which will build the majority of the 10 buildings, can make on leases.
Nicole Gelinas, senior fellow at the Manhattan Institute has been critical of the project’s financing in the past, noting that Hudson Yards relied on a similar funding scheme known as PILOT (payments in lieu of taxes) in which the developers would get a tax break and pay the state a predetermined fee that isn’t disclosed to the public. This structure was also used to partially fund the Moynihan Train Hall.
But, in the case of Hudson Yards, which Gelinas said made some sense since they were building a neighborhood from scratch, city taxpayers still ended up subsidizing that projectto the tune of $5.6 billion. Gelinas said she worries the same thing could happen with Hochul’s Penn project.
“In this case, there are already functional, taxpaying buildings within the ‘project area,’ and developers are of course free to renovate or even rebuild them under existing zoning,” she wrote in a statement.
The Penn project doesn’t technically need approval from city entities or go through the city’s typical zoning gauntlet to move forward, but it is being developed in coordination with the New York City Department of Transportation and the city planning commission.
Mayor Eric Adams, who has said he backs the Gateway project and appears to have a better relationship with the governor than his predecessor had with Cuomo, said through a spokesperson that he’s ready to work with the state on the midtown project.
“We look forward to continuing to work with the state to ensure the area around Penn Station is transformed into the world-class transit hub New Yorkers deserve,” Charles Lutvak, a City Hall spokesperson, wrote in a statement. “The city supports the state’s proposal for substantial new density along with transit and public space improvements around Penn Station, an area long overdue for upgrades. The City Planning Commission offered thoughtful input as part of an ongoing, collaborative process aimed at making the plan the best it can be.”
Empire State Development likewise said it viewed the letter as part of the ongoing conversation about how to redevelop midtown.
“We are encouraged by the Commission’s support for our collective goal: the long-overdue revitalization of the area around Penn Station, “ spokesperson Matthew Gorton wrote in a statement. "We will continue to work with the NYC Planning Commission, Mayor Adams’s Administration, and all stakeholders to make sure the world’s busiest transit hub is also the world’s best."
The public comment period for the project continues through February 22nd. The last public hearing concluded last month with hundreds of speakers, many voicing concerns about the loss of historic buildings in the neighborhood and an influx of even more new glass towers to Midtown, as office vacancies persist.