Who is Going to Pay for the $8 Billion Rebuild of Penn Station?

The Trump administration has revived Andrew Cuomo’s plan to use payments from real estate development around Penn Station to help fund the rebuilding of the station itself.

“PILOTS are on the table,” reported the Manhattan Borough President, Brad Hoylman-Sigal, using the acronym for payments-in-lieu-of-taxes, a system that diverts city property taxes to a specified purpose, such as rebuilding the station.

Hoylman-Sigal, who a few weeks ago joined other elected officials to complain about what they characterized as a lack of transparency in the Penn station project, said he remained concerned that neither he nor the community had received much information about how the project was being financed.

“We have not yet been privy to who is going to pay for Penn Station,” he said. “What’s the financing, ultimately, whether its PILOTS or something else?”

He agreed that PILOTS are both a financing tool and a community development issue. “So, what does that look like? We don’t know.”

Officials familiar with the Penn project said that the main new construction envisioned outside the station would be a luxury office tower that Vornado has long wanted to build. The tower would rise on the site of the Pennsylvania Hotel, which Vornado demolished in 2023.

When he was governor, Andrew Cuomo proposed what became known as the General Project Plan, a massive redevelopment of the area around Penn Station, including the construction of up to ten large office towers. The developers would then have made payments, in lieu of property taxes, to help fund the rebuilding of the station.

The project generated intense community resistance, but ultimately stalled, not over the neighborhood blowback, but because of the Covid induced real estate slump which undermined the profitability of new office space. But that lull seems to have been temporary and luxury office space in New York is now going at record prices.

Vornando Realty Trust is the largest landowner around Penn Station and would have built several of the office towers envisioned in the GPP. One of those towers is the one on the Hotel Pennsylvania site.

Vornado is now a partner in the consortium designated the other day by The Trump Administration as the Master Developer of the new Penn Station. That consortium, known as Penn Transformation Partners, is led by two European based construction firms, Halmar, the American subsidiary of the Italian firm ASTM, and Skanska, based in Stockholm, Sweden.

The GPP also included plans to expand train service by demolishing the block south of the station. Gov. Kathy Hochul has left the GPP in place but said she would not countenance destruction of a neighborhood. Officials said the new Penn Station plan leaves the block to the south intact.

Penn Transformation Partners beat two other bidders under requirements laid out in a Request for Proposals from Amtrak, which owns Penn Station. That RFP, given to the bidders earlier this year but only released publicly at the end of May, invited the bidders “to propose innovative ideas” for improving the station or financing the project by using “property not within the Amtrak Property.”

Hoylman-Sigal said he had “confirmed in the last couple of weeks” that such work was part of the plan but had no other information. “What’s the area that’s going to be considered,” he asked.

The Trump administration seized control of the Penn Station project from the MTA, the station’s largest tenant, last year and then put Andy Byford, former head of the city’s subways, in charge.

“Of all people to have as a go between with the Trump administration, I’m glad its Andy Byford,” said Hoylman-Sigal, “But I think probably at the end of the day he may have his limitations.

“Andy Byford continues to answer our questions where he can. That’s positive. There are some good developments. But we still don’t know whose paying for this even though the federal government seems to be the sole decision maker.”

Hoylman-Sigal said that Amtrak would hold “public input sessions in the coming weeks,” but there was no word from Amtrak on when those would be or what information would be shared beforehand for the public to give input on.

Amtrak and the US Department of Transportation announced the selection of Penn Transformation Partners earlier this month and the Transportation Secretary, Sean Duffy, said the Federal Government would provide $8 billion, which with inflation is in the ballpark of the $6 billion that Halmar had said in 2023 the proposal would cost.

But beyond that information has been erratic.

The Gothamist, a local news site, published renderings of the new Penn Station which federal officials confirmed had been submitted by Penn Transformation Partners, although they described them as drafts.

Vishaan Chakrabarti, Penn Transformation’s chief architect, said the renderings where “preliminary” but provided a “sneak peek” into how the group has “completely reimagined Pennsylvania Station.”

In a post on Linkedin, he said the plan would create “a safe, functional, and dignified station imbued with natural light, soaring ceilings, spacious platforms, and a bronze and stone material palette reminiscent of the original Penn, Moynihan and Grand Central Stations.”

The renderings appeared to propose the resolution of one controversial issue, the name of the station. It is still called Pennsylvania Station, but President Trump, who has taken a personal hand in the project, is named in a seal engraved into a wall near the new main entrance on Eighth Avenue.

Significantly, the renderings also show no changes to the block just to the south of the station, across 31^st street. This block, often described by its tax location, block 780, is in the path of the earlier plan to expand the station’s capacity by building a southern extension.

Federal officials have said their transformation of the station will include an increase in its capacity. But have been awaiting a report from the Federal Railroad Administration on how best to accomplish that. Part of the answer, they have said, will be a change in operation by the commuter railroads that use the station, Long Island Railroad and New Jersey Transit.

Under this change the commuter lines would carry some passengers through the station to points on either side, rather than discharging all passengers in Penn Station. Advocates say this so-called “through-running” can eliminate the need to expand the station beyond its present footprint.

But federal officials have yet to say whether they fully agree.

The agreement between the Trump administration and Penn Transformation Partners is what is known as a Public Private Partnership, or P3, in which the private consortium not only builds the project but helps to pay for it in exchange for long-term repayments.

This system was used successfully to rebuild terminals at LaGuardia and Kennedy Airport, which receive lucrative fees from commercial airlines to use the terminals.

But since the users of Penn Station are all government owned railroads it is less clear how the revenue will be generated to repay the private partners in the project, hence, for example, the potential use of PILOT payments from adjacent development.

These payments, known in urban development as “value capture,” are based on the idea that the improvement of the station, or any other piece of major infrastructure, increases the value

That is one of the many questions Hoylman-Sigal and others have been demanding answers to.

These payments, known in urban development as “value capture,” are based on the idea that the improvement of the station, or any other piece of major infrastructure, increases the value of adjacent property, like Vornado’s Pennsylvania Hotel site. The PILOT payments would capture some of that increase and use it to help fund the improvements.

Officials said the main role Vornado will play in the Master Developer consortium is as manager of expanded retail offerings inside the station, something it has developed considerable expertise in managing both retail spaces in Moynihan Train Hall and the Long Island Railroads concourse on the north side of Penn Station.

As for PILOT payments from Vornado from the new office tower it wants to build, those could be collected under the authority of the existing GPP if Governor Hochul agreed.

Amtrak does not have authority to collect such payments directly, although a house committee recently approved legislation that would give Amtrak the power to do just that at redevelopment projects around the country.

The legislation was moved forward by a bipartisan vote over the objections of the Democratic representative from Manhattan, Jerrold Nadler, who is one of the elected officials who joined Hoylan-Sigal in complaining about how Amtrak was managing the Penn Station project.