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Penn Station renovation plan could fall $6B short, watchdog group says

(CRAINS) AARON ELSTEIN, July 14, 2022

Taxpayers could be forced to shell out nearly $6 billion to pay for rebuilding Penn Station because new development in the area is unlikely to generate sufficient revenue, according to a study released today by a government watchdog group.

The findings from Reinvent Albany provide fodder for opponents of Gov. Kathy Hochul’s plan to pay for the massive public-works project with funding from private sources.

“We strongly support the state investing in major transit upgrades,” said Rachael Fauss, a senior research analyst at Reinvent Albany. “But that has nothing to do with the current Penn Station redevelopment deal.”

The Hochul administration fired back, saying the governor’s plan would enhance the city’s tax base by unlocking value from the long-neglected area around Penn Station.

“It’s disappointing that an organization that considers itself a citizens’ watchdog would prefer Penn Station remain a junkyard,” said Matt Gorton, a spokesman for Empire State Development.

Hochul wants to pay for rebuilding the dismal rail hub by harvesting property-tax revenue produced by Vornado Realty Trust and others developing about 10 office and apartment towers in the neighborhood. The state’s share of renovating Penn Station is expected to cost $7.5 billion to $10 billion.

In May, the city’s Independent Budget Office warned that the  new buildings might not generate enough tax revenue in light of the uncertain outlook for commercial office space in Midtown.

Reinvent Albany enlisted researchers at the New School’s Schwartz Center for Economic Policy Analysis to examine the potential financial impact of the project because the state has not provided details.

The researchers found that after $1.2 billion in estimated tax breaks to Vornado, plus $1.3 billion in refunds to the city to replace lost tax revenue, the state would have only $4.1 billion in proceeds from the new buildings to invest in the Penn Station project. The state would have to find at least $3.4 billion to cover the balance.

Opponents who fear neighborhood residents would be displaced by the planned project said it was time for Hochul to find a new way to pay for the desperately needed renovation of Penn Station.

“We suspected that this state-sponsored project was a liability all along,” said Layla Law-Gisiko, who chairs Community Board 5’s land-use committee. “We ask the governor to retire this mortally flawed project.”

Source: CrainsNY