Vornado’s properties would stand to benefit from the plan as it owns the majority of the sites near Penn Station that would be rebuilt and contain some tax-exempt residential housing, thanks to including affordable housing components, according to the report. “We feel pretty optimistic there’s going to be interest in these sites shaping the modern office.” “What we’re seeing and what developers are seeing is demand for new office space,” Leicht said. Leicht anticipated that the latter would be more likely. At the same time, the properties surrounding Penn Station could be a hot commodity given the demand for Class A space and the station’s access to the tri-state area, he added. If the value of office buildings fall, the revenue used to pay for the station could shrink, said Sweeting. Notably, the tax-exempt Madison Square Garden wouldn’t pay toward the project, eliminating what would be about $43 million in taxes annually that could help fund the renovations.įurther complicating the issue, those new supertall towers won’t be completed until 2044 while the station reconstruction will finish around 2032, leaving a decade when the city could be forced to provide debt service payments until it can collect that money, the report said.Īnother potential pitfall is that part of the taxes and fees collected by the ESD will be based on the value of those surrounding office properties, which could fluctuate given the pandemic’s impact on office property values in New York City. New York City collected $60 million in property taxes on the eight sites slated for the new development in 2022, a small fraction of the $8 billion to $10 billion needed for the renovations, according to the IBO report. The IBO raised concerns that those payments might not be enough, especially if the state is reimbursing the city. “There’s going to be an increased tax base in this area so it makes sense from a financial perspective that the tax base, as it increases, helps pay for that extra value - the improvements to Penn Station.” “This is not an unprecedented approach,” said Leicht. The state agency could afford to do so, because of the additional value brought in by allowing the construction of denser buildings, according to Leicht. The ESD would also pay New York City the property tax revenue it would have collected on the surrounding buildings had the changes to Penn Station not happened - meaning the city’s tax revenue wouldn’t come up short. The fees and PILOT would repay that debt - though PILOT funding has been a more controversial method of financing after it left New York City with unfunded costs of expanding the 7 train line to Hudson Yards. Until the buildings are completed and the ESD can collect that revenue and fees, ESD will fund New York’s share of transit improvements through bond or debt financing plus $1.3 billion in capital funding. “We’re not going to bring it to our board until we have that agreement in place.” “When we come back with our final project plan, I think the most important thing is that we will have an agreement with the city on any kind of PILOT structure or things that will impact city taxes,” said Holly Leicht, an adviser on the Penn Station-area project at the ESD. While the IBO questioned the state agency’s lack of a firm budget or debt structure, the ESD said it would have that information before it presents a final plan to its board in the next two months. The ESD would collect payments in lieu of taxes (PILOT) and fees for the rights to build those towers, mostly from Vornado Realty Trust, which owns the majority of the buildings near the station. Kathy Hochul, outlined how the Empire State Development Corporation would construct up to 10 new buildings around Penn Station from West 34th to West 30th streets between Ninth Avenue and Avenue of the Americas.Īs part of the proposal, ESD would let private developers build at a greater density than the city normally allows and bypass its land-use review process, directing property tax revenue and fees to the ESD rather than the city to help finance the redevelopment of the station. The plan to redevelop Penn Station, conceived by disgraced former Gov. How much is it actually going to cost? How much are they going to finance it? How are these payments structured?” … We’d like to have more information about the specifics of the plan. “It’s not whether this project is good or bad. “There’s a lot of information missing that you would want to have before you commit to moving ahead with this particular plan,” George Sweeting, IBO’s acting director, told Commercial Observer. SEE ALSO: Last-Minute New York Housing Deal Falls Apart in Legislative Session
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