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New York state secretly negotiates Penn deal, charge of watchdog

The state economic development agency has refused to disclose how it intends to pay for Penn Station’s planned renovation, supporters accused Thursday.

Empire State Development argued that sharing details about the funding would “impact” future negotiations with Vornado Realty Trust, the developer, who hopes to make big money from the project.

“Releasing the financial instrument would affect ESD’s negotiating position,” she wrote in a Feb. 18 letter to government watchdog Reinvent Albany.

The group is concerned that the calculations include massive subsidies for Vornado, fears compounded by ESD’s refusal to publicly disclose projected tax revenues for the 10 newly proposed towers near the transit hub.

Accounting firm Ernst & Young developed the $600,000 “financial tool” used to calculate estimated earnings, the letter said. It was funded half by the state and half by Vornado — though state officials insist the developer didn’t see the calculations.

“The document, which was withheld under the waiver for an upcoming contract, is a financial tool developed by an Ernst & Young subcontractor that will be used to calculate projected funding income and form the basis of negotiations with Vornado, with whom a contract is not yet in place was completed. ‘ the letter said.

Reinvent Albany’s Rachael Fauss said the letter is tantamount to ESD “in which she admits they are secretly negotiating terms with Vornado, which could be a massive tax break for her.”

Kathy Hochul
Gov. Kathy Hochul plans to seize and demolish blocks worth of property for the Vornado Realty Trust.
Getty Images/Spencer Platt

“They say there is an ‘upcoming contract negotiation,'” Fauss said. “They admit that they are secretly negotiating the PILOT terms with Vornado, and they specifically say ‘Vornado’ in the letter.”

A spokesman for ESD said negotiations still running – but with the city.

“There have been no financial negotiations with owners as the agreement with the city has to be finalized first,” spokesman Matthew Gorton said.

Penn station
Hochul’s $6.7 billion plan to renovate Pennsylvania Station in New York City is causing controversy.
Office of the Governor of New York

Release of the financial model “would reveal valuations that could weaken ESD’s hand to get the best value for the public in its future negotiations with Vornado,” Gorton said.

“This approach is not unusual or unconventional in projects of this size and scale,” he said.

State senators will hold a hearing Friday to ask questions about funding for the Penn Station project, which Gov. Kathy Hochul inherited from her predecessor Andrew Cuomo.

While Hochul reduced the size of the project’s 10 proposed skyscrapers by 1.4 million square feet, she still plans to confiscate and demolish blocks’ worth of land so Vornado can replace them with commercial skyscrapers.

Penn station
There are concerns that the calculations include massive subsidies for Vornado.
Office of the Governor of New York
Penn station
Negotiations with the city about the project are still ongoing.
Office of the Governor of New York

A state tariff known as “payments in lieu of taxes,” or PILOTs, is evaluated and used to fund renovations in Penn. The state has not said how much the renovation will cost.

ESD has said the PILOTs will be similar to those used for Related Companies’ Hudson Yards development – resulting in a $1.4 billion property tax break.

Vornado CEO Steven Roth donated $69,700 to Hochul’s re-election campaign in December, according to campaign finance records, and was also a major donor to Cuomo, who gave several speeches promoting the Penn Project.

ReThinkPennStationNYC, a group opposed to the development, on Thursday asked 20 questions it thinks ESD should answer at the hearing — including calculating the amount of money needed for the renovation and whether ESD has started negotiations with Vornado.

“The public and policymakers should be aware of the terms of this agreement before it is finalized,” Fauss said. “The public still has no idea how much money the development will bring in for the Penn Station renovation.”

A Vornado representative, who already owns much of the neighborhood, said the company has not spoken to state officials about PILOTS

“Vornado is focused on continuing to be a key partner in this neighborhood and is committed to a GPP that is transformative for the region and reflects the vision that Governor Hochul and Mayor Adams outlined last week,” the spokesman said in an explanation.

“Vornado has a strong track record of working on successful public-private partnerships that will open the Moynihan Train Hall, complete a new station entrance on 33rd Street and deliver a new LIRR concourse.”

https://nypost.com/2022/06/23/ny-state-negotiating-penn-deal-in-secret-watchdog-charges/ New York state secretly negotiates Penn deal, charge of watchdog

JACLYN DIAZ

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