OP-ED: Financial, legal and operational conflicts facing Gov. Cuomo's $16-billion NY Empire Station Complex Project

Release of the draft Environmental Impact Statement by the Empire State Development Corporation still leaves many unanswered questions. New York Gov. Andrew Cuomo's latest New York Penn Station project known as the "Empire Station Complex" is managed by the Empire State Development Corporation. It faces many financial, legal and operational conflicts and issues.

This $16 billion project, just like the Port Authority of New York & New Jersey (PANYNJ) $10-billion new 42nd Street midtown Manhattan bus Terminal, are both counting on the sale of air rights as a source for billions to help defray construction costs. There is a glut of surplus office space in Hudson Yards west of Penn Station and other Manhattan neighborhoods The Penn Station Empire Station Complex and Port Authority Bus Terminal projects are both located on the west side of midtown Manhattan only eight blocks apart from each other. They will be competing against each other for tenants.

If the air rights sale generates less than anticipated revenue, the shortfall could be up to several billion. This deficit will have to be made up by the project sponsor - the Empire State Development Corporation. It will look toward the states of New York and New Jersey, the New York Metropolitan Transportation Authority (MTA) and New Jersey Transit for a financial bailout. This means higher MTA and Port Authority bridge tolls, fare increases for NJ Transit, Long Island Rail Road and New York City Transit subway riders along with other tax increases and user fees.

There needs to be agreements with New York City and various owners of underground utilities including water, sewer, gas, electric, steam and cable before being ready to commence construction. Successful completion of these agreements can take several years. Who will pay for additional critical NYC municipal services such as fire, police and sanitation? The project may also be subject to NYC Urban Land Use Review Procedure (ULURP). This process takes many months from start to finish. NYC faces its own financial crisis and growing long-term debt. Why would City Hall honor a request from the Empire State Development Corporation to exempt developers from municipal taxes by issuing Payments In Lieu Of Taxes (PILOTS) that would defray these costs?

Both projects are also counting on billions in federal funding. Neither project has been officially admitted into the Federal Transit Administration New Starts or Core Capacity national competitive discretionary capital funding program. The Empire State Development Corporation would be competing against the PANYNJ, NJ Transit, NY MTA, NYC DOT and other Metro NY area transportation agencies that are counting on the same Federal Transit Administration grant programs to help provide billions toward the $29 billion Hudson River Gateway Tunnel to Penn Station, $10 billion NJ to NY Cross Harbor Freight Tunnel (in this case, the Federal Highway Administration), $6.9 billion Phase Two Manhattan Second Avenue Subway, $2.7 billion Brooklyn Queens Street Car Connector, $1.4 billion West Shore and $600 million North Shore Bus Staten Island Rapid Transit projects along with many more in the Metro NY area and across the nation. There is not enough space here to list them all.

Land acquisition, business and residential relocation to acquire and clear the site (between 6th and 9th Avenues from West 30th to West 34th Streets) for future construction will take years. What will happen to the several hundred dislocated residents and businesses? What about the loss of an estimated 9,000 jobs? Use of eminent domain as a last resort would also require years. Just imagine the legal fees for all of the above. Navigation of State Historic Preservation Office (SHPO) laws for demolition of the old Hotel Pennsylvania, Gimbels Bridge (part of the 100-year-old department store) and St. John, the Baptist Roman Catholic Church will take years to complete.

In the post COVID-19 world, Amtrak, Long Island Rail Road, NJ Transit, PANYNJ and Metro North Railroad all have to reevaluate anticipated future ridership growth projections. The MTA is spending $1.5 billion for Metro North Bronx East Access to Penn Station. Gov. Cuomo and the MTA have promised Metro North direct access to Penn Station within one year after the LIRR begins service into East Side Access to Grand Central Terminal in December 2022. Metro North will use the New Haven Line via Hell Gate Bridge, Sunnyside, Queens and East River Tunnels for direct access to Penn Station in December 2023. Metro North is also looking at Hudson line access to Penn Station via Amtrak's Empire Corridor. This second Metro North Penn Station access project might be part of the next MTA 2025 -2029 Five Year Capital Plan. It may have already been included within the yet-to-be released MTA 2020 - 2040 Twenty Year Capital Needs Plan. This document was promised by Gov. Cuomo and the MTA to be made public in December 2019. MTA Chairman Pat Foye has never come clean why this plan is now 15 months late.

In the post COVID-19 world, many former commuters will continue working from home. Others will forgo attending in-person conferences and use zoom from remote locations. It will be many years before ridership comes close to pre-COVID-19 numbers. The same is true for anticipated significant ridership growth by Amtrak, LIRR, NJ Transit and Metro North to Penn Station. Penn Station South is a key transportation component within the Empire Station Complex. It will consist of up to nine additional tracks and five platforms south of the existing Penn Station tracks and platforms. This new capacity will primarily serve New Jersey Transit. Amtrak and LIRR trains would be unable to use this new facility. Their trains need access to the East River tunnels which connect Manhattan to Queens. The Empire Station Complex does not include access to the existing East River tunnels or construction of any new East River tunnels. Either would cost $5 billion or more. You would have to build a new tunnel from a portal in Queens under the East River and across midtown Manhattan to connect with the new Penn Station South facility.

Promises by the Empire State Development Corporation that this project would free up capacity on existing Penn Station tracks 1 to 21 doesn't tell the whole story. Amtrak, LIRR and Metro North all have had previous plans for years to support expansion of existing or creation of new service to Penn Station long before the Empire Station Complex was conceived. The LIRR Penn Station West Side Yards has been operating at 100 percent capacity for years. The same is true for Amtrak/New Jersey Transit Queens Sunnyside Yards complex. There is no space to accommodate additional trains for mid day storage in support of increasing rush hour service. No plans have ever been made public for storage of future Metro North trains servicing Penn Station.

In the post COVID-19 world, the Empire State Development Corporation must reevaluate not only promised transportation ridership growth projections, but also how real the demand will be for the creation of new office space, retail, hotel and residential capacity promised by the Empire Station project.

There is no way to validate any project budget or promised time table for completion by 2038. Release of the draft Environmental Impact Statement is like reading the first chapter of a long novel. Preliminary and final design and engineering still needs to be completed. This is necessary for independent validation of project scope, budget and timetable. Value engineering needs to be performed to see if there are potential construction cost savings. Funding sources need to be confirmed and adopted as part of agency, authority, state or federal budgets. The FTA would have to offer a Full Funding Grant Agreement for Empire State Development Corporation to accept. They would be on the hook for any cost overruns above and beyond the capped level of federal support. A detailed project budget with funding sources along with a implementation schedule to reflect all the activities month-by-month, year-by-year, decade-by-decade or task-by-task is still outstanding. It needs to be developed to provide credibility and support for a potential project of this size and magnitude.

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Larry Penner is a transportation advocate, historian and writer who previously worked for the Federal Transit Administration Region 2 NY Office. This included the development, review, approval and oversight for billions of dollars in grants which provided funding for capital projects and programs to the NY MTA, NYC Transit, Long Island and Metro North Rail Roads, NJ Transit and over 30 transit agencies in NY & NJ.