The state says revenue from the new towers can finance the rebuilding of the rail terminal. But the pandemic has upended the need for office space.
For years, one of Gov. Andrew M. Cuomo’s top priorities has been an enormous development in the heart of Manhattan that would be among the largest real estate projects ever built in the United States.
Ten new buildings — five taller than 1,000 feet — would rise around Pennsylvania Station and form a towering business district stretching west toward Hudson Yards, the biggest private development in the country, and east to the Empire State Building.
At the center, the universally disliked rail station — North America’s busiest train hub — would be brought into the modern age with a sleek, expanded redesign and additional tracks and platforms. Before the coronavirus pandemic the transit hub served 600,000 daily riders on subways, commuter lines and Amtrak trains that crisscross beneath Madison Square Garden.
But the world has changed both for Mr. Cuomo, who has been weakened by deepening scandals that threaten his tenure, and for New York, where the pandemic has made remote work a lasting legacy and there is a record glut of office space.
Emboldened to confront a suddenly vulnerable governor, a coalition of elected officials and neighborhood groups, while acknowledging the need to fix Penn Station, have united in opposition to the plan, questioning whether this is the right time for such a mammoth undertaking even as the city moves to reopen and loosen nearly all pandemic restrictions.
“Do we need 10 more supertalls in the surrounding area of Penn Station?” asked State Senator Liz Krueger, a Manhattan Democrat. “Will there be demand for it?”
Mr. Cuomo argues that a global capital like New York needs a world-class transit hub and an ambitious development — “The next great investment,” he said in February — to transform a dowdy slice of Manhattan into a sleek commercial corridor. It would also achieve the dreams of many business leaders who have long sought to build big around the city’s most important transit nexus.
The state intends to pay for the rebuilding of Penn Station, which would cost an estimated $16 billion, through the development of the new towers, whose owners would contribute part of the revenue from office leases, retail sales and other sources. But generating the needed money could be difficult if office buildings become less desirable.
Critics also argue that the project would mainly reward one of New York’s most powerful real estate firms, whose chief executive and family have contributed hundreds of thousands of dollars to the governor’s campaign.
Mayor Bill de Blasio, though he supports rebuilding Penn Station, called Mr. Cuomo’s plan a “land grab that relies on overriding city rules.” With the city electing a new mayor this year, Mr. de Blasio’s successor could influence the project’s fate.
Now what had seemed like a foregone deal that would have allowed the state to circumvent city control and oversight is facing serious scrutiny.
The brewing conflict came to a head during eleventh hour state budget negotiations in Albany. On one side, Mr. Cuomo’s aides stressed that the project was his highest priority, making clear he would not tolerate any effort by the Legislature to remove his request for $1.3 billion. The funds would be used to buy dozens of properties, including low- and mid-rise office buildings, residences, shops and restaurants for the development.
In the end lawmakers celebrated what they saw as a victory: The $1.3 billion was restricted to transportation improvements at Penn Station though it may be somewhat symbolic since the state said it still had the power to clear land for the project.
The state also buckled to critics and agreed to an outside review by an array of stakeholders, including the city, local community boards, the Metropolitan Transportation Authority, New Jersey Transit and Amtrak, to look at the best ways to pay for a new rail terminal.
While the review’s findings would not be binding, they could complicate and delay the process and even lead to legal challenges.
“Nothing is set in stone,” said Gale Brewer, the Manhattan Borough president. “No one objects to fixing up Penn Station, but right now it’s a top-down plan for 10 buildings.”
Ms. Brewer and others said the project could be financed by other means, such as with contributions from state, city and transit agencies combined with federal assistance.
The mounting opposition has rattled state officials, who were confident that little stood in the way of the project, which could also receive financial help from President Biden’s sweeping infrastructure bill if it makes it through Congress.
“After decades of stops and starts,” said Matthew Gorton, a spokesman for the Empire State Development, the state agency overseeing the project, “the state proposed an actionable plan that leverages the momentum of the Biden administration’s focus on transportation and infrastructure, and the universal consensus — locally and across the region — that Penn Station needs to be overhauled and expanded and the surrounding neighborhood needs to be revitalized.”
The state said it still had the authority to purchase properties — and take them by eminent domain, if necessary — near the rail terminal, including a campus of Touro College and a 150-year-old Roman Catholic church that would have to be bulldozed to make room underground for nine new rail tracks and five platforms.
Under the state’s proposal, the 10 towers would include offices, stores and two hotels, with a portion of the revenues generated by those buildings paying down the billions of dollars in bonds needed for the rail terminal.
“There is no better place for a transit-oriented development in the entire New York City region than around Penn Station,” said Brian Fritsch, a manager at the Regional Plan Association, an influential planning group.
Mr. Cuomo, a third-term Democrat, is intent on muscling the project through at the lowest point of his tenure, as he confronts accusations of sexual harassment from several women, and scrutiny over his handling of nursing homes during the pandemic and his use of state resources to produce a memoir.
The backlash against the project echoes recent opposition from progressive elected leaders and community groups that has stopped other major projects — including Amazon’s proposed headquarters in Queens and the rezoning of Industry City in Brooklyn — over a variety of concerns, from gentrification to the lack of local input to the use of government funds.
Mr. Gorton said the state was prioritizing “engaging with the community and elected officials on the land-use proposal and related improvements through a robust outreach process.”
State Senator Brad Hoylman, a Democrat whose district includes the development site, called the project “a mega real estate deal posing as a transit improvement plan.”
At 19.6 million square feet, the project would be larger than Hudson Yards, which has more than 18 million square feet. An overhauled Penn Station would have a total of 30 train tracks and eventually link to new rail tunnels under the Hudson River, vastly improving access to Manhattan for suburban commuters.
“Where in the world is there a better place to put real estate bulk than right on top of the hub that’s the busiest in the country,” said Dan Biederman, the president of the 34th Street Partnership, a business-improvement district around the rail terminal. “This is exactly what we should be doing.”
While the Cuomo administration believes the development could be a cornerstone of the city’s post-pandemic recovery, it imagines a New York in which people will revert to the ways they worked and lived before the coronavirus.
Nearly three quarters of the new towers would be office space. However, there is more office space available for lease in Manhattan than at any point in at least three decades, and the market value of the city’s office buildings has plunged an estimated 25 percent over the past year.
State officials said the development was a bet on a robust economic recovery and that it made sense to build office towers within walking distance of Penn Station.
As proposed by Mr. Cuomo, the state would wield tremendous authority to override city rules on zoning and planning, which developers would have been subject to if they had proposed the buildings without the state’s involvement.
Unlike Hudson Yards, which was built atop rail tracks in a mostly undeveloped zone, the area around Penn Station is not empty, though it is sparsely populated — roughly 210 people live on blocks that would be bulldozed, the state said.
On one side of Penn Station is the Macy’s flagship store at Herald Square, home to some of the city’s most expensive retail space and busiest pedestrian traffic corridor.
Across Eighth Avenue from the station is the new Moynihan Train Hall, which opened in January and serves Amtrak and the Long Island Railroad and siphons off some of the crowds at Penn Station, but did not add more train tracks.
The area south of the station is less appealing, dominated by large parking garages, but does include the Church of St. John the Baptist, a French Gothic church where the first Mass was held in 1840.
A spokesman for the Archdiocese of New York, Joseph Zwilling, said the church had “very general discussions” with the state and that “no decisions have yet been made.”
Perhaps the biggest winner in the project would be Vornado Realty Trust, one of the city’s largest office developers, which owns four sites in the development zone and part of a fifth.
The five towers built atop its properties would be among the buildings whose revenues would help finance a new Penn Station. But it has not been determined how much Vornado might pay, including whether the company could negotiate a lower rate that would amount to a tax break.
The company’s chief executive, the billionaire Steven Roth, has laid out a vision of erecting skyscrapers in the neighborhood and has called the project the company’s “Promised Land.”
Mr. Roth and his wife, the theater producer Daryl Roth, have collectively given Mr. Cuomo about $400,000 in campaign donations. State officials said the donations had nothing to do with Vornado’s role in the venture.
“Manhattan’s West Side is the economic growth engine for the city,” Mr. Roth said in a statement, “anchored by Penn Station, the most vital transportation center for the region.”
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