Subsidy Sheet: Senate/PACB should reject secretive Penn Station Development deal, huge handout to Vornado

June 24, 2022

At today’s NY Senate hearing on the Penn Station redevelopment financing, Reinvent Albany urged the Senate and Public Authorities Control Board to reject the deal until Governor Hochul and Empire State Development clearly explain why it is in the public interest to divert billions in City property tax dollars and give Vornado a huge tax break for developing some of the most valuable land in the world.

The Governor and ESD are moving forward with a plan that blurs together refurbishing Penn Station (which Reinvent Albany supports) with a development deal that will give Vornado a huge upzoning and public subsidy in the form of artificially low property taxes called “Payments in Lieu of Taxes” (read more in this Crain’s op-ed from our Rachael Fauss). ESD still has not revealed many details about how the project will be paid for despite months of calls for transparency from transit advocates.

Some of the key questions from the testimony (quoted verbatim):

What is the logic of this financing approach given that there are frequently cost overruns on mega projects? PILOTs won’t be able to adjust to cost overruns, nor will the real estate market, meaning the State will have to pay for any increases in costs.
What is the impact on city real estate tax revenues, given the proximity to Hudson Yards? The Penn Station area does not exist in a vacuum, but rather in the center of midtown Manhattan.
What are the risks to the taxpayers if development does not go as planned, and Payments in Lieu of Taxes (PILOTs) come in at lower levels? (See IBO’s research about city payments made in Hudson Yards.) Given that subway ridership remains at 60% of 2019 levels and the return to office is slow, there are concerns about the resiliency of the real estate market in the post-COVID world.

–

Following Governor Hochul’s announcement of $100 million in Excelsior tax breaks for Regeneron Pharmaceuticals, Reinvent Albany released a list of all the subsidies Regeneron has received since 2006 – a stunning $500 million (this excellent research was compiled by our Senior Research Analyst Elizabeth Marcello!). Regeneron reported a profit of $974 million in the first quarter of 2022.

From our statement:

Why is New York State giving huge handouts to highly profitable corporations instead of seeking a clear financial or public ROI by investing public dollars in education, workforce development, and public infrastructure, all of which have a greater rate of return than handouts to corporations?

–

On June 17, Comptroller DiNapoli released his annual report on NY Industrial Development Agencies, finding that IDAs are spending more than ever while creating fewer jobs than ever.

Some highlights:

Net jobs gained were 167,684 in 2020, “the smallest number of jobs gained in the last ten years.”
While the number of projects is trending down, the projects themselves are becoming more expensive and outpacing inflation, with values being 4.9% higher in 2020 than in 2019. OSC says the rising value of commercial property may be one factor.
School district property tax exemptions were $686 million in 2020 – 39% of the total.
OSC has published six audits since its last IDA report, and five found “deficiencies in [IDAs’] project approval and monitoring practices.”

On Capitol Pressroom, the Comptroller also says he is “very optimistic” that Governor Hochul will sign the bill restoring his contract oversight powers, and says that the Legislature would not have passed the bill without the advocacy of good government groups.

–