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Unlocking Penn’s Potential

MAS Report_Unlocking Penn PotentialCity Council Speaker Christine Quinn recently announced her support for a 10-year limit to Madison Square Garden’s Special Use Permit to operate above Penn Station, rejecting the Garden’s request to operate in perpetuity on top of the county’s busiest train station.  The Municipal Art Society (MAS), with the Regional Plan Association and its other partners in the Alliance for a New Penn Station, applaud Speaker Quinn’s leadership on this issue.  This announcement is a signal that the City is ready to take the leadership necessary to relocate the arena and begin the process of building the next Madison Square Garden and a new Penn Station

Anybody who’s traveled through Penn Station knows why New York needs a new station.  It’s overcrowded and unsafe.  Circulation is a nightmare.  Rebuilding Penn Station can create New York City’s next great civic space, a respectable, dignified entrance into the city that provides relief to the over 600,000 commuters and intercity travelers who use the station daily.  Through the Gateway Project, Amtrak is currently mapping out a plan to build an additional trans-Hudson crossing, which will make great strides in increasing rail capacity along the Northeast Corridor, the nation’s busiest passenger rail line.  Planning for a new station in tandem with Gateway will insure that the New York region can meet anticipated commuter travel demand, expected to double in the next twenty years.

But the urgency goes beyond the vital need to invest in our transportation infrastructure.  Building a new world-class Penn Station, relocating Madison Square Garden and, in tandem, rezoning a large geographic area for new office, hotel, and residential development, will unlock an extraordinary amount of economic and real estate value.  Such a project would immensely contribution to the long-term economic health and competitiveness of the city, benefiting both public and private interests well into the future.

The Penn Station office district is vastly underperforming; according to the Cushman & Wakefield 1Q 2013 MarketBeat report, the district has the lowest overall rental rate of any of the Midtown submarkets.  The district is dominated by aging office buildings, and hasn’t had the significant, new Class A construction of the type that has occurred in the nearby Times Square submarket.  Given appropriate transit, public space and infrastructure investments, the area could accommodate substantially higher density.

A New Penn is the type of significant investment that New York City needs to remain globally competitive.  Cities around the globe are seeing striking results from creating high-density, mixed use neighborhoods centered around transit investments.  King’s Cross station in London, rebuilt and expanded for the Olympics, has led to tremendous development in the area, including the construction of Google’s £1 billion new London headquarters.  San Francisco’s Transbay Terminal will one day connect the city to California’s high speed rail system.  The project is funded in part by surrounding development, including the building of the city’s tallest building, the Transbay Transit Tower, currently under construction.

Funding a New Penn would require a financing package that would likely include support from Federal, State, and City levels, but New York has a tremendous funding opportunity within the district itself. MAS and James Lima Planning + Development recently produced Unlocking Penn’s Potential: Establishing a Penn Station Redevelopment and Revenue Capture District.  The report explores creating a Penn Station Redevelopment and Revenue Capture District (“Penn District”) as a potential funding opportunity for building a new Penn Station.  A Penn District could add billions of dollars of additional revenue to the City of New York through real property tax and other payments. Bonds could be issued against such revenue streams to fund capital costs for needed improvements. Based on a number of given assumptions, the report concludes that the net present value of  the bonus payments alone from the proposed Penn District would be an estimated $1.3 billion, at a 6.5% discount rate.

Relocating Madison Square Garden and building a new Penn Station is an incredibly complex, multi-phased project.  Making it happen will be a marathon run, requiring visionary long-term thinking and continued championing of the project. Yet we shouldn’t shy away from the project because of its complexities, but instead look for creative approaches – like the proposed Penn District mechanism – of moving the project forward.   New Yorkers have a history of completing major pieces of infrastructure aimed at leaving a better city for the coming generations.  The project will revitalize the surrounding area, creating a new desirable district to live, work and play in, and bring tremendous long-term economic value to the region.   A new Penn Station is the compelling infrastructure and development project of our era – now is the time to make it happen.