Subsidy Sheet: ESD has no answers to NYS Senate questions about Penn Station Dev financing

July 1, 2022

Last week’s State Senate Hearing on the Penn Station Development project again highlighted how the Hochul administration continues to not answer basic questions about the financing of the plan and billions in tax breaks for developer Vornado (The City).

Senators Comrie, Hoylman, and Krueger asked smart questions and made important points:

Senator Krueger suggested the project could have major overruns, asking, “Who’s going to pay when things go awry?” (Newsday).
Senator Comrie disputed the need for subsidies at all, saying, “Clearly there is no need for subsidies in the most desirable area of the City…so the need to give tax breaks for that area I think is unnecessary.”
Senator Hoylman asked for specifics about how Empire State Development is mitigating the risks associated with the value capture financing proposal, and if it is recession proof (ESD said it is not).

The Senators called for Governor Hochul to sign S7337 (Comrie) / A10157 (Paulin), which would ensure members of the Public Authorities Control Board, which approves financing for certain state projects, can vote without fear of retribution by the Governor. We also called for the signing of a bill to increase the transparency of ESD’s advisory committees.

Read our testimony here.

After the hearing, the Daily News Editorial Board called the plan “a dumbly conceived, secretive-in-execution, contributor-enriching, city-budget-robbing, Amtrak-rewarding, landmark-destroying, minimal-housing-creating concoction for the Penn Station environs.”

In testimony to ESD this week, Reinvent Albany also said that approving the Penn Station Final Environmental Impact Assessment would be “irresponsible”:

NYS taxpayers will be on the hook for at least a portion of bond payments from PILOTs and possibly much, much more if the development doesn’t go as planned decades from now. It would be irresponsible for ESD Directors to sign off on any aspect of this project without a clear financing plan and understanding of the PILOT (payment-in-lieu-of-taxes) agreements.

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A Crain’s analysis of NYC data found that the 421-a program, which gives a tax break to real estate developers, has not produced nearly enough affordable housing for those in need.

From 2016 to 2021, only about 30% of the 40,000 apartments completed under the tax break were “affordable,” and barely half of those were priced for low-income tenants. So-called “affordable” 1-bedroom apartments in New York go for as much as $2,400.

421-a expired last month, but Governor Hochul has signaled she will push for a replacement program, 485-w, when the Legislature reconvenes next year (Crain’s). Housing advocates have attacked 485-w as inadequate and called for more investments in public housing (Gothamist).

From the article:

Those numbers are too low for the number of units needed for rent-burdened households, or ones that spend more than 30% of their income on rent, the report found. Half of all rent-burdened households in need of affordable housing identified as extremely low-income, while 39% identified as very low-income or low-income … The report also found that affordable units built at all price points included additional subsidies from the Department of Housing Preservation and Development, meaning they were not supported solely through 421-a.

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