Plan to Rebuild Penn Station Area May Be Close to Failure
New York Times 2/23/2008
By CHARLES V. BAGLI
The sweeping $14 billion proposal to transform Pennsylvania Station and the district around it is in danger of collapse because of the softening economy, shortfalls in government financing, political inertia and daunting logistical problems, government officials and real estate executives involved in the project said this week.
The proposed project, known as Moynihan Station, calls for building half a dozen skyscrapers, relocating Madison Square Garden one block away and constructing a monumental new train station on 34th Street, between Seventh and Eighth Avenues. Civic groups, developers and government officials have embraced the plan as an act of civic redemption for the demolition of the original Penn Station in the 1960s, saying it will also create a first-class business district around the nation’s busiest rail hub.
But the project has grown in size and complexity, and the estimated cost of the new station has tripled, to $3 billion. There is squabbling between developers, the Garden, government officials, community groups and preservationists over the designs and how much the public would benefit. And now negotiations have stalled, despite three years of planning and lobbying in Albany and Washington, the officials and executives said. Those people spoke on condition of anonymity to avoid inflaming state officials.
Proponents of the plan, who view the $14 billion project as a rare opportunity to refurbish Penn Station and revitalize the district, say they still hope that Gov. Eliot Spitzer will be able to drag it back from the edge of failure. In an interview Friday, Mr. Spitzer said he was committed to the Moynihan project, which he contends is critical to the future of the city.
Officials say the governor plans to meet next week with the developers behind the project — Stephen M. Ross of Related Companies and Steven Roth of Vornado Realty Trust — and the owners of Madison Square Garden in an effort to resolve major financing issues.
But the developers, who have spent more than $50 million on the planning effort, and the Garden have grown weary of the slow pace of progress, the executives said.
The project’s linchpin, moving Madison Square Garden one block west to the Farley Post Office, may fall out of place. Frustrated by the delays and rising costs, Madison Square Garden has revived plans to renovate the 30-year-old arena instead of relocating. Garden officials have told real estate executives and civic leaders that they plan to announce the renovation plans in early March.
During discussions in December, Garden executives, developers and government officials agreed that if they did not make progress over the next two months, they would part ways, according to two people who have been briefed on the talks. Garden officials did not attend a scheduled planning meeting on Thursday.
The plan to build a grand train station and erect the skyscrapers was always dependent on the demolition of the current Garden, the brown doughnut-like structure that sits over the crowded corridors of Penn Station, where the station would be built. More than 550,000 passengers pass through the station every day.
Some government officials involved in reviewing the project contend that the Garden’s threat to renovate could be a bargaining posture intended to gain concessions on the design of the new arena in the Farley Post Office. Those officials say that the state and the city have leverage over the Garden, which would need a variety of state and city approvals to renovate the arena.
In any event, the governor said Friday that he was highly confident that his deal was going ahead.
“It’s a critical investment for Midtown,” Mr. Spitzer said in a telephone interview. “This, in conjunction with Hudson Yards, where we have taken a vacant piece of land and now have five competing bids to add 12 million square feet of commercial and residential space, will redefine Midtown Manhattan.”
The governor was referring to the pending sale of the development rights over the West Side railyards, which sit three blocks west of Penn Station, from 30th to 33rd Street, between 10th and 12th Avenues. The second round of bids for the development rights are due Tuesday.
Some government officials and real estate executives are concerned that a slowing economy and the current state of the credit markets, where there is little money available for large real estate deals, could cause problems for both the sale of the railyards and the Moynihan project.
The Spitzer administration can ill afford a setback for either project, urban planners say, after its announcement in January that it had significantly cut back its plans to expand the nearby Jacob K. Javits Convention Center.
“We’re convinced that this is the key catalyst to West Side development,” said Robert D. Yaro, president of the Regional Plan Association, a supporter of the Moynihan project. “It’s got lots of moving parts, and they’re not meshing well. But there’s so much money to be made by everyone and there’s so much in the public interest. It’s essential that we get it done and we get it right.”
One of the key issues for the Moynihan project is the cost of building a new train station, whose estimated price has grown to $3 billion from $1 billion. (The station would be named after the late Senator Daniel Patrick Moynihan, who first suggested turning the Farley Post Office into a new Penn Station.) The negotiations involve state and city officials and officials from the Long Island Rail Road, New Jersey Transit, Amtrak, two subway lines and the Port Authority.
Patrick J. Foye, co-chairman of the Empire State Development Corporation, said that the city and the state have each pledged to invest $300 million in the station, and that the developers have agreed to put up $550 million. The developers, in turn, would get valuable development rights to build skyscrapers in the surrounding area.
That would be especially tantalizing for Mr. Roth, whose company already owns a major portion of the neighborhood, including the Hotel Pennsylvania and No. 1 and No. 2 Penn Plaza.
“Significant progress on the Moynihan project has been realized, but there are significant challenges yet to be resolved,” Mr. Foye said Friday.
But even if the developers can whittle the cost of the station by several hundred million dollars, there is a serious shortfall. Both government officials and the developers are hoping that they can obtain what is essentially a matching grant of $800 million from the federal government, a figure that Congressional officials say may be unrealistically high.
There are also a raft of design issues, ranging from what the new Penn Station would look like to how a new arena for the Garden would fit into the Farley Post Office. The developers have proposed inserting 1.2 million square feet of shops and department stores into the station, which critics say would turn the building into a shopping mall rather than a monumental train station like Grand Central Terminal.
The Garden, which signed a nonbinding agreement with the developers in February 2006, would essentially trade its current site between Seventh and Eighth Avenues to the developers for a new $1 billion arena within the walls of the state-owned post office, a landmark building between Eighth and Ninth Avenues.