How Cuomo paved a clearer path for Hochul’s Penn Station master plan

NEW YORK — When Amazon turned down $3 billion in city and state subsidies and pulled out of a deal to build its headquarters in Queens, former Gov. Andrew Cuomo lashed out at — and ultimately declawed — the state oversight board he blamed for killing the project.

“You had this local political interest that just aborted the project,” Cuomo said in 2019, months after the arrangement collapsed. “That is a problem.”

Soon thereafter, Cuomo, a moderate Democrat, inserted language into the state budget significantly weakening the Public Authorities Control Board, the entity with final approval over state public financing deals. The Senate’s appointment of a vocal Amazon critic, Sen. Michael Gianaris, to the board, was widely seen as the breaking point behind the tech giant’s decision to leave.

Cuomo’s move may not have revived the Amazon deal, but it could have lasting repercussions on another major infrastructure project he helped develop before leaving office.

Gov. Kathy Hochu wants to let developers build up to 10 skyscrapers in the area surrounding Penn Station, the nation’s busiest rail hub. Instead of paying city taxes, the developers would fund an estimated $7 billion in upgrades to the rail hub that includes new entrances, a skylit atrium and an underground concourse connecting to the nearby Herald Square Station using so-called “payments in lieu of taxes,” which are expected to be lower than they’d otherwise pay.

But Hochul, also a Democrat, has faced criticism for not detailing the size of the tax breaks or incentives, which will primarily benefit one developer, Vornado, that owns much of the land covered in the proposal. Vornado CEO Steve Roth gave the maximum allowable amount of $69,700 to Hochul’s reelection campaign last year.

Vornado pays roughly $38 million annually in property taxes for the nearby Penn 1 building, which is much smaller than the skyscrapers being proposed that would benefit from property tax breaks.

“It’s potentially a massive windfall and a tax break,” said Rachael Fauss, senior research analyst at Reinvent Albany, a good government group.

As concerns abound, the project faces less independent oversight than other major development initiatives because of Cuomo’s legislative actions in 2019.

Lawmakers warn the Public Authorities Control Board is now limited in how it can assess public financing projects, providing almost no outside check on an effort entirely devised and pushed at the state level. If approved, Penn Station’s overhaul will be the largest development project in city history — spanning 18.3 million square-feet and taking decades to complete.

“Now we’re just advisory,” Sen. Liz Krueger, whose district includes Penn Station, said at a June Senate hearing. “Before both the Assembly and Senate had an actual vote that counted.”

Lawmakers recently passed a bill that would undo the changes Cuomo made to weaken the board. Sen. Leroy Comrie, the bill’s primary sponsor and one of the three voting members on the Public Authorities Control Board, has called on Hochul to sign the bill before the project gets underway. Assembly Member Amy Paulin, another voting member on the board, is the primary sponsor of the legislation in the lower house.

The board could vote on the project as early as this summer, as it’s only required to wait seven days after getting a copy of the plan to hold a vote. There’s no deadline for a decision, but there is external pressure to move the process forward because of looming deadlines to apply for federal cash to support the project in the fall.

Hochul, for her part, sees no urgency to sign the bill.

“I’m not constrained by artificial deadlines that are devised by other people,” Hochul said at an unrelated press conference, when questioned on the topic by POLITICO. She added she has until the end of the year to sign 1,000 bills currently awaiting her signature.

Hochul, who pledged a “new era of transparency” when she entered office, is facing criticism from good government groups for not moving faster on the legislation. The Penn Station plan already requires less public oversight because it’s being overseen by the quasi-governmental Empire State Development Corp., which doesn’t receive the same scrutiny as most development projects in New York City.

“It’s exactly the type of project that requires the most oversight and scrutiny,” said Fauss of Reinvent Albany.

In 2018, Cuomo inserted language into the state budget declaring the area around Penn Station a “public safety hazard,” laying the groundwork for the state to oversee the private development project. Under the state Urban Renewal Development Act, the Empire State Development Corp. has the power to bypass local authority over real estate projects if it deems an area to be blighted, which it officially did in 2021 for the neighborhood around Penn Station.

The Public Authorities Control Board is widely considered one of the few checks on the agency since any one of its three voting members can veto the project. The Senate and Assembly each appoint one member, giving the project some scrutiny beyond the executive branch. The third seat is reserved for an appointee from the governor. A non-voting fourth member is appointed by the Assembly minority.

“Having the PACB reclaim its oversight role represents the bare minimum of checks and balances we can hope for when the state has committed billions of dollars to these projects,” Gianaris said in an interview.

The board could also have other major votes in the future that make the pending legislation that much more important. It may be tasked with approving another controversial plan from Hochul to spend $600 million on a new Buffalo Bills stadium. But it remains unclear whether oversight falls to the PACB.

The board has exerted its power in two notable instances. In 2005, its two Albany appointees vetoed former Mayor Mike Bloomberg’s push to build a football stadium on Manhattan’s West Side that could also host the Olympic Games. That episode helped inspire the move to put Gianaris on the PACB when opposition was building against Amazon’s proposed headquarters in his district, he said.

“I was in the Assembly when that [Bloomberg’s stadium bid] happened, so I watched it all unfold,” he said. “That experience at PACB was not lost on me. As we were struggling to find points of leverage to have any influence over this whatsoever, that was clearly the one place where I could have it.”

Cuomo restricted the board to only considering whether a project has sufficient funding. His tweaks also allow the governor to immediately remove members, which critics have called a “gag order” that could influence how board members vote.

“Unless the law changes in the interim, the PACB does not have the power it used to to make sure deals like that are done properly, and that’s to the detriment of the communities in that area,” he said.

But the Hochul administration is looking to move full steam ahead with Penn at a time where Democrats are still in control in Washington and funds from the Biden administration’s federal infrastructure package will soon be available for major projects. The Federal Railroad Administration is currently writing up rules for competitive grant programs that New York could tap into.

She and other regional officials are also seeking funding for the first phase of the Gateway Program, a $14 billion effort to repair and expand rail tunnels under the Hudson River. The second phase entails building a new terminal to the south of Penn Station, which would require federal approval to tear down the 50 buildings that stand in the way. Amtrak is currently taking lead on the expansion plans and recently hired a design team.

Hochul has prioritized upgrades to Penn Station over other projects developed by her predecessor. In November, she rejected the premise of waiting to make upgrades to Penn Station until the Gateway Program is complete, as Cuomo initially envisioned. And she put other Cuomo projects, such as a proposed AirTrain to LaGuardia Airport, on ice.

“New Yorkers who make up 60 percent of the traffic coming into Penn Station deserve something better too,” Hochul said at a June press conference on the subject. The new terminal will serve Amtrak and New Jersey Transit riders.

Janno Lieber, chair and CEO of the Metropolitan Transportation Authority, has also said time is of the essence. The agency is opening new rail tunnels that will divert some of its trains to Grand Central, making it easier to start construction in Penn Station. The depressed ridership, however, will only exist for a limited time because the agency plans to add new commuting options to Penn Station from the Bronx, he said.

The state will have to pay between $7.5 billion to $10 billion to cover the Gateway Program and the Penn Station projects, according to Reinvent Albany. The federal government, Amtrak and New Jersey are also expected to contribute. New York and New Jersey recently struck a formal agreement on how to split the first phase of the Gateway Program.

As Hochul presses ahead, critics argue the state has yet to share pertinent details on the Penn Station proposal.

Reinvent Albany recently commissioned a study that found Hochul’s plan will only generate enough to cover half of the proposed Penn Station improvements. The Independent Budget Office, a nonpartisan budget watchdog, faulted the state for not releasing more financial details on the plan and warned taxpayers could be left on the hook for any revenue gaps.

The Empire State Development Corp. hasn’t said how much it expects to raise through payments in lieu of taxes, but has recently detailed how it plans to spend the funds generated.

The payments are expected to cover all of the transit infrastructure improvements, including the new subway entrances and underground concourse to Herald Square, and some of the public space projects. But only a small fraction will go toward the actual reconstruction and possible expansion of Penn Station, making that aspect of the project more reliant on federal support.

New York City Mayor Eric Adams signed on to the framework just days before it will be voted on at the Empire State Development Corp’s July 21 board meeting. The state has agreed to make the city whole for lost tax revenue by paying it back what it currently collects, plus an additional 3 percent each year, using revenues from the payments in lieu of taxes.

Once it’s submitted to the Public Authorities Control Board, members only have to wait a week before scheduling a vote on the proposal.

Hochul was noncommittal that she’ll restore the power it once had to take down a football stadium and send billionaire Jeff Bezos packing, despite the urging of top Democrats in the Legislature.

“I’ll simply point out, they passed the law that everybody’s complaining about,” she said, referring to the budget containing Cuomo’s tweaks to PACB.