Skyscraper plan to fund $7B to $8B Penn Station reconstruction sidelined

New York State is moving ahead with a $7 billion reconstruction of Penn Station and moving away from a plan to build 10 new skyscrapers nearby to help pay for the work, Gov. Kathy Hochul said Monday.

Hochul joined transportation leaders at Penn Station on Monday to announce the formal commencement of the design process for the project. She also revealed that the effort was being "decoupled" from a larger plan, approved a year ago by the Empire State Development — the state's development arm — to fund the improvements through revenue generated from 10 new towers that would be erected in the area surrounding Penn.

That effort was spearheaded by Vornado Realty Trust, which owns many of the properties that would have been developed. But in the past, the company has acknowledged that the soft market for Manhattan office space since the COVID-19 pandemic began has set back its plan. Vornado officials declined to comment Monday.

Hochul said Monday the state would, nevertheless, move ahead with upgrades of Penn, the Long Island Rail Road's primary Manhattan terminal.

"That does not mean we will not be building office space here at some point … We'll get that done over time, but I no longer want that to be a delay to this process, which is moving forward today," Hochul said.

The towers plan met considerable resistance from New York City preservationists, who saw it as a sweetheart deal for developers and political donors that would destroy the fabric of the historic Penn Station district, and could oust several small businesses and residents. Opponents of the plan protested behind Hochul during the announcement Monday, shouting her down with chants of "Don't tear down our neighborhood for Penn Station!"

Diana Gonzalez of Trains before Towers, a coalition of project opponents, said she saw the governor's announcement as "a win," but said area residents and merchants remain in limbo until the towers plan is permanently scrapped.

"We're creating this situation whereby having this thing hovering over us and not really knowing when it might actually happen is just stifling the neighborhood," Gonzalez said. "It needs to be done for good. That's our demand. And we're one step closer to that."

Without the payments in lieu of taxes — or PILOTs — generated by tenants of the new towers, the state must come up with an alternate funding plan for the Penn Station reconstruction, which Hochul has estimated will cost $7 billion to $8 billion. The state has already set aside $1.3 billion for the effort, and Hochul's office, in a statement, said it is "aggressively" pursuing federal grant dollars, and is also counting on the railroads that use Penn — including the LIRR — to share some costs.

Project officials will begin accepting proposed designs for a re-imagined Penn Station, which MTA officials have said could include a grand train hall with tall glass ceilings and natural light shining down on LIRR riders. Hochul unveiled new conceptual renderings of the re-imagined Penn Station, including images of brightly-lit new entrances on the corners of Penn Station at Eighth Avenue.

The effort will expand on the recent renovation of the LIRR's concourse at Penn, which includes wider walkways and taller ceilings. "This is a forward-looking event, but I've got to say, look around at what's already been accomplished," MTA chairman and CEO Janno Lieber said.

Hochul said the project design process will "be open to any architect, any design firm, any engineer to allow them the opportunity to compete for a position to perhaps be creating this world-class masterpiece." 

Some proposals could face resistance from Madison Square Garden, which sits atop Penn. MSG officials have raised concerns about the project disrupting the arena's truck-loading operation and its HVAC system. The latter, MSG officials have said, could force the Rangers NHL franchise out of the Garden for a full season. 

As MSG seeks a renewal of a special permit from New York City to continue operating at its current location, the MTA is arguing that the arena should be made to comply with its redesign plans if it is to stay at its current location.

By Alfonso A. Castillo

alfonso.castillo@newsday.com@alfonsoreports

Alfonso Castillo has been reporting for Newsday since 1999 and covering the transportation beat since 2008. He grew up in the Bronx and Queens and now lives in Valley Stream with his wife and two sons.