Subsidy Sheet: No budget, no financing numbers, no surprise: ESD Votes ‘Yes’ on Penn Station Mega Deal

Despite a $1.2 billion subsidy for real estate developer Vornado, an estimated $3 billion shortfall, a complete lack of transparency, and the looming construction of 10 office towers in an era where more Americans than ever are working from home, the Empire State Development board voted unanimously today for Governor Hochul’s Penn Station redevelopment plan. It is now up to the Public Authorities Control Board to veto the deal.

Redevelopment is great when it serves public needs, but the Penn Station plan will serve campaign donors more than it serves New Yorkers, and fails to meet basic standards of transparency or good government. Testimony to the ESD Board from our Elizabeth Marcello goes into the plan’s many failings:

• The financing doesn’t add up. A study by the Schwartz Center for Economic Policy Analysis notes: “With $4.1 billion in net commercial PILOT revenues under an optimistic scenario, this would leave a shortfall between $3.4 to $5.9 billion to be filled by other revenue streams (not including potential debt financing costs in the form of state interest support payments).”
• Disingenuous project goals. “The core of the project is a tax break worth up to $1.2 billion for that company. Is this project about expanding and improving transit access, or is this project about benefiting a major donor to the Governor?”
• Too many details are hidden. “Throughout the planning process for this Penn Station project, materials have been provided to the Community Advisory Committee (CAC) that have not been released to the public. Further, CAC members were under a gag order to not share any information with the public.”

After the Mayor and Governor reached a vague deal on the plan, we also highlighted the torrent of opposition to the project, the best of which came from the Daily News Editorial Board in an unusual three-editorial series that outlined issues with the project’s finances, construction, and secrecy. In a Forbes op-ed, economist Richard McGahey also said that the Penn Station project “risks billions in public funds.”

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Source: Getty Images

Vornado’s Roth Wins Pig at Trough Honors for Triple Penn Station Subsidy
Steven Roth of Vornado just scored subsidies worth billions of dollars from Governor Kathy Hochul’s Penn Station Redevelopment deal. Roth is a major political donor to  Hochul and friend and business partner of Donald Trump.

Roth, who has patiently accumulated, but not developed, most of the land around Penn Station, is also infamous for revealing that he deliberately let some properties deteriorate to get a government blight declaration. 

Three ways NY State Government is enriching Roth/Vornado with the Penn Dev Deal:

1. Allowing massively larger buildings to be built without maximizing government revenue by selling air/development rights at auction or anywhere near market value. 
2. Providing an estimated $1.2 billion in tax abatements by replacing NYC property taxes on Vornado’s massive new development with Payments in Lieu of Taxes (PILOTs) set at a lower rate than existing Penn area buildings. 
3. Steering an estimated $2 billion in PILOTs paid by Vornado for public realm improvements around Vornado’s Penn properties. It is every developer’s fantasy to be able to steer their property taxes towards directly increasing the value of their property instead of paying into the NYC general fund where they are spent on citywide needs like garbage pick-up, fire protection, clean water, schools, etc.

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At Boondoggle, Pat Garofalo has a great summary of the problems with Amazon’s latest application for completely unnecessary massive tax breaks. The Niagara Gazette reports that the New York Power Authority will neither confirm nor deny whether or not Amazon has applied for (also completely unnecessary) low-cost power. But as Pat points out, under state law, an application for low-cost power is not one of the few circumstances under which state agencies are allowed to neither confirm nor deny.

There’s no reason Amazon needs free power or a $123 million subsidy – the company is valued at more than $1 trillion and its profits soared during the pandemic. The company has also already received at least $427 million in subsidies from NY state and local governments according to the Good Jobs First. We agree with Greg LeRoy, who told the Lockport Journal, “I would not give Amazon one dime.”

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Other stories you may have missed:

• The Daily Gazette joined the chorus of editorial boards calling for the Governor to sign legislation that would increase transparency of ESD’s Community Advisory Committees and give the Legislature more power on the PACB.
• Senator Bernie Sanders (I-VT) urged Congress to not give $50 billion in tax breaks to computer chip manufacturers in an op-ed (The Guardian). It appears that the Senator’s advice will not be heeded (NY1).  The federal CHIPS deals will allow manufacturers in NY to receive even more subsidies than they received under Green CHIPS.
• Good Jobs First has revamped their website – now an incredible resource is even better! Their Amazon Tracker is now an interactive database that lets you see how much your state or city has given Jeff Bezos.
• RSVP for the American Economic Liberties Project’s event showing you how to fight secret subsidy deals.

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Fun fact: Intel, a major chip manufacturer and subsidy recipient, made nearly $20 billion in profits in 2021.

(Source: Op-ed by Sen. Sanders in the Guardian).

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If you got this from a friend, sign up here. Subsidy Sheet is written by Tom Speaker, Policy Analyst at Reinvent Albany. John Kaehny wrote this week’s second section. Rachael Fauss and Elizabeth Marcello helped edit.

Please send questions and tips to tom [at] reinventalbany.org. We look forward to hearing from you!