Watchdog Testimony Urges ESD Board of Directors to Vote NO on the Penn Station Development Deal

Reinvent Albany advocates for transparent and accountable New York State government and has closely followed the proposed Penn Station Redevelopment project. 

Reinvent Albany supports the State investing in mass transit, and renovating Penn Station to better serve transit riders. However, we ask you to vote “no” on the General Project Plan (GPP) and reject any financing approach that involves providing large tax abatements to a real estate developer building on some of the most valuable land on planet Earth. 

We urge you and the Hochul administration to be honest with the public about the actual costs of each component of this project. This should include who will pay for each component, and why it makes sense to use a PILOT agreement that will involve state taxpayers fronting the money for PILOT-backed bonds for years, and then taking on the full risk of paying for those bonds if the real estate developer – Vornado – does not build out its properties as authorized by the GPP.

The materials provided to the Board of Directors outline a City/State split of theoretical revenue from Vornado’s planned development around Penn Station. However, the materials do NOT include basic details, such as:

• How much would each component of the Penn Station area project cost (Penn Station refurbishment, Penn Station expansion, Gateway tunnels, and public realm improvements)?
• How much revenue is Vornado real estate development in the form of Payment In Lieu of Taxes (PILOTs) assumed to generate?
• How much will taxpayers have to pay before Vornado development starts generating PILOT revenue?
• What is the dollar figure for 12.5% of the cost of the reconstruction plus potential expansion of Penn Station? 
• What is the difference between “Transit Improvements” where 50% of PILOT revenues would be used, and “Penn Reconstruction” where 12.5% of such revenues would be used? What specific projects would fall under either category?

We note that the non-binding framework agreement  between the Governor and Mayor blurs together what were previously referred to in state presentations as two distinct project components: the “reconstruction” of the existing Penn Station and the “expansion” of the station. Each of these components is projected to cost billions of dollars, and we think lumping them together is a red flag that ESD has something to hide from the public. 

To date, Empire State Development still has not published details about the City-State deal – continuing a long failure to publish basic information about project financing and likely subsidies for Vornado. Three years into a state deal that could include a $1.2B tax break for Vornado, ESD has not explained the most fundamental question: why fund Penn Station improvements with a secretive scheme that steers future NYC property tax revenue to the State via a Payments in Lieu of Taxes (PILOT) and puts all the risk on taxpayers? Why is traditional capital financing being eschewed for something much riskier? Do ESD Board members know? Why isn’t this information public? 

The fatal flaws of Governor Hochul’s Penn Station plan include:

Financing doesn’t add up
A recently-released study commissioned by Reinvent Albany and written by researchers at the Schwartz Center for Economic Policy Analysis at The New School shows that even under the best circumstances, there simply won’t be enough money to fund New York’s share of the $40 billion project. The study 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
As noted, the details surrounding any relationship with Vornado, the majority property owner at the redevelopment site, remain murky. What is clear, however, is that 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. Our group filed a Freedom of Information Law request for the CAC materials that were eventually (and reluctantly) provided. 

This is not how democracy works. In a democracy, the public is involved at every stage of planning, and government operates openly and transparently. The Penn Station Redevelopment project is the poster child for a top-down and undemocratic project that does not have the public’s interest in mind. 

Vote No
The ESD Board is bound by a fiduciary duty to the public. Board members signed an acknowledgement of such duty with the state Authorities Budget Office. This duty requires that Board members act “in the best interest of the authority, its mission and the public.” In this spirit, we urge the ESD Board to act in good faith, review the information provided, in addition to what has not been provided, and remember their oath. 

We urge you to vote NO on this project. 

Thank you for the opportunity to submit written testimony. Please send any questions to Elizabeth Marcello at elizabeth [at] reinventalbany.org.