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Part 3 of 3: Penn Station Project – Good Transit or Real Estate Sense?

(RAILWAY AGE) David Peter Alan, September 5,2022

I began by looking at a project that would move a major transfer point in downtown Salt Lake City Utah, where it appears that a citizen-proposed plan that would work better has been ignored. I then looked at a much-larger project in the area of Midtown Manhattan, near Penn Station. It would expand Penn Station and build ten high-rise buildings, nine of which would be used for office space and the other for residential. There is opposition to the project, and there is reason to believe that it would spend $22 billion to build new station capacity that would not be needed in the future, along with new office capacity, despite the new trend of more employees working “remotely” all the time or on some days of the work week.

I will now conclude this series with a further look at some issues raised by the project’s opponents, and recent trends and developments that have brought the purported need for such a large and expensive project into question. In doing so, I will take a closer look at some of the issues that the project’s opponents have raised.

Yes, the Project is Huge!

The overall project is massive, and will change the character of the neighborhood completely. Several blocks of buildings would be demolished, and the project would expand Penn Station to the south and construct ten tall buildings; perhaps of questionable utility. Some of the apartments in the new buildings would be “affordable,” a selling point often mentioned by the project’s proponents. Still, financing aside, nobody seems to be addressing the issue of whether a project that would add so much office space to Midtown Manhattan is actually necessary, given recent trends that began since the COVID-19 virus hit in March 2020.

The virus is still with us. The latest variety to annoy and vex everybody is the BA5, but there have been others before, and there will probably be more to come. How many more will there be, and how contagious and how severe will their effects be? I don’t know, but I do know that commuting has changed. I also don’t know when or how much commuting will revert to pre-COVID five-day-per-week patterns, which should be a sign that betting billions of scarce public dollars now on a mega-project whose utility appears questionable could be a catastrophic public investment. 

Despite numerous predictions during the past two years that pre-COVID commuting patterns would soon return, that has not happened. That’s not to say that the trains are as empty as they were two years ago. People are still going places, but not as many are going to the office every weekday morning and home again in the late afternoon or early evening on their old schedules. Weekend ridership is strong on the railroads that serve New York City (Metro-North, Long Island Rail Road, and New Jersey Transit), and so is ridership on weekdays at certain times. Nonetheless, ridership during the former peak-commuting periods is still below pre-COVID levels, despite the fact that the local railroads are running their pre-COVID “peak-period” schedules, or close to that amount of service, on every line.

Will there be enough commuters to justify the project and its cost?

In May and June of 2021, I explored future commuting patterns in a three-part series headlined Commuting Post-COVID, which ran here on May 24, June 11 and June 15. While those were among the first articles to address the issue, “mainstream” general-circulation media have been reporting on it lately. It’s not just the COVID virus that has cut down on the number of riders who are making the five-day trek to their offices and home again. Technology and attitudes have made a difference, too. Maybe the virus accelerated these trends, and maybe they would have happened anyway. In any event, they’re happening, and the empty seats on morning “commuter-hour” trains mutely testify that change is here.

It is now possible for employees to work at home, and it is no longer necessary for everybody attending a meeting to be physically present in the meeting room. Meetings are now held on-line with apps like Zoom, so there is little need for most office workers to appear in person five days a week. That’s not to say that they will never need to go to the office again, although some big-tech companies have eliminated that requirement for many of their employees. It seems reasonable to expect that the “hybrid” situation where a worker goes into the office one, two, or three days a week and works at home on the other days, will catch on. That means the railroads will be able to transport the office workers on the days when they go into the City in the morning with fewer trains. In New Jersey, for instance, arrivals at Penn Station on trains that were once packed with commuters on the NEC, North Jersey Coast, Morris & Essex, and Montclair lines could be reconfigured to allow Raritan Line direct access to that facility at those hours for the first time. Such a schedule would fulfill the long-held goal of the Raritan Valley Rail Coalition, which formed in 1998 for the purpose of achieving such access.

This recent reduction in commuting does not only affect operations, but also infrastructure. If there are fewer trains arriving at Penn Station during the historic commuter-peak (measured as arrivals between 7:50 and 8:50), there may be less need for new tracks to be built to accommodate the trains that will run in the future. There may not even be any need for new tracks, as existing station infrastructure might be sufficient to handle future demand. In that scenario, there may be no need for a new project similar to the Penn South component of the Gateway Program, which was first proposed in 2011. 

One direct result of having fewer five-day commuters going into Midtown Manhattan is that employers will no longer need as much office space as they did in the past. Firms that needed five floors, for example, could re-design their space for the smaller number of employees who would work at the office on any given day. They might be able to save rent by using only three floors in the future. Technology now supports more “work-at-home” activity, and it would not be easy for managers all over Midtown to force all of their workers to return to the old five-day commuting routine. 

In a time of declining need for office use, does it make sense to propose nine huge new office buildings in the neighborhood? It is difficult to fathom how. Of course, it is always possible that there could be a surge of demand for office space due to unforeseen circumstances. That happens occasionally, but so does the reverse scenario. The most-recent “unforeseen circumstance” was the COVID-19 virus itself, which shifted work practices away from the historic five-day-commuting model to a new paradigm where working at home, at least some days of the work week, is part of the job.

Meanwhile, Existing City Transit is In Trouble

Against this backdrop, the existing subway system is facing severe financial problems, mostly due to the decline in ridership (and, consequently, in revenue) since the virus hit. While ridership has been recovering lately, the federal COVID-19 relief money will run out some day; an event that could prove catastrophic to the transit systems in New York and New Jersey. 

On July 26, Railway Age Senior Editor Carolina Worrell reported that recent reports indicate that the Metropolitan Transportation Authority (MTA) is facing a “Fiscal Cliff.” The MTA could lose almost $4 billion in expected fare and toll revenue (the agency owns tunnels and bridges, too), and there could be deficits of $2.4 billion each year, 2025 through 2028. That would mean fare hikes, service cuts, or layoffs if other funding cannot be found. The same day, though, Worrell reported that the MTA had amended its capital program the previous day to expedite a number of projects and support meg-projects including Penn Station Access (connect with the Hell Gate Bridge Route to run trains onto Metro-North’s New Haven Line) and Penn Station Expansion projects, which are part of the overall proposal discussed here.

Likewise, on July 25, Stephen Nessin reported on WNYC, the city’s NPR station (found at https://www.wnyc.org/story/mta-braces-future-shortfalls-due-ongoing-low-ridership): “With the ongoing pandemic, and many people still working from home, fewer people are taking mass transit. That means the MTA is spending federal relief money faster than it expected and it could burn through its $15 billion in another three years.” Nessin further reported: “The agency’s Chief Financial Officer is urging the board to start preparing now by thinking of ways to raise $2.5 billion a year to cover its shortfalls. Otherwise, they should prepare for service cuts, job losses or greater fare hikes.” 

With the core system in that much trouble, is this the time to spend $22 billion on infrastructure that may not be necessary, as the part of the system on which millions of riders depend is facing severe financial woes? In short, the question is whether or not the MTA can afford to spend billions of scarce dollars on mega-projects, when the core system is in deep trouble due to lack of ridership.

NJ Transit may also face financial woes when the COVID relief money runs out. In short, transit faces an uncertain future in the long run on both sides of the body of water that longtime New Jersey advocate Albert L. Papp calls the “Hudson Ocean.” I will report about that in the near future.

Can Plan Critics Make a Difference?

“Big real estate” and some politicians like the plan, but not everybody does. The opposition is not limited to one end of the political spectrum, either.

Nicole Galinas, columnist for the Post and a Senior Fellow at the right-leaning Manhattan Institute, said in a column dated July 25 headlined Penn Station is the worst deal since Manhattan was sold for $24 (and found at https://nypost.com/2022/07/25/penn-station-plan-is-the-worst-deal-since-manhattan-was-sold-for-24/): “Indeed, it will define the city, and the state, too — as having bloated and opaque governments that revel in conferring special favors.” Her suggestion: “Here’s how public infrastructure investment should work: Let’s say the state and city determine that, despite New York’s current 35.7% office worker occupancy and subway and commuter rail ridership stuck at about 60% of normal capacity, Manhattan will recover its office market in the next decade or so and continue to be a regional destination for white-collar workers indefinitely. The state and city could help that future along if they make Penn Station more pleasant for commuters. In that case, the state and city could borrow against future tax and fee dollars to make these long-term investments.” Galinas went on to complain that the City is giving its zoning authority over to the State, while also saying: “For all these billions in investment, moreover, Penn Station won’t really improve that much. Yes, the new configuration will allow more light, air and space, but it won’t get more trains to run more frequently, as the ReThink Penn Station NYC good-government coalition is constantly pointing out. Nor will the project do anything to create a single, unified regional transit system, rather than multiple fiefdoms controlled by separate, poorly coordinated New York and New Jersey entities.”

For its own part, ReThinkNYC has proposed its own plan, Rethinking Penn Station, which can be found on the organization’s website, www.rethinknyc.org. According to the ReThink plan: “Today, the Long Island Rail Road and NJ Transit’s commuter trains dead-end at Penn Station. Operating Penn Station as an inefficient terminal rather than as a through station is at the heart of our regional transportation challenges.” Regarding through-running, the ReThink proposal says: “Implementing through-running service at Penn Station can create a more pleasant experience for travelers, increasing train capacity in and out of the station, and provide connections to more destinations.”

One component of ReThinkNYC is RethinkPennStation, at www.rethinkpennstationnyc.org. RethinkPennStation has called for the original 1910 design of Penn Station to be replicated, with all of its historic grandeur (its architects, McKim, Mead and White, were often inspired by public buildings from ancient civilizations), and severely criticized the current proposal: “The plan to demolish the Penn Station neighborhood promoted by Governor Kathy Hochul and he Empire State Development Corporation (ESD), is backward and deeply flawed. Not only does it destroy blocks of a unique New York neighborhood, Penn Station itself would remain buried beneath Madison Square garden. The Hochul/ESD plan is ‘lipstick on a pig’ as Penn Station’s essential transit operation would remain unchanged subjecting tens of thousands to crowded and dangerous conditions.” The post decried the proposed demolition of historic buildings and continued: “our plan does NOT call for the wholesale destruction of a neighborhood. It does not displace thousands, and it does not demolish are architectural heritage” (emphasis in original). 

It’s All about Money and Politics 

In my last report on this subject, I noted that some elected officials have also opposed the proposal, expressing their concerns, including about about the sizable benefit that large real estate operator Vornado is slated to get from the deal. Watchdog group Reinvent Albany expressed similar concerns. So did Galinas, who said: “Rather than paying property taxes to the city, Vornado and its investment partners will provide “payments in lieu of taxes” (PILOT) to the state. The state and city refuse to say what this PILOT tax rate will be. Historically, PILOTs are a way to offer under-the-table tax breaks. Hudson Yards, for example, has gotten more than $1.1 billion in such property tax reductions, according to a New School estimate. Do you think Vornado will settle for anything less?” I cited the New School report in our previous article in this series. 

Galinas wrote: “As project documents note, the acquisition of three of the eight sites needed to build the eight office towers to pay for the transit infrastructure would ‘be effectuated by negotiated purchase with the current property owners and/or through the exercise of eminent domain’.” She continued: “As it happens, the other five sites are controlled by Vornado, a major real-estate developer whose top executive has donated nearly $70,000 to Hochul (and previously donated the same amount to her predecessor, Gov. Andrew Cuomo.” On July 21, David Meyer reported in the Post that Vornado CEO Steve “Roth donated $69,700 to Hochul’s re-election campaign in December, just one month after she announced her intention to advance the project, which was crafted by her disgraced predecessor, Andrew Cuomo.” Joseph M. Clift, former Planning Director for the LIRR and now an advocate in the City, commented this way in an e-mail message to this writer: “Vornado is the obvious big winner. Surprise, Surprise!”

Whatever shortcomings the project might have, Hochul is running for re-election, and starting a project of this magnitude could be considered a big “deliverable” for the City, whatever its long-term implications might be. “Builders” are remembered, for better or worse. New York’s biggest was William Marcy “Boss” Tweed, who never held office, but held sway in a historically extravagant manner over the City and its money during the late 1860s and until 1871, when he was deposed and locked up. The City Hall building he ordered is still in use today. Through much of the Twentieth Century, nobody “built” in New York like Robert Moses, whose reign lasted from the 1920s until the late 1960s. He transformed the City in many ways, including building miles of highways that displaced thousands of residents. He did that to the “outer boroughs” and almost did it to Manhattan, too, until concerted opposition from concerned citizens stopped him; one of his few defeats. The subway system was poised for large-scale expansion as his star was rising, but he put a stop to that. Not one mile of new subway infrastructure was built during his reign, until 1967, when it was almost over.

So maybe Salt Lake City is an example of a public inconvenience that local officials want to force upon the riding public for their own convenience. There is nothing new about that. Meanwhile, planners who don’t have political connections, but submit a sensible proposal, are ignored. There’s nothing new about that, either. Transit managers decide where facilities will go, and riders have no choice but to follow.

Sometimes the plan originates from a place on the political food chain far above transit management, but transit improvements are held up as the justification (some would say the excuse) for altering an entire neighborhood and spending billions of dollars, whether or not that project would actually improve the neighborhood, and whether or not that project would actually improve the transit itself. In the current development proposal for the Penn Station area, only 6.8% of the money would improve transit, while the other 93.2% would go to other uses. 

It looks like Robert Moses probably would have been proud of a plan like that, or even suggested it himself, despite the 6.8% that it proposes to spend for transit improvements. 

Source: Railway Age