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.

“What’s the financing, ultimately, whether its PILOTS or something else,” he asked. PILOTS, he agreed 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 on the site of the Pennsylvania Hotel, which Vornado demolished in 2023.

Is the General Project Plan Back?

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 theneighborhood blow back, but because of the COVID induced real estate slump which undermined the profitability of new office space. But luxury office space in New York is again going at record prices.

Vornado Realty Trust is the largest landowner around Penn Station and would have built several of the office towers envisioned in the GPP, including the one on the Hotel Pennsylvania site. Vornado is now a partner in the consortium designated by The Trump Administration as the Master Developer of the new Penn Station.

Vornado revealed as member of Penn Transformation Partners

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 notcountenance 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 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. 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. 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 inthe 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. 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 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. 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 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 developedconsiderable expertise in managing both retail spaces in Moynihan Train Hall and theLong 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, thosecould 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 thatat redevelopment projects around the country.

The legislation was moved forward by a bipartisan vote 64 to 1 over the objections of Congressman Jerry Nadler. He is one of the elected officials who joined Hoylman-Sigal in complaining about how Amtrak was managing the Penn Station project.