State officials have approved plans for a development surrounding Penn Station that could one day rival the scale of nearby Hudson Yards.
Empire State Development’s board of directors on Thursday signed off on the general project plan for the massive Penn Station Area development project. The proposal now heads to the Public Authorities Control Board, an oversight body whose ability to derail major projects was diminished by former Gov. Andrew Cuomo after it helped kill a deal to bring Amazon’s new corporate headquarters to Long Island City in 2019.
The board, whose members are appointed by the governor and state legislature, is expected to take up the issue later this month.
If approved, the plan will pave the way for 18 million square feet of commercial development across eight sites surrounding Penn Station, as well as up to 1,800 residential units. Revenue from the project is expected to help fund the planned redevelopment and possible expansion of the transit hub, along with several new subway and station entrances and an underground concourse connecting it with Herald Square.
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Earlier this week, Gov. Kathy Hochul and Mayor Eric Adams announced an agreement on how the development sites surrounding the station will be taxed. The city will continue to collect the property taxes it receives now on the development sites, which will increase at a rate of 3 percent each year. Developers, primarily Vornado Realty Trust, will also provide payments in lieu of taxes, or PILOTs, which can be directed to a specific purpose, in this case Penn Station work, rather than go into a general fund.
The property owners will not pay city taxes on the increased value of the land until the agreed-upon contributions to the project are met or after 80 years, at the latest. State officials still need to reach individual agreements with the developers of each site.
The PILOTs are expected to fully offset the cost of public-realm improvements, and half of the transit work. The payments will also cover 12.5 percent of the estimated $7 billion cost of renovating Penn Station and its possible expansion, reportedly a $12 billion project.
The general project plan now requires 1,172 residential units on two sites, of which 352 would be affordable and 108 would be supportive. If developers on the other sites opt to include the maximum amount of housing permitted, another 626 apartments would be added, with 188 set aside as affordable.
Critics of the plan have argued that the state’s value capture framework is not the best route to revamp the beleaguered Penn Station and will leave New York on the hook for any shortfalls in funding. A report commissioned by watchdog group Reinvent Albany found that the state could come up short of the $3.4 billion to $5.9 billion it needs to pay for its portion of Penn-related projects. The report also projected that Vornado could secure tax breaks worth as much as $1.2 billion.
On Thursday, the board also approved changes to the state’s plans for 5 World Trade Center, which allows a mixed-use tower to rise on the site, rather than a commercial building as originally envisioned. The new plan will allow for 1,200 residential units, of which 25 percent will be affordable.
Advocates and elected officials have called for 100 percent of the units to be affordable. State officials on Thursday noted that more affordable units can be added to the project as the public review process moves forward.